AFRICA GUIDE – COMPETITION€¦ · promulgated in terms of the Act. The Act established the...
Transcript of AFRICA GUIDE – COMPETITION€¦ · promulgated in terms of the Act. The Act established the...
AFRICA GUIDE – COMPETITION
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Contents
04 Introduction
06 OurCompetitionPractice
08 Botswana
16 Burundi
21 COMESA
28 Ghana
35 Kenya
48 Malawi
57 Mauritius
67 Mozambique
74 Namibia
84 Nigeria
94 Seychelles
106 SouthAfrica
118 Swaziland
126 Tanzania
132 Uganda
142 Zambia
150 Zimbabwe
156 KeyContacts
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Introduction to the Bowmans Competition Law Africa Guide 2018
TheCompetitionLawAfricaGuideprovidesanswerstofrequentlyaskedquestions
relatingtocompetitionlawregimesinvariousAfricanjurisdictions.
IthasbeenpreparedbycompetitionlawspecialistsinourSouthAfrican,Kenyan,TanzanianandUgandanofficesandlocallawyersacrosstheAfricancontinent.
RECENT AFRICAN COMPETITION LAW DEVELOPMENTS
CompetitionlawpresentsvariouschallengesforcompaniesdoingbusinessinAfrica.ThenumberofcompetitionlawregimesacrossAfricahasincreasedsignificantlyinrecentyearsandnationalregulatorsacrossthecontinentarebecomingincreasinglyactive.
Therearealsoanumberofregionalorganisationsregulatingcompetition,suchastheCOMESACompetitionCommission,whichregulatesmergersandanti-competitiveconductinthe19MemberStatesofCOMESA1.WhiletheCOMESACompetitionCommissioninitiallyfocusedonmergers,enforcementactivitiesinrespectofrestrictivepracticesisincreasing.
Co-operationbetweenregulatorsacrossthecontinentisalsoincreasingsteadily.Duringthecourseof2017,threeadditionalmemorandaofunderstanding(MoU)weresignedbycompetitionregulatorsinAfricaandBRICS,tofacilitatetheco-operationbetweencompetitionregulatorsonissuesofcompetitionpolicyandenforcement.
Therearenowmorethan20MoUsinexistencebetweencompetitionregulatorsinAfricaandBRICS.Regularcontactbetweencompetition
agenciesoccursand,insomeinstances,dedicateddeskofficersco-ordinatecommunication.
CompetitionlegislativedevelopmentsinAfricaareongoing.Duringthecourseof2017,variousauthoritiesintroducedneworamendedcompetitionlaws,regulations,guidelinesand/orpolicies.AlawestablishingtheRwandaInspectorateandCompetitionAuthoritywasenactedinJuly2017andtheBotswanaCompetitionBillNo.22of2017wasalsopublishedinJuly2017.
InSouthAfrica,on1December2017,theMinisterofEconomicDevelopmentpublishedtheCompetitionAmendmentBill2017(thedraftBill)forpubliccomment.Accordingtothebackgroundnote,thedraftBillaimstostrengthentheprovisionsoftheCompetitionActaimedataddressingstructuralchallengesintheSouthAfricaneconomy,inparticularconcentrationofownershipandtheraciallyskewedspreadofownershipintheeconomy.ThedraftBillalsoseekstoenhancethepolicyandinstitutionalframework,andproceduralmechanismsfortheadministrationoftheCompetitionAct.Theproposedamendmentsaddressfivepriorities:
• strengtheningtheprovisionsoftheActrelatingtoprohibitedpracticesandmergers;
• emphasisingtheimpactofanti-competitiveconductonsmallbusinessesandfirmsownedbyhistoricallydisadvantagedpersons;
• strengtheningtheprovisionsoftheActrelatingtomarketinquiries;
• thealignmentofcompetition-relatedprocessesanddecisionswithotherpublicpolicies,programmesandinterests;and
• enhancingtheadministrativeefficacyandprocessesofthecompetitionregulatoryauthorities.
1. Burundi,Comoros,DemocraticRepublicofCongo,Djibouti,Egypt,
Eritrea,Ethiopia,Kenya,Libya,Madagascar,Malawi,Mauritius,Rwanda,
Seychelles,Sudan,Swaziland,Uganda,ZambiaandZimbabwe.
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Inaddition,theMinisterofEconomicDevelopmentpublishedGovernmentNotices1003and1005on15September2017,reflectingrevisedthresholdsforintermediatemergersandrevisedfilingfeesforintermediateandlargemergers,effective1October2017.
InNamibia,inearly2017,themethodofcalculatingfilingfeespayableinrespectofmergersnotifiedtotheNamibianCompetitionCommissionwasamended,resultinginanoverallincreaseinfilingfeespayable.
KenyahasmadeprogressinitseffortstostrengthencompetitionregulationwiththeintroductionofrulesthatwillgoverntheworkofthenewlyestablishedCompetitionTribunal.
InGhana,theMinistryofTradeandIndustryhasindicatedthatcompetitionlegislationwillbeenactedin2018,withtheBillandpolicydocumentcurrentlybeingreadyforsubmissiontocabinetafterhavingbeendevelopedtwoyearsagoandhavingundergonestakeholderconsultation.
Competitionregulatorsarealsobeingproactiveintheirenforcementintermsofprohibitedpractices.TheCompetitionandConsumerProtectionCommissioninZambiahaslaunchedinvestigationsintoexcessivepricinginrespectofthesuddenincreaseinpricesofdisinfectants,specificallychlorine,inthewakeofthecholeraoutbreak.TheCompetitionCommissioninSouthAfricahasbeenproactiveinitsinvestigativerolebyconductinganumberofmarketinquiriesacrossvariousindustriesincludingbanking,healthcare,theretailgrocerysector,transportandthemarketfordatainthetelecommunicationsector.TheNamibianCompetitionCommissionisstillpursuingabuseofdominancecasesincludinginthewheatflour,financialservicesandaviationfuelsectors.
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BOWMANS
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Our Competition Law Practice
BowmansisaleadingPan-Africanlawfirm,employingmorethan400specialisedlawyersandprovidingdomesticandcross-borderlegalservicesinthefieldsofcorporatelaw,bankingandfinancelaw,anddisputeresolutionforoveracentury.Bowmansisdifferentiatedbyitsgeographicalreach,independenceandthequalityoflegalservicesitprovides.
ThefirmdeliversintegratedlegalservicestoclientsthroughoutAfricafromsixoffices(CapeTown,DaresSalaam,Durban,Johannesburg,KampalaandNairobi)infourcountries(Kenya,SouthAfrica,TanzaniaandUganda).BowmansalsoworkscloselywithleadingNigerianfirm,UdoUdoma&Belo-Osagie,whichhasofficesinAbuja,LagosandPortHarcourt,andhasstrongrelationshipswithotherleadinglawfirmsacrosstherestofAfrica.ItisarepresentativeofLexMundi,aglobalassociationwithmorethan160independentlawfirmsinallthemajorcentresacrosstheglobe.
Bowmansexpertiseisfrequentlyrecognisedbyindependentresearchorganisations.ThefirmhasbeennamedAfricanLegalAdviserbyDealMakersforthelastthreeconsecutiveyearsandSouthAfricanLawFirmoftheYearfor2016bytheWho’s Who Legal.
TheBowmansCompetitionpracticecontinuestobeattheforefrontofdevelopmentsinAfricancompetitionlaw,providingafullrangeofcompetitionandanti-trustlawservicestolocalandinternationalbusinessesoperatinginandaroundAfrica.Theseservicesrelatetomergercontrol,cartelsandmarkets,abuseofdominanceandotherrestrictivepractices,andtradeissues.Thepracticeoftenprovidescompetitionlawcompliancetrainingtoourclients.Ourinternationallyrecognisedcompetitionlawexpertsalsoparticipateinspecialcommitteesoncompetitionlaw;activelycommentondraftlegislationinavarietyofAfricancountries;andregularlycontributetocompetitionlawpublications.
Lastyear,the2017ChambersGlobalrankingratedourcompetitionteaminBand1andweadvisedonthreemattersthatwererecognisedaswinnersatthe7thAnnualGlobal
Competition Review(GCR)AwardsheldinWashingtonon28March2017.TheGCRAwardsrecognisethebestcompetitionandantitrustmattersoftheyearbasedonvotesbymembersoftheinternationalcompetitioncommunity.
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Botswana
BOOKBINDER BUSINESS LAW
Jeffrey Bookbinder | Chabo Peo
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1. What is the relevant competition legislation and who are the enforcers?
TherelevantcompetitionlegislationistheCompetitionAct,[Cap46:09](theAct)togetherwiththeCompetitionRegulations,2011(theRegulations),beingtheregulationspromulgatedintermsoftheAct.TheActestablishedtheCompetitionAuthority(theAuthority).TheActisenforcedbytheAuthority,theBotswanaCompetitionCommission(theCommission),whichisthegoverningbodyoftheAuthority,andtheHighCourtofBotswana.
2. Are there any proposed amendments or new regulations expected to come into force?
TheCompetitionBill,2017(theBill)waspublishedon12July2017.TheobjectoftheBillistorepealandre-enacttheActwithamendments.Amongstotherchanges,theBillestablishestheCompetitionandConsumerBoardwhichshallbethegoverningbodyoftheAuthority.3. Is the law actively enforced?
TheActisactivelyenforcedbytheAuthority,bothinrespectofmergersandinrelationtoprohibitedpractices.SincethecommencementoftheActinOctober2011,theAuthorityhasdealtwithover400cases.Themajorityofthesecasesaremergersbuttherehavebeenasubstantialnumberofabuseofdominancecasesandcasesofrestrictivebusinesspractices.Asatthetimeofwriting,theAuthorityhadrecentlyinstitutedproceedingsagainstfourwholesalersallegingtheoccurrenceofresalepricemaintenance.ThemattersarebeingadjudicatedbeforetheCommission.TheAuthorityhasaskedtheCommissiontolevyapenaltyinasumequivalentto10%oftherespectivewholesalers’annualturnoverforathree-yearperiod.Thepenaltybeingsoughtby
theAuthorityisthemaximumamountpermittedundertheAct.Infixingtheamountofafine,theCommissionmayhaveregardtospecificfactorsincludingthegravityoftheinfringementandtherecurrenceordurationoftheinfringement.
4. What are the current priorities or focus areas of the competition authorities?
ThefocusareasoftheAuthorityoverthepastyearhavebeen:
• mergercontrol;• cartelenforcement;and• actingasanadvisorybodytothe
GovernmentofBotswanainrespectofstatutorymonopoliesandhowbesttoalignthemwiththeAct.
5. What kind of transaction constitutes a notifiable merger?
ItisrequiredtonotifytheAuthorityofatransactionifit(i)constitutesamerger(asdefinedintheAct);and(ii)meetstherelevantthresholdsprescribedformandatorynotification.ForthepurposesoftheAct,amergeroccurswhenoneormoreenterprisesdirectlyorindirectlyacquireorestablishdirectorindirectcontroloverthewholeorpartofthebusinessofanother.Thereisnoclosedlistofhow‘control’maybeachieved.Controlmaybeachievedinanymanner,including:
• thepurchaseorleaseofshares,aninterest,orassetsoftheotherenterpriseinquestion;or
• theamalgamationorothercombinationwiththatenterprise.
Broadly,apersoncontrolsanotherfirmifthatperson,inter alia:
• beneficiallyownsmorethanone-halfoftheissuedsharecapitalofthefirm;
• isentitledtovoteamajorityofthevotesthatmaybecastatageneralmeetingofthefirm,
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orhastheabilitytocontrolthevotingofamajorityofthosevotes,eitherdirectlyorthroughacontrolledentityofthatperson;
• isabletoappointorvetotheappointmentofamajorityofthedirectorsofthefirm;
• isaholdingcompany,andthefirmisasubsidiaryofthatcompanyascontemplatedintheCompaniesAct;
• hastheabilitytocontrolthemajorityofthevotesofthetrusteesortoappointthemajorityofthetrusteesortoappointorchangethemajorityofthebeneficiariesofthetrust,inthecaseofanenterprisebeingatrust;
• ownsthemajorityofthemembers’interestsorcontrolsdirectlyorhastherighttocontrolthemajorityofmembers’votesintheclosecorporation,inthecaseoftheenterprisebeingaclosecorporation;or
• hastheabilitytomateriallyinfluencethepolicyofthefirminamannercomparabletoapersonwho,inordinarycommercialpractice,canexerciseanelementofcontrolreferredtointhebulletpointsabove.
6. What are the thresholds for mandatory merger notification (e.g. assets, turnover and/ or market share)?
Amergerisnotifiableifitmeetsthefollowingthresholds:
• theturnoverinBotswanaoftheenterpriseorenterprisesbeingtakenoverexceedsBWP10million;
• theassetsinBotswanaoftheenterpriseorenterprisesbeingtakenoverhaveavalueexceedingBWP10million;or
• theenterprisesconcernedwould,followingimplementationofthemerger,supplyoracquire20%ofaparticulardescriptionofgoodsorservicesinBotswana.Inrelationtothisrequirement,theAuthorityhasconfirmedthatevenwhereanacquiringfirmhasnopresenceinBotswanabutacquirescontrolofatargetfirmwithamarketshareof20%ormoreinarelevantmarket,themergerthresholdswillbetriggeredas,onastrictreadingofthelegislation,themergedentitywillhaveamarketshareof20%ormore.Putdifferently,thereisnoneedforanaccretioninmarketshareinorderforthenotificationobligationtobetriggered.
7. Is there a prohibition on the pre-implementation of a merger? If so, does the legislation make provision for a penalty?
Partiestoanotifiablemergermaynotimplementthemerger(i)beforeobtainingtherequisiteapproval;or(ii)priortotheperiodfortheAuthority’sreviewhavingelapsedwithouttheAuthorityhavingmadeadeterminationinrelationtothemerger.WheretheAuthorityformsareasonablesuspicionthatamergerisbeing,orhasbeen,implementedincontraventionoftheAct,theAuthoritymaygivedirectioninwritingtotheenterprise(s)concernedtotheeffectthat,interalia,implementationofthemergerbesuspendedpendingtheAuthority’sinvestigation.
Therearenoexpresspunitiveprovisionsinrespectoffailuretopre-notifytheAuthoritybutwheretheAuthoritydeterminesthatamergerhasbeenimplementedincontraventionoftheAct,itmaygivefurtherdirectiontotheenterprise(s):
• nottocompleteorimplementthemerger;• tosellorotherwisedisposeofanyassets
orsharesorotherinterestacquiredinthemerger;
• toterminateanyagreementstowhichthemergerwassubject;or
• totakesuchfurthermeasuresasmaybenecessarytorestoretheconditionsofcompetitionexistingpriortothemerger.
ShouldtheAuthoritydeterminethattherehasbeenafailuretocomplywithadirectiongivenwheretheAuthorityhaddeterminedthatamergerhadbeenimplementedincontraventionoftheAct,itmaygivenoticetotheenterprise(s)concernedofitsintentionsandconsideranyrepresentations.ItmaythereafterapplytotheHighCourtforanorderrequiringtheenterprise(s)tomakegoodthedefault.
8. What filing fees are required?
Thefilingfeeis0.01%ofthemergingenterprises’combinedturnoverorassetsinBotswana,whicheverishigher.
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9. Is it necessary to obtain approval for foreign-to-foreign mergers?
TheActappliesto“alleconomicactivitywithin,orhavinganeffectwithin,Botswana”.Accordingly,foreign-to-foreignmergersarenotifiableifthemergerinvolveseconomicactivitywithinorhavinganeffectwithinBotswanaandtheprescribedthresholdsaremet.
10. Are pre-notification contacts with the authorities permitted and are pre-notification meetings normal practice?
AlthoughtheActdoesnotspecificallyprovideforpre-notificationmeetings,inBotswanatheyarebothpermittedandnormalpractice.
11. To what extent are non-competition factors relevant to the assessment of a merger?
TheActspecificallyprovidesforpublicinterestconsiderationstobetakenintoaccount.AspartoftheassessmentthattheAuthorityisrequiredtomakeintermsoftheAct,theAuthoritymaytakeintoaccountanyfactoritconsidersrelevanttothebroaderpublicinterest,including:
• theeffectthatamergerwillhaveonaparticularindustrialsectororregion;
• employment;• theproductionordistributionofgoodsor
theprovisionofservices;• exports;• citizenempowerment;and• theabilityofnationalindustriestocompete
ininternationalmarkets.
TheAuthorityhastakenintoconsiderationnon-competitionfactorssuchaspublicinterest,employmentandcitizenempowermentintheassessmentofmergers.Forexample,inadecisionbytheAuthorityinlate2012,theAuthorityapprovedaproposedmergeronconditionthatthemergedentitywouldnotretrenchanyBotswana-basedemployeesforaperiodofthreeyearsfromthedateofthemerger.Inothermergersnotifiedsincethen,employment-relatedconditionshavebeenimposed.
12. Do the authorities contact customers and competitors of the merging parties as part of the merger review process? To what extent are the submissions of customers and competitors influential?
TheAuthoritymaycontactthecustomersandcompetitorswhosedetailsareprovidedbythefilingentityand,whereapplicable,thosealreadyknownbytheAuthority.ThesubmissionsaresourcedfortheAuthority’sinvestigativepurposesonlyanddonotdetractfromtheAuthority’sindependentassessmentofthemerger. 13. Who else can make submissions to the authorities when a merger is being considered? Are employees contacted as part of the process and can employees make submissions?
Anyperson,includingemployees,maymakevoluntarysubmissionstotheAuthorityeventhoughtheAuthoritydoesnotcontactemployeesortheirrepresentativesforsubmissions.
14. Are merging parties given an opportunity to make representations before a decision is issued where the authority intends to prohibit a merger or impose conditions?
IntermsoftheAct,theAuthoritymay,ifitconsidersitappropriate,determinethatoneormorehearingsshouldbeheldinrelationtoaproposedmerger.InsuchcasestheAuthorityisrequiredtogivereasonablenoticeinwriting.ThepartiesarethenrequiredtosubmittotheAuthority,within30daysofreceiptofthenotice,anyrepresentationsthattheymaywishtomakeinrelationtotheproposedaction.WhiletheActdoesnotincludeadefinitionofdays,basedonthecalculationoftimeperiodsundertheInterpretationAct,anyreferencetodaysmustbeinterpretedtomeancalendardays.
15. What are the opportunities for judicial appeal or review of a decision in respect of a merger that the parties are dissatisfied with?
MergersareinvestigatedbytheAuthorityandreferredtotheCommissionforadjudication.AlldeterminationsmadeanddirectionsgivenbytheCommissionaresubjecttoappealtotheHighCourtofBotswana.
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16. Does the legislation apply to joint ventures?
Thelegislationdoesnotspecificallyrefertojointventures.JointventuresthatareclassifiedasmergersfalltobenotifiedtotheAuthorityiftheymeetthethresholdsformandatorynotification.
17. Does the legislation specifically prohibit cartel conduct? If so, are there examples of the authorities pursuing firms for engaging in cartel conduct?
TheActregulatesprohibitedpracticesandspecificallyprohibitscertainhorizontalrestrictivepractices(unlawfulcompetitionbetweencompetitors).TheActstipulatesthatanenterpriseshallnotenterintoahorizontalagreementwithanotherenterprisetotheextentthatsuchagreementinvolvescertainpractices,suchas:
• price-fixing(eitherdirectorindirect);• dividingmarkets(byallocatingcustomers,
suppliers,territoriesorspecifictypesofgoodsorservices);
• bid-rigging(exceptwherethepersonrequestingthebidsortendersisinformedofthetermsoftheagreementbeforethetimethatthebidsortendersaremade);
• restraintsonproductionorsale,includingrestraintbyquota;
• aconcertedpractice;or• acollectivedenialofaccess,ofanenterprise,
towhichisanarrangementorassociationcrucialtocompetition[sic].
OtherhorizontalagreementsmaybeprohibitedbytheAuthorityif,followinganinvestigationbytheAuthority,suchagreementisfoundtohavetheobjectoreffectofpreventingorsubstantiallylesseningcompetitioninamarketforanygoodsorservicesinBotswana.TheAuthoritymaycarryoutaninvestigationtodeterminewhethertheprohibitionshouldbeappliedifitissatisfiedthatthepartiestotheagreement,inthecaseofahorizontalagreement,togethersupplyoracquire10%ormoreofthegoodsorservicesinanymarketinBotswana.TheAuthoritymayprohibitanyhorizontalagreementwhich(i)limitsorcontrolsproduction,marketoutletsoraccess,technicaldevelopmentorinvestment;(ii)appliesdissimilarconditionstoequivalenttransactionswithothertradingparties,therebyplacingthematacompetitiveadvantage;and(iii)makestheconclusionofcontractssubjecttoacceptancebyotherpartiesofsupplementary
conditionswhich,bytheirnatureoraccordingtocommercialusage,havenoconnectionwiththesubjectofsuchcontracts.
TheAuthorityhasinvestigatedcartelactivityamongstsuppliersofgovernmentfoodrations,medicalaidschemesandlocalpanel-beatingcompanies.
18. What are the authorities’ powers of investigation in relation to cartel conduct and other prohibited practices?
TheActconfersbroadinvestigativepowersontheAuthority.Notably,theActempowerstheAuthoritytosubpoenaanypersonconsideredbytheAuthoritytoberelevanttotheinvestigation.PartVIIoftheActstipulatestheinvestigativepowersoftheAuthorityinrespectofprohibitedhorizontalandverticalagreements.Section35toSection37oftheActempowerstheAuthority,eitheronitsowninitiativeoruponreceiptofinformationoracomplaintfromanyperson,tostartaninvestigationintoanypracticethatitreasonablysuspectsconstitutesacontraventionoftheprohibitedhorizontalorverticalagreementsprovisionsoftheAct,oramountstoanabuseofadominantpositioninthemarket.
Writtennoticeoftheinvestigationmustbeservedassoonaspracticableoneveryenterprisethatissuspectedtobeapartytothepractice,indicatingthenatureoftheinvestigationandinvitingtheenterprisetomakerepresentationsinthatregardiftheysowish.WheretheAuthorityconsidersthatitwouldmateriallyprejudicetheinitialstagesoftheinvestigationtogivesuchnotice,itmaydeferfromgivingnoticeuntilitspowersofsearchandentryareexercised.
TheAuthorityhasbroadpowersofsearchandseizure,includingthepower:
• toenterandsearchanypremisesduringnormalbusinesshoursbyadulyappointedandauthorisedinspectorinpossessionofawarrantauthorisingsuchentryandsearchofthepremises;and
• toenterandsearchanypremisesotherthanaprivatedwellingbyadulyappointedandauthorisedinspectornotinpossessionofawarrantauthorisingthesearchiftheowner,oranypersonincontrolofthepremises,consentstotheentryandsearchofthepremises.
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Notwithstandingthesebroadpowersofinvestigation,theAuthorityisnotempoweredtodemandtheproductionordisclosureofinformationordocumentswhichwouldbesubjecttolegalprofessionalprivilegeinacourtoflaw.However,theAuthorityisempoweredtodemandandbeprovidedwiththenamesandaddressesofanundertaking’sclientswhererequired.Further,theActempowerstheAuthoritytoconductdawnraidswithorwithoutawarrant.RecentlytheAuthorityconductedfourdawnraidsinthemedicalaidandmotorvehicleindustriesaswellasfoodsupplyforgovernmenttenders.
AninvestigationintermsoftheActmayonlycontinueforaperiodof12months,afterwhichtheAuthoritymusteitherreferthemattertotheCommissionforprosecutionorissueacertificateofnon-referraltothecomplainant.
However,the12-monthinvestigationperiodmaybeextendedbyagreementbetweentheAuthorityandthecomplainant.
19. What are the penalties for cartel conduct? Is there a leniency policy in place? Does the legislation impose criminal sanctions?
IntermsoftheAct,financialpenaltiesforprohibitedrestrictiveconductmaybeappliedonlywheretheCommissionhassatisfieditselfthatthebreachoftheprohibitionwascommittedintentionallyornegligently.Insuchcases,theamountofapenaltyimposedshallnotexceed10%oftheturnoveroftheenterpriseduringthebreachoftheprohibitionuptoamaximumofthreeyears.Infixingtheamountofaparticularfine,theCommissionmayhaveregardtospecificfactorsincludingthegravityoftheinfringementandtherecurrenceordurationoftheinfringement.
Anactionfordamagesorothersumofmoneybyanypersonorfirmmaybemadeonlyinrespectof:
• price-fixing(eitherdirectorindirect);• dividingmarkets(byallocatingcustomers,
suppliers,territoriesorspecifictypesofgoodsorservices);
• bid-rigging(exceptwherethepersonrequestingthebidsortendersisinformedofthetermsoftheagreementbeforethetimethatthebidsortendersaremade);
• restraintsonproductionorsale,includingrestraintbyquota;
• aconcertedpractice;or• acollectivedenialofaccess,ofanenterprise,
towhichisanarrangementorassociationcrucialtocompetition[sic],subjecttotheconducthavingbeenestablishedbyadeterminationoftheCommissionor,followinganappealagainstthedetermination,byajudgmentoftheHighCourtofBotswana.
TheAuthorityhasnoleniencypolicyinplaceatpresent.However,theAuthorityhasconductedworkshopstosensitisethebusinesscommunitytoadraftleniencypolicy.TheActdoesmakeprovisionforanyenterprisetoofferanundertakingtotheAuthoritytoaddressanyanti-competitiveconcernthathasarisen,ormaybeexpectedtoarise,priortoorduringaninvestigationofanyagreementinrespectofrestrictiveordominantconduct.
WhilsttherearenocriminalsanctionsexpresslyprovidedintheActforengagingincartelconduct,theActprovidesforcriminalsanctions,primarilyforindividualswhoarefoundtohaveinterferedinaninvestigation.
20. Is there a provision in the legislation providing for a mechanism to apply for exemption from certain parts of the legislation?
TheActprovidesthatanyagreement,otherthanarestrictiveagreementspecificallyprohibitedbytheAct,maybeexemptfromapplicationoftheActifitcanbereasonablyexpectedthattherewillbebenefitsforthepublicthatoffsettheanti-competitiveeffects,suchas:
• themaintenanceoflowerprices,higherqualityorgreaterchoiceforconsumers;
• thepromotionormaintenanceoftheefficientproduction,distributionorprovisionofgoodsandservices;
• thepromotionoftechnicaloreconomicprogressintheproduction,distributionorprovisionofgoodsandservices;
• themaintenanceorpromotionofexportsfromBotswanaoremploymentinBotswana;
• thestrategicornationalinterestofBotswanainrelationtoaparticulareconomicactivitybeingadvanced;
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• theprovisionofsocialbenefitswhichoutweightheeffectsoncompetition;
• theagreementoccurringwithinthecontextofacitizenempowermentinitiativeofgovernment;or
• theagreementinanyotherwayenhancingtheeffectivenessofthegovernment’sprogrammesforthedevelopmentoftheeconomyofBotswana,includingtheprogrammesofindustrialdevelopmentandprivatisation;providedthatthepreventionorlesseningofcompetitionisproportionatetothebenefitsforthepublicanddoesnotallowtheenterpriseconcernedtoeliminatecompetitioncompletely.
TheAuthoritymaygrantanexemptionwheretheagreementsareunlikelytoleadtoasubstantiallesseningofcompetition,orwhereoneormoreofthecircumstancesspecifiedinthelastfourbulletpointsaboveexistorarereasonablyexpectedtoexist,inrelationtothoseagreements.
WithregardtoexemptionsfromprovisionsoftheActdealingwithmergercontrol,theMinisterofTradeandIndustrymay,byregulation,specifycategoriesofmergersexemptfromtheapplicationoftheActbyreferencetothecommercialorindustrialsectorinvolved,thenatureoftheactivitiesinwhichtheenterprisesareengaged,orsomeaspectofthegeneralpublicinterest.
21. Is minimum resale price maintenance prohibited?
Subjecttocertainexemptions,theActprohibitsanyagreementinvolvingresalepricemaintenance.However,asuppliermayrecommendaresalepriceprovidedthat(i)thesuppliermakesitclearthatthepriceissimply‘recommended’andisnotbinding,andthat(ii)theproductlabellingmakesitclearthatthepriceis’recommended’.
22. In what circumstances are exclusive agreements unlawful? If exclusive agreements raise concerns in specific circumstances, what factors are relevant to their lawfulness or unlawfulness?
AnexclusiveagreementmaybeprohibitedbytheAuthorityif,followinganinvestigationbythe
Authority,suchagreementisfoundtohavetheobjectoreffectofpreventingorsubstantiallylesseningcompetitioninamarketforanygoodsorservicesinBotswana.Thefactorstobeconsideredare,interalia,whethertheagreementinissuelimitsorcontrolsproduction,marketoutletsoraccess,technicaldevelopmentorinvestment.
23. Does the legislation prohibit the abuse of a dominant position? If so, what is the threshold for dominance and what conduct amounts to an abuse?
TheActprohibitstheabuseofadominantposition.ForthepurposesoftheAct,adominantpositionreferstoasituationinwhichoneormoreenterprisespossesssucheconomicstrengthinamarketsoastoallowtheenterprisetoadjustpricesoroutputwithouteffectiveconstraintfromcompetitorsorpotentialcompetitors.
TheAuthoritywillconsideradominantpositiontoexistinthesupplyofgoodsorservicesif(i)25%ofthosegoodsorservicesaresuppliedbyoneenterprise,orareacquiredbyoneenterprise;or(ii)50%ofthosegoodsorservicesaresuppliedbythreeorfewerenterprises,orareacquiredbythreeorfewerenterprises.
TheActprovidesthat,indeterminingwhetheranabuseofadominantpositionhasoccurred,theAuthoritymayhaveregardtowhethertheagreementorconductinquestion:
• maintainsorpromotesexportsfromBotswanaoremploymentinBotswana;
• advancesthestrategicornationalinterestofBotswanainrelationtoaparticulareconomicactivity;
• providessocialbenefitswhichoutweightheeffectsoncompetition;
• occurswithinthecontextofacitizenempowermentinitiativeofgovernment,orotherwiseenhancesthecompetitivenessofsmall-andmedium-sizedenterprises;or
• inanyotherwayenhancestheeffectivenessofthegovernment’sprogrammesforthedevelopmentoftheeconomyofBotswana,includingtheprogrammesofindustrialdevelopmentandprivatisation.
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24. Are there examples of the authorities pursuing firms for abusing a dominant position?
ByOctober2013,33%ofthecasesinvestigatedbytheAuthoritywerecasesofabuseofdominancewhichincludedpredatorypricing,refusaltodealandexclusiveagreements.AcomplaintofpredatorypricingintheUHTlong-lifemilkmarketwaslodgedbyDeltaDairies(Pty)Limitedagainstachainstoresupermarket.FollowinginvestigationsitwasfoundthatthesupermarketchainstorewasnotadominantplayerasallegedanditsmarketshareintheUHTlong-lifemilkmarketwasonly2%(significantlybelowthe25%dominancethreshold).
Further,in2014adecisionwastakenbytheAuthoritytoorderamergedenterprise(Jack’sGym)todivest,inordertoreduceitsmarketconcentration.Themergerassessmentshowedthatthereweresubstantivecompetitionconcernsthatwouldariseinthemarketasthemergerresultedinthemergedentityacquiringadominantposition(asseenfrompre-mergermarketshareestimates).
25. Does the legislation impose penalties on firms for the abuse of a dominant position?
TherearenopunitivesanctionsimposedbytheActfortheabuseofadominantposition.TheActisaimedatremedying,mitigatingorpreventingthedetrimentaleffectsthatmayresult,haveresultedorwillresultfromtheadverseeffecton,orabsenceof,competition.Inpursuingtheseaims,theCommissionmayissueadirectiontoanenterpriserequiringitto:
• terminateoramendanagreement;• ceaseoramendapracticeorcourse
ofconduct,includingconductinrelationtoprices;
• observespecifiedconditionsinrelationtothecontinuationofanagreementorconduct;
• supplygoodsorservices,orgrantaccesstofacilities,eithergenerallyortonamedparties;
• separateitselffromordivestitselfofanyenterpriseorassets;or
• providetheCommissionwithspecifiedinformationonacontinuingbasis.
26. Are there rules in relation to price discrimination?
Yes.WhiletheActdoesnotcontainexpressprovisionsinrespectofpricediscrimination,theAuthorityreliesontheprohibitionintheActagainstanyagreementwhichenvisagestheapplicationofdissimilarconditionsinequivalenttransactionswithothertradingparties,tocontrolpricediscriminationwhichplacesentitiesatacompetitivedisadvantage.
27. Does the authority publish its decisions and, if so, is there a website where such decisions are available?
Yes.TheAuthoritypublishesmergernoticesandmergerdecisionsonitswebsite,whichcanbeaccessedatwww.competitionauthority.co.bw
BOOKBINDER BUSINESS LAW9thfloor,iTowersNorthLot54368,CBDGaboronePrivateBag382,GaboroneBotswanaT:+2673912397
www.bookbinderlaw.co.bw
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Burundi
RUBEYA & CO-ADVOCATES Willy Rubeya
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1. What is the relevant competition legislation and who are the enforcers?
TherelevantcompetitionlegislationisLawNo.1/06of25March2010(theAct).NoministerialordershavebeenissuedtoassistwiththeapplicationoftheActatthisstage.
InaccordancewiththeAct,aCompetitionCommissionshallbeestablished(theCommission)astheindependentregulatortoenforceit.TheCommissioncanconductinvestigationsinitiatedbytheMinistryofTrade,interestedpartiesoronitsowninitiative.TheCommissionwillberequiredtohandoveramattertotheAttorneyGeneralwherecriminalsanctionsaretobeappliedtoapartybeinginvestigatedorhavingalreadybeeninvestigated.TheCommissionhasnotyetbeenestablished.However,itisreferredtoinArticle12oftheAct.
2. Are there any proposed amendments or new regulations expected to come into force?
TherearenoproposedamendmentsornewregulationsasatthetimeofwritingandtheActisstillinforce.
3. Is the law actively enforced?
TheActisnotactivelyenforcedatthisstagebecausetheCommissionhasnotyetbeenestablished.
4. What are the current priorities or focus areas of the competition authorities?
TheCommissionhasnotyetbeenestablished.
5. What kind of transaction constitutes a notifiable merger?
ConcentrationsaresubjecttomergercontrolandmustbenotifiedtotheCommission.
Aconcentrationisdeemedtoarisewhere:
• twoormoreundertakingsunitethroughmergeroracquisitionoranyotherformofhorizontal,verticalorheterogeneoustakeover(basedonArticle46oftheAct);
• thereisatransferofownershiporuseofallorpartoftheproperty,rightsorobligationsofacompany(basedonArticle47,paragraphoneoftheAct);or
• thetransactionhastheeffectorpurposeofallowingacompanyoragroupofcompaniestodirectlyorindirectlyexerciseadominantinfluenceintherelevantmarket.
WheretheCommissionfindsthattheconcentrationwillmateriallyreducecompetition,itcanmakeanorderfortheconcentrationtobeprohibitedorfortheundertakingsconcernedtodisposeofassetsorsharesinordertoalleviatethedamagetocompetition.TheCommissionmayauthoriseconcentrationsthathavetheeffectofmateriallyreducingcompetitioniftheyresultinefficiencygainsforthenationaleconomythatoutweighthedetrimentaleffecttocompetition intherelevantmarket.However,thegainmust nothavebeenachievablewithouttheconcentrationtakingplace(basedonArticle48,paragraphoneoftheAct).
6. What are the thresholds for mandatory merger notification (e.g. assets, turnover and/ or market share)?
ThethresholdsformandatorynotificationaretobeprescribedbytheMinistryofTradeuponrecommendationbytheCommission.Itisprovidedthatproposedconcentrations,wheretheindividualandcombinedturnoveroftheundertakingsconcernedexceedthethresholdprescribedbytheMinistryofTrade,mustbenotifiedtotheCommission.SuchproposedconcentrationscannotbeimplementedforaperiodofthreemonthscommencingonthedateofnotificationtotheCommission.
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ProposedconcentrationswheretheindividualandcombinedturnoveroftheundertakingsconcernedarebelowthethresholdsprescribedbytheMinistryofTrademustbenotifiedtotheCommissionwithin15daysoftheircompletion(basedonArticle49oftheAct).
7. Is there a prohibition on the pre-implementation of a merger? If so, does the legislation make provision for a penalty?
TheActestablishesatieredstructurewherebytheabilitytopre-implementaconcentrationiscontingentuponthethresholdbeingexceeded.ConcentrationscategorisedasfallingbelowthethresholdmaybeimplementedpriortotheirnotificationtotheCommissionprovidedthattheCommissionisnotifiedwithintheprescribedperiodaftercompletionoftheconcentration.ConcentrationscategorisedasexceedingthethresholdsshallnotbeimplementedpriortonotificationandapprovalbytheCommission.Therearenopenaltiesforpre-implementationbuttheCommissionhastherighttocancelthemerger.
8. What filing fees are required?
Notapplicable.
9. Is it necessary to obtain approval for foreign-to-foreign mergers?
Notapplicable.
10. Are pre-notification contacts with the authorities permitted and are pre-notification meetings normal practice?
Pre-notificationcontactswiththecompetitionauthoritiesarenotdealtinthelegislation.
11. To what extent are non-competition factors relevant to the assessment of a merger?
TheCommissionwillconsiderapplicationsbasedoncircumstancesrelevanttothemerger,butsincetheCommissionisnotyetoperationaltherearenoexamplesatthisstage.
12. Do the authorities contact customers and competitors of the merging parties as part of the merger review process? To what extent are the submissions of customers and competitors influential?
Notapplicable.
13. Who else can make submissions to the authorities when a merger is being considered? Are employees contacted as part of the process and can employees make submissions?
Intermsofthecurrentposition,onlytheMinistryofTradecanmakesubmissions.WhentheCommissionbecomesoperational,theMinistryofTrade,anybusinessentity,oranyinterestedpartywillbeallowedtomakesubmissions.
14. Are merging parties given an opportunity to make representations before a decision is issued where the authority intends to prohibit a merger or impose conditions?Notapplicable.
15. What are the opportunities for judicial appeal or review of a decision in respect of a merger that the parties are dissatisfied with?
Article16oftheActprovidesforthepossibilityofreview.TheCommissionwillconsiderapplicationsforreviewofitsdecisionswherecircumstanceshavechanged.Decisions,whichwillneedtobemotivatedandmadepubliclyavailable,willbecapableofbeingappealed.Suchanappealwillhavenosuspensiveeffect.
16. Does the legislation apply to joint ventures?
ThemergercontrolaspectsoftheActapplytojointventureswherethereisanacquisitionofcontrolbyoneormoreundertakings.
17. Does the legislation specifically prohibit cartel conduct? If so, are there examples of the authorities pursuing firms for engaging in cartel conduct?
RestrictiveagreementsandpracticesareregulatedbyArticle37oftheAct,whichprohibitsconcertedpractices,
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agreementsandalliances,expressorimplied,between undertakingswhichhaveastheirobjectormayhaveastheeffectoftheirconduct,theprevention,restrictionordistortionofcompetitioninamarketand,inparticular,thosewhich:
• limitaccesstothemarket;• interferewithpricesettingthrough
marketforces,byartificiallyincreasingordecreasingprices;
• distortthemarket,distributionchannelsandsourcesofsupply;
• limitorcontrolproduction,markets,investmentortechnicaldevelopment;
• distortorfixconditionstoatenderwithoutinformingthetenderer;or
• amounttoarefusaltosell.
18. What are the authorities’ powers of investigation in relation to cartel conduct and other prohibited practices?
TheMinistryofTradehas,andinfuturetheCommissionwillhave,thepowertoinvestigatecartelconductandotherprohibitedpractices.
19. What are the penalties for cartel conduct? Is there a leniency policy in place? Does the legislation impose criminal sanctions?
TheCommissionmayimposeawiderangeofsanctionspenalisingcartelconductandotherformsofrestrictiveagreementsandpractices.TheCommissionmay,eitherattherequestofaninterestedpartyorofitsownaccord:
• issueaprohibitoryinjunctionstoppingtheanti-competitivepractice;
• makeanorderfordamages;and• orderpenaltypaymentsfortheperiodduring
whichtheoffendingundertakingwasindefault.
Moreover,wheretheanti-competitivepracticeadverselyaffectstheeconomyorrelevantsector,theCommissionmaytakemeasurestoimposeinteriminjunctiverelief.Wheretheoffendingundertakingdoesnotcomplywiththeprohibitoryinjunction,theCommissioncanimposeafinancialpenaltyofupto50%oftheprofitsor20%ofthenationalturnoverachievedinthefinancialyearinwhichthepracticeswereimplemented.Thefinesareproportionatetotheseriousnessofthechargesandthescaleofthedamagetotheeconomy.Thefinesmaybedoubledintheeventthattheoffenceisrepeated.
Theundertakingmustpaythepenaltywithinaperiodof60days,commencingonthedateofnotificationofsuchpenalty.Wherethereisadelayinpayingthepenalty,theundertakingisliableforfurtherpaymentwherebyadailyamountisimposed,equivalenttoahundredthoftheoriginalpenalty.Uponthenon-paymentofapenalty,theCommissionmayorderthetemporaryclosureoftheundertaking.Wheretheundertakingproducesavarietyofproducts,theclosureaffectstheproductssubjecttotheanti-competitivepractice(s).
Anundertakingthatsufferslossesordamagesasaresultofanti-competitivepracticesmayapplytotheCommissionforanorderfordamagesifitcanestablishacausallinkbetweentheanti-competitivepracticesandanydamagesufferedbyit.
TheActdoesnotprovideforcriminalsanctionstobeimposedforthecontraventionofprovisionsrelatingtorestrictiveagreementsandpractices.Criminalsanctionsareapplicableonlytooffencesincidentaltoaninvestigationorproceedings,assetoutinArticle73oftheAct.
20. Is there a provision in the legislation providing for a mechanism to apply for exemption from certain parts of the legislation?
ConcentrationscanbeallowedifpreviouslynotifiedtotheCommission,orwherethepartiestotheconcentrationcanshowthattheconcentrationhasbroughtabout,orwillbringabout,netgainstoeconomicefficiencybyreducingthepriceofgoodsorservices,orwherethereisasignificantimprovementinthequalityortheefficiencygainsintheproductionordistributionofthiscommodity.
21. What powers of investigation does the legislation confer on the competition authorities to investigate cartels, if any?
OffencesprovidedforbytheActarewithinthecompetenceoftheofficersoftheJudicialPolice,swornofficersoftheMinistryofTrade,customsagentsandswornagentsoftheCommission.Theinvestigatorsareempoweredtosubpoenadocumentsrelevanttotheinvestigation.
Further,theinvestigatorsmaybegrantedsearchorders allowingthemtoaccesstheundertaking’spremises,vehicles,aswellastheprivatedwellingsoftheindividualsconcerned.Thesearchorderspermittheinvestigatorstoseizedocumentsand
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productsrelevanttotheinvestigation,evenifsuchdocumentsandproductsareconfidential.Tofacilitatethis,undertakingsareunderadutytoensurethatalldocumentsrelevanttotheiractivitiesarekeptsafeforaminimumof10years.
Theofficialsinvolvedareboundbyadutyofprofessionalsecrecy.Oncetheinvestigatorshavecompletedanofficialreport,theydivestthemselvesoftheirinvolvementintheprocedureandtheenquiryiscontinuedbytheCommission.
22. Is minimum resale price maintenance prohibited?
IntermsofArticle31oftheAct,minimumresalepricemaintenanceisprohibited,saveinthecaseofbooks,newspapersoranyotherpublicationsorwherethesaleofaparticularproductisspecificallyregulated.
23. In what circumstances are exclusive agreements unlawful? If exclusive agreements raise concerns in specific circumstances, what factors are relevant to their lawfulness or unlawfulness?
TheActprohibitsconcertedpractices,agreementsorpartnerships,whetherexpressorimplied,whichhavetheobjectoreffectofrestrictingordistortingfreecompetitionwithinthenationalmarketorasubstantialpartthereof.
24. Does the legislation prohibit the abuse of a dominant position? If so, what is the threshold for dominance and what conduct amounts to an abuse?
TheActprohibitstheabuseofadominantpositiononthenationalmarketorasubstantialpartthereof.Inparticular,abuseofdominancemayinvolve:
• preventingtheestablishmentofacompetingundertaking;
• requiringorinducingasuppliernottodealwithacompetingundertaking;
• theterminationofanestablishedcommercialrelationshiponthegroundsthatabusinesspartnerrefusestosubmittounjustifiedcommercialconditions;
• limitingproduction,themarketortechnicaldevelopmenttotheprejudiceofconsumers;
• refusaltosell; • discriminatorysalesconditions;or • salestying.
However,iftheundertakingcanestablishthatthepracticesconcernedareaimedatorresultinanincreaseinthequalityofgoodsorservices,ortheimprovementinproductionorthereductionofcosts,inadditiontoanimprovementinthetechnical,technologicaloreconomicprocesses,thepracticesmentionedabovewillbedeemedtofalloutsidethescopeoftheabuseofdominance.Thepracticesmustnotresultinanyanti-competitiveeffectgoingbeyondwhatisstrictlyrequiredtoachievethegains.Furthermore,thepracticesmustnoteliminateallformsofcompetitioninasubstantialpartoftheparticularsector.
25. Are there examples of the authorities pursuing firms for abusing a dominant position?
Notapplicable.
26. Does the legislation impose penalties on firms for the abuse of a dominant position?
TheCommissionmayimposethesamesanctionsfortheabuseofdominanceasthosewhichmaybeimposedforrestrictiveagreementsandpractices.Seequestion7.
27. Are there rules in relation to price discrimination?
Yes,thelawprovidesrulesinrelationtopricediscrimination.TheAct,inArticles59and60,providesforupperandlowerceilingpricestobeset.
28. Does the authority publish its decisions and, if so, is there a website where such decisions are available?
Notapplicable.
RUBEYA & CO-ADVOCATES 28Ruedel'industriePOBox202Bujumbura,BurundiT:+25722248910
www.rubeya.bi
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BOWMANS
Tamara Dini | Xolani Nyali | Sivuyise Lutshiti
COMESA
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1. What is the relevant competition legislation and who are the enforcers?
TheCommonMarketforEasternandSouthernAfrica(COMESA)isaregionalorganisationwhosemissionistopromoteeconomicintegrationthroughtradeandinvestmentinEasternandSouthernAfrica(theCommonMarket).
COMESAcomprises19memberstates:Burundi,Comoros,theDemocraticRepublicofCongo,Djibouti,Egypt,Eritrea,Ethiopia,Kenya,Libya,Madagascar,Malawi,Mauritius,Rwanda,Seychelles,Sudan,Swaziland,Uganda,ZambiaandZimbabwe.
Asatthetimeofwriting,fiveoftheCOMESAmemberstates(namelytheDemocraticRepublicofCongo,Djibouti,Eritrea,LibyaandUganda)havenodomesticcompetitionlawregimesinplace.
TheCOMESAcompetitionlawregimebecameoperativeon14January2013.TherelevantcompetitionlegislationcomprisestheCOMESACompetitionRegulationsandtheCOMESACompetitionRules,2004(asamended),whichwereamendedinMarch2015.TheenforcerofthelegislationistheCOMESACompetitionCommission,whichisestablishedunderArticle6oftheRegulationsandisbasedinLilongwe,Malawi.
TheCommissionisresponsiblefor,interalia,mergercontrolandtheenforcementoftheprohibitionsagainstanti-competitivebusinesspractices.
ByvirtueoftheCOMESATreaty,theRegulationsarebindingonallCOMESAmemberstates.
2. Are there any proposed amendments or new regulations expected to come into force?
Asatthetimeofwriting,therearenoproposedamendmentsornewregulationsexpectedtocomeintoforce.
3. Is the law actively enforced?
Thelawisactivelyenforced.AsatJanuary2018,morethan100mergershadbeenreportedtotheCommissionsinceitwasestablishedinJanuary2013.Thesehavelargelybeenapprovedunconditionallybutapproximatelyeightmergershavebeenapprovedsubjecttoconditions.
Todate,thereisnorecordofconcludedenforcementactioninrelationtoprohibitedpractices.TheCommissionpublishedanoticeinJune2016invitingcompaniesoperatingintheCommonMarkettoself-assesswhethertheywerepartytoagreementswhichcouldbeconstruedasamountingtoaprohibitedpractice.SuchcompanieswereinvitedtoseekauthorisationfromtheCommissionforthepotentiallyoffendingagreements. ItalsopublishedanoticeinMarch2017notifyingthepublicthatithadinitiatedaninvestigationintothecommercialisationofmediaandmarketingrightsforAfricanfootballtournamentagreementsenteredintobetweentheConfédérationAfricainedeFootball(CAF)andLagardèreSportsSAS,asportmarketingagencyandmemberoftheLagardèreGroup,basedinParis,France.ThisisthefirstinvestigationbytheCommissioninrespectofpotentiallyanti-competitiveconduct.
4. What are the current priorities or focus areas of the competition authorities?
Sinceitbecameoperational,theCommission’spriorityhasbeendealingwithapprovalapplications(inparticular,mergernotifications,applicationsforauthorisationandapplicationsforexemptionorders).
5. What kind of transaction constitutes a notifiable merger?
A‘merger’isdefinedintheRegulationsasthedirectorindirectacquisitionorestablishmentofacontrollinginterestbyoneormorepersonsinthewholeorpartofthebusinessofacompetitor,supplier,customerorotherperson,whetherthatcontrollinginterestisachievedasaresultof:
• thepurchaseorleaseofthesharesorassets;• theamalgamationorcombinationwitha
competitor,supplier,customerorotherperson;or
• anymeansotherthanthosespecifiedinthe• firsttwobulletpoints.
Amergerwhereeithertheacquiringfirm,orthetargetfirm,orboth,operateintwoormorememberstates(i.e.amergerwitharegionaldimension)andwherecertainthresholdsofcombinedannualturnoverorassetsareexceeded,
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constitutesanotifiablemergerandmustintheordinarycoursebenotifiedtotheCommission.TherequirementthatfirmsoperateintwoormorememberstatesismetwherethefirmsconcernedhaveapresenceorgenerateturnoverintheCommonMarket.
Thethresholdsfornotifiablemergersare1:
• thecombinedannualturnoverorvalueofassets(whicheverishigher)ofthemergingpartiesintheCommonMarketequalsorexceedsUSD50million;and
• eachofatleasttwoofthemergingpartieshasannualturnoverorassetsintheCommonMarketofUSD10millionormore.
Incircumstanceswhereeachofthemergingpartiesgeneratestwo-thirdsormoreoftheirannualturnoverinoneandthesamememberstate,aCOMESAfilingwillnotberequired.Instead,nationalnotificationobligationswillapply.
IntermsoftheRegulations,whereamemberstateattainsknowledgeofamergernotificationsubmittedtotheCommission,thememberstatemayrequesttheCommissiontoreferthemergerforconsiderationunderthememberstate’snationalcompetitionlawifthememberstateissatisfiedthatthemerger,ifcarriedout,islikelytodisproportionatelyreducecompetitiontoamaterialextentinthememberstateorinanypartofthememberstate(Article24(7)oftheRegulations).
TheCommissionmustthendecidewhethertodealwiththemergeritselfortoreferthemerger(inwholeorinpart)tothecompetentauthorityofthememberstateconcerned,withaviewtothatmemberstate’snationalcompetitionlawbeingapplied(Article24(8)oftheRegulations).
AbenefittobusinessisthatasingleCOMESAfilingmayreplacemultiplefilingsundernationallegislation.However,thereareafewjurisdictionsinEasternandSouthernAfricathatarenotmembersofCOMESA,includingthelargestandmostdiversifiedeconomyinAfrica,SouthAfrica.Thismeans,forexample,thataBelgianentityacquiringcontrolofaSouthAfricanentitywithsubsidiariesinSwazilandandMalawimayneedtoobtainapprovalfromtheSouthAfricancompetitionauthorities(ifthethresholdsformandatory
notificationinSouthAfricaaremet)andfromtheCommission(asSwazilandandMalawiarememberstates).
6. What are the thresholds for mandatory merger notification (e.g. assets, turnover and/ or market share)?
Asnotedabove,inorderforamergertobenotifiabletotheCommission:
• eithertheacquiringfirm,orthetargetfirm,orboth,mustoperateintwoormorememberstates;
• thecombinedturnoverorassets(whicheverishigher)ofthemergingpartiesintheCommonMarketmustbeUSD50million ormore;and
• eachofthemergingpartiesmusthaveturnoverorassetsintheCommonMarketofatleastUSD10million.
Further,whereeachofthemergingpartiesgeneratestwo-thirdsormoreoftheirannualturnoverinoneandthesamememberstate,thepartiesneednotfilewithCOMESA.Insuchinstances,nationalnotificationobligationsapplyinstead.
7. Is there a prohibition on the pre-implementation of a merger? If so, does the legislation make provision for a penalty?
ApartytoanotifiablemergermustnotifytheCommissionoftheproposedmergerwithin30daysoftheparties’decisiontomerge(theguidelinesindicatethat‘days’referstocalendardays).TheguidelinesprovidethattheCommissionconsidersthatadecisionisevidencedby(i)theconclusionofalegallybindingagreementtocarryoutthemerger(whichmaybesubjecttoconditionsprecedent);or(ii)theannouncementofapublicbidinthecaseofpubliclytradedsecurities.
TheRegulationsdonotstatethatamergermaynotbeimplementedpriortoclearance.TheCommissionhasconfirmedthatpartiestoanotifiablemerger,whohavefiled,mayimplementamergerpriortoapprovalbeinggranted,althoughtheyruntheriskoftheirmergerhavingtobeunbundledatalaterstage
1. SeeamendmenttotheCOMESACompetitionRulesontheDetermination
ofMergerNotificationThresholdsandMethod
ofCalculation,2015.
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if,forexample,theCommissionweretoprohibitthemerger.ImplementationofamergerincontraventionoftheRegulationswillresultinthemergerhavingnolegaleffect,inwhichcaserightsorobligationsimposedonthemergingpartiesbyanyagreementwillnotbelegallyenforceableintheCommonMarket.
Inaddition,theCommissionmayimposeapenaltyofupto10%ofeitherorbothofthemergingparties’annualturnoverintheCommonMarket,asreflectedintheaccountsofanypartyconcernedfortheprecedingfinancialyear,forfailuretonotifyamerger.
8. What filing fees are payable?
Currently,filingfeespayableare0.1%ofthemergingparties’combinedannualturnoverorcombinedassets(whicheverishigher)intheCommonMarket,subjecttoacapofUSD200000.
9. Is it necessary to obtain approval for foreign-to-foreign mergers?
TheRegulationsapplyto“alleconomicactivities...withinorhavinganeffectwithin”theCommonMarket.Foreign-to-foreignmergersarenotifiableiftheyhavearegionaldimensionandifthethresholdsaremet.Seequestion5.
10. Are pre-notification contacts with the authorities permitted and are pre-notification meetings normal practice?
TheCommissionhaspermittedandencouragedpre-notificationcontactswherenecessary.Intheordinarycourse,pre-notificationcontactsarenotrequiredbutcanbehelpfultoclarifyandagreewiththeCommissiontheapproachthatwillbetakeninaparticularmergerfilingandthespecificinformationthattheCommissionwillrequire.
11. To what extent are non-competition factors relevant to the assessment of a merger?
TheRegulationsprovidethatwhencalledupontoconsideramerger,“theCommissionshallinitiallydeterminewhetherornotthemergerislikelytosubstantiallypreventorlessencompetition”(byassessingarangeofcompetitionand
market-relatedfactors),andifitappearsthatthemergerislikelytosubstantiallypreventorlessencompetition,theCommissionmustthendetermine:
• whetheranytechnological,efficiencyorotherpro-competitivegainwillbegreaterthanandoffsettheanti-competitiveeffects;and
• whetherthemergercanbejustifiedonsubstantialpublicinterestgrounds.
Indeterminingthelatter,theCommissionisrequiredtotakeintoaccountallmattersthatitconsidersrelevantinthecircumstancesandtohaveregardtothedesirabilityof:
• maintainingandpromotingeffectivecompetitionbetweenpersonsproducingordistributingcommoditiesandservicesintheregion;
• promotingtheinterestsofconsumers,purchasers,andotherusersintheregion,withregardtotheprices,qualityandvarietyofsuchcommoditiesandservices;
• promotingthroughcompetition,thereductionofcostsandthedevelopmentofnewcommodities;and
• facilitatingtheentryofnewcompetitorsintoexistingmarkets.
TheRegulationsfurtherprovidethatamergershallbecontrarytothepublicinterestiftheCommissionissatisfiedthatthemerger:
• haslessenedsubstantially,orislikelytolessensubstantially,thedegreeofcompetitionintheCommonMarketoranypartthereof;or
• hasresultedin,orislikelytoresultin,orstrengthen,apositionofdominancewhichisorwillbecontrarytothepublicinterest.
12. Do the authorities contact customers and competitors of the merging parties as part of the merger review process? To what extent are the submissions of customers and competitors influential?
TheCommissionmayconductanenquiryforthepurposesofdeterminingwhetherornottoapproveamerger(Article26(5)and26(6)oftheRegulations).Beforeembarkingonanenquiry,theCommissionshalltakeallreasonablestepstonotifyalltherelevantmemberstates.Thenoticeshallin
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relationtotheenquiry:(i)includethenatureoftheproposedenquiry;and(ii)calluponanyinterestedpersonswhowishtosubmitwrittenrepresentationstotheCommissioninrelationtothesubjectmatteroftheenquiry.Inaddition,themergernotificationformsforanotificationtotheCommissionrequirethecontactdetailsoftheparties’competitorsandcustomers.TheCommissiontypicallycontactscompetitorsandcustomerseitherdirectlyorthroughnationalregulators.
13. Who else can make submissions to the authorities when a merger is being considered? Are employees contacted as part of the process and can employees make submissions?
Employeesarenottypicallycontactedaspartofthemergerreviewprocess.Pleasealsoseetheresponsetoquestion12.
14. Are merging parties given an opportunity to make representations before a decision is issued where the authority intends to prohibit a merger or impose conditions?
Article26oftheRegulationsprovidesasfollows:“BeforemakinganorderunderthisArticle,theCommissionshallensurethateverypersonaffectedtherebyisinformedofthegeneralcontentoftheorderitproposestomakeandisgivenanadequateopportunitytomakerepresentationsinthematter.”
WheretheCommissionhasconcernsaboutaparticularmerger,itwillinformthemergingpartiesbeforeadecisionismadetoprohibitthemergerorimposeconditions.Asatthetimeofwriting,theCommissionhasnotprohibitedanymergersalthoughithasapprovedcertainmergerssubjecttoconditions.
15. What are the opportunities for judicial appeal or review of a decision in respect of a merger that the parties are dissatisfied with?
AnypersonaggrievedbyadecisionbytheCommissionmayappealtotheBoardofCommissioners.TheBoardmayhearappealsfrom,orreviewanydecisionbytheCommissionthatmay,intermsoftheRegulations,bereferredtoitandmaymakeanyrulingorordernecessaryorincidentaltotheperformanceofitsfunctionsintermsoftheRegulations.DecisionsoftheBoardofCommissionersmaybeappealedtotheCOMESACourtofJusticebasedinKhartoum,Sudan.
16. Does the legislation apply to joint ventures?
TheRegulationsdonotspecificallyrefertojointventures.JointventuresthatareclassifiedasmergersfalltobenotifiedtotheCommissioniftheyconstituteamergerasdefinedandhavearegionaldimension.TheGuidelinesprovidethatforajointventuretobeamerger,itmustbeafull-functionjointventureandmustperformallthefunctionsofanautonomouseconomicentity.
17. Does the legislation specifically prohibit cartel conduct? If so, are there examples of the authorities pursuing firms for engaging in cartel conduct?
Yes.TheRegulationsprohibitthefollowingpracticeswhereundertakingsareengagedinthemarketinrivalorpotentiallyrivalactivities:
• agreementsfixingprices,whichagreementshinderorpreventthesaleorsupplyorpurchaseofgoodsorservicesbetweenpersons,orlimitorrestrictthetermsandconditionsofsaleorsupplyorpurchasebetweenpersons,orlimitorrestrictthetermsandconditionsofsaleorsupplyorpurchasebetweenpersonsengagedinthesaleofpurchasedgoodsorservices;
• collusivetenderingandbid-rigging;• marketorcustomerallocationagreements;• allocationbyquotaastosalesandproduction;• collectiveactiontoenforceagreements;• concertedrefusalstosupplygoodsorservices
toapotentialpurchaser,ortopurchasegoodsorservicesfromapotentialsupplier;or
• collectivedenialsofaccesstoanarrangementorassociationwhichiscrucialtocompetition.
TherearenoexamplesofcartelcasesatthisstageastheCommissionhasnotyetproceededagainstanyfirmsforengagingincartelconduct.
18. What are the authorities’ powers of investigation in relation to cartel conduct and other prohibited practices?
Inconductingitsinvestigations,theCommissionmay,inaccordancewiththeRegulationsandinkeepingwiththeprinciplesofnaturaljustice,orderanypersontoappearbeforeittogiveevidence,requirethediscoveryorproductionofanydocumentorpartthereof,andtakeanyotherreasonableactionwhichmaybenecessarytofurthertheinvestigation.
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IntermsoftheapplicationoftheRegulationsanddomesticcompetitionlawofthememberstates,itisstipulatedthattheRegulationshaveprimaryjurisdictionoveranindustryorasectorofanindustrywhichissubjecttothejurisdictionofaseparateregulatoryentity,regardlessofwhetherdomesticorregional.Theonlyfurtherexemptionsarethosemadebynationallegislation.
19. What are the penalties for cartel conduct? Is there a leniency policy in place? Does the legislation impose criminal sanctions?
IntermsofRule79,themaximummonetarypenaltyforeachcontraventionofArticle19is750000unitswhichisequivalenttoUSD750000.TheRegulationsdonotprovideforaleniencypolicyanddonotspecifycriminalsanctionsforcartelconduct.However,theCommissionhaspreparedaDraftCorporateLeniencyPolicydocumentwhichhasbeencirculatedforcomment.
20. Is there a provision in the legislation providing for a mechanism to apply for exemption from certain parts of the legislation?
TheCommissionmay,uponapplicationbyoronbehalfofanundertaking,grantanauthorisationtotheundertakingtoenterintoand/orgiveeffecttocontracts,arrangementsorunderstandingseveniftheyareanti-competitive,iftheCommissiondeterminesthattherearepublicbenefitsoutweighingtheanti-competitivedetrimentofthecontract,arrangementorunderstanding.
Whiletheauthorisationremainsinforce,nopartytothecontract,arrangementorunderstandingwillbeinbreachoftheapplicableArticlesoftheRegulationsbyenteringintoorgivingeffecttothecontract,arrangementorundertaking.Theauthorisationmaybegrantedtocoverthosewhosubsequentlybecomepartiestothecontract,arrangementorunderstanding.Theundertakingconcerned,oranyotherpersonwithasubstantialfinancialinterestaffectedbyadecisionoftheCommissioninthisregard,mayappealthatdecisiontotheBoardofCommissionersinthemannersetoutintheRegulationsandtheRules.
TheCommissionhastodatepublishedonlyoneapplicationforexemption/authorisationbyEvereadyEastAfricaLimitedinrelationtoagreementsthatithaswithfourdifferentmultinationalsuppliersforthesupplyof,interalia,writinginstruments(pens,etc.),carbatteries,
lightingproductsincludingincandescentandenergy-savingbulbs,andhomecarefast-movingconsumergoods.
21. Is minimum resale price maintenance prohibited?
TheRegulationsdonotstatethatminimumresalepricemaintenanceisprohibited.
22. In what circumstances are exclusive agreements unlawful? If exclusive agreements raise concerns in specific circumstances, what factors are relevant to their lawfulness or unlawfulness?
Anexclusiveagreementbetweenundertakings(likeanyotheragreementbetweenundertakings)shallbeprohibitedifitmayaffecttradebetweenmemberstatesandhasasitsobjectoreffecttheprevention,restrictionordistortionofcompetitionwithintheCommonMarket.Thisisapplicableonlyifanagreementis,orisintendedtobe,implementedwithintheCommonMarket.
23. Does the legislation prohibit the abuse of a dominant position? If so, what is the threshold for dominance and what conduct amounts to an abuse?
TheabuseofdominanceisprohibitedbytheRegulations.Anundertakingisconsidereddominantinamarketifbyitselfortogetherwithaninterconnectedcompany,itoccupiessuchapositionofeconomicstrengththatwouldenableittooperateinthemarketwithouteffectiveconstraintsfromitscompetitorsorpotentialcompetitors.AdominantpositionreferstotheabilitytounilaterallyinfluencepriceoroutputintheCommonMarketoranypartofit.
AnyabusebyoneormoreundertakingsofadominantpositionwithintheCommonMarketorinasubstantialpartofitshallbeprohibitedasincompatiblewiththeCommonMarketinsofarasitmayaffecttradebetweenmemberstates,ifit:
• restricts,orislikelytorestrict,theentryofanyundertakingintoamarket;
• preventsordeters,orislikelytopreventordeter,anyundertakingfromengagingincompetitioninamarket;
• eliminatesorremoves,orislikelytoeliminateorremove,anyundertakingfromamarket;
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• directlyorindirectlyimposesunfairpurchaseorsellingpricesorotherrestrictivepractices;
• limitstheproductionofgoodsorservicesforamarkettotheprejudiceofconsumers;
• asapartytoanagreementmakestheconclusionofsuchagreementsubjecttoacceptancebyanotherpartyofsupplementaryobligationswhich,bytheirnatureoraccordingtocommercialusage,havenoconnectionwiththesubjectoftheagreement;or
• engagesinanybusinessactivitythatresultsintheexploitationofitscustomersorsuppliers,soastofrustratethebenefitsexpectedfromtheestablishmentoftheCommonMarket.
24. Are there examples of the authorities pursuing firms for abusing a dominant position?
Therearenoexamplesatthisstage.
25. Does the legislation impose penalties on firms for the abuse of a dominant position?
Withregardtopenaltiesforcontraventionoftheprovisionsagainstabuseofdominance,Rule79providesthatthemaximummonetarypenaltyforeachcontraventionis500000units.Currently500000unitsisequivalenttoUSD500000.
26. Are there rules in relation to price discrimination?
TheRegulationsdonotspecificallyprohibitpricediscrimination.
27. Does the authority publish its decisions and, if so, is there a website where such decisions are available?
Yes.TheCommission’swebsiteiswww.comesacompetition.org.
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Ghana
AB & DAVID Isabel Boaten | Benjamin Kpakpo Sackar
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1. What is the relevant competition legislation and who are the enforcers?
Inthecontextofageneralanti-trustorcompetitionregulation,thereisnogeneralanti-trustorcompetitionlawinGhana.Adraftbill,theCompetitionandFairTradePracticesBill(theCompetitionBill),hasbeeninexistencesince2004.ThereisnoindicationastowhentheCompetitionBillwillbecomelaw.
Currently,thelegislationwhichisofageneralcharacterandmakesexpressreferenceto“competition”inGhanaistheProtectionAgainstUnfairCompetitionAct,2000(Act589)(theUnfairCompetitionAct).However,theUnfairCompetitionActdoesnotapplyinthesamewayasanti-trustorcompetitionlegislationinotherjurisdictionsinthecontextofmergersand/oracquisitions.Itisageneralmechanismfortheprotectionofbusinessgoodwilland
reputation,proprietaryinformation,whetherornotitisregisteredandthepreventionofactsthatcauseorarelikelytocauseconfusionwithrespecttoanotherperson’senterprise.
TheUnfairCompetitionActdoesnotcreateanyregulatorybodyoradministrativeprocessforthepurposeofenforcement.Rather,itprovidesthatanaggrievedpersonmayseekcommonlawremediesinacompetentcourt.Thecourtmayawardinjunctiveorotherequitableremedies,compensatorydamages,oranyotherremedythatitdeemsfit.
Inaddition,notethat,althoughthereisnogeneralanti-trustorcompetitionlegislation,varioussectorallawsandregulatorsareresponsibleforthepromotionoffaircompetitionand,incertainsectors,mergercontrolaswell.Themostnotableoftheseare:
SECTOR LAW REGULATOR
BankingBanksandSpecialisedDeposit-TakingInstitutionsAct,2016(Act930)
BankofGhana
MiningMineralsandMiningAct,2006(Act703)(MiningAct)
MineralsCommission
EnergyEnergyCommissionAct,1997(Act541)
EnergyCommission
AviationGhanaCivilAviationAct,2004(Act678)
GhanaCivilAviationAuthority
TelecommunicationElectronicCommunicationsAct,2008(Act775)(ECA)
NationalCommunicationAuthority
PensionsNationalPensionsAct,2008(Act766)
NationalPensionsRegulatoryAuthority
InsuranceInsuranceAct2006,(Act724)(InsuranceAct)
NationalInsuranceCommission
Publicutilities:electricityandwater
PublicUtilitiesRegulatoryCommissionAct,1997(Act538)
PublicUtilitiesandRegulatoryCommission
Petroleum,OilandGasPetroleum(ExplorationandProduction)Act,2016(Act919)
PetroleumCommission
PetroleumCommissionAct,2011(Act821)
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MergercontrolprovisionsinrelationtopubliccompaniesarecontainedintheSecuritiesIndustryAct,2016(Act929)(theSECRules)withtheSecuritiesandExchangeCommissionbeingmandatedtoreview,approveandregulatetakeovers,mergersandacquisitionsofpubliccompanies.
GhanaisalsoamemberoftheEconomicCommunityofWestAfricanStates(ECOWAS).TheECOWASCompetitionAuthorityisresponsibleforregulatingmergersandacquisitionswitharegionaldimensionandaimstofunctioninasimilarwaytoCOMESA.TheECOWASSupplementaryActonCompetitionRules,2008(theECOWASCompetitionRules)prohibitanti-competitivebusinessconductwhichprevents,restrictsordistortscompetitionwithinthecommonmarketofECOWAS.Prohibitedactsincludeagreements,decisionsandconcertedpracticeswhich,forinstance,fixpricesortradingconditions,limitorcontrolproduction,sharemarkets,customersandsourcesofsupply.PleasenotetherearenopubliclyrecordeddecisionsrelatingtoGhanawheretheECOWASCompetitionRuleshavebeenapplied.
2. Are there any proposed amendments or new regulations expected to come into force?
Currently,therearenoproposedamendmentsornewregulationsinrespectofanti-trustapplicabletomergers,takeoversandacquisitions.Asnotedinquestion1,thereisnoindicationastowhentheCompetitionBillwillbecomelaw.
3. Is the law actively enforced?
Theindustry-sectorregulatorsarereasonablyactive.However,logisticalconstraintsandmorepressingprioritiesmay,attimes,reducetheireffectivenessandefficiency.
4. What are the current priorities or focus areas of the competition authorities?
EntitiesseekingtomergehavetheresponsibilitytocomplywithGhanaianlaw,whichincludestheUnfairCompetitionAct.UndertheUnfairCompetitionAct,anyactorpracticeinthecourseofindustrialorcommercialactivitywhich
iscontrarytohonestpractices,isanti-competitiveorconstitutesunfaircompetition.Notethatanactorpracticeincludesanomission.However,‘honestpractices’isnotdefined.TheUnfairCompetitionActfocusesonthefollowingspecificareas:
• anyconductoractivitywhichcausesconfusionwithrespecttoaperson’sbusiness,productsorservices.Theconfusionmaybeinconnectionwithatrademark,atradename,orsomethingwhichidentifiesabusiness;
• anyconductoractivitywhichdamagesthegoodwillorreputationofaperson’sbusiness,productsorservices;
• anyconductoractivitywhichmisleadsorislikelytomisleadthepublicinrespectofaperson’sbusiness,productsorservices.Thismayarisefromtheadvertisementorpromotionofgoodsorservicesinconnectionwith,forinstance,themanufacturingprocessofaproduct,thequalityofaproductorservice,orthegeographicaloriginofaproductorservice;
• anyconductoractivitywhichdiscreditsaperson’sbusiness,productsorservices.Thismayarisefrommakingafalseorunjustifiableallegationduringtheadvertisementorpromotionofgoodsorservices;
• theacquisition,disclosureoruseofsecretinformationwithouttheconsentoftherightfulownerandinamannercontrarytohonestbusinesspractices.Theacquisition,disclosureoruseofsecretinformationmayresultfromconductoractivitysuchasindustrialorcommercialespionage,breachofcontractorbreachofconfidence;and
• anyconductoractivitywhichresultsinthebreachofalawofGhana,aninternationalobligationoraregionalobligationtowhichapersonissubject,inamannercontrarytohonestbusinesspractices.TheinternationalobligationsincludeWorldTradeOrganisationprotocolsandagreementssuchasthoseonanti-dumpingissuesandsubsidies.
ItisunclearfromtheUnfairCompetitionActwhethertheprocessesorstepstoimplementmergersortoembarkonacquisitionsqualifyas“actorpractice”forwhichtheUnfairCompetitionActbecomesapplicabletoregulate.Inpractice,mergersandacquisitionshavebeendonewithoutexpressreferencetocompliancewiththeUnfairCompetitionAct.
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Asageneralpolicyconsiderationintermsofthesectorialregulators,thepriorityofthesectoralregulatorsispremisedonthenationalinterest,primarilythegrowthanddevelopmentoftheeconomy.Bywayofexample,undertheMiningActsharetransactionsaretightlyregulatedinthenationalinterest.TheMiningActfurtherprovidesthatnomineralrightorinterestshallbetransferred,assignedordealtwithinanyothermannerwithoutthepriorapproval,inwriting,ofthesectorminister.Theministerisempoweredtorestrictapersonfrombecoming thecontrollerofaminingcompanyifitwillbeprejudicialtothenationalinterest.
5. What kind of transaction constitutes a notifiable merger?
Thesector-specificlawsreferredtoearlierrequirenotificationandapprovalofcertainmergers.Examplesofnotifiabletransactionsunderthevarioussectorallegislationaresetoutbelow.UndertheBanksandSpecialisedDeposit-TakingInstitutionsAct,2016(Act930),thefollowingtransactionsrequirenotificationtoandapprovalbytheBankofGhana:
• achangeinthecontrolofabankoritsholdingcompany;
• asale,disposalortransferofthewholeorapartofthebusinessofabank;
• theamalgamationormergerofabankwithanyotherbankorinstitution;and
• thereconstructionofabank.
NotethattheBankofGhanamaynotapproveashareacquisitionormergerifthetransfereemayexerciseinfluencetothedetrimentofthebankandultimatelytoitsconsumers.UndertheInsuranceAct,aschemeoftransferoramalgamationofaninsurancebusinessmustfirstbenotifiedtotheNationalInsuranceCommission(NIC)andapprovalobtainedpriortoimplementation.UndertheECA,ifatransferofsharesinalicenseecompanyresultsinachangeofcontrolormaycausethatcompanytobreachlicencetermsrelatingtoitsownershipstructure,thentheNationalCommunicationsAuthority(NCA)mustfirstapprovethetransfer.Ifnochangeincontrolornobreachresultsfromthetransfer,merelynotifyingtheNCAofthetransactionwillbesufficient.Intheminingsector,therecannotbeamergerwithoutthepriorwrittenconsentoftheMinisterofMines.‘Merger’isnot
definedintheMiningActnorintheCompaniesAct1963(Act179)asamended(theCompaniesAct).
ThegeneraldescriptionthatappliestoallcompaniesundertheCompaniesActis‘amalgamation’.Amalgamationisdefinedas:“amergeroftheundertakingorapartoftheundertakingoftwoormorecompaniesoroftheundertakingsorpartoftheundertakingsofoneormorecompaniesandoneormorebodycorporates".Seequestion6forabriefdiscussionofwhatconstitutesamergerintermsoftheSECRules.
6. What are the thresholds for mandatory merger notification (e.g. assets, turnover and/ or market shares)?
Generally,therearenothresholdswhenitcomestothenotificationofmergers.Therelevantsectoralregulatormay,however,needtobenotifiedofamergerpriortoitsimplementation(asdiscussedinquestion5).Bywayofexample:
• Inthebankingandinsurancesectors,amergerrequirestheapprovaloftheBankofGhanaortheNIC,respectively.
• TheSECRules(TakeoverandMergersCode)governsmergers,substantialacquisitions,takeoversandschemesofarrangement.
Withrespecttolistedcompanies,acquisitionsof30%ormoreofthesharesofapubliclylistedcompany(oritsholdingcompany)triggeramandatorytakeoverofferandrequiretheapprovaloftheSEC.
7. Is there a prohibition on the pre-implementation of a merger? If so, does the legislation make provision for a penalty?
Generally,thepre-implementationofmergersrequiringapprovalisprohibited.Theconsequencesfornon-complianceincludetheannulmentofmergers,prohibitionoftheexerciseofvotingrights,andprohibitionofthepaymentofdividendsandbonussharesorrightsissues.
8. What filing fees are required?
Generally,filingfeesarepaidforeachregulatoryorsectoralfilingrequired.However,forthemostpart,thesearenominal.Notethattherearenofeespayableinrespectofanapplicationforthe
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priorapprovaloftheBankofGhanainrespectofmergersortakeoversinbanksandfinancialinstitutions.Wherethestatedcapitalincreasesasaresultofamerger,astampdutyispaidontheincreaseinthestatedcapitalofthemergedcompany.
9. Is it necessary to obtain approval for foreign-to-foreign mergers?
TherearenospecificlawsandregulationsthatapplyinGhanatoforeign-to-foreignmergers.However,itisnotinconceivablethataforeign-to-foreignmergermighttrigger themergercontrolprovisionsofthesectorallegislationdiscussedabove.Therearenospecificexamplesofthis,however.
10. Are pre-notification contacts with the authorities permitted and are pre-notification meetings normal practice?
Formalorinformalguidancemaybesoughtfromtherelevantsectoralregulatorybodiespriortonotification.Pre-notificationfilings,dialoguesormeetingsarenotexpected,buttheregulatorybodieswouldnotbeadversetotheseortoprovidingguidancewhererequired.
11. To what extent are non-competition factors relevant to the assessment of a merger?
Regulatorshavethediscretiontoconsidernon-competitionfactorsinamergerreviewprocess.Suchfactorsincludepromotionofthenationalinterest,impactonemployment,promotingcompetitivenessofnationalfirmsininternationalmarkets,equitabledistributionofownershiporwealthandpromotionof‘nationalchampions’.
Notethat,undertheLabourAct,2003(Act651):
• Whereamergerislikelytoresultinredundancies,theemployerisrequiredtonotifythechieflabourofficerinadvanceoftheintendedredundancyandalsofurnishtherelevanttradeunionwithinformationontheredundancy.
• Theemployermustalsoconsultthetradeuniononmeasurestobetakentoavertorminimiseanytermination,aswellastheeffectsofterminationontheemployees.
• Thequantumofredundancypaymentsandtheirtermsandconditionsmustbe
negotiatedbetweentheemployerandtheemployeesorthetradeunion.
• Inrespectofthequantumofredundancypaymentsandthetermsandconditionsofredundancypayments,anaggrievedemployeemaysubmitapetitiontotheNationalLabourCommissionforredress.
12. Do the authorities contact customers and competitors of the merging parties as part of the merger review process? To what extent are the submissions of customers and competitors influential?
Asectoralregulatorhaswidediscretioninthemergerreviewprocessandmaywellcontactthirdpartiesduringthisprocess.
13. Who else can make submissions to the authorities when a merger is being considered? Are employees contacted as part of the process and can employees make submissions?
Sectoralregulatorsconsideremployeeissuesaskey,andwillgenerallyrequirethatanadequateplanhasbeenputinplacetoaddressanyemploymentissues,includingretrenchments(seetheresponsetoquestion11).Approvalmaybegrantedconditionallysubjecttocompliancewithcertainemployment-relatedobligations.
14. Are merging parties given an opportunity to make representations before a decision is issued where the authority intends to prohibit a merger or impose conditions?
Inpractice,whereasectoralregulatorintendstoprohibitamerger,itwillmeetwiththepartiesandrelevantstakeholdersforpurposesoftakingsubmissionsastowhythemergershouldnotbeprohibited.
15. What are the opportunities for judicial appeal or review of a decision in respect of a merger that the parties are dissatisfied with?
Generally,wherepartiesaredissatisfiedoraggrievedwiththedecisionofaregulator,theymayseekredressbeforethecourts.UndertheInsuranceAct,forexample,whereapartyisdissatisfiedwithadecisionoftheNIC,itmayappealtotheHighCourt.
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16. Does the legislation apply to joint ventures?
Locallegislationdoesnotapplytojointventures.However,theECOWASCompetitionRules,subjecttoitsimplementationcomingintoforce,couldbeapplicabledependingonthecircumstances.NotethattotheextentajointventureviolatestheECOWASCompetitionRules,thismayconstituteabreachoftheUnfairCompetitionAct,andthuswillbedeemedanti-competitiveconductintermsoftheActandtheapplicablesanctionswillapply.
17. Does the legislation specifically prohibit cartel conduct? If so, are there examples of the authorities pursuing firms for engaging in cartel conduct?
AlthoughtheUnfairCompetitionActdoesnotexpresslyprohibitcartelconduct,itgenerallyprohibitsanactorpracticewhichiscontrarytohonestbusinesspractices.Withregardto thesectorallegislation,therearenospecificprohibitionsoncartelconductandtherearenoexamplesofregulatorspursuingfirmsforcartelconduct.However,asdiscussedunderquestion18,regulatorsaregenerallyvestedwithpowerstoprohibitandinvestigateanyconductincludingthosethatmaybeanti-competitiveinnaturewhichwillextendtocartelconduct.
Bywayofexample,undertheECA,alicenceissuedtoanetworkoperatormustincludeaconditionthatthelicenceissubjecttothelicenseenotengaginginanti-competitiveconduct.Additionally,theNCAisauthorisedtopreventandsanctionanti-competitivebehaviour.
Further,theECOWASCompetitionRules,whichareregionalobligations,specificallyprohibitcartelconductwithintheCommonMarketofECOWAS.
18. What are the authorities’ powers of investigation in relation to cartel conduct and other prohibited practices?
Asnoted,thesectoralregulatorsaregenerallyvestedwithpowerstoinvestigateandpreventprohibitedpractices,whichmayincludecartelconduct.Theregulatorsaremandatedtorequestrelevantinformationand,inappropriatecases,
mayembarkoninspectionsincasesofsuspectednon-compliance.Regulatorsmayalsoseektheassistanceofthecourttointervenefurther,whereappropriate,andtosubpoenarelevantdocumentsandwitnesses.
19. What are the penalties for cartel conduct? Is there a leniency policy in place? Does the legislation impose criminal sanctions?
TheUnfairCompetitionActgenerallydoesnotprovideforpenaltiesorcriminalsanctionsforunfairoranti-competitiveconduct.However,sincebreachoflawispartofconductprohibitedundertheUnfairCompetitionAct,adefaultingentitymaybeliableforanyconsequentialcriminalsanctionapplicableforbreachofarelevantlaw.Anaggrievedpersongenerallymayseekcivilremediesincourt.
Intermsofcertainsectorallegislation:anyacttendingtoamounttoanti-competitiveconductmayresultinactionsbeingtakenbytheregulator,includingtherevocationofthelicenceoftheguiltyparty(e.g.inthetelecommunicationssector)andwithdrawalofadvantagesorstatesupport.
Therearenocriminalsanctionsforanti-competitiveconductintermsoftheUnfairCompetitionAct.Thereisnoleniencypolicyinplace.
20. Is there a provision in the legislation providing for a mechanism to apply for exemption from certain parts of the legislation?
Generally,whereanti-competitiveconductisprohibited,therearenostatedexemptions.
21. Is minimum resale price maintenance prohibited?
Minimumresalepricemaintenanceisnotexpresslyprohibitedunderanylaw.However,minimumresalepricemaintenancewillbeprohibitedundertheUnfairCompetitionActifitisshowntobecontrarytohonestbusinesspractices.Alsonotethatsectoralregulatorsaregenerallygivenpowerstomakeregulationsprovidingguidelinesandrulesontariffs.Forexample,theNCAhasthepowertoestablishregulationregimes,whichmayincludethesetting,reviewandapprovalofpriceswhereitdetectsanti-competitivepricingoractsofunfaircompetition.
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22. In what circumstances are exclusive agreements unlawful? If exclusive agreements raise concerns in specific circumstances, what factors are relevant to their lawfulness or unlawfulness?
Exclusiveagreementsarenotexpresslyprohibited.Exclusiveagreementsmay,however,beanti-competitivetotheextentthattheyareshowntoresultinuncompetitivepricing,poorqualitygoods,orservicesorgenerallycontrarytohonestbusinesspractices.
23. Does the legislation prohibit the abuse of a dominant position? If so, what is the threshold for dominance and what conduct amounts to an abuse?
AlthoughboththesectorallegislationandtheUnfairCompetitionActhavenospecificorexpressprohibitionsagainstabuseofadominantposition,theECOWASCompetitionRulesspecificallyprohibittheabuseofadominantpositionacquiredthroughthepossessionofasubstantialshareofthemarketwhichenablesthecontrolofprices.Furthermore,ifapracticeisshowntobecontrary tohonestbusinesspractices,itwillcontravenetheUnfairCompetitionAct.
24. Are there examples of the authorities pursuing firms for abusing a dominant position?
Therearenoexamplesofauthoritiespursuingfirmsforabusingdominantpositions.
25. Does the legislation impose penalties on firms for the abuse of a dominant position?
No.Anaggrievedpartymayseekcivilremediesincourt.
26. Are there rules in relation to price discrimination?
TherearetypicallynospecificrulesonpricediscriminationinthesectorallegislationandintheUnfairCompetitionAct.However,anyallegationofpricediscriminationcouldbepotentiallyassessedintermsofwhethertheconductiscontrarytohonestbusinesspractices.
Withregardtothesectorallegislation,theECAprovidessomelimitedexamplesofaprovisiononpricediscrimination.Underthe
ECAforexample,operatorsareenjoinednottodiscriminateamongsimilarlysituatedusers.Specifically,callstoruralareasshallnotbepricedhigherasaresultofaspecialinterconnectionagreement.UndertheECOWASCompetitionRules,theECOWASCompetitionAuthorityhasthepowertoinjunctdiscriminatorypricingpractices.
27. Does the authority publish its decisions and, if so, is there a website where such decisions are available?
Thepublicationofdecisionsmayvaryamongregulatorsandthesemayormaynotbepublished.Wheretherehasbeenajudicialrevieworappealofadecisionbyacourt,itbecomesamatterofpublicrecordandthusaccessibletothepublicattheregistryofthecourts.TheJudicialServiceofGhanahasawebsitewhereitpublishessomeselectedcourtdecisionswhichmightincludecompetition-relateddecisions.Thejudiciary’swebsiteiswww.judicial.gov.gh
AB & DAVID 8DrIsertRoad,NorthRidgePOBoxTF330AccraGhanaT:+233302253073/+233302253074/+233307012129
www.abdavid.com
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Kenya
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Joyce Karanja-Ng’ang’a | Michelle Kimonye
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1. What is the relevant competition legislation and who are the enforcers?
TherelevantlegislationistheCompetitionActNo.12of2010(theAct)whichcameintoforceon1August2011.TheActrepealedtheRestrictiveTradePractices,MonopoliesandPriceControlAct(Chapter504oftheLawsofKenya).
TheActestablishestheCompetitionAuthorityofKenya(theAuthorityortheCAK)whoseprincipalfunctionsincludeapplying,promotingandenforcingcompliancewiththeAct.TheActalsoestablishestheCompetitionTribunal(theTribunal)whichhearsappealsfromdecisionsoftheAuthority.
TheActempowerstheCabinetSecretaryofNationalTreasury(theCS)(inconsultationwiththeCompetitionAuthorityofKenya)tomakerulestogivebettereffecttotheprovisionsoftheAct.However,noruleshavecurrentlybeenissuedbytheCS.
2. Are there any proposed amendments or new regulations expected to come into force?
2.1 Recent amendments to the ActTHE STATUTE LAW (MISCELLANEOUS AMENDMENTS) ACT OF 2017
TheStatuteLaw(MiscellaneousAmendments)Actof2017(theMiscellaneousAmendmentAct2017)amendedtheActbysubstitutingparagraph3,sub-paragraph4oftheSchedule.ThenewprovisionnowindicatesthattheChairmanoftheAuthorityshallpresideoverallmeetingsinwhichheorsheispresent.IftheChairmanoftheAuthorityisnotpresent,thenoneofthememberspresentmaybeappointedtopresideoverthemeeting.
THE COMPETITION AMENDMENT ACT 2016
TheCompetitionAmendmentAct2016(theAmendmentAct)madecertainchangestotheAct.TheAmendmentActwasassentedtoon23December2016andtookeffecton13January2017.Itssalientprovisionsaresummarisedasfollows:
DEFINITIONS IN THE ACT
Local authorityThetermlocalauthorityisdefinedintheActashavingthesamemeaningassignedintheLocalGovernmentAct(Cap.265).TheActhadnodefinitionofcountygovernment.TheAmendmentActdeletesthedefinitionoftheterm“localauthority”andsubstitutesitwiththedefinitionoftheterm“countygovernment”.CountygovernmentwillmeancountygovernmentasestablishedbyArticle76(1)oftheConstitution.
UndertakingAnundertakingwaspreviouslydescribedintheCompetitionActas“anybusinessactivityintendedtobecarriedon,orcarriedon,forgainorrewardbyaperson,apartnershiporatrustintheproduction,supplyordistributionofgoodsortheprovisionofanyservices".
TheAmendmentActprovidesthefollowingdefinitioninstead.“Undertakingmeansanybusinessactivityintendedtobecarriedonorcarriedonforgainorrewardbyaperson,apartnershiporatrustintheproduction,supplyordistributionofgoodsorprovisionofanyservice,andincludesatradeassociation.”
Thisamendmentisaimedatincludingtradeassociationsinthedefinitionofundertakings.AtradeassociationisdefinedintheCompetitionActasabodyorperson(whetherincorporatedornot)whichisformedforthepurposesoffurtheringtheinterestsofitsmembersorpersonsrepresentedbyitsmembers.
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ABUSE OF BUYER POWER
TheAmendmentActintroducesnewprovisionsthatprohibitabuseofbuyerpower. Theprovisionsrelatingtoabuseofbuyerpowerareasbelow:
• Buyerpowermeans“theinfluenceexertedbyanundertakingorgroupofundertakingsinthepositionofapurchaserofaproductorservice toobtainfromasuppliermorefavourableterms,ortoimposealong-termopportunitycostincludingharmorwithheldbenefitwhich,ifcarriedout,wouldbesignificantlydisproportionatetoanyresultinglong-termcosttotheundertakingorgroupofundertakings”.
• AnyconductthatamountstoabuseofbuyerpowerinamarketinKenya,orasubstantialpartofKenya,isprohibited.
• Indeterminingbuyerpower,theAuthorityshalltakeintoconsiderationthenatureanddeterminationofcontractterms,thepaymentrequestedforaccessinfrastructureandthepricepaidtosuppliers.
• TheAuthority,inconsultationwiththeCSandotherrelevantgovernmentagenciesandstakeholders,shalldeveloprulesforthebettercarryingoutofthesectionoftheCompetitionActthatrelatestoabuseofbuyerpower.
MERGERS
Definition of controlTheAmendmentActamendsthedefinitionoftheterm‘control’byaddingthatapersonwillbeseenascontrollinganundertakingifheorsheownsmorethanone-halfofitsbusinessassets.
Control of mergersTheAmendmentActnowallowstheAuthority(inconsultationwiththeCS)tosetthresholdsforanyproposedmergertobeexcludedfromtheprovisionsofPartIVoftheAct(PartIVoftheActisthepartthatdealswithmergercontrol).TheinclusionofthisamendmenttotheCompetitionActwillenabletheCAKtoissuethresholdsthatcouldsignificantlyaltermergerregimeinKenya,i.e.itwillnolongerbethatallmergersarenotifiableandsomemergerscouldoutrightlybeexcludedfromPartIVoftheAct.
Revocation of approval of proposed mergerTheCAKisempoweredtorevokeadecisionapprovingtheimplementationofaproposedmergerifthedecisionwasbasedonmateriallyincorrectormisleadinginformationfromapartytothemergerorifanyconditionattachedtothemergerisnotcompliedwith.TheAuthorityisrequiredtoprovidewrittenreasonsforsuchadecision.
Inthesecircumstances,theAmendmentActallowstheCAKtoimposeafinancialpenaltyofupto10%oftheprecedingyear’sannualgrossturnoveroftherelevantpartytoamerger,wheretheCAK’sapprovalofsuchmergerwasbasedonmateriallyincorrectormisleadinginformationfromthatpartyorifanyconditionattachedtothemergerisnotcompliedwith.Italsobuildsincriminalsanctionsforpersonswhoarepartytoamergerandprovidemateriallyincorrect/misleadinginformationorfailtocomplywithanyconditionattachedtothemerger’sapproval:afinenotexceedingKES10millionorimprisonment,foratermnotexceedingfiveyears,orboth.
FINANCIAL PENALTIES FOR INFRINGEMENT OF PROHIBITIONS
TheAmendmentActraisesthefinancialpenaltiesthatmaybeimposedbytheAuthority,grantingtheAuthoritypowertoimposeafinancialpenaltyofupto10%ofanundertaking’simmediatelyprecedingyear’sgrossannualturnoverinKenya,wheretheundertakingisfoundtohaveinfringedtheprohibitionsonrestrictivetradepractices,restrictivetradepracticesapplicabletotradeassociationsandtheabuseofdominantposition,followingtheconclusionofaninvestigation.
GENERAL POWERS OF THE AUTHORITY
Power to hold enquiriesAlthoughtheAuthoritywasempoweredtoconductenquiriesorsectoralstudiesonmattersaffectingcompetitionandconsumerwelfare,therewasnostatutoryobligationplacedonotherpersonstoprovideinformationtotheAuthorityinthisregard.TheAmendmentActmakesitmandatoryforallpersons,undertakings,tradeassociationsorbodiestoprovideinformationrequestedbytheAuthority.ItisimportanttonotethattheActalreadygrantedCAKthepowertocompelanypersontoprovide
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itwithinformationinrespectofaninvestigationitwasconducting.Thispowerhas,however,nowbeenextendedtoenquiriesandsectoralstudies.
Proposed decision of the AuthorityUponconclusionofaninvestigation,theActrequirestheAuthoritytoprovideawrittennoticeformakingadecisionthattheprohibitionsonRestrictiveTradePractices(PartA)orRestrictiveTradePracticesApplicabletoTradeAssociations(PartB)hadbeeninfringed.TheAmendmentActextendsthisobligationtoincludePartCoftheAct,whichrelatestoAbuseofDominantPosition(PartC).
Action following investigationUndertheAct,theAuthorityisinteraliaempoweredtodeclareconductthatisthesubjectmatteroftheAuthority’sinvestigationasconstitutinganinfringementoftheprohibitionsonRestrictiveTradePractices(PartA)orRestrictiveTradePracticesApplicabletoTradeAssociations(PartB).TheAmendmentActextendsthispowertoincludeAbuseofDominantPosition(PartC).
Interim reliefUndertheAmendmentAct,thepowerstomakeinterimorders(i.e.directinganundertakingtostopanddesistfromprohibitedconduct)willnotonlyapplytoundertakingsthathaveinfringedtheprohibitionsrelatingtoRestrictiveTradePractices(PartA)orRestrictiveTradePracticesApplicabletoTradeAssociations(PartB),butextendstoundertakingsfoundtobeabusingtheirdominantpositions(PartC).
Consumer welfare offence investigationsTheAmendmentActgrantstheAuthoritythepowerstoinvestigate,conductdawnraids,holdconferences,hearingsandpublishdecisionsinrespectofconsumercomplaints(itmirrorsthepowersandproceduralprovisionsthatarealreadyinplaceinrespectofinvestigatingrestrictivetradepracticesandabuseofdominancewhichwerepreviouslylackinginrelationtoconsumercomplaints).
THE STATUTE LAW (MISCELLANEOUS AMENDMENTS) ACT OF 2015
TheStatuteLaw(MiscellaneousAmendments)Actof2015(theMiscellaneousAmendmentsAct)amendedtheActbyinsertinganewsubsection
underSection93.Section93(nowSection93(1)),gavetheCS,inconsultationwiththeAuthority,thepowertomakerulestoeffecttheprovisionsoftheAct.
TheMiscellaneousAmendmentsActaddedinanewsubsection(subsection(2))expoundingonthepowersunderSection93(1)byprovidingthattherulestobemadebytheCSshallbemadewithrespecttoanythingthatmayrequireprescriptionundertheAct.
2.2 Proposed Regulations
PROPOSAL FOR MERGER THRESHOLDS
Asmentionedabove,theAmendmentActallowstheAuthority(inconsultationwiththeCS)tosetthresholdsforanyproposedmergertobeexcludedfromtheprovisionsofPartIVoftheAct,whichdealswithmergercontrol.TheCAKhasnotyetpublishedproposedthresholdsbelowwhichmergerswillnotbenotifiablebutthisisexpectedtooccurduringthecourseof2018.
GuidelinesAlthoughnoregulationsareinplace,theAuthorityhasissuedanumberofguidelines,whichmerelyindicatetheAuthority’sthinkingandintendedapplicationoftheprovisionsoftheAct,butwhicharenotlegallybinding.SomeoftheseguidelineshavebeenreconsolidatedbytheAuthorityforeaseofreferenceandincludethefollowing:
• PublicInterestTestinMergerDeterminationsGuidelines;
• GuidelinesonRelevantMarketDefinition(MarketDefinitionGuidelines);
• GuidelinesforSection42(guidelinesontheExclusionofProposedMergersfromProvisionsofPartIVoftheAct,No.12of2010)(theExclusionGuidelines).(ItisimportanttonotethattheExclusionGuidelinesmaynolongerbeapplicableoncethresholdsformergernotificationsaresetandpublished);GuidelinesontheControlofUnwarrantedConcentrationofEconomicPowerunderPartVoftheCompetitionAct;
• ConsumerprotectionguidelinesissuedunderPartVIoftheAct,June2014;
• ConsolidatedGuidelinesontheSubstantiveAssessmentofRestrictiveTradePracticesundertheCompetitionAct;
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• ConsolidatedGuidelinesontheSubstantiveAssessmentofMergersundertheCompetitionAct(theMergerGuidelines);
• Guidelinesonengagingwithconsumerorganisations,June2014;
• ExemptionguidelinesfromSection21(1)oftheAct(onrestrictivetradeagreements);
• ExemptionguidelinesforHorizontalPractices,2012;and
• TheLeniencyProgrammeGuidelinesunders.89AoftheAct.
Reconsolidation of formsTheAuthorityhasalsoreconsolidateditsprescribedformsforeaseofreference.ThefollowingformsarenowreadilyavailableontheAuthority’swebsite:
• Exemptionforminrespectofintellectualpropertyrules;
• Exemptionforminrespectofprofessionalrules;
• Exemptionformforcertainrestrictivepractices;
• Confidentialityclaimform;• Mergernotificationform(asdescribedabove);• Mergerwithdrawalforms;• Consumercomplaintform;• Specialcomplianceprocessdeclaration
formfortradeassociations;and• Self-evaluationreportingtemplateforspecial
complianceprocessfortradeassociations.
3. Is the law actively enforced?
AlthoughtheAuthorityhashistoricallybeenfocusingmoreonmergercontrol,itnowappearskeentobecomemoreactiveintheenforcementofrestrictivetradepracticesincludingtheabuseofdominanceandunwarrantedconcentrationsofeconomicpower.
In2017,theAuthoritycommencedinvestigationsontherestockingofNakumattSupermarketbyTuskysSupermarket,followingaproposedmergerdealbetweenthesupermarketchains.
InMarch2016,theAuthorityconducteditsfirstdawnraidontwofertiliserfirmssuspectedofpricefixing.TheAuthorityalsoannouncedthatitintendstocarryoutinvestigationsintoanti-competitivebehaviourinKenya’sfinancialservicesandagro-processingsectorsparticularlyontheissueofpricefixingbyfirmsinthesesectors.
OtherareaswheretheAuthorityhascarriedoutinvestigationsincludetheabuseofdominanceinthepaytelevisionsector,pricefixinginthetelecommunicationssectorandunwarrantedconcentrationofeconomicpowerinthecementindustry.
4. What are the current priorities or focus areas of the competition authorities?
InitsStrategicPlanfortheperiodfrom2013/14to2016/17,theAuthorityhasindicatedthatitsfocuswillbeon:
• Enforcementofcompetitionandprotectionofconsumers,whichincludesmergercontrol,controlofunwarrantedconcentrationofeconomicpower,regulatingrestrictivetradepracticesandenhancingenforcementofcompetitionandconsumerwelfare;
• Research,advocacyandawarenesscreation,includingcarryingoutmarketenquiries/researchinanyidentifiedprioritysectors;
• Mobilisationandoptimalutilisationofresources,suchasdevelopingmechanismstogeneraterevenueinternallyandtoattractexternalfunding;
• Infrastructureandhumancapitaldevelopment,whichincludesensuringoptimalstaffinglevels,deepeningofstaffskillsandadequatephysicalinfrastructure,servicesandgeneralsupplies;
• Visibilityandcorporateimage,namelytoenhanceitsvisibilityandtopromoteitscorporateimage.
PursuanttoanewsletterpublishedbytheAuthorityonitswebsite(IssueNumber1of2017),theAuthorityalsoindicatesthat:
• Itwillprioritisetheissuanceofadvisoriestocountygovernmentsastheydeveloppoliciesandlawsaffectingmarketsintherespectivecounties.
• TheAuthority,pursuanttoitsmandateofconsumerprotectionasoutlinedinPartVIoftheAct,hasintensifiedconsumerawarenesscampaign,whichisfocusedonmattersofconsumerwelfare.
5. What kind of transaction constitutes a notifiable merger?
TheActcontainstwodefinitionsoftheterm‘merger’.
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Section2oftheActdefinesa‘merger’as“anacquisitionofshares,businessorotherassets,whetherinsideoroutsideKenya,resultinginthechangeofcontrolofabusiness,partofabusinessoranassetofabusinessinKenyainanymannerandincludesatakeover”.
Notably,atransactionconstitutesanotifiablemergerwhenitfallswithinthemergerdefinitionsetoutinSection41oftheAct(ratherthanthedefinitioninSection2oftheAct).Section41(1)oftheActstatesthatamergeroccurswhenoneormoreundertakings,directlyorindirectly,acquiresorestablishesdirectorindirectcontroloverthewholeorpartofthebusinessofanotherundertaking.Section41(2)statesthatamerger,asdefinedinSection41(1),maybeachievedinanymannerincluding:
• thepurchaseorleaseofshares,acquisitionofaninterestorpurchaseofassetsoftheotherundertakinginquestion;
• theacquisitionofacontrollinginterestinasectionofthebusinessofanundertakingcapableofitselfbeingoperatedindependentlywhetherornotthebusinessinquestioniscarriedonbyacompany;
• theacquisitionofanundertakingunderreceivershipbyanotherundertakingeithersituatedinsideoroutsideKenya;
• acquiringbywhatevermeansthecontrollinginterestsinaforeignundertakingthathasacontrollinginterestinasubsidiaryinKenya;
• inthecaseofaconglomerateundertaking,acquiringthecontrollinginterestofanotherundertakingorasectionoftheundertakingbeingacquiredcapableofbeingoperatedindependently;
• verticalintegration;• exchangeofsharesbetweenoramong
undertakingswhichresultsinsubstantialchangeinownershipstructurethroughwhateverstrategyormeansadoptedbytheconcernedundertakings;or
• amalgamation,takeoveroranyothercombinationwiththeotherundertaking.
6. What are the thresholds for mandatory merger notification (e.g. assets, turnover and/ or market share)?
UndertheCompetitionAct,whetherornotmergingpartiesaresupplyingsimilargoodsorservices,anotificationtotheCAKisrequiredwhereachangeincontroloccursandthedefinitionofamergerintheCompetitionActismet.
Asmentionedpreviously,however,theAmendmentActallowstheCAKtosetthresholdsforanyproposedmergertobeexcludedfromtheprovisionsofPart4oftheCompetitionAct(Part4oftheCompetitionActcontainstheprovisionsthatdealwithmergersandmergercontrol).TheCAKhasyettosetandpublishsuchthresholds.
Untilsuchthresholdsarepublished,mergingpartiescanapplyforexclusionpursuanttotheGuidelinesforExclusionofMergers(theExclusionGuidelines)publishedbytheCAK.TheExclusionGuidelinesarenotbindingastheyhavenotbeenpassedintolaw.Theyare,however,indicativeoftheCAK’sinternalpolicyonhowitexercisesitsdiscretiontoexcludemergersfromtheprovisionsoftheCompetitionAct.
TheExclusionGuidelinesprovideinteraliathatthefollowingtypesoftransactionsmaybeconsideredforexclusionfromtheprovisionsoftheAct:
General
CombinedturnoverofthemergingpartiesisbetweenKES100millionandKES1billion.
Healthcaresector
CombinedturnoverofthemergingpartiesisbetweenKES50millionandKES500millionshillings.
Carbon-basedmineralsector(firmsengagedinupstreamproductionandsupplyofoil,naturalgasorcoal)
Ifvalueofthereserves,rightsandassociatedexplorationorproductionassets(includingequipment,machinery,fixtures,etc.)tobeheldasaresultofthemergerisbelowKES4billion.
Carbon-basedmineralexplorationandprospecting(butnotproductionofoil,naturalgasand/orcoal)
Undertakingsunderthissector(whichisdefinedastheExcludedSectorunderthedefinitionsintheExclusionGuidelines)mayalsoapplyforexclusion.
AwrittenapplicationintheprescribedformmustbemadetotheAuthorityrequestingexclusion.
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7. Is there a prohibition on the pre-implementation of a merger? If so, does the legislation make provision for a penalty?
TheActexpresslyprohibitstheimplementationofamergerpriortoreceiptofapprovalfromtheAuthorityand,wheretheapprovalisconditional,implementationofthemergerissubjecttothestatedconditions.AnymergerwhichisimplementedintheabsenceofanauthorisingorderfromtheAuthorityisofnolegaleffect.
Paymentofthefullpurchasepriceisdeemedasimplementationwhereaspaymentofamaximumamountnotexceeding20%oftheagreedpurchasepriceisnotdeemedtoconstituteimplementation.AnypersonwhoimplementsamergerincontraventionoftheActcommitsanoffenceandisliableonconvictiontoimprisonmentforaperiodnotexceedingfiveyears,ortoafinenotexceedingKES10million,orboth.
Inadditiontotheabovesanctions,theAuthoritymayimposeapenaltyofanamountnotexceeding10%ofthegrossannualturnoverinKenya(duringtheprecedingyear)oftheundertakingorundertakingsinquestion.
8. What filing fees are required?
TheAuthorityintroducedmergerfilingfeeswitheffectfrom1August2014,requiringmergingpartiestoprovideevidenceofpaymentofthefilingfeesaspartofthemergernotificationinorderforanapplicationtobedeemedcomplete.Thefeespayableareasfollows:
COMBINED TURNOVEROF THE MERGING PARTIES
FILING FEE PAYABLE
ExclusionapplicationNofilingfeepayable(exclusionfilingisstillrequired)
KES500milliontoKES1billion(healthcaresector)
KES500000
KES1billiontoKES50billion KES1million
AboveKES50billion KES2million
Nofeeispayableforanexclusionapplication.
9. Is it necessary to obtain approval for foreign-to-foreign mergers?
TheActrequiresthatanymergerswhichtakeplaceoutsideKenyaandwhichresultinthechangeofcontrolofabusiness,partofabusiness,oranassetofabusinessinKenyainanymanner,mustbenotified.
Inaddition,Section6oftheActmakesprovisionforextraterritorialapplicationoftheActandinteralia,providesthattheActshallapplytoconductoutsideKenyaby:
• acitizenofKenyaorapersonordinarilyresidentinKenya;
• abodycorporateincorporatedinKenyaorcarryingonbusinesswithinKenya;
• anypersoninrelationtothesupplyoracquisitionofgoodsorservicesbythatpersonintoorwithinKenya;or
• anypersoninrelationtotheacquisitionofsharesorotherassetsoutsideKenyaresultinginthechangeofcontrolofabusiness,partofabusinessoranassetofabusiness,inKenya.
10. Are pre-notification contacts with the authorities permitted and are pre-notification meetings normal practice?
TheActissilentonpre-notificationmeetings.However,inpractice,theAuthorityiswillingtohavepre-notificationmeetingsuponrequestfromthemergingparties.Pre-notificationmeetingswiththeAuthorityareadvisable,particularlyinrespectofcomplicated,highprofileortime-sensitivematters.
11. To what extent are non-competition factors relevant to the assessment of a merger?
Section46(2)oftheActallowstheAuthority,inmakingitsdeterminationinrelationtoaproposedmerger,totakeaccountofanycriteriawhichitconsidersrelevanttothecircumstancesinvolvedintheproposedmerger.Assuch,theAuthorityhasthediscretiontotakenon-competitionfactorsintoaccount.ThefactorsstipulatedintheAct,whichmaybeconsideredbytheAuthorityinclude:
• theextenttowhichtheproposedmergerwouldbelikelytoresultinabenefittothepublic,whichwouldoutweighanydetrimentwhichwouldbelikelytoresultfromanyundertaking,includinganundertakingwhichisnotapartytotheproposedmerger,
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acquiringadominantpositioninamarketorstrengtheningadominantpositioninamarket;
• theextenttowhichtheproposedmergerwouldbelikelytoaffectaparticularindustrialsectororregion;
• theextenttowhichtheproposedmergerwouldbelikelytoaffectemployment;
• theextenttowhichtheproposedmergerwouldbelikelytoaffecttheabilityofsmallundertakingstogainaccesstoanymarket;and
• anybenefitslikelytobederivedfromtheproposedmergerrelatingtoresearchanddevelopment,technicalefficiency,increasedproduction,efficientdistributionofgoodsorprovisionofservicesandaccesstomarkets.
TheMergerGuidelinesalsohighlightpublicinterestfactorsaskeytomakingadeterminationinrelationtoaproposedmerger.Theseincludejoblossesandefficiencies,impactofthemergeronsmall-andmedium-sizeenterprisesandtheimpactofforeigndirectinvestment.TheMergerGuidelinesprovidethattheAuthoritywillconductapublicinterestassessmentregardlessoftheoutcomeofthecompetitionassessment.
12. Do the authorities contact customers and competitors of the merging parties as part of the merger review process? To what extent are the submissions of customers and competitors influential?
TheActdoesnotcontainaspecificprovisionempoweringtheAuthoritytocontactcustomersandcompetitorsofthemergingpartiesaspartofthemergerreviewprocess.However,theActdoesallowanypersonincludingapersonnotinvolvedasapartyintheproposedmergertovoluntarilysubmittoaninvestigatorortheAuthorityanydocument,affidavit,statementorotherrelevantinformationinrespectofaproposedmerger.TheMarketDefinitionGuidelinesprovidethat,whereappropriatewithregardtotheproductandgeographicmarket,theAuthoritywillcontactthemaincustomersandcompetitorsofthepartiesinitsenquiries.ThepurposeofthecontactisfortheAuthoritytogatherviewsontheboundariesofthemarketsaswellasthefactualinformationthattheAuthoritymayrequiretoreachaconclusiononthescopeofthemarket.
Withregardtotheextenttowhichsubmissionsbycustomersandcompetitorsareconsidered,
theMarketDefinitionGuidelinesprovidethatsubmissionsbycustomersandcompetitorswillbeusedforpurposesofmarketdefinitiononlywheretheyaresufficientlybackedbyfactualevidence.
13. Who else can make submissions to the authorities when a merger is being considered? Are employees contacted as part of the process and can employees make submissions?
TheActstipulatesthatanyperson,includingapersonnotinvolvedasapartyintheproposedmerger,mayvoluntarilysubmittotheAuthorityanydocument,affidavit,statementorotherrelevantinformationinrespectofaproposedmerger.
Withregardtosubmissionsbyemployees,theActdoesnotspecifythatemployeesofthemergingentitiesmaymakesubmissionstotheAuthoritybut,asindicatedabove,theywouldbeentitledtodoso.
14. Are merging parties given an opportunity to make representations before a decision is issued where the authority intends to prohibit a merger or impose conditions?
TheActdoesnotrequire,butdoesgenerallyempower,theAuthoritytogivethemergingpartiesanopportunitytomakerepresentationsbeforeissuingitsdecisiontoapproveorprohibitamerger.UndertheAct,wheretheAuthoritydecidestoprohibitorconditionallyapproveaproposedmerger,itmustissuewrittenreasonsforitsdeterminationtothemergingparties.TheAuthority’sdecisioncanbechallengedthroughanapplicationforreviewintheTribunal,asdiscussedfurtherinquestion15below.
15. What are the opportunities for judicial appeal or review of a decision in respect of a merger that the parties are dissatisfied with?
TheActmakesprovisionforpartiesdissatisfiedwiththeAuthority’sdecisiononamergertoappealtotheTribunal,whichisestablishedunderSection71oftheAct.Section48oftheActprovidesthatnolaterthan30daysafternoticeisgivenbytheAuthorityintheKenyaGazetteofitsdeterminationonaproposedmerger,apartytothemergermayapplytotheTribunalforthe
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Authority’sdecisiontobereviewed.TheTribunalhasitsownrulesofprocedureandtiming.Within30daysafterreceivingtheapplicationtoreviewtheAuthority’sdecision,theTribunalshallbynoticeintheKenyaGazetteissueanoticeoftheapplicationandinviteinterestedpartiestomakesubmissionstotheTribunalinregardtothematterbeingreviewed.
Withinfourmonthsofthedateonwhichanapplicationforreviewismade,theTribunalisrequiredtomakeadeterminationeither:
• overturningthedecisionoftheAuthority;• amendingthedecisionoftheAuthorityby
orderingrestrictionsorincludingconditions;• confirmingthedecisionoftheAuthority;or• referringthematterbacktotheAuthorityfor
reconsiderationonspecifiedterms.
Section73oftheActprovidesthatthepersonswhoareentitledtoappealtotheTribunalincludeanypersonwho,byanordermadeunderSection46oftheAct(beingtheAuthority’sdeterminationofthemerger),isenjoinedfromproceedingwithaproposedmergerorauthorisedtoproceedwithaproposedmerger,subjecttoconditionsprescribedbytheorder.
IfapartyisaggrievedbythedecisionoftheTribunal,afurtherrightofappealliestotheHighCourtofKenya,whichmustbemadewithin30daysofthenoticeoftheTribunal’sdecisionbeingfiledonthatparty.ThedecisionoftheHighCourtisfinal.
Itisimportanttonote,however,thatincaseswherecompetitionlawclaimsoriginateintheHighCourt(asjudicialreviewwritsorconstitutionalpetitions),decisionsoftheHighCourtcanbeappealedattheCourtofAppeal.DecisionsoftheCourtofAppealcanbeappealedattheSupremeCourt,whichisfinal.
16. Does the legislation apply to joint ventures?
TheActappliestojointventuresonlyinsofarasajointventureconstitutesanotifiablemergerasdefinedundertheAct.TheMergerGuidelinesalsoprovidesomefurtherguidanceontheextenttowhichjointventuresarenotifiablemergers,whichincludesthatthejointventurewouldneedtobeafull-functionjointventure.
17. Does the legislation specifically prohibit cartel conduct? If so, are there examples of the authorities pursuing firms for engaging in cartel conduct?
UndertheAct,theAuthorityisempoweredtoregulatecartelconduct,includinganyagreementsorconcertedpracticeswhichhavetheobjectoreffectofpreventing,distortingorlesseningcompetitioninanygoodsorservicesinKenya.
ThefollowingdefinitionsintheActinthisrespectareworthnoting:
• ‘agreement’whenusedinrelationtoarestrictedpracticeincludesacontract,arrangementorunderstanding,whetherlegallyenforceableornot;and
• ‘concertedpractice’meansco-operativeorco-ordinatedconductbetweenfirms,achievedthroughdirectorindirectcontact,thatreplacesindependentaction,butwhichdoesnotamounttoanagreement.
TheActspecificallyprohibitscertainhorizontalrestrictivepractices(unlawfulconductbetweencompetitors)aswellascertainverticalrestrictivepractices(unlawfulconductbetweenanundertakinganditssupplierorcustomer,orboth).
TheActalsoprohibitsdirectorindirectpricefixing;dividingmarketsbyallocatingcustomers,suppliers,areasorspecifictypesofgoodsorservices;distorting,restrictingorpreventingcompetitionandcollusivetendering.
PartiestoanyagreementmayapplytotheAuthorityforanexemptionfromtheapplicationoftheprovisionsoftheActwhichprohibitrestrictivetradepractices.
TheAuthoritymaygrantanexemptionifitissatisfiedthatthereareexceptionalandcompellingreasonsofpublicpolicyastowhytheagreement,decision,concertedpracticeorcategoryofthesame,oughttobeexcludedfromtheapplicationoftheAct.TheAuthoritymaygranttheexemptionforaspecifiedperiodandsubjecttocertainterms.
TheAuthorityisalsoempoweredtograntblockexemptionsforanycategoryofdecisions,practicesoragreementsbetweenfirms.ThispoweristobeexercisedsubjecttotheapprovaloftheCS,bynoticeintheKenyaGazette.
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TherecentlypublishedLeniencyGuidelinesalsopointtotheAuthority’sshiftoffocusfrommergerstotheregulationofcartelconduct.
BywayofexampleoftheCAK’sactionsoncartels,in2016,theCAKconducteditsfirstdawnraidattheofficesoffertiliserproducersMeaLimitedandYaraEastAfrica,bothofwhicharemembersoftheFertiliserAssociationofKenya(FAK),ontheallegationofpricecollusionbetweenthetwocompanies.
Recently,theCAKrefusedtograntanexemptiontotheEastAfricanTeaTradersAssociation(EATTA)tobeexemptedfromthepricefixingprovisionsoftheAct.
18. What are the authorities’ powers of investigation in relation to cartel conduct and other prohibited practices?
TheAuthorityisempoweredtoinvestigaterestrictiveandprohibitedtradepractices,whichincludecartelconduct,eitheronitsowninitiative,oronreceiptofinformationfromanyperson,governmentagencyorministry.
Inconductingitsinvestigations,theAuthoritymay,bynoticeinwritingtothepersonbeinginvestigated:
• requiretheperson(ordirectororothercompetentofficerinthecaseofabodycorporate)toprovideinformationrelatingtotheinvestigationwithinthetimeandinthemannerspecifiedinthenotice;
• requirethepersontoappearbeforetheAuthoritytogiveevidenceorproduceanydocuments;
• requirethepersontoproducecertaindocumentstotheAuthorityortoapersonspecifiedinthenoticetoactontheAuthority’sbehalf;and
• requestthepersoninpossessionofcertainrecordstogivecopiesoftherecordstotheAuthority.
TheAuthorityalsohassearchandseizurepowersundertheAct,theenforcementofwhichcanbecarriedoutwiththeassistanceofpoliceofficersandotherlawenforcementagencies.
19. What are the penalties for cartel conduct? Is there a leniency policy in place? Does the legislation impose criminal sanctions?
Anypersonwhocontravenestheprovisionsprohibitingcartelconductisliableonconvictiontoimprisonmentforaperiodnotexceedingfiveyears,orafinenotexceedingKES10million,orboth.
TheAuthorityisempoweredbytheActtooperatealeniencyprogrammeandtothisend,in2017,theAuthorityissuedtheLeniencyProgrammeGuidelines,whichoperationaliseSection89AoftheAct.Undertheleniencyprogramme,anyfirmthatvoluntarilydisclosestheexistenceofanyagreementorpracticewhichisprohibitedbytheActandco-operateswiththeAuthorityinitsinvestigationsmaybegrantedleniencybytheAuthorityandsparedfromallorpartofanyfinesthatwouldotherwiseapplytoitundertheAct.
Anapplicationforleniencycanbemadeonlywhen:
• theCAKhasnoknowledgeofthecontravention;or
• theCAKhasknowledgeofthecontraventionbutlackssufficientinformationtobegininvestigation;or
• theCAKhascommencedinvestigationsbutneedsfurtherevidencetopenalisetheoffenders.
Eligibleapplicantsareawardedleniencyasfollows:
• Thefirstthroughthedoorshallreceive100%immunity.
• Thesecondmaybegrantedupto50%reductioninpenaltiesapplicable.
• Thethirdmaybegrantedupto30%reductioninpenaltiesapplicable.
• Anyothersubsequentapplicantwhoprovidesusefulinformationbeforecompletionofinvestigationmaybegrantedupto20%reductioninpenaltiesapplicable.
FurtherdetailsoftheleniencyprogrammearesetoutintheLeniencyProgrammeGuidelines.
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20. Is there a provision in the legislation providing for a mechanism to apply for exemption from certain parts of the legislation?
TheAmendmentActallowstheCAKtosetthresholdsforanyproposedmergertobeexcludedfromtheprovisionsofPart4oftheCompetitionAct(Part4oftheCompetitionActcontainstheprovisionsthatdealwithMergersandMergercontrol).Thesethresholdsareyettobeset.
TheActalsomakesprovisionforexemptionofcertainformsofrestrictivetradepractices.
Section25oftheActprovidesthatanyundertakingorassociationofundertakingsmayapplytotheAuthoritytobeexemptedfromtheprovisionsoftheActwithrespecttorestrictiveagreements,practicesanddecisions.Theseprovisionsmaybeinrespectof:
• anyagreementorcategoryofagreements;• anydecisionorcategoryofdecisions;or• anyconcertedpracticeorcategoryof
concertedpractices.
Onceanapplicationforexemptionismade,theAuthorityisrequiredtopublishnoticeoftheapplicationintheKenyaGazette.ThenoticeshouldindicatethenatureoftheexemptionsoughtbytheapplicantandcalluponinterestedpersonstosubmittotheAuthority,within30daysofthepublicationofthenotice,anywrittenrepresentationswhichtheymaywishtomakeinregardtotheapplication.
TheActalsoempowerstheAuthoritytoissueblockexemptionsforanycategoryofdecisions,practicesoragreementsbetweenfirms,subjecttotheapprovaloftheCS,bynoticeintheKenyaGazette.
Inadditiontotheexemptionsprovidedforabove,theActalsomakesprovisionforexemptionswithrespecttointellectualpropertyrightsandprofessionalrules.
21. Is minimum resale price maintenance prohibited?
Section21(1)oftheActprovidesthatagreementsbetweenundertakings,decisionsbyassociationsofundertakings,decisions
byundertakingsorconcertedpracticesbyundertakings,whichhaveastheirobjectoreffecttheprevention,distortionorlesseningofcompetitionintradeinanygoodsorservicesinKenya,orapartofKenya,areprohibited,unlesstheyareexemptinaccordancewiththeprovisionsoftheAct.
Section21(3)(d)expresslyprohibitsanyagreement,decisionorconcertedpracticewhich,interalia,involvesapracticeofminimumresalepricemaintenance.
However,Section21(4)oftheActprovidesthattheprohibitiononmaintenanceofminimumresalepricesstatedaboveshallnotpreventasupplierorproducerofgoodsorservicesfromrecommendingaresalepricetoare-sellerofthegoodsoraprovideroftheservice,providedthat:
• itisexpresslystipulatedbythesupplierorproducertothere-sellerorproviderthattherecommendedpriceisnotbinding;and
• ifanyproduct,oranydocumentorthingrelatingtoanyproductorservice,bearsapriceaffixedorappliedbythesupplierorproducer,thewords‘recommendedprice’appearnexttothepricesoaffixedorapplied.
22. In what circumstances are exclusive agreements unlawful? If exclusive agreements raise concerns in specific circumstances, what factors are relevant to their lawfulness or unlawfulness?
Exclusiveagreementsareunlawfultotheextentthattheyhavetheobjectoreffectofpreventing,distortingorlesseningcompetitionintradeinanygoodsorservicesinKenya,orapartofKenya,unlesstheyareexemptedinaccordancewiththeAct.
TheprohibitionisgeneralandtheActdoesnotexpresslystipulatethefactorstobetakenintoaccountindeterminingwhethertheexclusiveagreementhastheobjectoreffectofpreventing,distortingorlesseningcompetitionintheKenyanmarket.However,theActparticularlyprohibitsanyagreementwhich,amongotherthings,limitsorcontrolsproduction,marketoutletsoraccess,technicaldevelopmentorinvestment.Asexclusiveagreementsmayhavetheeffectoflimitingorcontrollingproduction,marketoutletsoraccess,theywould,onthefaceofit,likelybedeemedtobeunlawfulunlessexempted.
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TheAuthoritymaygrantanexemptionifitissatisfiedthatthereareexceptionalandcompellingreasonsofpublicpolicyastowhytheagreementoughttobeexcludedfromtheprohibitionscontainedintheActonrestrictivetradepractices.
Inmakingadeterminationonanexemption,theAuthoritywilltakeintoaccounttheextenttowhichtheagreementcontributesto,orresultsin,orislikelytocontributetoorresultin:
• maintainingorpromotingexports;• improving,orpreventingdeclineinthe
productionordistributionofgoodsortheprovisionofservices;
• promotingtechnicaloreconomicprogressorstabilityinanyindustry;and
• obtainingabenefitforthepublicwhichoutweighsorwouldoutweighthelesseningincompetitionthatwouldresult,orwouldbelikelytoresult,fromtheagreement,decisionorconcertedpracticeorthecategoryofagreements,decisionsorconcertedpractices.
23. Does the legislation prohibit the abuse of a dominant position? If so, what is the threshold for dominance and what conduct amounts to an abuse?
TheActprohibitstheabuseofadominantpositionanddefinesadominantundertakingasanundertakingthatproduces,supplies,distributesorotherwisecontrolsnotlessthanhalfofthetotalgoodsorservicesproduced,suppliedordistributedinKenyaoranysubstantialpartthereof.
Firmsthat,althoughnotdominant,controlbetween40%and50%ofthemarketshare(unlesstheycanshowthattheydonothavemarketpower)orcontrollessthan40%ofthemarketsharebuthavemarketpowerarealsoconsideredtobedominant.Forthesepurposes,marketpowerisdefinedasthepowerofafirmtocontrolprices,excludecompetitionorbehave(toanappreciableextent)independentlyofitscompetitors,customersorsuppliers.
Conductthatamountstoabuseofadominantpositionincludes:
• directlyorindirectlyimposingunfairpricesortradingconditions;
• limitingorrestrictingproduction,marketoutletsormarketaccess,investment,distribution,technicaldevelopmentortechnologicalprogressthroughpredatoryorotherpractices;
• applyingdissimilarconditionstoequivalenttransactionswithothertradingparties;
• makingtheconclusionofcontractssubjecttoacceptancebyotherpartiesofsupplementaryconditionswhichbytheirnatureoraccordingtocommercialusagehavenoconnectionwiththesubjectmatterofthecontracts;and
• theabuseofintellectualpropertyrights.
24. Are there examples of the authorities pursuing firms for abusing a dominant position?
ItisinthepublicdomainthattheAuthorityhasbeenconductinginvestigationsonfirmsoperatinginthecementsector,telecommunicationssectorandpayTVsub-sector,pursuanttocomplaintsfiledagainstthefirmsfor,interalia,abuseofdominance.
25. Does the legislation impose penalties on firms for the abuse of a dominant position?
Yes.Currently,anypersonwhoabusestheirdominantpositionisliableonconvictiontoimprisonmentforaperiodnotexceedingfiveyears,orafinenotexceedingKES10million,orboth.Notehowever,asmentionedabove,theAmendmentActalsopermitstheAuthoritytoimposeafinancialpenaltyofupto10%oftheimmediatelyprecedingyear’sgrossannualturnoverinKenyaoftheundertakinginquestion.
26. Are there rules in relation to price discrimination?
Asatthetimeofwriting,therearenorulesexpresslyrelatingtopricediscrimination.However,theActdoesprohibitagreements,decisionsorconcertedpracticeswhichapplydissimilarconditionstoequivalenttransactionswithothertradingparties,therebyplacingthematacompetitivedisadvantage.
27. Does the authority publish its decisions and, if so, is there a website where such decisions are available?
TheAuthorityisrequiredtopublishitsdecisionsintheKenyaGazette,althoughthisislimitedtothefinaldecisionoftheAuthority.TheAuthorityalsopublishesasummaryofthedecisionsithasmadeduringtherelevantyear,initsannualreport.TheAuthorityisnotrequiredto,nordoesitpublishitsdetailedreasoneddecisions.However,ithasindicatedthatitmayconsiderdoingsointhefutureinordertocreateprecedents.
TheAuthority’swebsiteiswww.cak.go.ke
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PFI PARTNERSHIPS Elton Jangale
Malawi
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1. What is the relevant competition legislation and who are the enforcers?
TheprimaryrelevantlegislationistheCompetitionandFair-TradingAct(No.43of1998oftheLawsofMalawi),whichiscomplementedbytheCompetitionandFair-TradingRegulations(GN20/2006).ThecoreobjectiveoftheActistopromotecompetitioninMalawi.TheActisenforcedbytheCompetitionandFair-TradingCommission(theCommission)whichisestablishedundertheAct.TheCommissioncomprisesaBoardofCommissionersandaSecretariat.TheBoardhastheultimatemandateforcompetitionenforcementinMalawi.
EffectiveAugust2016,anewCompaniesAct(No.15of2013),whichreplacedtherepealedCompaniesAct(No.19of1984),providesfortheregulationoftheprocedureandmannerthroughwhichmergersinvolvingacompanyorcompaniesthatarelistedontheMalawiStockExchange(MSE)orcompaniesnotlistedonMSEbutwithmorethan10shareholders.Byregulatingtheprocedureandmannerthroughwhichmergersareconducted,theActseekstoprotecttheinterestsofshareholdersofthecompanywhosesharesaretargetedforacquisition.
IntermsoftheCompaniesAct2013,theCommissionhasbeendesignatedasapanelontakeoversandmergerswhichisrequiredtoregulatetakeoverbids,mergertransactionsandothertransactionsthathaveormayhave,directlyorindirectly,aneffectontheownershiporcontrolofcompanies.ThismandateeffectivelyempowerstheCommissiontoassessalloffersfortakeover,acquisitionorexchangeownershipofsharesonMSEtoensurethatthereisfairandequaltreatmentofallshareholdersinatargetcompanyandtoensurethatshareholdersarenotdeniedanopportunitytomakeaninformeddecisiononthemeritsofanoffer.Thiswillbeapplicabletoanyofferforacquisitioninvolvingmorethan30%shareholdinginalistedcompanyoracompanywithmorethan10shareholders.
2. Are there any proposed amendments or new regulations expected to come into force?
DraftregulationswereissuedforpubliccommentinJanuary2014.Thedraftregulationsarestillundergoinginternalgovernmentprocesses.InSeptember2015,theCommissionissueda
publicnotice,whichwaspublishedinthelocalnewspapers,indicatingthattheStatePresidentofMalawihadapprovedreformstothecompetitionandconsumerprotectionregime,including(i)amendingtheActtoeliminatecertaingapsinthelegislation;(ii)amendingtheConsumerProtectionActtoharmoniseitwiththeAct;and(iii)aligningsectorallawsandtheActtocreatecomplementarityandreduceconflictbetweentheselaws.Todate,therehasbeenslowprogressonthereforms,whichhavenotyetbeenissuedoutforpubliccommenting.
3. Is the law actively enforced?
Yes,thelawisactivelyenforcedbytheCommissionwhichdrawsitsmandatefromtheAct.TheActseekstopromotecompetitionbyprohibitinganti-competitiveconduct.Asageneralrule,theActprovidesthatanyagreementorbusinessconductwhichhasorwouldlikelyhavenegativeeffectoncompetitionisprohibited.TheActenumeratesexamplesofbusinesspracticeswhichhaveorwouldlikelyhavenegativeeffectsoncompetitionandare,therefore,prohibited.Theseinclude:cartels,suchaspricefixingormarketallocationagreementsamongcompetingfirms;bidrigging;resalepricemaintenance;predation;abuseormisuseofmarketpower;and,exclusivearrangementsoragreements.
TheroleoftheCommissionistoensurethatmarketplayersarenotengagedinanti-competitiveconductandanyotherbusinesspracticesthathaveorwouldlikelyhavenegativeeffectsoncompetition.ThemandateoftheCommissioncoversanyactivitythathascommercialvalue.TheCommissionusesatwo-prongedapproachtodischargeitsmandate.OnonehandisthepreventiveapproachwhichseekstoassistmarketplayerstovoluntarilycomplywiththeprovisionsoftheAct;and,ontheotherhandistheenforcementapproachwhichseekstoassistmarketplayerscorrectanyoffendingconduct.TherearesanctionsprescribedforanyinfringementoftheprovisionsoftheAct.Nonetheless,theCommissionmayexercisediscretionandissuereformatoryorders.AnyactiontakenbytheCommissionundertheenforcementapproachisbasedonthoroughinvestigationswhichinvolvesolicitinginformationfromthemarketandgettinginformationfromthepartiesunderinvestigationsandotherstakeholders.Theresultsoftheinvestigations
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submitanyrelevantdocumentsthatcanhelptheCommissiontoaccessthelikelyimpactofthetransactiononcompetition.Thedocumentsmayincludereportsofmarketstudiesconductedbythepartiesorotherauthoritiesintheindustry.
TheHighCourtofMalawiintheStateandtheCompetitionandFair-TradingCommission,miscellaneouscaseno.1of2013(applicationforjudicialreview),confirmedthattheActdoesnotcreateanobligationforanyonetoseekauthorityfromtheCommissionforamergerortakeover.Inaddition,theCourtconfirmedthatundertheActtheonlyoffencethatpartiescanbechargedwithinthiscontextistheoffenceofparticipatinginamergerortakeoverwhichislikelytolessencompetitionintherelevantmarket.SimplyparticipatinginamergerortakeoverwithoutauthorisationisnotsufficienttoconstituteacontraventionoftheAct.
Notwithstandingthis,theCommissionappearstoconsiderthatanymergerbetweentwoormoreindependententerprises,ortakeoverofoneormoresuchenterprise,requiresauthorisation.TheCommissionhasindicatedthattheassessmentofwhetherthemergerresultsinasubstantiallesseningofcompetitionisanassessmentthatisintendedtobeconductedbytheCommissionafterpartieshavenotifiedthemergerandthisisnotanassessmentthatshouldbeconductedbythepartiesinordertodeterminewhethertonotifyornot.
ForthepurposesoftheAct,‘merger’meanstheacquisitionofacontrollinginterestin:
• anytradeinvolvedintheproductionordistributionofanygoodsorservices;
• anassetwhichis,ormaybeutilisedinconnectionwith,theproductionordistributionofanycommodity,wherethepersonwhoacquiresthecontrollinginterestalreadyhasacontrollinginterestinanyundertakinginvolvedintheproductionordistributionofthesamegoodsorservices;or
• theacquisitionofacontrollinginterestinanytradewhosebusinessconsistswhollyorsubstantiallyin(i)supplyinggoodsorservicestothepersonwhoacquiresthecontrollinginterest;or(ii)distributinggoodsorservicesproducedbythepersonwhoacquiresthecontrollinginterest.
aresubmittedtotheBoardinareportthatisbasedonlegalandeconomicanalysesoftheevidencegathered.ThereportformsthebasisfordeliberationsanddeterminationbytheBoard.
4. What are the current priorities or focus areas of the competition authorities?
Recently,therehavebeencompetitioninvestigations,includingcartels,intothefollowingsectors:insurance,banking,airandroadpassengertransportservices,poultry,maize,education,healthcareandwaterservice.InMay2017,theCommissionconsideredandadjudicatedoveratotalof25casesofwhich19wereonunfairtradingpracticeswhiletherestwereonanti-competitivetradepractices.
TheCommissionhasadoptedanapproachthatfocusesonencouragingvoluntarycompliancewiththelaw,asopposedtoaprosecutorialapproach.Anextensiveeducationandadvocacyprogrammehasbeenlaunched.
5. What kind of transaction constitutes a notifiable merger?
TheActdoesnotcreateamandatorymergernotificationregime.AnytransactionwhichislikelytoresultinsubstantiallesseningofcompetitioninamarketinMalawiisrequiredtobenotifiedtotheCommissionforapproval.TheCommissiontakestheviewthatallmergersarenotifiable.
MergernotificationscanbenotifiedtotheCommissionbeforeorafterclosureofamergertransactionorconsummationofthemerger.TheCommissionacceptsnotificationsatanytime.Ifnotifiedafterconsummated,itisadvisablethatthenotificationbemadewithoutdelay.Partiesthatnotifythetransactionafterthemergerhasalreadybeenconsummatedriskbeingrequiredtounwindthetransactionintheeventthatthemergerisfoundtobeanti-competitive.Anotificationofamergercanbemadebyanyofthepartiesorbyapersondesignatedbytheparties.
Tonotifyamergertransaction,partiesneedtocompleteanapplicationformwhichisobtainablefromtheofficesorwebsiteoftheCommission.Inadditiontotheforms,partiesarerequiredto
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Thereisnoclosedlistofhowcontrolmaybeachieved.Broadly,acontrollinginterest,inrelationto(i)anyundertaking,meansanyinterestwhichenablestheholdertoexercise,directlyorindirectly,anycontrolwhatsoeverovertheactivitiesorassetsoftheundertaking;and(ii)anyasset,meansanyinterestwhichenablestheholdertoexercise,directlyorindirectly,anycontrolwhatsoeverovertheasset.
Inthe2014/2015financialyear,theCommissionreviewed13mergernotifications,representinga150%increasefromthepreviousyear’scases.Ofthese13cases,sevenwerenotifiedtotheCOMESACompetitionCommission.Oftheremainingsixcases,fiverelatedtomergersthatinvolvedapartywithnocommercialpresenceinMalawiandonlyonewasfoundtolikelyresultinsubstantiallesseningofcompetitionintherelevantmarket(themergerwasapprovedsubjecttocertainundertakings).TheCommissionregistered42allegedviolationsoftheAct,representinga61.5%increasefromthepreviousfinancialyear,andprocessed76consumercomplaints.
On4September2015,theCommissionconcludedamemorandumofunderstandingwiththeCOMESACompetitionCommission,toensureco-operationbetweenthetwoauthorities.Itincludesagreementsrelatingto:
• notificationofeitherparty’senforcementactivitieswhichmayaffectimportantinterestsoftheotherparty;
• exchangeofinformationregardinganti-competitivebusinesspracticeswhicheitherpartybelievesisrelevantto,ormaywarrant,enforcementactivitybytheotherparty;
• co-operationininvestigationswherebybothpartieswillrenderassistancetooneanotherintheirinvestigations;and
• advancingtechnicalassistanceandcapacity-buildingprogrammesthroughintegratedstrategies.
On29March2016,anewstrategicplanfortheCommissionwaslaunched.ThecurrentStrategicPlan(2015-2020)hasasitsaspiredstrategicoutcomethattheCommissionwillhavecreatedahighlycompetitiveandfair-tradingenvironmentinMalawiforconsumerwelfareandbusinessprosperitybytheendof2020.
6. What are the thresholds for mandatory merger notification (e.g. assets, turnover and/ or market share)?
Therearenominimumthresholdsformergernotifications.Basically,allmergersarenotifiable.
Inassessinganymerger,theCommissionwillconsiderwhetherthetransactionwill(i)resultineliminationofacompetitorfromthemarket;(ii)leadtoanewcompanycreatedafterthemergertoincreaseitsmarketpowerwhichcanbeabused;(iii)leadtocrowdingoutofcompetitorsfromassessinginputsordistributionchannels;or(iv)createanenvironmentthatwouldlikelyforceothercompetitorstoengageinanti-competitivebusinesspractices.
Additionally,theCommissionassessesthebenefitsthatthemergerwillcreate.Adecisionwhetherornottoauthoriseamergerisbasedonanassessmentofwhetherthebenefitsofthemergeroutweighitsanti-competitiveeffects.
7. Is there a prohibition on the pre-implementation of a merger? If so, does the legislation make provision for a penalty?
Asthemergernotificationregimeisnotmandatory,thereisnoprohibitiononthepre-implementationofamerger.Itis,however,anoffencetoeffectamergerthatislikelytoresultinsubstantiallesseningofcompetitioninthemarketwithouttheapprovaloftheCommission.Ifthepartiesdecidetoseekauthorisationforthemergerortakeover,itisadvisablethatthepartiesawaitclearancebeforeconsummatingthemerger.
Thereisnostatutorypenaltyspecificallyorexpresslyattributabletocontraventionofmergernotificationstatutoryrequirements.Thereis,however,ageneralprovisionintheActwhichstatesthatanypersonguiltyofanoffenceforwhichnospecificpenaltyisprovided(e.g.asisthecaseinrespectofmergers)shallbeliableforafineofMWK500000oranamountequivalenttothefinancialgaingeneratedbytheoffence,ifsuchamountisgreater,ortoimprisonmentforfiveyears.Intheeventofaconvictionforcontraveningthemergernotificationstatutoryprovisions,itismostlikelythatcourtswouldorderfinesinsteadofcustodialsentences;andanyorderofcustodialsentencewouldbeasalastresortasaresultoffailuretopayafine.
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Further,anymergerortakeover,whichisheldtoresultinsubstantiallesseningofcompetitionintheMalawimarket,shallnothaveanylegaleffect;andnorightsorobligationsimposedontheparticipatingpartiesbyanyagreementinrespectofthemergerortakeovershallbelegallyenforceable.
8. What filing fees are required?
Thefilingfeepayableforamergeris0.05%ofthecombinedturnoverortotalassets,whicheveristhehigher,oftheenterprisesproposingtoeffectthemergerortakeover.
9. Is it necessary to obtain approval for foreign-to-foreign mergers?
Yes,itisnecessarytoobtainapprovalforforeign-to-foreignmergerswhicharelikelytoresultinsubstantiallesseningofcompetitionintheMalawimarket.
10. Are pre-notification contacts with the authorities permitted and are pre-notification meetings normal practice?
AlthoughtheActdoesnotrequirepre-notificationmeetings,theCommissionencouragespartiestohaveapre-notificationmeetingwiththeCommissiontodiscusshowthetransactionmaybenotifiedandgetclarificationontheinformationthatneedstobesubmitted.
11. To what extent are non-competition factors relevant to the assessment of a merger?
Non-competitionfactorsconsideredbytheCommissioninevaluatingamergerincludetheextenttowhichamergerislikelytoresultin(i)increaseinemployment;(ii)accelerationintherateofeconomicdevelopment;(iii)specialattributesofaparticular(industrial)sectororregion;or(iv)theabilityofsmallbusinessesortheinformalsectororthesociallydisadvantagedandpersonswithdisabilitiestobecomecompetitive,i.e.impactinexpandingthebaseofentrepreneurshipandhumandevelopment.
Forexample,intermsofspecialattributesofaparticularindustrialsector,inassessmentofarecentmergerbetweenNationalBankofMalawi(NBM)andIndeBank,theCommissionfoundthat,whilethetransactionwouldresultinareductioninthenumberofbanksinMalawiandthatthe
marketshareofNBMastheacquirerwouldincreasefurtherafterthemerger,thebenefitsofthetransactionoutweigheditsnegativeeffects.TheCommissionreachedaconclusionthatthetransactionsavedIndeBankfromstatutoryclosurewhichwouldhaveresultedinlossofsavingsbyIndeBankcustomersandnegativelyaffectedthebankingindustry.However,tomitigatethenegativeeffectsthatthetransactionwouldlikelycreate,theCommissionrequiredNBMtocommittoundertakingswhichincludedarequirementthatthebankwouldnotabuseitsincreasedmarketshare.
12. Do the authorities contact customers and competitors of the merging parties as part of the merger review process?
TheCommissioncontactscustomersandcompetitorsiftheyareconsideredtobeaffectedbythemerger.
13. Who else can make submissions to the authorities when a merger is being considered? Are employees contacted as part of the process and can employees make submissions?
Suppliers,governmentministries,departmentsandagenciesoranyotherinterestedstakeholdersmaybecontactedbytheCommissiontomakesubmissions.IftheCommissionembarksonapublicenquiry,awideconsultationprocesswithstakeholdersisfollowed.Employeesareabletomakesubmissions;however,inpracticetheCommissiondealswithtradeunions,notusuallywithindividualemployees.Submissionsonbehalfofemployeesareimportanttothemergerassessmentprocess.TheCommissionisempoweredtorequireanyparticipantinthemarketwithinwhichamergerortakeoverisproposedtogranttheCommissionaccesstorecordsrelatingtopatternsofownershipandpercentagesofsalesaccountedforbyenterprisesintherelevantsector.
14. Are merging parties given an opportunity to make representations before a decision is issued where the authority intends to prohibit a merger or impose conditions?
Thereisnoformalprocesstomakerepresentationsbeforeadecisionisissued(suchasapublichearing).Oncethemergingpartieshavemadetheirinitialsubmissions,theCommissionisrequiredunder
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theActtocomebacktothepartieswithadecisionwithin45days.However,theCommissionmayaskforadditionalinformationregardingthemerger,thepartiesortheirbusinesses.IftheCommissionasksfortheadditionalinformation,the45daysstartrunningfromthedatetheCommissionreceivestherequestedinformation.TheCommissionthenmakesitsordertoapproveorrejecttheapplication,oritmayapprovetheapplicationonconditionthatcertainstepsbetakentoreducenegativeeffectsofthemergerortakeoveroncompetition.
15. What are the opportunities for judicial appeal or review of a decision in respect of a merger that the parties are dissatisfied with?
AfindingoftheCommissioncanbeappealedtoajudgeinchamberswithin15daysofthedateofthefinding.Thejudgeinchambersmayconfirm,modifyorreversetheCommission’sfindingsoranypartthereof,ordirecttheCommissiontoreconsiderthematter,inwholeorinpart.TheCommission’sfindingsremaininforcependingtheoutcomeoftheappeal,unlessthejudgeordersotherwise.
Extensionofthe15-dayperiodwasconsideredbytheHighCourtofMalawiinthecontextofanapplicationforauthorisationofanexclusivityagreementwhichwasdeterminedundersection44oftheAct.Inacommercialcasenumber2of2014,AirtelMalawiLtdversusTheCompetitionandFair-TradingCommission,theCourtheldthatitdidnothavethepowertograntanextensiontothe15-dayperiod.Althoughthiscasedidnotdealwithamergerspecifically,itislikelytobeapplicableinmergercases.
16. Does the legislation apply to joint ventures?
Thelegislationdoesnotspecificallyrefertojointventures.AjointventurethatisclassifiedasamergerortakeoverisnotifiabletotheCommission.
17. Does the legislation specifically prohibit cartel conduct? If so, are there examples of the authorities pursuing firms for engaging in cartel conduct?
Yes,theActregulatesprohibitedpracticesandspecificallyprohibitscertainhorizontalrestrictivepractices(i.e.unlawfulconductbetweencompetitors).Anycategoryofagreements,
decisionsorconcertedpracticeslikelytoresultintheprevention,restrictionordistortionofcompetitiontoanappreciableextentinMalawiorinanysubstantialpartofMalawi,isprohibited.Section33(3)oftheActenumeratesexamplesofbusinesspracticeswhichhaveorwouldlikelyhavenegativeeffectsoncompetitionandare,therefore,prohibited.Theseinclude:cartels,suchaspricefixingormarketallocationagreementsamongcompetingfirms;bidrigging;resalepricemaintenance;predation;abuseormisuseofmarketpower;andexclusivearrangementsoragreements.
TheCommissiontakesproactiveactiontoidentifymarketplayerswhicharepotentiallyinvolvedincartelconspiracyormarketswhichmaybeaffectedbycartelisation.CarteldetectiontoolsusedbytheCommissioninvolveanalysesofobservableeconomicdataandfirmbehaviour,systematicmonitoringofmediaaswellastrackingfirmsandindividualstodetectbehaviourwhichisinconsistentwithahealthycompetitiveprocess.
InOctober2014,theCommissiondeterminedthattheInsuranceAssociationofMalawi(IAM)engagedinacartelandorderedIAMtoceaseanddesistfromthepractice;andmakepublicwithdrawalofanyrecommendedpremiumratesthatmightbeinforce.TheCommissionlaunchedinvestigationsfollowingtheinformationitcameacrosswhichallegedthatIAMengagedinsettingofpremiumratesandrecommendingthesametoitsmemberscontrarytoSections32(1)and34(1)oftheAct.Also,theCommissionorderedIndependentSchoolsAssociationofMalawi(ISAM)toceaseanddesistfromengaginginanti-competitivebusinesspractices.ThisfollowedinvestigationsthatconfirmedthatISAMhadbeenengaginginprohibitedpricefixingbysettingfeesinordertoreducecompetitionamongmembers.Apartfromsettingthefees,theAssociationwasalsoinvolvedindevelopingacodeofconductaimedatregulatingtheconductofmemberswithregardtowheretoopenschools,whotoadmitasstudentsandwhotorecruitasteachers.TheCommissionhasalsoissuedsimilarordersagainstMinibusOwnersAssociationofMalawiandTravelAgentsAssociationofMalawi.
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18. What are the authorities’ powers of investigation in relation to cartel conduct and other prohibited practices?
TheActconfersbroadpowersofinvestigationontheCommission,includingthepowerto(i)summonandexaminewitnesses;and(ii)callforandexaminedocuments.
ThefunctionsoftheCommissionincludecarryingout,onitsowninitiativeorattherequestofanyperson,investigationsinrelationtotheconductofbusinesssoastodeterminewhetheranyenterpriseiscarryingonanti-competitivetradepracticesorunfairtradingpracticesandtheextentofsuchpractices,ifanyandtodoallsuchactsandthingsasarenecessary,incidentalorconducivetothebettercarryingoutofitsfunctionsundertheAct.
TheActempowersaninvestigatingofficerwhoisinpossessionofawarranttosearchandinspectallthingsuponthepremisesofthesuspectedenterprise.TheCommissionisempoweredtoobtainallinformationitconsidersappropriate,andforsuchpurposesitisempowered,interalia,tohearanyinterestedpartyandtoholdpublicmeetings.
19. What are the penalties for cartel conduct? Is there a leniency policy in place? Does the legislation impose criminal sanctions?
Thereisnospecificpenaltyforcartelconduct.However,itisanoffencetoengageinanyformofcartelconductassetoutundersection33(3)oftheAct.ApersonwhoisguiltyofanoffenceundertheActforwhichnospecificpenaltyisprovided,isliableforafineofMWK500000oranamountequivalenttothefinancialgaingeneratedbytheoffence,ifsuchamountisgreater,andtoimprisonmentforfiveyears.
Further,anypersonwhosuffersinjury,lossorharmasaresultofanyagreement,arrangement,undertaking,actoromissionwhichisprohibitedbytheActmayrecoverdamagesbywayofcivilproceedingsintheHighCourtofMalawifromthepersonresponsibleforanysuchagreement,arrangement,undertaking,actoromission.Thereisnoleniencypolicyinplace.
20. Is there a provision in the legislation providing for a mechanism to apply for exemption from certain parts of the legislation?
TheActspecificallypermitstheCommissiontoauthoriseanyact,agreementorunderstandingwhichisnotprohibitedoutrightbytheAct(i.e.anact,agreementorunderstandingwhichisnotnecessarilyillegalunlessabused)ifthatact,agreement,orunderstandingisconsistentwiththeobjectivesoftheActandtheCommissionconsidersthat,onbalance,theadvantagestoMalawioutweighthedisadvantages.
However,theCommissionisprohibitedfromauthorisingacts,agreementsorunderstandingsofakinddescribedascartelconductandabuseofdominanceundersections33(3)and41(1)respectively.AnexampleofanapplicationforauthorisationisthecaseofChibukuProductsLtd(CPL)inwhichanapplicationbyCPLwasmadetotheCommissionintermsofsection44oftheAct,forauthorisationtodistributeCPL’sproductsthroughappointedexclusivedistributors.AlthoughtheCommissiondeterminedthattheproposeddistributionarrangementhadthelikelyeffectofrestrictingcompetitioninthedistributionofCPL’sproducts,theCommissionauthorisedthearrangementsubjecttocertainamendmentsofrestrictiveclausesinthedistributionagreement.Thearrangementhadpositiveelementswhichoutweighedtheanti-competitiveeffects.Inparticular,itensuredtheavailabilityofCPL’sproductsinremoteareasatreasonableprices.
21. Is minimum resale price maintenance prohibited?
TheActdoesnotdistinguishbetweenminimumandmaximumresalepricemaintenance.Resalepricemaintenanceisprohibitedifitlimitsaccesstomarketsorotherwiseundulyrestrainscompetitionorhas,orislikelytohave,anadverseeffectontradeortheeconomyingeneral.
IntermsoftheRegulations,anenterprisemayapplytotheCommissionforauthorisationtoengageinresalepricemaintenanceifitisoftheviewthattheconductwillnot(i)limitaccessto
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markets;(ii)undulyrestraincompetition;or(iii)haveanadverseeffectontradeortheeconomyingeneral.
22. In what circumstances are exclusive agreements unlawful? If exclusive agreements raise concerns in specific circumstances, what factors are relevant to their lawfulness or unlawfulness?
Exclusivedealingarrangements,insofarastheymakethesupplyofgoodsorservicesdependentontheacceptanceofrestrictionsonthedistribution,manufactureorprovisionofcompetingorothergoodsorservices,areprohibitediftheylimitaccesstomarketsorotherwiseundulyrestraincompetitionorhave,orarelikelytohave,anadverseeffectontradeortheeconomyingeneral.
IntermsoftheRegulations,anenterprisemayapplytotheCommissionforauthorisationtoenterintoanexclusivedealingarrangementofthisnatureifitisoftheviewthattheconductwillnot(i)limitaccesstomarkets;(ii)undulyrestraincompetition;or(iii)have,orbelikelytohave,anadverseeffectontradeortheeconomyingeneral.
23. Does the legislation prohibit the abuse of a dominant position? If so, what is the threshold for dominance and what conduct amounts to an abuse?
TheActaddressesthemisuseofmarketpower,providingthatanypersonwhohasadominantpositionofmarketpowershallnotusethatpowerforthepurposeof(i)eliminatingordamagingacompetitorinthatmarketoranyothermarket;(ii)preventingtheentryofapersonintothatmarketoranyothermarket;or(iii)deterringorpreventingapersonfromengagingincompetitiveconductinthatmarketoranyothermarket.
TheActandRegulationsdonotprovideathresholdordefinitionofdominance,howevertheCommission’swebsiterecordsthatanenterprisewouldbedeemedtobedominantwhenitpossessessuchsignificantmarketpowertoadjustpricesoroutputsortradingtermswithouteffectiveconstraintfromcompetitorsorpotentialcompetitors.
TheActalsoprohibitspredatorybehaviourtowardscompetitorsincludingtheuseofcostpricingtodamage,hinderoreliminatecompetition,ifthebehaviourlimitsaccesstomarketsorotherwiseundulyrestrainscompetition,orhas,orislikelytohave,adverseeffectsontradeortheeconomyingeneral.
24. Are there examples of the authorities pursuing firms for abusing a dominant position?
InAugust2017,theCommissiondismissedallegationsofabuseofdominanceagainstCPFeedsLimited.Specifically,itwasallegedthatCPFeedsweresellingchickensatapricewhichundercutsmallscalepoultryproducers.ThisfollowedinvestigationswhichtheCommissionconductedwhichshowedthatCPFeedswasverticallyintegratedsuchthattheirproductioncostsforchickensweremuchlowerthanthatofsmallscalepoultryproducers.Thisallowedthecompanytosellatmuchlowerprices.TherewasnoevidencetoprovethatCPFeedswasabusingitsmarketpower.TheCommissionheldthatthesmall-scaleproducersweredemandingprotectionfromlegitimatecompetitionfromcompaniesenjoyingeconomiesofscaleandscope.
In2013,theCommissioninvestigatedanddismissedacaseinwhichFasaProductsLtdwasaccusedofengaginginanti-competitivebusinesspractices.ItwasallegedthatFasahadappointedexclusivedistributorsforsoyapiecesandwasrefusingtoallowotherwholesalerstopurchasetheproductdirectlyfromthefactoryshop.
TheCommissionhasalsoreferredamattertotheReserveBankofMalawi,asafinancialservicessectorregulator,tocomeupwithappropriateregulationstoleveltheplayingfieldforcreditreferencingbusinesses,afteritfoundthattheconductbymembersoftheBankingAssociationMalawicreatedananti-competitivebusinessenvironmentincreditreferencing.
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25. Does the legislation impose penalties on firms for the abuse of a dominant position?
Thereisnospecificpenaltyforabuseofdominance;however,itisanoffenceforanypersonwhohasadominantpositionofmarketpowertomisusethatpower.ApersonguiltyofanoffenceundertheActforwhichnospecificpenaltyisprovidedmaybeliableforafineofMWK500000oranamountequivalenttothefinancialgaingeneratedbytheoffence,ifsuchamountisgreater,andtoimprisonmentforfiveyears.Further,anypersonwhosuffersinjury,lossorharmasaresultofanyagreement,arrangement,undertaking,actoromissionwhichisprohibitedbytheActmayrecoverdamagesbywayofcivilproceedingsintheHighCourtfromthepersonresponsibleforanysuchagreement,arrangement,undertaking,actoromission.
26. Are there rules in relation to price discrimination?
TheActrequiresenterprisestorefrainfromengagingindiscriminatorypricinganddiscriminationintermsandconditions,inthesupplyorpurchaseofgoodsorservices,includingbymeansofpricingpoliciesintransactionsbetweenaffiliatedenterpriseswhichoverchargeorunderchargeforgoodsorservicespurchasedorsuppliedascomparedwithpricesforsimilarorcomparabletransactionsoutsidetheaffiliatedenterprises,iftheactorbehaviourlimitsaccesstomarketsorotherwiseundulyrestrainscompetition,orhasorislikelytohaveanadverseeffectontradeortheeconomyingeneral.
Thisprohibitiondoesnotonlyapplytodominantfirms,buttoanycategoryofagreements,decisionsandconcertedpracticeswhichislikelytoresultintheprevention,restrictionordistortionofcompetitiontoanappreciableextentinMalawiorinanysubstantialpartofit.
27. Does the authority publish its decisions and, if so, is there a website where such decisions are available?
SomedecisionsareavailableontheCommission’swebsitewww.cftc.mwunder‘Media/PressRelease’.However,notalldecisionsappeartobepublished.
AmongthoserecentlypublishedareshortsummariesofthemergersconsideredforauthorisationbytheCommission,suchas:
• AcquisitionofSABMillerplcbyAnheuser-BuschInBevSA/NV(ABInBev);and
• AcquisitionofshareholdinginCharterInsuranceCompanybyLibertyHoldingsLtdandLibertyNominees(Proprietary)Ltd.
PFI PARTNERSHIPSCompetition,PPP&BusinessLawConsultants5GardenCourt,ChimutuRoad,offChilembweRoad,Area11P.O.Box30556Lilongwe3MalawiT:+2651776813E:[email protected]
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APPLEBY
Malcolm Moller
Mauritius
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1. What is the relevant competition legislation and who are the enforcers?
TheCompetitionActof2007(theAct)istherelevantcompetitionlegislationinMauritius.TheCompetitionCommission(theCommission),setupbytheAct,isanindependentstatutorybodythatenforcesthelegislationandhasthefollowingfunctions:
• toconductanyhearingswithinterestedpersonsorparties;
• todeterminewhetherarestrictivebusinesspracticeisoccurringorhasoccurred;
• toinvestigatemergers;and• todeterminesuchpenaltyorotherremedy
asitconsidersfittoimposeinresponsetoanidentifiedanti-competitivepracticeandtodeterminetheactionanenterpriseisrequiredtotaketoensurecompliancewiththepenaltyorremedy.
2. Are there any proposed amendments or new regulations expected to come into force?
Therearenoproposedamendmentsornewregulationsthatareexpectedtocomeintoforce.However,asrequiredbytheAct,theCommissionhaspublisheddocumentssettingout:
• guidelinesontheeconomicandlegalanalysiswhichshallbeusedforthedeterminationofcasesundertheAct;
• guidelinesontheprincipleswhichshallbeusedforthedeterminationofpenaltiesorremediesimposedundertheAct,andonthemannerinwhichturnoveristobecalculatedforthepurposesofSection59;and
• itsrulesofprocedure.
AsstatedontheCommission’swebsite,inNovember2009,theCommissionpublisheditsfinalversionsofthefollowingguidelines,followingapublicconsultationondraftversions:
• CCM1–CompetitionCommissionRulesofProcedure2009andCompetitionCommission(Amendment)RulesofProcedure2011
• CCM2–Marketdefinitionandthecalculationofmarketshares
• CCM3–Collusiveagreements• CCM4–Monopolysituationsand• non-collusiveagreements• CCM5–Mergers• CCM6–RemediesandPenalties• CCM7–Guidelinesgeneralprovisions
3. Is the law actively enforced?
WhereastheActwaspassedon20December2007,PartsIandIIoftheAct,whichsetout,interalia,theshorttitleandinterpretationoftheActalongwiththedutiesoftheexecutivedirectoroftheCommission,havebeenproclaimedintoforcewitheffectfrom24October2008,andPartsIIItoIX,whichsetout,interalia,theinvestigationsanditsproceduresdonebytheexecutivedirector,theproceedingsbeforetheCommissionanddisclosuresmadetotheCommissionandconfidentiality,havebeenproclaimedintoforcewitheffectfrom25November2009.
TheCommissionisaparastatalbody,undertheaegisoftheMinistryofFinancialServices,GoodGovernanceandInstitutionalReforms.However,theCommissionisindependentofthelocalgovernmentinitsdecision-making.TheCommissionwasestablishedin2009,andithasbeenveryactiveinmeetingitsstatutoryfunctions.
AccordingtotheCommission’smostrecentpubliclyavailableannualreport,beingfortheyear2014-2015,during2014,28enquirieswereinitiated.Addedtothat,therewere12ongoingenquirieswhichwerelaunchedfromtheprecedingyear,resultinginthetheCommissionadministering40enquiriesinallduring2014.In2015,theCommissioninitiated20enquirieswhilst30wereclosed.FortheyearendingDecember2014,theCommissionreceived76complaintsoutofwhich28proceededtoenquiry.During2015,atotalof69issueswerereportedtotheCommission.Followingascreeningprocess,20matterswerereferredforenquiry.Theseenquiriescutacrossavarietyofmarketsandindustriesrangingfromtheagriculturalsectortotheinformationandtechnologysectors.
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5. What kind of transaction constitutes a notifiable merger?
AmergerisdefinedundertheActasthebringingtogether,undercommonownershipandcontrol,oftwoormoreenterprises,ofwhichatleastonecarriesonactivitiesinMauritius,orthroughacompanyincorporatedinMauritius.ThedeterminationofwhetheramergerexistsforthepurposesoftheActisbasedonbothqualitativeandquantitativecriteriafocusingonboththeconceptofcontrolandmarketshare.
Enterprisesshallberegardedasbeingundercommoncontrolwheretheyare:
• enterprisesofinterconnectedcorporateentities;
• enterprisescarriedonbytwoormorecorporateentitiesofwhichonepersonhas,orgroupsofpersonshave,control;or
• twodistinctenterprises,onecarriedonbyacorporateentityandtheothercarriedonbyapersonhavingcontrolofthatcorporateentity.
Anypersonmayberegardedasbringinganenterpriseunderhisorhercontrolwhere:
• thatpersonbecomesabletocontrolormateriallyinfluencethepolicyoftheenterprise,withouthavingacontrollinginterestinthatenterprise;
• thatpersonisalreadyabletocontrolormateriallyinfluencethepolicyoftheenterpriseandacquiresacontrollinginterestinthatenterprise;or
• thatpersonisalreadyabletomateriallyinfluencethepolicyoftheenterpriseandbecomesabletocontrolthatpolicy.
TheActprohibitsmergersituationswhichresultinarestrictivebusinesspracticeasdefinedtherein.ThereisnorequirementtonotifytheCommissionwherethereisamergerundertheAct(subjecttothediscussionunderquestion6),buttheexecutivedirectoroftheCommission(theExecutivedirector)hasthepowertoinvestigateorcausetobeinvestigatedsuchmergersituationwhereheorshehasreasonablegroundstobelievethatsuchmergeramountsorwouldamounttoarestrictivebusinesspractice.
4. What are the current priorities or focus areas of the competition authorities?
TheprimaryfunctionoftheCommissionistopromotecompetitionbyenforcingtheActintheinterestofconsumers,businessesandtheMauritianeconomy.ItsmainroleundertheActistopreventbusinessesfromengaginginrestrictivebusinesspracticeswhichfallwithinthetermsofPartIIIoftheAct.TheCommissionaimstobetheleadingcompetitionauthorityintheregion,recognisedforitsintegrity,professionalismandcontributiontoeconomicgrowth.
InordertoencouragecompliancewiththeprovisionsoftheActandbringResalePriceMaintenance(RPM)toanend,theCommissionhasputinplaceaone-offandtime-limitedamnestyofferforenterprisesinvolvedinRPMconduct.RPMqualifiesasa‘collusiveagreement’andisprohibitedbyvirtueofSection43oftheAct.RPMisgenerallyunderstoodtomeananypracticebywhichthesuppliersandresellerscometoanunderstandingthatplacesrestrictionsonthepricesthatresellerschargewhenresellingthesuppliers’goods/services(OECD,2008).ThemostcommonformofRPMoccurswhenasupplieragreeswithitsdealersontheminimumpricelevelatwhichtosellthesupplier’sgoodsorservices.Boththesupplierandhisreseller,engaginginRPM,areliableforafinancialpenaltyofupto10%oftheirrespectiveturnoverinMauritiusduringtheperiodofthebreach,foruptoamaximumoffiveyears.
TheRPMAmnestyisavailabletoallenterpriseswhohaveengagedinRPM,providedthat,amongotherthings,theyrevealtheirconducttotheCommission,makeanapplicationforRPMbythesetdeadlineandundertaketoamendtheirconducttoceasetheRPM.ByapplyingfortheRPMamnesty,theriskofbeingseverelyfinedbytheCommissionisconsiderablyreduced.TheRPMAmnestythusoffersaone-offopportunityforenterprisestoredressanyillegalRPMconductwithoutincurringfinancialliabilityandprovidesenterpriseswiththeopportunitytobringtheircommercialpracticesintocompliancewiththelaw.
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TheActalsoprovidesthatwheretwoormoreenterprisesintendtomerge,anyoneoftheenterprisesmayapplytotheCommissionforguidanceastowhethertheproposedmergerislikelytoresultinasubstantiallesseningofcompetitioninanymarketforgoodsorservices.
6. What are the thresholds for mandatory merger notification (e.g. assets, turnover and/ or market share)?
IntermsoftheAct,a‘mergersituation’shallbesubjecttoreviewbytheCommissionwhere:
• allthepartiestothemergersupplyoracquiregoodsorservicesofanydescription,andfollowingthemerger,themergedentitywillsupplyoracquire30%ormoreofallthosegoodsorservicesinthemarket;
• priortothemerger,oneofthepartiestothemergeralonesuppliesoracquires30%ormoreofgoodsorservicesofanydescriptiononthemarket;and
• theCommissionhasreasonablegroundstobelievethatthecreationofthemergersituationhasresultedin,orislikelytoresultin,asubstantiallesseningofcompetitionwithinanymarketforgoodsorservices.
However,inpractice,itisdeemedoptionalformergingpartiestonotifytheCommission.Onlymergersthatsubstantially,orarelikelytosubstantially,lessencompetitionwillbesubjecttoremedyundertheAct.Weunderstand‘remedy’tobetheconditionsplacedonamergeraswellastheguidanceprovidedtothemergingpartiesbytheCommissionwherethereisapossibilityofthemergersubstantiallylesseningcompetition.
IftheCommissionersdeterminethatanenterprisehasbeenpartytoamergersituationwhich“hasresulted,orislikelytoresult,inasubstantiallesseningofcompetitionwithinamarketforgoodsorservices”,theCommissionmaygivetheenterprisesuchdirectionsasitconsidersnecessary,reasonableandpracticableto“mitigate,restrictorpreventanysubstantiallesseningofcompetitionorlikelysubstantiallesseningofcompetitionanditseffects”.
Inthecaseofacompletedmerger,adirectionmayrequireanenterpriseto:
• divestitselfofsuchassetsasarespecifiedinthedirectionwithintheperiodsospecifiedinthedirection;or
• adopt,ortodesistfrom,suchconduct,includingconductinrelationtoprices,asisspecifiedinthedirectionasaconditionofmaintainingorproceedingwiththemerger.
7. Is there a prohibition on the pre-implementation of a merger? If so, does the legislation make provision for a penalty?
Thereisnoprohibitionagainstthepre-implementationofamerger.However,asstatedabove,theexecutivedirectorhasthepowerto,interalia,investigateorcausetobeinvestigatedsuchmergersituationwhereheorshehasreasonablegroundstobelievethatarestrictivebusinesspracticeisoccurringorabouttooccurwhichwouldinvolvesubstantiallesseningofcompetitionwithinanymarketforgoodsorservices.Wheretwoormoreenterprisesintendtomerge,anyoneoftheenterprisesmayapplytotheCommissionforguidanceastowhethertheproposedmergersituationislikelytoresultinasubstantiallesseningofcompetitionwithinanymarketforgoodsorservices.
8. What filing fees are required?
Nofilingfeesarepayableforthefilingofamerger.
9. Is it necessary to obtain approval for foreign-to-foreign mergers?
TheCommissionandtheActdrawnodistinctionbetweenMauritian-ownedandforeign-ownedenterprises.Assuch,thereisnospecificrequirementtoobtainapprovalforforeign-to-foreignmergersbuttheordinarycriteriasetoutinresponsetoquestion5apply,inparticular,whereatleastoneoftheforeignentitiescarriesonbusinessinMauritius.
AnyoneoftheenterprisesmayapplytotheCommissionforguidanceastowhethertheproposedmergersituationislikelytoresultinasubstantiallesseningofcompetitionwithinthemarket.
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10. Are pre-notification contacts with the authorities permitted and are pre-notification meetings normal practice?
Wheretwoormoreenterprisesintendtobeinamerger,anypartymayapplytotheCommissionforguidanceastowhetheraproposedmergersituationislikelytoresultinasubstantiallesseningofcompetitionwithinthemarketandamounttoarestrictivebusinesspractice.
Althoughitcannotbesaidthatpre-notificationmeetingsarenormalpractice,theCommissionhasreceivedandacceptsapplicationsforguidancefrompartiestomergers.
11. To what extent are non-competition factors relevant to the assessment of a merger?
Asstatedabove,thestandardunderwhichamergerisassessediswhetherithasresultedin,orislikelytoresultin,asubstantiallesseningofcompetition.Thistestisabouttheeffectsofthemerger,notthemotives.However,theCommissiontakesintoconsiderationotherelementsinassessingamerger,suchastheidentificationoftherelevantmarketsaffectedbythemergersituation,andwhetheroff-settingpublicbenefitsarepresent.
TheActdoesnotspecificallydefinetheconceptof‘publicbenefit’forcurrentpurposes.Itisthereforearguedthatthegeneralunderstandingofpublicbenefitorpublicinterestshouldbeadopted.Differentconsiderationsmaybegivenmoreorlessweight,dependingonthefactsofagivencase.
12. Do the authorities contact customers and competitors of the merging parties as part of the merger review process? To what extent are the submissions of customers and competitors influential?
Inassessingwhetheramergerislikelytoorhasresultedinasubstantiallesseningofcompetition,theCommissionwillconsiderarangeofevidence,bothquantitativeandqualitative.Suchevidencemayincludethatfromcustomerinterviewsandsurveys.
13. Who else can make submissions to the authorities when a merger is being considered? Are employees contacted as part of the process and can employees make submissions?
Itisunclearwhether,inthecontextofamerger,theCommissionconsidersotherpartiessuchastheemployeesduringitsinvestigation.
14. Are merging parties given an opportunity to make representations before a decision is issued where the authority intends to prohibit a merger or impose conditions?
WearenotawareofmergingpartiesbeingforewarnedthattheCommissionintendstomakeanegativefindingregardingtheirmerger(beitacompleteprohibitionoraconditionalapproval).However,mergingpartiesmayrequesttheCommissiontoconveneahearingatwhichtheycanmakerepresentationsandwheretheCommissioncanheartheirviews.TheCommissionmayconvenesuchahearinguponreceiptoftheexecutivedirector’sinvestigationreport.
15. What are the opportunities for judicial appeal or review of a decision in respect of a merger that the parties are dissatisfied with?
AnypersonaffectedbyanorderordirectionoftheCommissioncanappealtotheSupremeCourtofMauritius,underSection67oftheAct,bylodgingawrittennoticeofappealwiththeRegistryoftheSupremeCourtandtheCommissionwithin21daysofthedateoftheorderordirection.
16. Does the legislation apply to joint ventures?
Yes.Thelegislationappliestoanyperson,firm,partnership,corporation,company,associationorotherjuridicalperson,engagedincommercialactivitiesforgainorrewardandincludestheirbranches,subsidiaries,affiliatesorotherentitiesdirectlyorindirectlycontrolledbythem.
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17. Does the legislation specifically prohibit cartel conduct? If so, are there examples ofthe authorities pursuing firms for engaging in cartel conduct?
TheActspecificallyprohibitscollusion,alsoknownascartelconduct.Section41oftheActstatesthatanagreement,orprovisionofanagreement,shallbecollusiveif:
• itexistsbetweenenterprisesthatsupplygoodsorservicesofthesamedescription,oracquiregoodsorservicesofthesamedescription;
• ithastheobjectoreffect,inanyway,offixingthesellingorpurchasepricesofthegoodsorservices;
• sharingmarketsorsourcesofthesupplyofthegoodsorservices;or
• restrictingthesupplyofthegoodsorservicesto,ortheacquisitionofthemfrom,anyperson;and
• itsignificantlyprevents,restrictsordistortscompetition.
Anyagreementorprovisionofanagreementwhichiscollusiveshallbeprohibitedandvoid.Collusiveagreementscanalsotaketheformofbid-riggingandresalepricemaintenance.Anagreementoraprovisionofbid-riggingshallbeconsideredcollusive,ifonepartyagrees(i)nottosubmitabidortender;or(ii)agreesupontheprice,termsorconditionsofabidortender.ResalePriceMaintenance(RPM)isalsoaformofcollusiveagreement,andisdescribedas“anagreementbetweenasupplierandadealerwiththeobjectoreffectofdirectlyorindirectlyestablishingafixedorminimumpriceorpriceleveltobeobservedbythedealerwhenresellingaproductorservicetohiscustomers".
AnexamplewheretheCommissioncarriedoutaninvestigationonapossiblecartelwasinthebeermarket.TheexecutivedirectorlaunchedaninvestigationinMarch2014intoapotentialcollusiveagreementbetweentwocompanieswiththeobjectand/oreffectofsharingthemarketforbeerinMauritiusorofrestrictingthesupplyofbeerinMauritius,inbreachoftheprovisionsofSection41oftheAct.
TheagreementbetweenthetwocompanieswasfoundtobeinbreachofsaidSection41oftheAct.TheCommissionpublisheditsdecisioninSeptember2014wherebytheyalsoimposedfinancialpenaltiesonthecompaniesinvolved.
Inthisinstance,oneofthepartieswasorderedtopayafineofapproximatelyMUR20million,andtheotherpartyafineofapproximatelyMUR6.5million.
TheCommissionmadealandmarkdecisionin2017whichinvolvedafineofRs30million,asdetailedbytheCommissionbelow:
“Thefirstsemesterof2017wasmarkedbythefirstdecisionoftheCommissiononaresalepricemaintenancecase.On16March,theCommissionfinedPanagoraMarketingCoLtd(Panagora)nearlyRs30mforbreachingsection43oftheActbyengaginginRPM.TheCommissionalsoimposedvariousdirectionsonPanagoratoensurethatanyresalepricemaintenancepracticeswhichwerefoundarestoppedcompletely.
Panagorasupplies‘Chantecler’chickentosupermarkets,hypermarketsandsmallretailshops,whichsellthoseproductstoconsumers.Chanteclerisavailablebothchilledandfrozenandindifferentcutsandpackaging.GoingbythedefinitionofRPMundertheAct,asanagreementbetweenasupplierandadealerwiththeobjectoreffectofdirectlyorindirectlyestablishingafixedorminimumpriceorpriceleveltobeobservedbythedealerwhenresellingaproductorservicetohiscustomers,theCommissionfoundthatPanagorahadsubjectedthesalesofChantecler,tothreesuchtypesofagreementswithvariousresellers.
TheCommissionagreedwiththeexecutivedirectorwhofoundthatPanagorawashinderingtheabilityofresellerstoindependentlysetthepriceforChanteclerproducts.Thiseffectivelypreventedresellersfromcompetingamongthemselvesintermsofpriceandservicetoattractclients.Inturn,consumersweredeniedbenefitsintermsofmorecompetitivepricesamongothercompetitivevariables.
Overandabovefinancialpenalties,theCommissionhasalsoimposeddirectionsonPanagora.ThedirectionsincludeobligationstogiveresellersthefreedomtosetownpricesonChanteclerproducts,toaffixthewords‘recommendedprice’wherePanagoraaffixesapriceasdeterminedbyitselfontheproducts,andtoensurethatresellersarenotawareofpricesofferedtoeachother,amongothers.PanagorahasappealedagainstthedecisionoftheCommissionandthelatternowawaitsthefirstinterventionoftheSupremeCourtonthemeritsofacasebroughtbeforeit.”
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18. What are the authorities’ powers of investigation in relation to cartel conduct and other prohibited practices?
TheActprovidestheexecutivedirectorwithverystronginvestigatorypowers.Theexecutivedirectormay,forthepurposesofanyinvestigationundertheAct,doanyofthefollowing:
• requireanypersontoproduceanybook,document,recordorarticleortoprovidespecifiedinformationinawrittenstatement,whichrelatestoanymatterrelevanttotheinvestigationincludingmarketshareinformationoradescriptionofaparticularmarket.Anysuchrequestshallbeexercisedbyserviceofawrittennoticesignedbytheexecutivedirectorandthelattermayalsorequireapersontoproducefurtherinformationafterconsideringthematerialproducedinresponsetoanearliernotice;
• orderanypersontofurnishastatementinwritingmadeonoathoraffirmationsettingoutallinformationwhichmayberequiredunderthenotice;
• orderanypersontoattendataspecifiedtimeandplace,forthepurposeofbeingexaminedorallyinrelationtoanymatter;
• enterandsearchthepremisesofanypersonandtakepossessionofdocumentsorcopiesofthemwithawarrantsignedbyamagistrate;or
• seizeanddetainitemswhichmayberequiredasevidence.
19. What are the penalties for cartel conduct? Is there a leniency policy in place? Does the legislation impose criminal sanctions?
AnyenterprisewhichhasintentionallyornegligentlyinfringedtheActforcartelconductfacesafinancialpenaltywhichshallnotexceed10%oftheturnoveroftheenterpriseinMauritiusduringtheperiodofthebreachoftheprohibition,uptoamaximumperiodoffiveyears.TheCommissionmayalsogivetheenterprisesuchdirectionasitconsidersappropriatetoensurethattheenterpriseceasestobeapartytotherestrictiveagreement.TheCommissionmay,inparticular,requiretheenterprisetoterminateormodifytheagreementwithinsuchperiodasmaybespecified.TheCommissionhasaleniencypolicyinplace.ItiscontainedintheCompetitionCommissionGuidelinesonCollusiveAgreements.
EnterprisesthatcomeforwardwithinformationwhichenablesorassiststheCommissiontodeterminetheexistenceofcartelconductmayreceivesubstantialreductionsin,orcompleteimmunityfrom,financialpenaltiesleviedbytheCommissionforthatconduct.Applicationsforleniencymaybemadeeitherorallyorinwriting.TheActdoesnotprovideforanycriminalsanctionsforcartelconduct.
20. Is there a provision in the legislation providing for a mechanism to apply for exemption from certain parts of the legislation?
Thereisnoprovisioninthelegislationprovidingforamechanismtoapplyforexemptionfromcertainpartsofthelegislation.However,petroleumproductsandliquidpetroleumgasareexcludedfromtheAct,andthefollowingagreementsorpracticesareexcludedfromtheAct:
• anypracticeofemployersoranyagreementbywhichemployersarepartiesinsofarasitrelatestotheremuneration,termsorconditionsoremploymentofemployees;
• anyagreementinsofarasitcontainsprovisionsrelatingtotheuse,licenceorassignmentofrightsunderorexistingbyvirtueoflawsrelatingtocopyright,industrialdesign,patents,trademarksorservicemarks;and
• anypracticeoragreementapprovedorrequiredunderaninternationalagreementtowhichMauritiusisaparty.
21. Is minimum resale price maintenance prohibited?
MinimumresalepricemaintenanceisprohibitedunderSection43oftheAct.However,asupplierorproducermayrecommendaminimumresalepricetoare-sellerprovidedthattherecommendationisnotbinding.
22. In what circumstances are exclusive agreements unlawful? If exclusive agreements raise concerns in specific circumstances, what factors are relevant to their lawfulness or unlawfulness?
Anyagreementthathastheeffectofsignificantlypreventing,restrictingordistortingcompetitionwithinMauritiusisprohibited.Exclusiveagreementsarenotinthemselvesprohibited,butmightbeiftheyareexpectedtoresultinanti-competitiveforeclosureby,forinstance,preventingcompetitors
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fromsellingtocustomersthroughtheuseofexclusivepurchasingobligationsorrebates.
Indeterminingthelawfulnessorunlawfulnessofanagreement,theCommissionwillhaveregardtothedesirabilityofmaintainingandencouragingcompetitionandthebenefitstobegainedinrespectoftheprice,quantity,varietyandqualityofgoodsandservices,andshallfirstdeterminewhethercompetitioninanymarketisadverselyaffectedandwhethertheagreementhastheobjectoreffectofpreventing,restrictingordistortingcompetition.
23. Does the legislation prohibit the abuse of a dominant position? If so, what is the threshold for dominance and what conduct amounts to an abuse?
Amonopolysituationshallexistinrelationtothesupplyofgoodsorservicesofanydescriptionwhere:
• Thirtypercentormoreofthosegoodsorservicesaresupplied,oracquiredinthemarket,byoneenterprise;or
• Seventypercentormoreofthosegoodsorservicesaresupplied,oracquiredinthemarket,bythreeorfewerenterprises.
Itisnotinitselfabreachofthelawforanenterprisetobeinamonopolysituation.However,intermsofSection46(2)oftheAct,enterpriseswhichholdmonopolypositionsmaybeinbreachoftheActwheretheyareabusingorexploitinganymarketpowerthispositionconfersuponthemand/orareengagedinconductwhichrestricts,preventsordistortscompetitionorotherwiseexploitsthemonopolysituation.Section46(2)providesthatamonopolysituationshallbesubjecttoreviewbytheCommissionwheretheCommissionhasreasonablegroundstobelievethatanenterpriseinamonopolysituationisengaginginconductthat:
• hastheobjectoreffectofpreventing,restrictingordistortingcompetition;or
• inanyotherwayconstitutesexploitationofthemonopolysituation.
Inreviewingamonopolysituation,theCommissionshalltakeintoaccount:
• theextenttowhichanenterpriseenjoysoragroupofenterprisesenjoy,suchapositionofdominanceinthemarketsoastomakeitpossibleforthatenterpriseorthoseenterprisestooperateinthatmarket,andtoadjustpricesoroutput,withouteffectiveconstraintfromcompetitorsorpotentialcompetitors;
• theavailabilityornon-availabilityofsubstitutablegoodsorservicestoconsumersintheshortterm;
• theavailabilityornon-availabilityofnearbycompetitorstowhomconsumerscouldturnintheshortterm;and
• evidenceofactionsorbehaviourbyanenterprisethatis,oragroupofenterprisesthatare,partytothemonopolysituationwheresuchactionsorbehaviourshaveorarelikelytohaveanadverseeffectontheefficiency,adaptabilityandcompetitivenessoftheeconomyofMauritius,orarelikelytobedetrimentaltotheinterestsofconsumers.
Furthermore,theguidelinesonmonopolysituationsissuedbytheCommissionsetoutsomeadditionalconsiderationstheCommissionwilltakeintoaccount,whendecidingwhethertoinvestigateandwhethertotakeactionregardingmonopolysituations.
24. Are there examples of the authorities pursuing firms for abusing a dominant position?
TheCommissionhascarriedoutseveralinvestigationsinthepastyearswhereithadreasonablegroundstobelievethatsomeenterpriseswereabusingtheirdominantposition.SummariesofsomeoftheinvestigationsthathavebeencarriedoutbytheCommissionfollow.
OPENING OF INVESTIGATION ON MONOPOLY SITUATION IN RELATION TO MOBILE TELEPHONY SECTOR
TheexecutivedirectoroftheCommissionhasopenedaninvestigationonanallegedmonopolysituationsubjecttoreviewundersection46oftheAct,pertainingtothemobiletelephonysector.Theexecutivedirectorisconcernedthattwomobiletelephonyoperators,whichmaybeinamonopolysituation,couldbeengaginginboth
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exclusionaryandexploitativeconductinrelationtotheirpricingpolicyforvoicecallingservices.
Atthisearlystageoftheinvestigation,theunderlyingconcernisthattwomobiletelephonyoperatorscouldbediscriminatingbetweentariffsforvoicecallsplacedwithinthesamenetwork(referredtoas‘onnetworkcalls’or‘on-netcalls’)andcallsplacedtoothernetworks(referredtoas‘offnetworkcalls’or‘off-netcalls’).Thispricediscriminationcouldbepreventing,restrictingordistortingcompetitioninthelocalmobiletelephonysector,whichultimatelycoulddeterorslowinvestment,innovationandgrowthinthesector.Additionally,thepricediscriminationbetweenon-netandoff-netcallscouldmeanthatsubscribersarepayingrelativelymoreforoff-netvoicecallsforreasonswhichmaypotentiallybeunrelatedtocostdifferentials.
Noconclusionhasbeenreachedatthisstageandafirmconclusioncanbedrawnonlyaftercompletionoftheinvestigation.
Atthisstage,theexecutivedirectorhasconcludedthathehasreasonablegroundstobelievethatsuchconductonthepartofbothmobileoperatorsmayconstituterestrictivebusinesspractices.Uponcompletionoftheinvestigation,theexecutivedirectorwillreporthisfindingstotheCommission.IftheCommissionconcludesthattheobjectoreffectoftheconductistorestrict,preventordistortcompetitioninanymarket,orinanywayconstitutestheexploitationofamonopolysituation,itmaytakenecessarystepstoremedythesituation.Alternatively,theinvestigationmightfindnoinfringementoftheAct,inwhichcasetheinvestigationwouldbeclosedwithoutfurtheraction.NofinancialpenaltiescanbeleviedforabreachofthemonopolyprovisionsoftheAct;thefocusinsteadisontakingmeasurestorestorecompetition.
BUNDLING OF INSURANCE AND CREDIT PRODUCTS IN THE BANKING SECTOR
Followinganenquiry,theCommissionlaunchedaninvestigationintothebankingsectorinAugust2010todeterminewhetherbanksthatofferhousingloansareinamonopolysituationandwhetherbytyingtheirhousingloanstodecreasingtermassurance(DTA),theyareactingtoprevent,restrictordistortcompetitionintheprovisionofDTAforthepurposeofcontractingahousingloan.
TheCommissionwasconcernedthatthenatureofthecommercialarrangementsbetweenbanksandinsurancecompaniesmightnotsecurethebestdealforborrowers,e.g.insomecasesbanksmightbefavouringinsurancecompanieswithwhichtheyhaveinstitutionallinks.Moreover,byexploitingthemonopolysituationstheyenjoyduetothepointofsaleadvantagetosellinsurance,bankscouldbesellinganinsurancepolicythatismoreexpensivethanthehousingloanborrowerscouldhaveboughtfromanotherinsurancecompany,whilethebanksearnacommission.
TheCommissioncarriedoutinvestigationson13banksandissueditsdecisionsinrespectofeachbankinNovember2012.Inthisregard,theCommissionconcludedthatsomeofthebankswereinbreachofSection46(2)(a)oftheActbyengaginginanexclusionaryabuseofamonopolysituationthathastheeffectofpreventing,restrictingordistortingcompetitionintheDTAmarket.TheCommissionproposedsomeremediesandgaveananalysisoftheremediesproposed.TheCommissionfurtherstressedinitsreportthatremediesshouldnotbeseenaspenaltiesandthat,byimposingremedies,theCommissionaimstomakemarketsworkbetterthantheywouldotherwisehavedone.
ALLEGED MONOPOLY ABUSE IN THE SUPPLY OF SECONDARY SCHOOL BOOKS IN MAURITIUS
TheexecutivedirectoroftheCommissionlaunchedaninvestigationinJanuary2012,underSection51oftheAct,intoanallegedabuseofamonopolysituationinthesupplyofsecondaryschoolbooksbyEditionsLePrintempsLtd(ELP)basedonananonymouscomplaintreceived.TheCommission’sdecisionwasissuedinSeptember2014,wherebytheyfound,interalia,thatELPwasnotincontraventionoftheAct.
INVESTIGATION INTO IMAGE-BASED CLEARING SOLUTIONS PROVIDED TO COMMERCIAL BANKS
TheCommissionlaunchedaninvestigationinMarch2013intoimage-basedclearingsolutionsprovidedbyanenterprisetocommercialbanksinMauritius.DuringtheCommission’sinvestigation,theenterpriseofferedcertainundertakingstoallaytheconcernsraisedbytheCommission.Followinganassessmentintotheefficacyoftheundertakings,theExecutivedirectorconcludedthattheundertakings,asofferedbytheenterprise,
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wouldsatisfactorilyaddressthecompetitionconcernsraisedbytheCommission.TheCommissionacceptedtheenterprisesundertakingsandthematterwassettledaccordingly.
25. Does the legislation impose penalties on firms for the abuse of a dominant position?
WheretheCommissiondetermines,afterreview,thatanenterpriseisinvolvedinamonopolysituation,andthatinrelationtoamonopolysituation,anyconductoftheenterprise(i)hastheobjectoreffectofpreventing,restrictingordistortingcompetition;or(ii)inanyotherway,constitutesexploitationofthemonopolysituation,theCommissionmaygivetheenterprisesuchdirectionasitconsidersnecessary,reasonableandpracticableto:
• remedy,mitigateorpreventtheadverseeffectsoncompetitionthattheCommissionhasidentified;or
• remedy,mitigateorpreventanydetrimentaleffectsonusersandconsumerssofarastheyhaveresultedfrom,orarelikelytoresultfrom,theadverseeffectson,ortheabsenceof,competition.
Suchdirectionmayinclude,butisnotlimitedto,arequirementthattheenterprisetowhichitisgivenshall:
• terminateoramendanagreement;• ceaseoramendapracticeorcourseof
conduct,includingconductinrelationtoprices;
• supplygoodsorservices,orgrantaccesstofacilities;
• separateordivestitselfofanyenterpriseorassets;or
• providetheCommissionwithspecifiedinformationonacontinuingbasis.
Anypersonwhofailswithoutreasonableexcusetocomplywitharequirementimposedonhimorhershallcommitanoffenceandshall,onconviction,beliabletoafinenotexceedingMUR500000andtoimprisonmentforatermnotexceedingtwoyears.
26. Are there rules in relation to price discrimination?
Therearenospecificrulesinrelationtopricediscrimination.Pricediscriminationisnotinitselfanti-competitiveandtheCommissiondoesnotregarditasanabuse.However,pricediscriminationmaybepartofastrategythatisanabusesuchaschargingpredatoryprices,andsuchabusivepricingbehaviourwouldbeinvestigatedbytheCommission.
27. Does the authority publish its decisions and, if so, is there a website where such decisions are available?
TheCommissionhasawebsite,www.ccm.mu,whereitpublishesitsdecisions.ThewebsitealsoliststhecurrentinvestigationsthatarebeingundertakenbytheCommissionandthereportsofcompletedinvestigations.
APPLEBY9thFloor,MedineMewsLaChausséeStreetPortLouisMauritiusT:+2302034300
www.applebyglobal.com
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HENRIQUES, ROCHA & ASSOCIADOS
Fabrícia Almeida Henriques
MORAIS LEITÃO, GALVÃO TELES,SOARES DA SILVA & ASSOCIADOS
Pedro Gouveia e Melo
Mozambique
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1. What is the relevant competition legislation and who are the enforcers?
ThemainpieceofcompetitionlegislationisLaw10/2013of11April2013(theCompetitionLaw).FurtherimplementingrulesarecontainedintheCompetitionLawRegulation,approvedbyDecree-Law97/2014,of31December2014.
MinisterialDiploma79/2014,of5June2014,establishesthefeesapplicable,inparticular,tomergercontrolnotificationsandrequestsforexemptionofrestrictiveagreements.
TheadministrativeauthoritywithexclusivejurisdictiontoenforcetheCompetitionLawistheAutoridadeReguladoradaConcorrência(CompetitionRegulatoryAuthority;theAuthority),anindependententityendowedwithadministrativeandfinancialautonomyandbroadsupervisory,regulatory,investigatoryandsanctioningpowers.TheStatuteoftheAuthoritywasapprovedbyDecree37/2014,of1August2014.
2. Are there any proposed amendments or new regulations expected to come into force?
TheCompetitionLawforeseesthatanumberofimplementingregulationsaretobeapproved(e.g.settingouttheapplicableformstosubmitmergernotificationsandestablishingaleniencyprogramme),butnodraftsorproposalsarepubliclyavailable.
3. Is the law actively enforced?
TheAuthorityisnotyetoperational,butitisexpectedtobecomesointhenearfuture.SincetheAuthorityhasexclusivejurisdictiontoenforcetheCompetitionLaw,theprohibitionsofanti-competitiveconductandthemergercontrolprovisionsoftheCompetitionLawarenotyetapplicableinpractice.
4. What are the current priorities or focus areas of the competition authorities?
Notapplicable
5. What kind of transaction constitutes a notifiable merger?
TheCompetitionLawappliestotransactionsthat(i)areconsideredtobe‘concentrationsbetweenundertakings’,and(ii)meetthejurisdictionalthresholds.
Thefollowingoperationsaredeemedtoconstituteaconcentrationbetweenundertakings:
• amergerbetweentwoormorehithertoindependentundertakings;
• theacquisitionofcontrol,byoneormoreundertakings,overotherundertaking(s)orpart(s)ofotherundertakings;and
• thecreationofajointventureperforming,onalastingbasis,allthefunctionsofanautonomouseconomicentity(i.e.afull-functionjointventure).
Theconceptofanundertakingencompassesallentitiesconductingeconomicactivitythroughtheofferofgoodsorservicesinthemarket,regardlessoftheirlegalstatus.
ThefollowingexceptionsdonotconstituteaconcentrationinthemeaningoftheCompetitionLaw:
• thetemporaryortransitionalacquisitionofcontroloveranundertaking;
• theacquisitionofshareholdingsorassetsbyaninsolvencyadministratorwithininsolvencylegalproceedings;
• theacquisitionofashareholdingmerelyasaguarantee;
• thetemporaryacquisitionbyfinancialinstitutionsorinsurancecompaniesofshareholdingsincompaniesactiveoutsidethefinancialsector,insofarasthesecuritiesareacquiredwithaviewtotheirresale,iftheacquirerdoesnotexercisethecorrespondingvotingrightswithaviewtodeterminethecompetitivebehaviourofthetarget(oronlyexercisesthemwithaviewtopreparethesale),andifthedisposalofthecontrollinginterestoccurswithinoneyear;and
• twoormoreconcentrationsbetweenthesameundertakingsinaperiodoffiveyearsthatindividuallydonotmeetthejurisdictionalthresholds.However,iftheconcentrationresultingfromthe
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conclusionofthelastagreementmeetsthejurisdictionalthresholds,itshouldbenotifiedtotheAuthoritybeforeclosing.
6. What are the thresholds for mandatory merger notification (e.g. assets, turnover and/ or market share)?
Notificationismandatorywhenevertheconcentrationmeetsatleastoneofthefollowingthresholds:• Thecombinedturnoverofalltheundertakings
concernedinMozambiqueintheprecedingyearisequaltoorexceedsMZN900million.
• Thetransactionresultsintheacquisition,creationorreinforcementofashareof,orabove50%ofthenationalmarketofagivengoodorservice,orinasubstantialpartthereof.
• Thetransactionresultsintheacquisition,creationorreinforcementofashareof,orabove30%ofthenationalmarketofagivengoodorservice,orinasubstantialpartthereof,aslongaseachofatleasttwooftheundertakingsconcernedachievedintheprecedingyearaturnoverofatleastMZN100millioninMozambique.
TheCompetitionLawprovidesthat,evenwhentheconcentrationdoesnotmeetthejurisdictionalthresholds,theAuthoritymaynevertheless,withinsixmonthsofitbecomingpublicknowledge,openexofficioaninvestigationandrequestthenotificationoftheconcentration,incaseitisdeemedtoappreciablyimpede,distortorrestrictcompetitionanddoesnotbenefitfromapublicinterestexemption.Partiesinvolvedinanon-reportabletransactionmayvoluntarilysubmitafilingtotheAuthority,whichmaywellbeadvisableifthereisanychancethattheAuthoritywillinterveneexofficio.
7. Is there a prohibition on the pre-implementation of a merger? If so, does the legislation make provision for a penalty?
AconcentrationmeetingthejurisdictionalthresholdsissubjecttomandatorynotificationtotheAuthoritywithinsevenworkingdaysfromtheconclusionoftheagreementoracquisitionproject,andcannotbeimplementedbeforeanon-oppositiondecisionis(expresslyortacitly)adoptedbytheAuthority.
Failuretofileanoticeofconcentrationwithinthestatutorydeadlinesubjecttomandatorynotificationexposesthemergingpartiestoseriousnegativeconsequences.Inparticular:
• thebreachofthenotificationdeadlinemakestheundertakingsconcernedliabletofinesofupto1%ofthepreviousyear’sturnoverforeachoftheparticipatingundertakings;and
• thevalidityofanylegalinstrumentrelatedtothetransactionisdependentupontheexpressortacitclearancebytheAuthority.
IncaseswheretheAuthorityopensanexofficioinvestigationoftheconcentration,thestatutorydecisiondeadlinesdonotapply.
TheearlyimplementationofaconcentrationsubjecttomandatoryfilingwithoutexpressortacitclearancefromtheAuthority,orinbreachofaprohibitiondecision,makestheundertakingsconcernedliabletofinesofupto5%ofthepreviousyear’sturnoverforeachoftheparticipatingundertakings.
8. What filing fees are required?
PursuanttoMinisterialDecree79/2014,of5June2014,theeffectivenessofthenotificationisdependentonapaymentofafilingfeebythenotifyingpartiesof5%oftheturnoverofthepreviousyear.
Asthevalueofthefilingfeeissignificantlyhigherthanthemaximumfineforuntimelynotification(1%ofturnover),andequaltothemaximumfineapplicableforimplementationbeforeclearanceandprohibitedanti-competitivepractices(5%ofturnover),itishopedthatthisvalueresultsfromatypingerrorandwillberectifiedbeforetheAuthoritybeginsoperation.
9. Is it necessary to obtain approval for foreign-to-foreign mergers?
Foreign-to-foreignmergersarecaughtbytheCompetitionLawtotheextentthattheyhave,ormayhave,effectsintheterritoryofMozambique.Therefore,foreign-to-foreignmergersmaybesubjecttomandatoryfilingwheneverbothpartiesorthetargetaloneachieve,directlyorindirectly,salesinMozambique(despitethefactthatneitherof
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theundertakingsconcernedisestablishedinthecountry),andthejurisdictionalthresholdsaremet.
10. Are pre-notification contacts with the authorities permitted and are pre-notification meetings normal practice?
TheCompetitionLawRegulationprovidesforconfidentialandinformalpre-notificationcontacts.AstheAuthorityisnotyetoperational,thereisnoindicationofwhetherpre-notificationmeetingswillbecomestandardpractice.
11. To what extent are non-competition factors relevant to the assessment of a merger?
Initssubstantiveanalysis,theAuthorityisboundtotakeintoaccountpublicinterestreasonswhichmayjustifyanyimpedimentsorrestrictionstocompetitionresultingfromthenotifiedconcentration.Inparticular,theAuthority’spublicinterestassessmentshouldconsidertheeffectofthetransactionon:
• aspecificsectororregion;• employment;• thecapacityofsmallenterprises,orenterprises
controlledbyhistoricallydisfavouredpersons,tobecomecompetitive;and
• thecapabilityofnationalindustrytocompeteinternationally.
12. Do the authorities contact customers and competitors of the merging parties as part of the merger review process? To what extent are the submissions of customers and competitors influential?
FollowingpublicationofanoticeofthenotificationbytheAuthorityintwonationalnewspapers(whichshouldbemadewithinfivedaysoffiling),anyinterestedthirdpartymaysubmitcommentsonthetransactionwithinthedeadlineestablishedbytheAuthority,whichcannotbelessthan15workingdays.CompetitorsshouldbealsoheardwhentheAuthoritytakesintoaccountnon-competitionpublicinterestreasons(seequestion11).
Inaddition,priortotheadoptionofafinaldecisionintheprocedure,theAuthoritymustholdahearingofthenotifyingparties,aswellasof
thirdpartiesthathavealreadyintervenedintheprocedureandexpressedanadverseopiniononthemerger.ThehearingsuspendsthetimeperiodsfortheadoptionofadecisionbytheAuthority.
13. Who else can make submissions to the authorities when a merger is being considered? Are employees contacted as part of the process and can employees make submissions?
WhilethereisnospecificreferenceintheCompetitionLawtoemployees,theAuthoritycanrequestinformationfromanyrelevantundertakingorindividual.Itmayalsobearguedthatemployeescanbeconsidered‘interestedthirdparties’andbeallowedtointerveneintheprocedure(seequestion12above).
14. Are merging parties given an opportunity to make representations before a decision is issued where the authority intends to prohibit a merger or impose conditions?
Asmentionedinquestion11,priortotheadoptionofafinaldecisionintheprocedure,theAuthoritymustholdahearingofthenotifyingparties,aswellasofanyinterestedthirdpartiesthathaveshowntobeagainstthetransaction.Ifnosuchthirdpartieshavecomeforwardandifthedecisionisanunconditionalclearance,theAuthoritycanwaivethehearingofthenotifyingparties.
15. What are the opportunities for judicial appeal or review of a decision in respect of a merger that the parties are dissatisfied with?
AlloftheAuthority’sdecisionsonmergercontrol,eitherclearingorprohibitingamerger,aresubjecttojudicialreview.
TheStatuteoftheAuthoritydeterminesthattheAuthority’sdecisionsmaybeappealedincourt,namelytotheJudicialCourtoftheCityofMaputo,inthecaseofproceduresleadingtotheapplicationoffinesandothersanctions,andtotheAdministrativeCourt,withregardtomergercontrolproceduresandrequestsforexemptionsrelatingtorestrictiveagreements.
16. Does the legislation apply to joint ventures?
Yes.Thecreationof,ortheacquisitionofcontrolover,ajointlycontrolledundertakingconstitutesaconcentrationwheneverthejointundertakingfulfils
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thefunctionsofanindependenteconomicentityonalastingbasis(i.e.afull-functionjointventure),andissubjecttothemergercontrolrulesoftheCompetitionLawifthejurisdictionalthresholdsaremet.
Wherethecreationofthejointventurehastheobjectoreffectofco-ordinatingthecompetitivebehaviourofundertakingsthatremainindependent,suchco-ordinationisassessedundertherulesapplicabletoprohibitedagreementsandpractices(seeArticles15to18oftheCompetitionLaw).
17. Does the legislation specifically prohibit cartel conduct? If so, are there examples of the authorities pursuing firms for engaging in cartel conduct?
TheCompetitionLawspecificallyprohibits,interalia,agreementsandconcertedpracticesbetweencompetingundertakingsresultingintheadoptionofauniformorconcertedcommercialconduct,infixingdirectlyorindirectlypricesorotherbusinessconditions,limitingproductionordistributionofproductsandservices,andpartitioningmarketsorsupplysources.
Asmentionedabove,theCompetitionLawprohibitionshavenotyetbeenenforced.
18. What are the authorities’ powers of investigation in relation to cartel conduct and other prohibited practices?
Intheenforcementofitssanctioningandsupervisorypowers,theAuthorityisabletointerviewanyrelevantpersons,requestdocuments,conductsearchesandseizuresinthepremisesoftheundertakingsconcernedand,whennecessary,proceedtothesealingofbusinesspremises.Searchesandseizuresatbusinesspremisesmustbeconductedwithawarrantofthecompetentjudiciaryauthority.TheAuthoritymayrequesttheassistanceofthepoliceforcewhennecessary.
19. What are the penalties for cartel conduct? Is there a leniency policy in place? Does the legislation impose criminal sanctions?
Partiesinvolvedinprohibitedanti-competitivepractices(includingcartels,otherhorizontalandverticalagreements,abuseofdominantposition
andabuseofeconomicdependence)areliableforfinesofupto5%oftheirconsolidatedturnover.
Thefollowingancillarysanctionsmayalsobeapplied:(i)publicationofthesanctionintheofficialjournaland/orinanationalorlocalnewspaper;(ii)theinterdictionoftheinfringingcompanyfromparticipationinpublictendersforaperiodoffiveyears;and(iii)thebreakupofthecompany,transferofshareholdercontrol,saleofassets,partialterminationofabusinessentity,andanyotheractnecessaryfortheeliminationoftheharmfuleffectstocompetition.
NocriminalsanctionsareforeseenintheCompetitionLaw.
TheCompetitionLawforeseesthataleniencyprogrammeistobeestablishedbyaregulationoftheAuthority,butnodrafthasyetbeenmadepublic.
20. Is there a provision in the legislation providing for a mechanism to apply for exemption from certain parts of the legislation?
TheCompetitionLawestablishesanadministrativeprocedurefortheissuancebytheAuthorityofanexemptiontotheprohibitionsinthelaw.Therequestforexemptionshouldbesubmittedbyoneormoreoftheundertakingsthatarepartytoanagreement,accordingtoaformtobeapprovedbytheAuthority.
Theconditionsforexemptionareasfollows:
(i)Theagreementshouldpursueoneofthefollowingobjectives:
• contributingtoimprovingtheproductionordistributionofgoodsandservices;
• reducingpricestoconsumers;• acceleratingeconomicdevelopment;• incentivisingthetechnologicaldevelopment
ofMozambicancompanies;• enablingabetterallocationofresources;• promotingnationalgoodsorservices;• promotingexports;• promotingthecompetitivenessofsmall-and
medium-sizednationalcompanies;• contributingtotheconsolidationofnational
companies;and• promotingtheprotectionofintellectual
property.
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(ii)Theagreementmustnoteliminatecompetitionorcontainrestrictionsthatarenotindispensabletotheattainmentoftherelevantobjectivesabove.
Professionalassociationsrecognisedbythegovernmentmayalsorequestexemptionfortheirinternalrulesthathavetheeffectofappreciablyrestrictingcompetition.Theexemptionisgrantedwhentherulesinquestionareessentialtomaintaintheprofessionalstandardsorthespecificitiesoftheprofession.
21. Is minimum resale price maintenance prohibited?
OneoftheprohibitedverticalrestraintsexpresslylistedintheCompetitionLawistheimpositionondistributorsofresaleprices,discounts,paymentconditions,profitmarginsoranyothercommercialconditionsintheirdealingswiththirdparties.
22. In what circumstances are exclusive agreements unlawful? If exclusive agreements raise concerns in specific circumstances, what factors are relevant to their lawfulness or unlawfulness?
AgreementswithexclusivityprovisionsarenotexpresslyprohibitedbytheCompetitionLaw,butoneoftheexamplesofprohibitedverticalconductistheimpositionofminimumormaximumquantitiesondistributorsintheirpurchasesofcontractualproducts.Thisprohibition,givenitsbroadwording,isalsolikelytocoverobligationstopurchasealloracertainpercentageofthebuyer’srequirementsofsuchproducts.Suchrestrictionsmaybenefitfromexemptionifallthelegalcriteriaaremet.
23. Does the legislation prohibit the abuse of a dominant position? If so, what is the threshold for dominance and what conduct amounts to an abuse?
TheCompetitionLawprohibitstheabusiveexploitation,byoneormoreundertakings,ofadominantpositioninthenationalmarketorinasubstantialpartthereof,havingasobjectoreffecttheimpediment,distortionorrestrictionofcompetition.
TheCompetitionLawRegulationestablishesarebuttablepresumptionofdominanceforanundertaking,orcollectivelyfortwoormoreundertakings,whosemarketshareequalsorexceeds50%.
TheCompetitionLawsetsoutanextensivebutnon-exhaustivelistofbehavioursconsideredabusive,suchas:
• refusingtoprovideaproductorserviceortograntaccesstoessentialinfrastructurewithoutcause;
• terminatingacommercialrelationshipwithoutjustification;
• forcingorinducingasupplierorconsumernottodealwithacompetitor;
• sellingbelowcostwithoutjustification;• importinggoodsbelowtheircostinthe
exportingcountry;• pricediscrimination;• tying;• excessivepricing;and• anyotherconductlistedinArticles17
and18asprohibitedhorizontalorverticalagreements.
TheCompetitionLawalsoprohibitstheabusiveexploitation,byoneormoreundertakings,ofthestateofeconomicdependenceofanysupplierorclientwhichdoesnothaveanequivalentalternative.AbusiveconductmaytaketheformofanyoftheverticalagreementsandpracticesprohibitedbytheCompetitionLaw.
24. Are there examples of the authorities pursuing firms for abusing a dominant position?
AstheAuthorityisnotyetoperational,theCompetitionLawprohibitionsarenotcurrentlyenforced.
25. Does the legislation impose penalties on firms for the abuse of a dominant position?
Partiesinvolvedinabuseofdominantpositionandabuseofeconomicdependenceareliableforfinesofupto5%ofconsolidatedturnover,aswellastotheancillarysanctionsreferredtoinquestion19.
26. Are there rules in relation to price discrimination?
Pricediscriminationislistedasaprohibitedpracticeinthecontextofverticalagreements,theabuseofadominantpositionandtheabuseofeconomicdependenceofasupplierorclient.
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Pricediscriminationisconsideredanabuseofadominantpositionwhereit:
• islikelytoprevent,distortorrestrainfreecompetition;
• relatestoequivalenttransactionsofgoodsandservicesofthesametypeandquality;and
• referstosaleprices,discounts,paymentconditions,grantedcreditorotherservicesrenderedthatrelatetothesupplyofgoodsandservices.
27. Does the authority publish its decisions and, if so, is there a website where such decisions are available?
DecisionsoftheAuthoritywillbepublishedintheofficialjournalofMozambique(BoletimdaRepública).Inaddition,theStatuteoftheAuthorityprovidesthatdecidedcasesarepublishedontheAuthority’swebsite,butthisisnotyetoperational.
HENRIQUES, ROCHA & ASSOCIADOS EdifícioJATV-1RuadosDesportistas,833,6º,fracçãoNN5MaputoMoçambiqueT:+25821344000
www.hrlegalcircle.com
MORAIS LEITÃO, GALVÃO TELES, SOARES DA SILVA & ASSOCIADOSRuaCastilho,1651070-050LisboaPortugalT:+351213817400
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KOEP & PARTNERS
Josias Andries Agenbach | Meyer van den Berg | Marko Himmel
Namibia
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1. What is the relevant competition legislation and who are the enforcers?
InNamibia,competitionlawisregulatedbytheCompetitionAct2of2003andtherulespassedintermsofthisAct.TheCompetitionActandtheRulesareenforcedbytheNamibianCompetitionCommission.
TheHighCourtofNamibiahasjurisdictiontohearanddetermineanymatterarisingfromproceedingsinstitutedintermsoftheCompetitionAct.
2. Are there any proposed amendments or new regulations expected to come into force?
Noamendmentshavebeenenactedtodate,butitisunderstoodthatthethresholdsareunderreview.
3. Is the law actively enforced?
CompetitionlawinNamibiaisactivelyenforcedinrespectofmergercontrol.Becauseofthecurrentrelativelylowmergerthresholds,alargenumberoftransactionsfalltobenotified.IntermsoftheAct,theCommissionisrequiredtomakeadeterminationonaproposedmergerwithin30daysafterreceiptofthemergernotification.However,theActprovidesthatthisperiodmaybeextendedbyafurther30daysiftheCommissionrequestsadditionalinformationorifaconferenceisconvened.Theperiodsreferredtoabovecanbeextendedduetothecomplexityoftheissues,iftheCommissiondeemsitappropriatetodoso,bynoticeinwritingtotheundertakingsinvolved,byaperiodnotexceeding60days.
WhiletheActdoesnotincludeadefinitionofdays,theCommissioninterpretsanyreferencetodaysasbusinessdays.
Thelawrelatingtorestrictivebusinesspracticeshasnotbeenasactivelyenforcedasmergercontrolatthisstage.Someallegedrestrictivepracticeshavebeeninvestigatedandinmostinstances,settlementshavebeenreachedwiththeallegedoffendersbeforeactionwasinstitutedthroughtheNamibiancourts.Unfortunately,thegeneralpublichasnotbeenmadeawareoftheseinvestigations.TheCommissionhasalsoconductedmarket
enquiriesintheautomobileindustry,theretailsector,thecementandthepoultryindustriesinpartnershipwiththeAfricanCompetitionForum.
4. What are the current priorities or focus areas of the competition authorities?
TheNamibiancompetitionauthoritiesplacestrongemphasisonthepromotionoflocalcontentandemploymentretention.
5. What kind of transaction constitutes a notifiable merger?
TheCompetitionActprovidesthatamergeroccurswhenoneormoreundertakingsdirectlyorindirectlyacquireorestablishdirectorindirectcontroloverthewholeorpartofthebusinessofanotherundertaking.IntermsoftheAct,amergermaybeachievedinanymannerincludingthroughthepurchaseofshares,aninterest,orassetsoftheotherundertakinginquestion;oramalgamationorothercombinationwiththeotherundertaking.
TheActdoesnotmakeexpressprovisionfortheexclusionofcertaintransactionsfromthemergerdefinition(e.g.wherearestructuringoccurswithinthesameeconomicentity).However,theCommissionhasindicatedthatitdoesnotregardinternalrestructuringsasrequiringnotification.Acautiousapproachisneverthelessadvisable.
Thetriggerfornotificationisachangeofcontroland,morespecifically,whetheratransactionfallswithintheambitofSection42(3)oftheAct,whichsetsoutthevariouswaysinwhichcontrolmayexist.
Intermsoftheseprovisions,apersoncontrolsanundertakingifthatperson:
• beneficiallyownsmorethanone-halfoftheissuedsharecapitaloftheundertaking;
• isentitledtovoteamajorityofthevotesthatmaybecastatageneralmeetingoftheundertaking,orhastheabilitytocontrolthevotingofamajorityofthosevotes,eitherdirectlyorthroughacontrolledentityofthatundertaking;
• isabletoappoint,ortovetotheappointment,ofthemajorityofthedirectorsoftheundertaking;
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• isaholdingcompany,andtheundertakingisasubsidiaryofthatcompanyascontemplatedintheNamibianCompaniesAct;
• inthecaseoftheundertakingbeingatrust,hastheabilitytocontrolthemajorityofthevotesofthetrusteesortoappointthemajorityofthetrusteesortoappointorchangethemajorityofthebeneficiariesofthetrust;
• inthecaseoftheundertakingbeingaclosecorporation,ownsthemajorityofthemembers’interestorcontrolsdirectlyorhastherighttocontrolthemajorityofmembers’votesintheclosecorporation;or
• hastheabilitytomateriallyinfluencethepolicyoftheundertakinginamannercomparabletoapersonwho,inordinarycommercialpractice,canexerciseanelementofcontrolasmentionedintheprecedingbulletpoints.
TheCompetitionActfurtherprovidesthatitistheCommissionthatmustmakeadeterminationinrespectofamergerand,indoingso,willevaluatethecriteriawhichitconsidersrelevanttothecircumstancesapplicabletotheproposedmerger,includingwhethertherewillbeaneffectoncompetition.Itisnottheroleofthemergingpartiestoevaluateanyeffectoncompetitionand,onthebasisoftheirevaluation,decidewhetherornottonotifyamerger;thisevaluationisthetaskoftheCommission.
6. What are the thresholds for mandatory merger notification (e.g. assets, turnover and/ or market share)?
RecentdevelopmentsinNamibiancompetitionlawsawthepublicationofmonetarymergernotificationthresholds.ThepublicationofthesethresholdslimitstheclassofmergersrequiringnotificationtoandapprovalfromtheCommission.Thenewthresholdstakeatwo-stepapproach.
Step1:thefirststepistolookatthecombinedvalueoftheparties.TheActdoesnotapplywherethecombinedvalueoftheassetsand/orturnoveroftheacquirerandtargetequalsordoesnotexceedthevaluessetoutbelowinsub-paragraphs(a)to(d):
(a)thecombinedannualturnoverin,intoorfromNamibiaoftheacquirerandtargetisequaltoorvaluedbelowNAD30million;
(b)thecombinedassetvalueinNamibiaoftheacquirerandtargetisequaltoorvaluedbelowNAD30million;
(c)theannualturnoverin,intoorfromNamibiaoftheacquirerplustheassetsinNamibiaofthetargetisequaltoorvaluedbelowNAD30million;
(d)theannualturnoverin,intoorfromNamibiaofthetargetplustheassetsinNamibiaoftheacquirerisequaltoorvaluedbelowNAD30million.
Step2:thesecondstepistolookatthevalueofthetargetonly.Ifthecombinedvalueof(a)to(d)aboveallfallbelowNAD30million,thenthemergerisnotnotifiable.However,ifoneofthecombinationsexceedNAD30million,thenextstepistolookattheassetandturnovervaluesofthetargetonly.IfthevalueoftheassetsandturnoverofthetargetfallbelowNAD15million,themergerwillnotbenotifiable(evenifacombinedvaluein(a)to(d)aboveexceedsNAD30million.
Thenewthresholdnoticereferstotransferredundertakinginsteadoftarget.Theamendedthresholdsspecificallydefineatransferredundertakingasthetotalofalltheundertakingsthataretransferredundertakingsinrespectofamergerwhichincludeanyundertaking,orthebusinessorassetsoftheundertakingthat,asaresultofatransactioninanycircumstancessetoutinsection42oftheAct:
(a)wouldbecomecontrolledbyanotherundertaking;and
(b)anyotherundertakingthatiscontrolledby,orthedirectorindirectcontroloverthewholeorpartofitsbusinessisheldby,anundertakingwhichwouldbecomecontrolledbyanotherundertaking.
Further,wheretheCommissionconsidersitnecessarytodealwithamergerintermsoftheAct,itmaycalluponmergingpartiestosubmitamergernotificationtoitwithin30daysofreceiptofwrittendemand,inrespectofmergersinwhichthevaluefallsbelowthethresholdamountssetout.ThemethodofcalculationoftheassetorturnovervalueisprescribedandasageneralpropositionmustbedeterminedinaccordancewithNamibianGenerallyAccepted
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AccountingPracticesorInternationalFinancialReportingStandards.Inlightoftherelativelylowthresholdvalues,thismayresultinmanymergersinvolvingcomparativelysmallbusinessenterprisestriggeringthemergernotificationobligations.
7. Is there a prohibition on the pre-implementation of a merger? If so, does the legislation make provision for a penalty?
Nopartytoanotifiablemergermayimplementthemergerbefore:
• ithasobtainedtherequisiteapprovalfromtheCommission;or
• theCommission’sreviewperiodinrelationtotheproposedmergerhaslapsedwithouttheformerhavingmadeadeterminationinrelationtotheproposedmerger.
IntheeventthatamergerhasbeenimplementedincontraventionoftheprovisionsoftheCompetitionAct,theCommissionmaymakeapplicationtotheHighCourtfor:
• aninterdictrestrainingthepartiesinvolvedfromimplementingthemerger;
• anorderdirectinganypartytothemergertosellorotherwisedisposeofanyshares,interestorotherassetsithasacquiredpursuanttothemerger;
• declaringvoidanyagreementorprovisionofanagreementtowhichthemergerwassubject;or
• theimpositionofapecuniarypenalty,whichtheCourtconsidersappropriate,butnotexceeding10%oftheglobalturnoveroftheundertakingduringitsprecedingfinancialyear.
TheCommission,however,recognisesthatmergersinmultiplejurisdictionsmaybesubjecttostaggeredapprovalsinthevariousjurisdictionsandallowcarvingoutorring-fencinginrespectoftheNamibianapproval,providedthatduenoticebegiveninadvance.
8. What filing fees are required?
Thefeesforfilingamergernoticeareasfollows:• NAD10000ifthecombinedfigureis
valuedbelowNAD50million;• NAD25000ifthecombinedfigureis
valuedatoraboveNAD50million,butlessthanNAD65million;
• NAD50000ifthecombinedfigureisvaluedatoraboveNAD65million,butlessthanNAD75million;
• NAD75000ifthecombinedfigureisvaluedatoraboveNAD75million,butlessthanNAD100million;
• NAD125000ifthecombinedfigureisvaluedatoraboveNAD100million,butlessthanNAD1billion;
• NAD250000ifthecombinedfigureisvaluedatoraboveNAD1billion,butlessthanNAD3.5billion;or
• NAD500000ifthefigureisvaluedatoraboveNAD3.5billion.
Forthesepurposesthecombinedfiguremeansthegreaterofthe:
• combinedannualturnoverin,intoandfromNamibiaoftheacquirerandthetarget;
• combinedassetsinNamibiaoftheacquirerandthetarget;
• annualturnoverin,intoandfromNamibiaoftheacquirerplustheassetsinNamibiaofthetarget;or
• assetsinNamibiaoftheacquirerplustheannualturnoverin,intoandfromNamibiaofthetarget.
Whendeterminingthecombinedfigure,theacquireristakentorefertoalltheundertakingsthatareacquiringundertakingsinrespectofthemerger.An‘acquiringundertaking'isdefinedas:(i)anyundertakingthat,asaresultofatransactioninanycircumstancessetoutinSection42oftheAct,wouldacquireorestablishdirectorindirectcontroloverthewholeorpartofthebusinessofanotherundertaking;(ii)anyotherundertakingthathasdirectorindirectcontroloverthewholeorpartofthebusinessofanundertakingreferredtoin(i);and(iii)anyotherundertakingthatiscontrolledby,orhasdirectorindirectcontroloverthewholeorpartofthebusinesswhichisheldby,anundertakingreferredtoin(i)or(ii).
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Whendeterminingthefilingfee,itisnecessarytoconsidertheassetsinNamibiaandtheturnoverinNamibiaoftheentiregroupofcompaniestowhichtheacquirerbelongs.
9. Is it necessary to obtain approval for foreign-to-foreign mergers?
IntermsoftheCompetitionAct,itwouldbenecessaryforundertakingstonotifyandobtainapprovalfromtheCommissionintheeventofforeign-to-foreignmergers,ifthemergerinquestionconstituteseconomicactivityinNamibiaorwillhaveaneffectinNamibia,inadditiontomeetingthestatutorythresholdsformandatorynotification.
TheconceptsofeconomicactivityinNamibiaandaneffectinNamibiaareunclearandnostatutorydefinitionsareavailableatpresent.Foreignprecedentmaybepersuasiveinevaluatingtheseconcepts.
10. Are pre-notification contacts with the authorities permitted and are pre-notification meetings normal practice?
TheCompetitionActdoesnotprovideforpre-notificationcontactsorpre-notificationmeetings,althoughtheCommissioniswillingtoholdpre-notificationmeetingsorotherwiseenterintopre-notificationdiscussions.
11. To what extent are non-competition factors relevant to the assessment of a merger?
TheCompetitionActprovidesthattheCommissionmaybaseitsdeterminationofaproposedmergeronanycriteriawhichitconsidersrelevanttothecircumstancesinvolvedintheproposedmerger.Thesecriteriamayincludethefollowing,namely,theextenttowhichtheproposedmergerwouldbelikelyto:
• preventorlessencompetitionortorestricttradeortheprovisionofanyserviceortoendangerthecontinuityofsuppliesorservices;
• resultinanyundertaking,includinganundertakingnotinvolvedasapartyintheproposedmerger,acquiringadominantpositioninamarketorstrengtheningadominantpositioninamarket;
• resultinabenefittothepublicwhichwouldoutweighanydetrimentwhichwouldbe
likelytoresultfromanyundertaking,includinganundertakingnotinvolvedasapartyintheproposedmerger,acquiringadominantpositioninamarketorstrengtheningadominantpositioninamarket;
• affectaparticularindustrialsectororregion;• affectemployment;• affecttheabilityofsmallundertakings,in
particularsmallundertakingsownedorcontrolledbyhistoricallydisadvantagedpersons,togainaccesstoortobecompetitiveinanymarket;
• affecttheabilityofnationalindustriestocompeteininternationalmarkets;or
• resultinlikelybenefitstobederivedfromtheproposedmergerrelatingtoresearchanddevelopment,technicalefficiency,increasedproduction,efficientdistributionofgoodsorprovisionofservicesandaccesstomarkets.
12. Do the authorities contact customers and competitors of the merging parties as part of the merger review process? To what extent are the submissions of customers and competitors influential?
TheCommissionmay,ifitconsidersitappropriateanduseful,holdaconferenceinrelationtoaproposedmerger.TheCommissionmayalsoinvitepartiesotherthanthenotifyingpartiestomakerepresentationsatsuchaconference.Further,theCompetitionActempowerstheCommissiontorefertheparticularsofaproposedmergertoaninspectorforinvestigation.Anyperson,includingapersonotherthanthenotifyingparties,maysubmittosuchinspector(ortheCommission)anydocument,affidavitorotherinformationinrespectoftheproposedmerger.ThepracticeoftheCommissionistomakeenquiriesandcontactcustomers,competitorsandevenotherregulators,inthecaseofaregulatedindustry.
13. Who else can make submissions to the authorities when a merger is being considered? Are employees contacted as part of the process and can employees make submissions?
Asnotedabove,anyperson,includingemployees,maybeinvitedtomakesubmissionstotheCommissionorprovideinformationoftheirownvolition.Aspartofthemergernotification,partiesarerequestedtostatewhateffectthemergerwillhaveonemployment.
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14. Are merging parties given an opportunity to make representations before a decision is issued where the authority intends to prohibit a merger or impose conditions?
TheCommissionmay,ifitconsidersitappropriateanduseful,conveneconferencesbetweenpartieswheretheycanmakerepresentationsbeforeadecisionisissuedbytheCommission.Asarule,however,mergerfilingsshouldfromtheoutsetbeascompleteandcomprehensiveaspossible.
However,theCompetitionActmakesprovisionforpre-determination(butpost-notification)conferencesattherequestoftheCommission.TheCommissionmayalsoappointaninspectorduringthedeterminationphasetoinvestigatethemergerandconsultwiththepartiesand/oranythirdpartythatmayhaveaninterestinthemerger.
15. What are the opportunities for judicial appeal or review of a decision in respect of a merger that the parties are dissatisfied with?
IntermsoftheCompetitionAct,apartytoaproposedmergermay,within30daysfromthedeterminationbytheCommission,inthefirstinstance,applytotheMinisterofTradeandIndustrytoreviewsuchdetermination.
Oncetheinternalreviewappealprocesshasbeenexhausted,anapplicationforreviewtotheHighCourtintermsoftheprinciplesofadministrativelawandprocedureisalsoavailable.
16. Does the legislation apply to joint ventures?
TheCompetitionActdoesnotspecificallyprovidefor,orevendefine,jointventuresbutspecificallyincludesanyamalgamationorcombinationbetweenundertakingsandaccordinglytheambitofthelegislationseekstoencompassallbusinessforms.Therefore,anyjointventurewhichconstitutesanundertakingandinvolvesitselfinamergerasdefinedwouldfalltobenotifiedtotheCommission.Dependingonthecircumstances,oneormoreundertakingsseekingtoformajointventuremayberequiredtocomplywiththeprovisionsoftheActregulatingmergers.JointventuresarealsosubjecttotheprovisionsoftheActthatprohibitanti-competitiveconduct.
17. Does the legislation specifically prohibit cartel conduct? If so, are there examples of the authorities pursuing firms for engaging in cartel conduct?
TheCompetitionActprohibitsrestrictivepracticesand,inparticular,contemplatesandincludesinitsambitagreementsconcludedbetweenpartiesinahorizontalrelationship,beingundertakingstradingincompetition.Agreementsbetweenundertakings,decisionsbyassociationsofundertakingsorconcertedpracticesbyundertakingswhichhaveastheirobjectoreffectthepreventionorsubstantiallesseningofcompetitionintradeinanygoodsorservicesinNamibia,orapartofNamibia,areprohibited.Inparticularlegislationprohibitsanyagreement,decisionorconcertedpracticewhich:
• directlyorindirectlyfixespurchaseorsellingpricesoranyothertradingconditions;
• dividesmarketsbyallocatingcustomers,suppliers,areasorspecifictypesofgoodsorservices;
• involvescollusivetendering;• involvesapracticeofminimumresale
pricemaintenance;• limitsorcontrolsproduction,marketoutletsor
access,technicaldevelopmentorinvestment;• appliesdissimilarconditionstoequivalent
transactionswithothertradingparties,therebyplacingthematacompetitivedisadvantage;or
• makestheconclusionofcontractssubjecttoacceptancebyotherpartiesofsupplementaryconditionswhichbytheirnatureoraccordingtocommercialusagehavenoconnectionwiththesubjectofthecontracts.
InAugust2016,afteraninvestigationbytheCommission,SanlamNamibiaandPPSInsuranceLtdagreedtopayNAD15million(approximatelyEUR990000)forallegedlydividingthemarketthroughajointventuremarketingagreementandadmittedcontraveningtheAct.Thiswasthefirstpenaltypaidforacontraventionandthefirstadmissionofguiltintermsofsection23oftheAct.ThesettlementfollowedaseriesofnegotiationsbetweentheCommissionandtherespondentsandwasthereforeanegotiatedoutcomeratherthanamattertestedonitsmerits.Therespondentshave
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sincefiledanapplicationforexemptionwiththeCommissioninrelationtotheparticularconduct.
18. What are the authorities’ powers of investigation in relation to cartel conduct and other prohibited practices?
TheCommissionhasbroadinvestigativepowersandmay,eitheronitsowninitiativeoruponreceiptofinformationoracomplaintfromanyperson,launchaninvestigationintoanyconductorproposedconductwhichisallegedtoconstituteormayconstituteaprohibitedpractice.Investigationmustbeinstitutedwithinthreeyears.IftheCommissiondecidesthatanyoftheprohibitionsonrestrictivebusinesspracticeshavebeeninfringed,itmustgivewrittennoticeoftheproposedinvestigationtoeachundertakingwhichmaybeaffectedbythatdecision.Thenoticemust,interalia,informeachundertakingthatitmaysubmitwrittenrepresentationstotheCommission.ThenoticemustalsorequesttheundertakingtoindicatewhetheritrequiresanopportunitytomakeoralrepresentationstotheCommission,inwhichcasetheCommissionwillconveneaconference.
Afterconsiderationofanywrittenrepresentationsandofanymattersraisedataconference,theCommissionmayinstituteproceedingsintheCourtagainsttheundertakingorundertakingsconcernedforanorder:
• declaringtheconductwhichisthesubjectmatteroftheCommission’sinvestigation,toconstituteaninfringementoftheprohibitiononrestrictiveagreements,practicesanddecisionsorabuseofdominantposition;
• restrainingtheundertakingorundertakingsfromengaginginthatconduct;
• directinganyactiontobetakenbytheundertakingorundertakingsconcernedtoremedyorreversetheinfringementortheeffectsthereof;
• imposingapecuniarypenalty,whichmaynotexceed10%oftheglobalturnoveroftheundertakingduringitspreviousfinancialyear;or
• grantinganyotherappropriaterelief.
TheCompetitionActprovidestheCommissionwithrelativelywidepowersofsearchandseizureand
thetakingofevidence.Inspectors(appointedbytheCommission)areempoweredundertheActto:
• searchanypremises;• searchanypersononthepremisesifthere
arereasonablegroundsforbelievingthatthepersonhaspersonalpossessionofanydocumentorarticlethathasabearingontheinvestigation;
• examineanydocumentorarticlefoundonthepremisesthathasabearingontheinvestigation;
• requestanyinformationaboutanydocumentorarticlefoundonthepremises;
• takeextractsfrom,ormakecopiesof,anybookordocumentfoundonthepremisesthathasabearingontheinvestigation;
• useanycomputersystemonthepremisestosearchanydatacontainedinoravailabletothatcomputersystem,reproduceanyrecordfromthatdataandseizeanyoutputfromthatcomputerforexaminationandcopying;and
• attachandremovefromthepremisesforexaminationandsafekeepinganythingthathasabearingontheinvestigation.
Aninspectormaynotenteruponandsearchanypremisesunlessheorsheobtainsawarrantauthorisingsuchentryandsearch,unlesstheowner,oranyotherpersonincontrolofthepremisesconsentstotheentryandsearchofthepremises,ortheinspectoronreasonablegroundsbelievesthatawarrantwouldbeissuedifappliedfor,andthatthedelayinobtainingawarrantwoulddefeattheobjectoftheentryandsearch.
TheCommissionmayalsoreceiveinevidenceanystatement,document,informationormatterthatmayinitsopinionassisttodealeffectivelywithaninvestigationconductedbyit,whetherornotsuchstatement,document,informationormatterwouldotherwisebeadmissibleinacourtoflaw.
19. What are the penalties for cartel conduct? Is there a leniency policy in place? Does the legislation impose criminal sanctions?
TheCommissionmaynotbyitselfimposeanypenaltiesbuthastoapproachtheHighCourtofNamibiatodoso.TheCourtmayimposeapecuniarypenaltyforanyamountwhichitconsidersappropriatebutnotexceeding10%oftheglobal
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turnoveroftheundertakingduringitsprecedingfinancialyear.Indetermininganappropriatepenalty,theCourtmusthaveregardtoallrelevantmattersconcerningthecontravention.
TheCommissionmayalsoatanytime,duringorafteraninvestigationintoanallegedinfringementpertainingtoprohibitedpractices,enterintoanagreementofsettlementwiththeundertaking(s)concerned,settingoutthetermstobesubmittedbytheCommissionbyapplicationtotheCourtforconfirmationasanorderoftheCourt.Suchanagreementmayinclude,withtheconsentofanypersonwhosubmittedacomplainttotheCommissioninrelationtotheallegedinfringement,anawardofdamagestothecomplainant,and/oranyamountproposedtobeimposedasapecuniarypenalty.
AcontraventionorfailuretocomplywithaninterimorfinalorderoftheCourtgivenintermsoftheCompetitionActconstitutesanoffence.Uponconviction,theperpetratorisliabletoafinenotexceedingNAD500000,ortoimprisonmentforaperiodnotexceeding10years,ortoboth.InthecaseofanyothercontraventionoftheCompetitionAct,aconvictedpersonisliabletoafinenotexceedingNAD20000,ortoimprisonmentforaperiodnotexceedingoneyear,ortoboth.
20. Is there a provision in the legislation providing for a mechanism to apply for exemption from certain parts of the legislation? TheCompetitionActallowsanyundertakingorassociationofundertakingstoapplytotheCommissiontobeexemptfromtheprovisionsrelatingtorestrictivebusinesspracticesinrespectofanyagreementorcategoryofagreements,anydecisionorcategoryofdecisions,oranyconcertedpracticeorcategoryofconcertedpractices.
TheCommissionmay,uponsuchapplicationandonsuchconditionsastheCommissionmaydetermine,grantanexemptioninrelationtoanyagreementorpracticerelatingtotheexerciseofanyrightorinterestacquiredorprotectedintermsofanylawrelatingtocopyright,patents,designs,trademarks,plantvarietiesoranyotherintellectualpropertyrights.
Ifaprofessionalassociation’srulescontainarestrictionthathastheeffectofpreventingorsubstantiallylesseningcompetitioninamarket,theassociationmayapplytotheCommissionforanexemption.
21. Is minimum resale price maintenance prohibited?
Yes.
22. In what circumstances are exclusive agreements unlawful? If exclusive agreements raise concerns in specific circumstances, what factors are relevant to their lawfulness or unlawfulness?
Agreementsbetweenundertakings,decisionsbyassociationsofundertakingsorconcertedpracticesbyundertakingswhichhaveastheirobjectoreffectthepreventionorsubstantiallesseningofcompetitionintradeinanygoodsorservicesinNamibia,orapartofNamibia,areprohibitedunlesstheyareexemptinaccordancewiththeprovisionsoftheCompetitionAct.
Agreementsandconcertedpracticescontemplatedaboveincludeagreementsconcludedbetweenpartiesinahorizontalrelationship,beingundertakingstradingincompetition,orpartiesinaverticalrelationship,beinganundertakinganditssuppliersorcustomers,orboth.
Inparticular,legislationprohibitsanyagreement,decisionorconcertedpracticewhich:
• directlyorindirectlyfixespurchaseorsellingpricesoranyothertradingconditions;
• dividesmarketsbyallocatingcustomers,suppliers,areasorspecifictypesofgoodsorservices;
• involvescollusivetendering;• involvesapracticeofminimumresale
pricemaintenance;• limitsorcontrolsproduction,marketoutletsor
access,technicaldevelopmentorinvestment;• appliesdissimilarconditionstoequivalent
transactionswithothertradingparties,therebyplacingthematacompetitivedisadvantage;or
• makestheconclusionofcontractssubjecttoacceptancebyotherpartiesofsupplementaryconditionswhichbytheirnatureoraccording
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• makingtheconclusionofcontractssubjecttoacceptancebyotherpartiesofsupplementaryconditionswhichbytheirnatureoraccordingtocommercialusagehavenoconnectionwiththesubjectmatterofthecontracts.
24. Are there examples of the authorities pursuing firms for abusing a dominant position?
Yes.Forexample,inApril2016,theCommissioninitiatedproceedingsintheHighCourtagainstNamcars(Pty)Ltd,adominant,onlineadvertisingwebsite,foranorderdeclaring,amongothers,thatNamcarshasabuseditsdominantpositionincontraventionofsection26(1),readwithsection26(2)(b)oftheAct.TheallegationisthatNamcarsimposedapolicyprohibitingautomotivedealerswhoadvertisewithNamcarsfromadvertisingitsusedvehiclesoncompetingwebsites.TheCommissionhasrecordeditswillingnesstoengagewiththerespondentinanendeavourtosettlethismatterwiththeobjectofavoidingcourtproceedings.
25. Does the legislation impose penalties on firms for the abuse of a dominant position?
FollowinganinvestigationintotheconductofoneormoreundertakingsbytheCommission,theCommissionmayinstituteproceedingsincourtagainsttheundertakingorundertakingsconcernedforanorderimposingapecuniarypenalty,amongothers.
Thecourtmayimposeapecuniarypenaltyforanyamountwhichthecourtconsidersappropriate,butnotexceeding10%oftheglobalturnoveroftheundertakingduringitsprecedingfinancialyear.Indetermininganappropriatepenalty,thecourtmusthaveregardtoallrelevantmattersconcerningthecontravention.
TheCommissionmayatanytime,duringorafteraninvestigationintoanallegedinfringement,enterintoanagreementofsettlementwiththeundertaking(s)concernedsettingoutthetermstobesubmittedbytheCommissionbyapplicationtothecourtforconfirmationasanorderofthecourt.
Suchanagreementmayinclude,withtheconsentofanypersonwhosubmittedacomplainttotheCommissioninrelationtotheallegedinfringement,
tocommercialusagehavenoconnectionwiththesubjectofthecontracts.
23. Does the legislation prohibit the abuse of a dominant position? If so, what is the threshold for dominance and what conduct amounts to an abuse?
Abuseofdominanceisprohibited.Forpurposesofdeterminingwhetheranundertakinghas,ortwoormoreundertakingshave,adominantposition,theCommissionhas,bywayofRule36,prescribedthefollowingcriteria,namelywhereanundertakinghas,ortwoormoreundertakingshave:
• atleast45%ofthatmarket;• atleast35%,butlessthan45%,ofthatmarket,
unlessitcanshowthatitdoesnot,ortheydonot,havemarketpower;or
• ithas,ortheyhave,lessthan35%ofthatmarket,buthasorhavemarketpower.
Forthepurposesofthisrule‘marketpower’isdefinedtomeanthepowerofanundertakingorundertakingstocontrolprices,toexcludecompetitionortobehavetoanappreciableextentindependentlyofitscompetitors,customersorsuppliers.
TheMinister,withtheconcurrenceoftheCommission,hasdeterminedbynoticeinthegazette,thattheabuseofdominantpositionprovisionsoftheActdonotapplytoanundertakingwhoseannualturnoverin,intoorfromNamibiaisequaltoorvaluedbelowNAD10million,orwhoseassetsinNamibiaareequaltoorvaluedbelowNAD10million.
AnyconductonthepartofoneormoreundertakingswhichamountstotheabuseofadominantpositioninamarketinNamibia,orapartofNamibia,isprohibited.Abuseofadominantpositionincludes:
• directlyorindirectlyimposingunfairpurchaseorsellingpricesorotherunfairtradingconditions;
• limitingorrestrictingproduction,marketoutletsormarketaccess,investment,technicaldevelopmentortechnologicalprogress;
• applyingdissimilarconditionstoequivalenttransactionswithothertradingparties;or
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anawardofdamagestothecomplainant,and/oranyamountproposedtobeimposedasapecuniarypenalty.
Anorderimposingapecuniarypenaltyhastheeffectof,andmaybeexecutedasifitwere,aciviljudgmentgrantedbythecourtinfavouroftheGovernmentofNamibia.
ApecuniarypenaltypayableintermsoftheCompetitionActispaidintotheStateRevenueFund.
26. Are there rules in relation to price discrimination?
TheCompetitionActprohibitsrestrictivepracticesandtheabuseofadominantposition.Suchprohibitedconductmayinclude,directlyorindirectly,imposingunfairpurchaseorsellingpricesorotherunfairtradingconditionsandapplyingdissimilarconditionstoequivalenttransactionswithothertradingparties.
27. Does the authority publish its decisions and, if so, is there a website where such decisions are available?
ThedecisionsoftheCommissionarepublishedintheGovernmentGazette,whichisunfortunatelynotavailablewithoutasubscription.Asatthetimeofwriting,theCommissionhadnotpublisheddecisionsonitswebsitewww.nacc.com.na
KOEP & PARTNERS 33SchanzenRoadPOBox3516WindhoekNamibiaT:+26461382800/+26461382803
www.koep.com
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UDO UDOMA & BELO-OSAGIE Dan Agbor | Ozofu Ogiemudia | Faridah Orimobi
Nigeria
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1. What is the relevant competition legislation and who are the enforcers?
Nigeriacurrentlydoesnothaveanydedicatedcompetitionlegislation.However,adraftFederalCompetitionandConsumerProtectionBill(theFCCPBill)hasbeenpassedbytheNigerianSenateandtheHouseofRepresentatives.TheFCCPBill,whichseekstocreatealevelplayingfieldforallbusinessesacrossvarioussectors,ispresentlybeingharmonisedbythetwohousesbeforeitispresentedforPresidentialAssent.Itisnotclear,however,whenPresidentialAssentwillbeissued.HighlightsoftheFCCPBillareprovidedinsection2onthefollowingpage.
UntiltheFCCPBillbecomeslaw,thecurrentpositionofthelawisthattheprovisionsoftheInvestmentsandSecuritiesAct,2007(theISA)andtheRulesandRegulationsoftheSecuritiesandExchangeCommission(theSEC)madepursuanttotheISA(theSECRules)empowertheSECtodeterminewhetheranymerger,acquisitionorbusinesscombinationislikelytosubstantiallypreventorlessencompetition.Section118(1)oftheISAprovidesthateverymerger,acquisitionorbusinesscombinationbetweenoramongcompaniesissubjecttopriorreviewandapprovalbytheSEC.
Therearealsocertainsector-specificlaws,guidelinesandprovisionsthatdealwithcompetition-relatedissues,including:
• TheNigerianCommunicationsCommission(theNCC),whichistheregulatorfortheNigeriantelecommunicationssector,issuedtheCompetitionPracticesRegulation(theNCCRegulations)in2007toaddresscompetitionissuesinthetelecommunicationssector.TheNCCRegulationsapplyinadditiontotheanti-competitionprohibitionprovisionsoftheNigerianCommunicationsAct,(ChapterN97)LawsoftheFederationofNigeria,2004.
• ThePointofSaleCardAcceptanceServicesGuidelines2011(CBNPOSGuidelines),publishedbytheCentralBankofNigeria,containprovisionsprohibitingcardassociationsorcardschemesfromengaginginanti-competitiveactivitiesoranyactthatwillleadtotheabuseofadominantposition,monopolyorunfaircompetition.Itfurtherprohibitscollusionbetweentwoormorecardassociations,cardschemesorpaymentschemesinrespectofissuing,acquiring,processingorswitchingofpaymentcards.
• GuidelinesonMobileMoneyServicesinNigeriaissuedbytheCentralBankofNigeriain2009containsprovisionsthatprohibitMobileMoneyOperatorsfromengaginginanyconductwhichhastheeffectofanti-competitioninanyaspectofmobilemoneyservices.
• TheOperationalRulesandRegulationsfortheNigeriaCentralSwitchhasextensiverulesfortheprohibitionofanti-competitiveactivities,includingexclusivityagreements,tie-inagreements,refusalstodeal,predatoryfeesoranyotheractivitieslikelytohaveanadverseeffectoncompetitioninNigeria.
• TheElectricPowerSectorReformAct,2005(EPSRA)enablestheNigerianElectricityRegulatoryCommission(NERC)topromote(wherefeasible)competitionandprivatesectorparticipation.
• ThePublicProcurementAct,2007expresslyprohibitssuppliers,contractorsandconsultantsfromenteringorattemptingtoenterintoanycollusiveagreements,whetherenforceableornot,wherethepricesquotedintheirrespectivetenders,proposalsorquotationsareorwouldbehigherthanwouldhavebeenthecasehadtherenotbeencollusionbetweenthepersonsconcerned.ThisActalsoforbidsbid-rigging,whichitdefinesasanagreementbetweenpersonswherebyofferssubmittedhavebeenpre-arrangedbetweenthem;or
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3. Is the law actively enforced?
TheFCCPBillhasnotbeenpassedintolawandisnotinforceinNigeria.Theprovisionsofthelegislationreferredtoinquestion1,however,areinforce.Withrespecttomergersandacquisitions,theSECseekstoensurecompliancewiththeprovisionsoftheISAanditsrulesingrantingitsapproval.TheNCChasbeenproactiveinenforcingitsregulationswithrespecttocompetition-relatedissues.
4. What are the current priorities or focus areas of the competition authorities?
ThereiscurrentlynocompetitionauthorityinNigeria.However,themonitoringofcompetitionissuesiscarriedouttosomeextentthroughsector-specificregulationsbytherelevantregulators.TheSECisprimarilyfocusedoncompetitionissuesarisingfrommergersoracquisitionsacrossallsectorsoftheeconomy.
5. What kind of transaction constitutes a notifiable merger?
Section119(1)oftheISAdefinesa‘merger’asanyamalgamationoftheundertakingsorpartoftheundertakingsorinterestoftwoormorecompanies,ortheundertakingsorpartoftheundertakingsofoneormorecompaniesandoneormorecorporateentities.
UndertheISA,mergersarecategorisedassmall,intermediateorlarge.IntermediateandlargemergersconstitutenotifiablemergersundertheISA.AsmallmergerisnotifiableonlyifsorequiredbytheSEC.TheSECmayrequirenotificationofasmallmergerif:
• withinsixmonthsafterimplementationofthesmallmerger,theSECisoftheopinionthatthesmallmergermaysubstantiallypreventorlessencompetition;or
• themergercannotbejustifiedonpublicinterestgrounds.
Notably,however,themergingentitiestoasmallmergerarerequiredtoinformtheSECofthesmallmergerattheconclusionofthemerger.
wheretheirconducthashadtheeffectofdirectlyorindirectlyrestrictingfreeandopencompetition,distortingthecompetitivenessoftheprocurementprocessoranescalationorincreaseincostsorlossofvaluetothenationaltreasury.
• Section30(4)(i)oftheCivilAviationAct,2006veststheNigerianCivilAviationAuthority(NCAA)withthepowertoinvestigateanddetermineuponitsowninitiative,oruponthereceiptofacomplaintbyanyaircarrier,airtravelagent,consumerofairtransportservicesorotheralliedaviationserviceprovider,whetheranyairserviceproviderhasbeenorisengagedinunfairordeceptivepracticesorunfairmethodsofcompetitioninairtransportationorinthesaleofticketsorintheprovisionofotheralliedaviationservices;andthepowertoordersuchairserviceprovidertodesistfromsuchpracticesormethodofcompetition.TheRegulationsissuedpursuanttothislegislationalsorestrictcertainanti-competitiveconductintheaviationindustry.
2. Are there any proposed amendments or new regulations expected to come into force?
TheFCCPBillwhichiscurrentlybeingharmonisedbytheNationalAssembly,aimstocreatealevelplayingfieldforallbusinessesacrossvarioussectors.Essentially,theobjectivesoftheFCCPBillareto:
• establishaFederalCompetitionandConsumerProtectionCommissionforthepurposeofcarryingoutthefunctions,dutiesandresponsibilitiesoftheproposedFCCPBill;
• establishaCompetitionandConsumerProtectionTribunaltoadjudicateoverconductprohibitedundertheAct;
• prohibitagreementsbetweenoramongfirmsrestrictingoreliminatingcompetitioninagivenmarket;
• prohibittheabuseofdominantpositionormarketpowerofacompany;
• regulatemergersandacquisitionstoensurethatcompetitionintherelevantmarketisnoteliminatedbythemergingoftwoormorecompanies;and
• evaluatepricefixingbyadominantfirmoranumberoffirmsinconcert.
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6. What are the thresholds for mandatory merger notification (e.g. assets, turnover and/ or market share)?
MergerthresholdsarecalculatedonthecombinedannualturnoverorassetsofthepartiesinNigeriaasfollows:
• smallmergers—thecombinedannualturnoverorassetsofthepartiesinNigeriaislessthanNGN1billion;
• intermediatemergers—thecombinedannualturnoverorassetsofthepartiesinNigeriaisbetweenNGN1billionandNGN5billion;and
• largemergers—thecombinedturnoverorassetsofthepartiesinNigeriaismorethanNGN5billion.
7. Is there a prohibition on the pre-implementation of a merger? If so, does the legislation make provision for a penalty?
PartiestoasmallmergermayimplementthemergerwithoutthepriorapprovaloftheSECunlesstheSECrequiresotherwise.WheretheSECrequeststhatpartiestoasmallmergernotifytheSECofthetransaction,thepartiesareprohibitedfromtakinganyfurtherstepstoimplementthemergeruntilthemergerhasbeenapprovedbytheSEC.
Section123(3)oftheISAexpresslyprohibitspartiestoanintermediateorlargemergerfromimplementingthemergerwithoutthepriorapproval(withorwithoutconditions)oftheSEC.PartiesthatfailtonotifytheSECofintermediateandlargermergersruntheriskofthemergerbeinginvalidatedordissolvedastheSECreservesabreakuppowerunderSection128oftheISAandSECRule432.
TheISAdoesnotprescribespecificpenaltiesforafailuretoobtaintheSEC’sapprovalofamerger.TheSECRules,however,imposedifferentfinesdependingonwhetherthemergeramountstoanintermediateorlargemerger.ForintermediatemergersafineofnotlessthanNGN1.5millionisprescribed,andNGN5000foreverydayofcontinuingdefaultornullificationofthesaidtransactionfromthedateoftheconsummationofthetransaction.Forlargemergers,theSECRulesimposeafineofnotlessthanNGN2million,andNGN5000foreverydayofcontinuingdefaultornullificationofthesaidtransactionfromthedateoftheconsummationofthetransaction.
TheSECmayalsomakeordersdirectinganypersoninbreachoftheISAtocompensateanyotherpersonwhomayhavesuffereddirectlossasaresultofsuchbreach.Penaltiesmaybeimposedontheerringcompaniesaswellastheirrespectiveofficers.
Public companies
TheSEC’sfeesarecomputedonthebasisofthevalueofthesharesissuedbythesurvivingcompanyasfollows:
•FirstNGN500million–0.3%•NextNGN500million–0.22%•Anysumthereafter–0.15%
Private companies
TheSEC’sfeesarecalculatedonthebasisofthetotalvalueoftheconsiderationofthetransaction,inthesamemanneraspubliccompaniesabove.
8. What filing fees are required?
TheSECMergerRulesstipulateaprocessingfeeapplicabletotheregistrationofsecuritiesbytheSEC(intheamountofNGN50000permergingcompany)forintermediateandlargemergers.
9. Is it necessary to obtain approval for foreign-to-foreign mergers?
ThereiscurrentlynorequirementundertheISAortheSECRulestoobtainapprovalforforeign-to-foreignmergers.WhendeterminingwhetheranacquisitionoramergerhasoccurredforNigerianlawpurposes,theformoftheNigerian(domestic)companypost-transactionisrelevant.Ifthedomesticcompanytobeacquiredwillcontinuetoexistinitscurrent(pre-transaction)formpost-transaction,withoutachangeintheshareholdersofrecordofthedomesticlegalentity,thetransactiondoesnothavetobenotifiedtotheSEC.
ThetestthathascustomarilybeenappliedindeterminingwhethertheSEC’sapprovalisrequiredisthatthetransactionisrequiredtobenotifiedtotheSECifitisanacquisitionofcontrolofaNigeriancompanythatresultsinachangeintheshareholdersofrecordofthedomesticcompany.
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tofileanydocument,affidavit,statementorotherrelevantinformationinrespectofamergerandpermitstheSEC,incarryingoutitsassessmentofthetransaction,torelyonsuchinformation.
13. Who else can make submissions to the authorities when a merger is being considered? Are employees contacted as part of the process and can employees make submissions?
Foranintermediateoralargemerger,theprimaryacquiringcompanyandtheprimarytargetcompanyarerequiredtoprovideacopyofthenotificationtoSEC,toanyregisteredtradeunionthatrepresentsasubstantialnumberofitsemployeesor,intheabsenceofsuchregisteredtradeunions,totheemployeesconcernedortheirrepresentatives.However,therearenoexpressrequirementsforemployeestobecontactedaspartofthemergerassessmentprocess.Asnotedinquestion10,theSEChaspowerstomakesuchcontactandtoreceiveanysubmissions.
14. Are merging parties given an opportunity to make representations before a decision is issued where the authority intends to prohibit a merger or impose conditions?
ThereisnoexpressobligationorrequirementinlawfortheSECtoprovidemergingpartieswithanopportunitytomakerepresentationsbeforeitissuesitsdecisiontoeitherprohibitamergerorimposeconditions.TheSECispermittedinSection124(2)oftheISAtorequireadditionalinformationfromanyofthemergingparties,whileSection124(3)allowsanypersontovoluntarilyfileadditionalinformationwiththeSECinrespectofthemerger.InpracticetheSECwill,afterreviewingtheapplication,setoutitsqueriesinaletterwhichwillserveasthebasisuponwhichthepartieswouldprovideadditionalinformationinordertoadequatelyaddresstheSEC’squeries.
WheretheSECexercisesitspowerstoorderthebreak-upofthecompanybecauseitisoftheopinionthatthebusinesspracticeofsuchcompanysubstantiallypreventsorlessenscompetition,thepartiestothemergerareentitledtomakerepresentations.Priortothebreak-upordertakingeffect,thefollowingprocessmustbefollowed:
• TheSECwillnotifytheaffectedcompanyinwritingofthegroundsfortheproposedbreak-up.
10. Are pre-notification contacts with the authorities permitted and are pre-notification meetings normal practice?
Whilethereisnostatutoryrequirementforpre-notificationcontactwiththeSEC,itisusualforpartiestohavepre-notificationcontactswiththeSECbeforetheformalapplicationismade.
Thisisusuallydonewherethepartiesrequireagreaterdegreeofclarityonvariousrequirementscontainedintheregulationsandlawsthatcouldapplytotheproposedtransaction.
11. To what extent are non-competition factors relevant to the assessment of a merger?
Inadditiontoconsideringcompetitionissues,theISArequirestheSEC(inassessingthemerger)toconsiderwhether:
• themergerisjustifiableonsubstantialpublicinterestgrounds;
• allshareholderswouldbefairly,equitablyandsimilarlytreated;and
• shareholdershavebeengivensufficientinformationaboutthemerger.
12a. Do the authorities contact customers and competitors of the merging parties as part of the merger review process?
TheSECisempoweredtocontactcustomersandcompetitorsofthemergingparties.However,wearenotawareofinstanceswheretheSEChasexercisedthispower.
Rule426oftheSECRulesprescribesthatanotifyingpartytoamergershouldprovidealistofitsmajorcompetitorsinitsproductmarketandmarketpositionormarketshareoftheseplayers.TheSECmayalsorequestthatthenotifyingpartyidentifyandprovidecontactdetails,foreachidentifiedproductorservice,forfivecustomersofthemergingentitiesineachoftheidentifiedgeographicalareaswiththelargestaggregatepurchasesinvalueduringthelastfinancialyear.
12b. To what extent are the submissions of customers and competitors influential?
TheISAgrantstheSECthepower,inassessingamergerapplication,toinvestigateorappointanypersontocarryoutinvestigationsregardingthemerger.TheISAalsoexpresslypermitsanyperson
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• Theaffectedcompanyisgiven30days(fromdateofreceiptoftheletter)withinwhichtoforwardtheirresponsetotheSEC.
• Ifafterreviewingthecompany’sresponse,theSECfindsthatcompetitionisrestrained,seniorofficersofthecompanyshallbeinvitedtofurtherdefendtheirposition.
TheSEChasnotyetexercisedthispowerandassuchtherearecurrentlynoprecedentsinthisregard.
15. What are the opportunities for judicial appeal or review of a decision in respect of a merger that the parties are dissatisfied with?
TheISAestablishedtheInvestmentsandSecuritiesTribunal(theIST)andhasvesteditwithexclusivejurisdictiontohearanyquestionoflaworanydisputeinvolvingadecisionordeterminationoftheSECintheoperationandapplicationoftheISA,ajurisdictionwhichincludesdecisionsinrespectofmergers.PartieshavearightofappealtotheCourtofAppealiftheyaredissatisfiedwiththedecisionoftheIST.
16. Does the legislation apply to joint ventures?
TheISAisgenerallylimitedinitsapplicationtocompanies,andisnotapplicabletounincorporatedjointventures.Thisnotwithstanding,partXIIoftheISA(whichprovidesformergers,takeoversandacquisitions)extendsthedefinitionofcompanytoincludepartnerships,firmsorassociationsofindividuals.Thus,whereunincorporated,jointventuresenterintomergersthatmeetthethresholdsformandatorynotificationorapproval,notificationofsuchmergersmustbemadetotheSECortheSEC’sapprovalmustbesought(asthecaserequires).
17. Does the legislation specifically prohibit cartel conduct? If so, are there examples of the authorities pursuing firms for engaging in cartel conduct?
Although,thereisnodedicatedcompetitionlawinNigeria,cartelconductisprohibitedbyarangeofstatutesinvarioussectors,asdiscussedinquestion1.Inrelationtothecommunicationssector,theCommunicationsActexpresslyprohibitscartelconduct.
In2011,therewasaninvestigationundertheCivilAviationActastowhetherthesimultaneousimpositionofthefuelsurchargebyBritishAirwaysandVirginAtlanticAirwayswasdeceptive,unfair,andanunfairmethodofcompetition.Theresultoftheinvestigationwasafindingthatbothairlinesjointlycontrolled90%ofthepassengertrafficbetweenLagosandLondon,andthatthetwoairlinescommunicatedandagreedontheleveloffuelsurchargeonpassengerstobeassessedpriortointroducingsuchfareincreases.Thiswasfoundtoamounttocollusion.TheinvestigativecommitteeoftheNCAArecommendedfinesandpenalties,aswellascompensationtoaffectedpassengers.
18. What are the authorities’ powers of investigation in relation to cartel conduct and other prohibited practices?
Asmentioned,thereisnosingleauthorityinNigeriathatisvestedwiththeresponsibilityofactingasthecompetitionwatchdogforNigeria.
Withrespecttosector-specificcompetitionregulation,suchregulatorsmayutilisetheirgeneralinvestigativepowerswithrespecttocompetition-relatedinvestigations.Inthecontextofthetelecommunicationssector,Section61oftheCommunicationsActempowerstheNCCtoinvestigateanymatterpertainingtotheadministrationoftheCommunicationsActoritssubsidiarylegislationiftheNCChasgroundstobelievethataninfringement,civilorcriminal,oftheprovisionsoftheCommunicationsActoritssubsidiarylegislationwas,isorwillbecommitted.
Forpurposesofconductinganinvestigation,theNCCmayappointinspectorswhoshallhavethepowertoenterthepremisesofpersonsunderinvestigationwithoutnotice,andtoinspectandtakecopiesofanyrecordsconsideredrelevanttotheinvestigation.Inconductingitsinvestigations,theNCCmustnotifyanypersonsorentitiesthatarethesubjectofinvestigation,andmustgivethemtheopportunitytomakerepresentationsinwritingorinpersonbeforeanyadversedecisionisreached.
Inthecontextofthepowersector,Section82(5)oftheEPSRAstatesthattheNERCisresponsibleforconsidering(inrelationtoservicesincompetitivemarkets)howtopreventandmitigatetheabuseof
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marketpowerwhenitisestablishingtariffsandapprovingmergersandacquisitions.Inordertoaccomplishthis,theNERChasthepowertorequireinformationfromitslicensees,undertakeenquiriesandestablishorhireanindependentcomplianceassessortomonitortheactivitiesofitslicensees.
19. What are the penalties for cartel conduct? Is there a leniency policy in place? Does the legislation impose criminal sanctions?
NospecificpenaltiesareprescribedintheCommunicationsActforcartelconduct.Section140oftheCommunicationsAct,whichsetsoutpenalties,generallyprovidesthatpersonsguiltyofanoffenceundertheCommunicationsActshallbeliableforafinenotexceedingNGN100000,ortoimprisonmentforaperiodnotexceedingoneyear,ortoboth.Inthecaseofasubsequentconviction,personsguiltyofanoffenceundertheCommunicationsActshallbeliableforafineofNGN500000,orimprisonmentforaperiodnotexceedingthreeyears,orboth.Furthermore,theNCCoranypersonaggrievedmayseekinterimorinterlocutoryinjunctionsagainsttheconductofalicenseethatisengagingincartelconduct.ThereisnocorporateleniencypolicyinplaceinNigeria.
Withrespecttothepowersector,iftheNERCdeterminesthatsection82(5)oftheEPSRAhasbeenviolated,itmaylevyfinesuptoNGN50millionorissueceaseorders.
20. Is there a provision in the legislation providing for a mechanism to apply for exemption from certain parts of the legislation?
Section309oftheISAprovidesthat,iftheMinisterofFinance,afterconsultationwiththeSEC,isoftheopinionthatitisnecessaryorexpedientintheinterestofthepublic,heorshemayexemptanypersonorclassofpersonsbuyingorsellingsecuritiesorotherwisedealingwiththesecuritiesmarketfromtheoperationoftheprovisionsoftheISAbyanorderpublishedinthegazette.SuchexemptioncouldincludepartXIIoftheISA,whichcontainsthecompetition-relatedprovisions.Section121oftheISAalsogivestheSECthepower,ifitappearsthatthemergerislikelytosubstantiallypreventorlessencompetition,todetermineifamergerislikelytoresultinanytechnologicalefficiencyorpro-
competitivegainwhichwillbegreaterthan,andoffsettheeffectsof,anypreventionofcompetition.
Furthermore,Section93oftheCommunicationsActgrantstheNCCthepowerstoauthoriseconductthatmaybeconstruedtohavethepurposeoreffectofsubstantiallylesseningcompetitioninanyaspectoftheNigeriancommunicationsindustry.TheNCCmay,beforeauthorisingtheconduct,requirethelicenseetosubmitanundertakingregardinghisorherconductinanymatterrelevanttotheauthorisation.
Inthepowersector,Section82(2)oftheEPSRAprovidesthattheNERC,afterconsultingwiththeMinisterofPoweranddeterminingthatitisinthepublic’sinterest,maydeterminewhen,andunderwhatconditions,aregulatedservicemaybeexemptfromtariffregulation.
21. Is minimum resale price maintenance prohibited?
Minimumresalepricemaintenanceisnotexpresslyprohibited.ThePriceControlActChapterP28LawsoftheFederationofNigeria,2004(PriceControlAct)providesthat,theMinisterofCommercemay(ontherecommendationofthePriceControlBoard)grantanorderapprovinganyresalepricemaintenanceagreementorarrangemententeredintobythemanufacturer,importerordistributorofacommodityontheonehand,andtheseller(whetherawholesalerorretailer)ofthatcommodity,ontheother.ThePriceControlActfurtherprovidesthat,wheresuchanorderisinforce,itshallbeunlawfulforanypersontosell,agreetoselloroffertosellanycommoditytowhichanapprovedresalepricemaintenanceagreementorarrangementrelatesotherthaninaccordancewiththetermsoftheagreementorarrangement.ItappearsthatthePriceControlBoardiscurrentlydormantinNigeria.
Regulation13(d)oftheNCCRegulationsempowerstheNCCtoreviewallagreementsandpracticeswhichmayconstituteresalepricemaintenance.ThepurposeofthereviewistodeterminewhethertheagreementorpracticemayhavethepurposeoreffectofsubstantiallylesseningcompetitioninNigeria.
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22. In what circumstances are exclusive agreements unlawful? If exclusive agreements raise concerns in specific circumstances, what factors are relevant to their lawfulness or unlawfulness?
UnderNigerianlaw,contractsinwhichapartycovenantstorestricthisorherfuturelibertytoexercisehisorhertrade,businessorprofessioninacertainmannerare,primafacie,void.However,injustifiedcircumstances,theexclusivityclauseswillbevalidandbinding.
Thereiscurrentlynoclearauthorityonwhatwillamounttojustifiablecircumstances’.TheSupremeCourtofNigeriahasheldthat,asageneralrule,eachcasemustbedecidedonitsownfactsandmerit.Consequently,whetherornotaclauseinarestraintoftradeagreementisjustifiablewilldependonthecircumstancesoftheparticularcase.InthecaseofNissan(Nig.)LtdvYoganathan[2010]4NWLR,theCourtofAppealheldthata“restraintinacontractmerelytopreventcompetitionwillnotbeenforcedbythecourts”.Inthatcase,however,thecourtfoundthattherestraintoftradeinquestionwasenforceable.
Regulation13(e)oftheNCCRegulationsempowerstheNCCtoreviewallagreementsandpracticeswhichconstituteexclusivedealingagreements,intermsofwhichalicenseereachesandagreeswithanotherpartyforthesupplyofproductsorservicesonanexclusivebasis.Thepurposeofthereviewistodeterminewhethertheexclusivityobligationhas,ormayhave,theeffectofsubstantiallylesseningcompetitioninrelatedcommunicationsmarkets.
Section71(6)oftheEPSRAprovidesthat,unlessexpresslygranted,alicencegrantedbytheNERCwillnotbeexclusive.TheNERCmayallowalicensedactivitytobeexclusiveforallorpartoftheperiodofthelicenceprovidedthatsuchlicenceisforaspecificpurpose,forageographicalareaorforsomecombinationofboth.
23. Does the legislation prohibit the abuse of a dominant position? If so, what is the threshold for dominance and what conduct amounts to an abuse?
Rule432oftheSECRulesempowerstheSECtoorderthebreak-upofacompanywheretheSEC
findsthatthecompanyconstitutesarestrainttocompetitionorcreatesamonopolyinaparticularindustry.TheSECRulesfurtherprovidethatanabuseofdominantpositionisoneofthecircumstancesthatconstitutesarestrainttocompetition.TheimplicationoftheRulesisthat,whereacompanyisfoundtohaveabuseditsdominantposition,theSECcouldorderthebreak-upofthecompany.UndertheSECRulesanabuseofdominantpositionmay,inparticular,consistof:
• directlyorindirectlyimposingunfairpurchaseorsellingpricesorotherunfairtradingconditions;
• limitingproduction,marketsortechnicaldevelopmenttotheprejudiceofconsumers;
• applyingdissimilarconditionstoequivalenttransactionswithothertradingparties,therebyplacingthematacompetitivedisadvantage;and
• makingtheconclusionofcontractssubjecttoacceptancebytheotherpartiesofsupplementaryobligationswhich,bytheirnatureoraccordingtocommercialusage,havenoconnectionwiththesubjectofthecontracts.
Withrespecttothetelecommunicationssector,adominantpositionisdescribedinRegulation18oftheNCCRegulationsasapositionofeconomicstrengthinoneormorespecificallydefinedcommunicationsmarkets,suchthat,alicenseeinthatpositionhastheabilitytounilaterallyrestrictoutput,raiseprices,reducequalityorotherwiseactindependentlyofcompetitorsorconsumers.
Indeterminingwhetheralicenseewithinthecommunicationsmarketisinadominantposition,theNCCconsidersthefollowing:
• themarketshareofthelicensee,determinedbyreferencetorevenues,numbersofsubscribersorvolumesofsales;
• theoverallsizeofthelicenseeincomparisontocompetinglicenseesparticularlyanyresultingeconomiesofscaleorscopethatpermitthelargerlicenseetoproduceproductsorservicesatalowercost;
• controlofnetworkfacilitiesorotherinfrastructure,accesstowhichisrequiredbycompetinglicenseesandthatcannot,forcommercialortechnicalreasons,beduplicatedbyacompetinglicensee;
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• theabsenceofbuyingpowerornegotiatingpositionofcustomersorconsumers,includingsubstantialbarrierstoswitchingserviceproviders;
• easeofmarketentry,andtheextenttowhichactualorpotentialmarketentryprotectsagainsttheexerciseofmarketpowersuchasraisingprices;and
• therateoftechnologicalorotherchangeinthemarket,andrelatedeffectsformarketentryorthecontinuationofadominantposition.
Subjecttotheforegoingindicesfordeterminingwhetheralicenseeisinadominantposition,Regulation20oftheNCCRegulationsestablishesapresumptionofdominancewherealicensee’sgrossrevenuesinaspecificcommunicationsmarketexceeds40%ofthetotalgrossrevenueofalllicenseesinthatmarket.
24. Are there examples of the authorities pursuing firms for abusing a dominant position?
Yes.In2013,theNCCcarriedoutadeterminationofdominantpositionsinthevarioussegmentsoftheNigeriantelecommunicationsmarket.ThatstudyresultedinthedeclarationofMTNNigeriaasthedominantoperatorinthemobilevoicesegmentofthemarket.Furthertothisdetermination,in2014,theNCCcarriedoutroutinecompliancechecksonapprovedtariffplansofnetworkoperators.ItdiscoveredthatMTNNigeriawaschargingitssubscribersontheMTNiPulse,atariffofonekobopersecondor60koboperminute,whichwasbelowtheMobileTerminationRateofNGN6.40perminuteatthetime.ItwasdiscoveredthattheMTNtariffofferinghadnoregulatoryapprovalandwasalsoinbreachofitsobligationasadominantoperatorinthevoicesegmentoftheNigeriantelecommunicationsmarket.Asaresultofthebreach,theNCCcommencedanenforcementprocessagainstMTN.
AsaresultofMTN’sconduct,theNCCplacedcertainobligationsonMTNwhichincluded,amongothers,thatMTNshouldnotofferanydifferentialpricinginitson-netandoff-netmobilevoiceservice.MTNwasdirectedtocollapseitson-netandoff-nettariff.
Alsoin2014,theNCCcarriedoutcompliancechecksonregulatoryobligationswhichrevealedvariouscasesofviolationsofthedominanceobligationsbyMTN.FollowingtheNCC’sfindings,
MTNwasinvitedtoprovideexplanationsfortheobservedviolations.MTN’sexplanationswerefoundtobeunacceptabletotheNCC.TheNCCissuedafinalwarningtoMTNanddirectedthat:
• MTNshouldimmediatelycollapsetheon-netandoff-nettariffonitsnetworkandstrictlycomplywithallobligationsplacedonMTNunderthe2013DeclarationofDominance;
• MTNshouldnotifytheNCCofcompliancewiththeCommunicationsActwithin10daysofreceiptofthedirective;and
• MTNshoulddiscontinueandwithdrawallunapprovedpromotions,includingbutnotlimitedto‘MTN100%DailyOn-netPromo’,‘MTN200%rechargebonus’,‘On-netBonusSMSPromo’,and‘MTNAlldayWOWPromo’.
25. Does the legislation impose penalties on firms for the abuse of a dominant position?
Section92(4)oftheCommunicationsActempowerstheNCCtodirectthatalicenseeinadominantpositiondiscontinueanactivityinthecommunicationsmarketwhichhasormayhavetheeffectofsubstantiallylesseningcompetitionandtoimplementappropriateremedies.Inaddition,theRegulationsprovidethatwheretheactivitiesofalicenseeconstituteanabuseofitsdominantposition,orananti-competitivepractice,theNCCmayissueanorderthatsuchlicenseepaycompensationtopersonsaffectedbysuchabuseaswellaspublishanacknowledgementandapologyforsuchactions.IntermsofSection140oftheCommunicationsAct,wherenospecificpenaltyisprescribedforanyoffence,apersonfoundguiltyoftheoffenceshallbeliableforafinenotexceedingNGN100000,ortoimprisonmentforaperiodnotexceedingoneyear,ortoboth.Intheeventofasubsequentconviction,personsguiltyofanoffenceundertheCommunicationsActshallbeliableforafineofNGN500000,orimprisonmentforaperiodnotexceedingthreeyears,orboth.
26. Are there rules in relation to price discrimination?
Therearenogenerallyapplicablerulesinrelationtopricediscrimination.TheCBNPOSGuidelines,however,containprovisionstotheeffectthatamerchantshallundernocircumstanceschargeadifferentprice,surchargeacardholderorotherwisediscriminateagainstanymemberofthepublicwho
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choosestopaywithacardorbyotherelectronicmeans.TheNigeriaInter-BankSettlementSystemOperationalGuidelinesalsoprovidethatpartiestoswitchingservicesshallnotabusetheirdominantpositionsbydirectlyorindirectlyimposingunfairordiscriminatoryconditionsandfeesintheprovisionoftheirservices.
TheNCCRegulationsprohibitthepracticeofdeliberatelyreducingtheprofitmarginthatmaybeachievedbyacompetinglicenseethatrequireswholesalecommunicationsservicesfromthelicenseeinquestion,byincreasingthepricesforthewholesalecommunicationsservicesrequiredbythatcompetinglicenseeorbydecreasingthepricesofcommunicationsservicesinretailmarketswheretheycompete,orboth.
27. Does the authority publish its decisions and, if so, is there a website where such decisions are available?
TheISArequirestheSECtopublishanoticeofitsdecisionsinrelationtotheapprovalofmergersinthegazette.ThereisnolegalrequirementfortheSECtopublishitsdecisionsonitswebsite.TheNCC,however,publishesitsdecisionsonitswebsite.
UDO UDOMA & BELO-OSAGIE10thand13thfloorsStNicholasHouseCatholicMissionStreet,LagosPOBox53123(Ikoyi)NigeriaT:+23414622307/+23414622308/+23414622309/+23414622310
www.uubo.org
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APPLEBY Malcolm Moller
Seychelles
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• topreventtheabuseofadominantpositionbyanenterprise;
• toeliminateanti-competitivepractices;and• topreventorcontrolanti-competitivemergers.• tomakeavailabletoconsumersandpersons
engagedinbusiness,generalinformationwithrespecttotheirrightsandobligationsundertheLaws;
• toassistanationalbodyindevelopingandpromotingtheobservanceofstandardsofconductforthepurposeofensuringgoodbusinesspractice;
• toreceiveandevaluateconsumercomplaints;• toassistconsumersinresolvingcomplaints;• toinvestigatewhetherenterprisesare
engagedinrestrictivebusinesspractices;• todetermineandmonitorthestandardsof
servicessuppliedbyserviceproviderstoensurecompliance;and
• toperformsuchotherfunctionstogiveeffecttotheFTCA.
THE FAIR COMPETITION ACT
TheFairCompetitionAct(FCA)wasenactedinNovember2009andcameintooperationon5April2010toensurethatthebenefitsofthecompetitionprocessinSeychellesareunhinderedbyanti-competitiveactivity.TheobjectivesoftheFCAare:
• topromote,maintainandencouragecompetition;
• toprohibittheprevention,restrictionordistortionofcompetitionandabuseofdominantpositionsintrade;and
• toensurethatenterprisesirrespectiveofsize,havetheopportunitytoparticipateequitablyinthemarketplace.
TheFCAappliestoallindividualsandbusinesses,tradeandprofessionalassociations,andtheStateandpublicbodiesinsofarastheyarecarryingoncommercialactivities.TheFCAgenerallyoutlawsanyagreements,businesspracticesandconduct
1. What is the relevant competition legislation and who are the enforcers?
• TherelevantlegislationinSeychellesistheFairCompetitionAct2009,theFairTradingCommissionAct2009andtheConsumerProtectionAct2010(together,theLaws).
• TheFairTradingCommissionisestablishedundertheFairTradingCommissionAct(FTCA)astheenforcertoensurethatindividualsandbusinessescomplywiththeLaws.TheCommissionisrequiredundertheFTCAtoissuerulesandguidelinesontheeconomicandlegalanalysiswhichshallbeusedforthedeterminationofcasesundertheFTCA.TheCommissionhasthefollowingdutiesandpowers:• topromotetheeducationofconsumers
andbusinessesthroughadvocacyandpublications;
• thepromotionandmaintenanceoffairandeffectivecompetition;
• tocarryoutonitsowninitiativeorattherequestofanypersonorenterprisethathasaninterestinamatter:• suchinvestigationsinrelationto
conductoftradeaswillenableittopreventtheuseofbusinesspracticesincontraventionoftheLawsorasitmayconsidernecessaryordesirableinconnectionwithanymattersfallingwithintheprovisionsoftheLaws;
• anysuchenquiryintothepracticesofanyprofessionalassociationtoensurethatsuchpracticesarenotcontrarytoanyoftheLaws;
• anystudies;and• publishsuchreportsandinformation
regardingmattersaffectingtheinterestsofconsumersandenterprises.
• tokeepunderreviewcommercialactivitiestoensurethatpracticesthatmayadverselyorunfairlyaffecttheinterestsofconsumersandbusinessesarepreventedorterminated;
• totakesuchactionasitconsidersnecessary:
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whichhaveadamagingeffectoncompetitioninSeychelles.TheFCAmoreindicativelyprohibitsarrangementsbetweenundertakingsthatimpedecompetition,orareintendedtodoso,e.g.agreeingtofixprices,cartelagreements,orbid-rigging;theabusebyoneormoreundertakingsofadominantpositioninamarket;andcertainmergersandacquisitions,unlesspriorapprovalisobtainedfromtheCommission.
THE CONSUMER PROTECTION ACT
TheConsumerProtectionAct(CPA)wasenactedon29November2010.TheCPAaimsatprotectingconsumers’rightsbyimposingcertaindutiesonproducersandsuppliersofgoodsandservicesintheSeychelles.
TheCommission,inadministeringtheCPA,shallpromoteandadvancetheeconomicwelfareofconsumersby:
• theachievementandmaintenanceofaconsumermarketthatisfair,accessible,efficient,sustainableandresponsibleforthebenefitofconsumers;
• reducinganydisadvantagesexperiencedbyconsumers;
• promotingfairbusinesspractices;• promotingfaircontractterms;• protectingconsumersfrommisleading,
deceptiveorfraudulentconduct;and• improvingconsumerawareness
andinformation.
TheCPAappliestoanygoodsandservicespromotedorsuppliedinSeychellesintheordinarycourseofthesupplier’sbusiness.TheFCAprovidesforasystemofenforcementthroughcompliancenotices.Assuch,theCommissionmay:
• initiateorreceivecomplaintsconcerningallegedprohibitedconduct;
• investigateandevaluatecomplaintsorallegedcontraventionsoftheFCA;
• conducthearingsandissuenotices,giveordersanddirections;and
• imposeremediesorfinancialpenalties.
2. Are there any proposed amendments or new regulations expected to come into force?
TheCommissionconcludedstakeholders’consultationontheproposedamendmentsand
consolidationoftheFairTradingAct,2009,theConsumerProtectionAct,2010andtheFairCompetitionAct,2009inOctober2016,whichpertaintothecreationoftheFairTradingTribunalwhichwillbetheadjudicatingbody,separatefromtheFairTradingCommission.Therolesandresponsibilitiesofsectorregulatorsvis-à-vistheCommissionwerealsodiscussedatlength,aswerewaystoimprovethecurrentprovisionsoftheConsumerProtectionAct,2010andtheFairCompetitionAct,2009.
3. Is the law actively enforced?
TheLawsareactivelyenforcedbytheCommission,whichaimstosafeguardtheinterestsofconsumers,promotecompetitionandfairtradeinSeychellestobenefitconsumers,businessesandtheeconomy.
TheFairTradingCommissionfollowsapatternofatwiceweeklyinspectionschedule.ThescheduledinspectionsaspertheCommission’sstandardpracticefocusesoncompliancewiththefollowingsectionsoftheCPA:
• Section19:toensureinformationisinalanguageSeychelloiscanunderstand.
• Section20:toensurepricesaredisplayedclearlytoconsumers.
• Section21:toensuregoodsarenotbeingsoldabovepricesorthatsuppliersarenotengagedindualpricing.
• Section22:toensureproductsonofferforsalearelabelledproperly.
• Section24:toensuregoodsonofferforsalehavenotexceededtheirexpirydates.
• Section25:toensuresuppliersofgoodsareprovidingreceiptsafterpurchaseandthatreceiptscomplywithCPArequirements.
Inadditiontotheabove,theDepartmentremainsavailableforurgentinspectionswithinthefirst30minutesofarequestbeingmadetotheCommission(onMahe)subjecttotherequestfulfillingthecriteriaforsuch.Thelatterreferstosituationscompromisingconsumerinterest;forinstance,inthecaseofasignificantnumberofexpiredgoodsonofferforsaleinaparticularoutletthattheCommissionisalertedtoeitherbyastaffmemberoftheCommissionoramemberofthepublic,includingabusiness.
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itintendstoeffectthemerger,islikelytocontrol40%ormoreofamarket,orsuchotheramountsastheMinisterresponsiblefortrademayprescribe.NotifiablemergersareprohibitedunlesspermittedbytheCommission.Forsuchamergertotakeplace,theCommission’sapprovalisrequired.
6. What are the thresholds for mandatory merger notification (e.g. assets, turnover and/ or market share)?
Proposedmergerswherebytheentityresultingfromthemergerislikelytocontrol40%ormoreofthemarketareprohibitedunlesspermittedbytheCommission.Inthisregard,itismandatoryforsuchproposedmergerstobenotifiedtotheCommission.
TheCommissionmaygrantitspermissioninthefollowingcircumstances:
• themergerislikelytobringaboutgainsinreal(asdistinctfrompecuniary)efficienciesthataregreaterthan,orarelikelytooffset,theeffectsofanylimitationsoncompetitionthatresultorarelikelytoresultfromthemerger;or
• oneofthepartiestothemergerisfacedwithactualorimminentfinancialfailure,andthemergerrepresentstheleastanti-competitiveoftheknownalternativeusesfortheassetsofthefailingbusiness.
7. Is there a prohibition on the pre-implementation of a merger? If so, does the legislation make provision for a penalty?
TheFCAprovidesthatwhereanenterprisewishestoestablishamerger,itshallapplytotheCommissionforpermissiontoeffectthemerger.Theapplicationismadethroughtheprescribedapplicationformwhichshouldcontaintheprescribedinformation.WheretheCommissiondeterminesafterinvestigationthatenterpriseshaveeffectedamerger(asdefinedintheFCA)withouttheCommission’spermission,theCommissionmaybynoticeinwritingdirecttheenterprisesconcernedsothatthemergermaybedeterminedwithinsuchtimespecifiedinthedirection.Anenterpriseseekingpermissiontoeffectamergershalldemonstratethatifthemergerwasnotcompleted,itisnotlikelythattherelevantefficiencygainswouldberealisedbymeansthatwouldlimitcompetitiontoalesserdegreethanthemerger;ordemonstratethatreasonablestepshavebeentakenwithintherecent
Inthescenarioexplainedabove,inspectionsarespecifictothealertand/orcomplaintreceivedbutthisdoesnotprecludeathoroughinspectionbeingconductedsoonafter.
In2016,theCommissionreceived342complaints,whichrepresentsasignificantincreasecomparedtothesameperiodin2015(166complaints).
Weeklyroutineinspections,compliancevisitsandtip-offsundersection33(j)oftheConsumerProtectionAct,2010havebeenvigorouslycarriedoutbytheMarketSurveillanceteamoftheCommission,inbusinessoutletssuchaselectronicshops,householdshops,supermarkets,retailers,bottlingplants,pharmacies,hotelsandrestaurants.Duringtheyearunderreview,theCommissioncarriedout116routineinspections,asignificantincreaseof61%ascomparedtothepreviousyear(72inspections).
4. What are the current priorities or focus areas of the competition authorities?
TheCommission’sobjectiveistopromoteefficiencyandcompetitivenessamongbusinessenterprisesandserviceprovidersandtoimprovethestandardsofservice,qualityofgoodsdistributedandservicessuppliedbybusinessenterprisesandserviceprovidersoverwhichithasjurisdiction.
TheFairTradingCommissionhasrecentlyinitiatedresearchaimedatidentifyingthelapseintheconstructionindustryintheSeychellesthatcanpossiblyleadtomarketfailures.ThiswillenabletheCommissionalongwithotherauthoritiestocreateawarenesswithregardtorightsandresponsibilitiesofboththeconsumerandserviceproviderswherethereisagap,therebyimprovingconsumerwelfareandimprovingservicequality.TheCommissionisconductingthesurveytoobtaininformationthatwillallowittounderstandthelevelofknowledgeofthegeneralpublic(18yearsandabove)inrelationtoconstruction.
5. What kind of transaction constitutes a notifiable merger?
AccordingtotheFCA,anotifiablemergerisonewhichinvolvesanenterprisethatbyitselfcontrolsor,togetherwithanyotherenterprisewithwhich
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pasttoidentifyalternativepurchasersfortheassetsofthefailingbusiness,anddescribeindetailtheresultsofthesearchforalternativepurchasers.
TheFCAcontainsageneralprovisionrelatingtotheimpositionofpenalties.OneofthepowersoftheCommissionistoimposeremediesorfinancialpenaltiesonanenterprisewhichconductsitsbusinessinbreachoftheFCA.ItappearsthatthisprovisionappliestotheimplementationofmergerswithouttheCommission’spermission.
8. What filing fees are required?
Anon-refundablefeeofSCR1500ispayableonsubmissionofacompletedmergerapplicationform.WheretheCommissionacceptsthemerger,thepartiesarerequiredtopayafee(assetoutbelow)basedonapercentageoftheircombinedturnoverfortheirprecedingfinancialyear.Wherethemergerinvolvesafailingfirm,theCommissionwilluseitsdiscretiontodeterminetheappropriatefeepayable.
THRESHOLDS COMBINED TURNOVER/ASSET VALUE
Lower 0.1%ofSCR0-SCR500000
Higher 0.5%ofSCR501000andabove.
9. Is it necessary to obtain approval for foreign-to-foreign mergers?
TheFCAdoesnotspecificallycaterforforeign-to-foreignmergers.However,theFCAmentionsthatwhereanenterprisewishestoeffectamerger,itshallapplytotheCommissionforpermission.ThisprovisionoftheFCAdoesnotmakeadistinctionbetweenSeychelles-registeredentitiesandforeignentities.Anypracticeoragreement,whichisapprovedorrequiredunderaninternationalagreementtowhichSeychellesisaparty,isexcludedfromtheprovisionsoftheFCA.
10. Are pre-notification contacts with the authorities permitted and are pre-notification meetings normal practice?
Pre-notificationcontactspriortothesubmissionofamergerapplicationarenotrequiredintermsoftheFCAandpartiesmaysimplysubmitamergerapplicationformwiththerequisiteinformation.
11. To what extent are non-competition factors relevant to the assessment of a merger?
UndertheFCA,theCommissionshallassessthefollowingbeforegrantingpermissionforamerger,namely:
• thestructureofthemarketlikelytobeaffectedbytheproposedmerger;
• thedegreeofcontrolexercisedbytheenterprisesconcernedinthemarket,andparticularlytheeconomicandfinancialpoweroftheenterprises;
• theavailabilityofalternativestotheservicesorgoodssuppliedbytheenterprisesconcernedinthemerger;
• thelikelyeffectoftheproposedmergeronconsumersandtheeconomy;and
• theactualorpotentialcompetitionfromotherenterprisesandthelikelihoodofdetrimenttocompetition.
12. Do the authorities contact customers and competitors of the merging parties as part of the merger review process? To what extentare the submissions of customers and competitors influential?
Inordertounderstandthescopeofthemarketinrelationtotheproposedmerger,itisregardedasnecessaryfortheCommissiontocontactthecustomersandcompetitorsofthemergingparties.Aspartofthereviewprocess,customersandcompetitorsmaybeinterviewedbytheCommissioninordertounderstandtheeffectofamergerontherelevantmarket.TheCommissionpublishesanoticeinthegazetteandinatleastonedailynewspaperinformingthepublicoftheapplicationandadvisingthatanypersonwhohasaninterestinthemattermaysubmitwrittenobjectionstothegrantoftheauthorisationwithinthetimespecifiedinthenoticeandtheCommissionwillconsiderallobjectionsreceivedandsatisfyitselfthatitisreasonableinthegivencircumstancestogranttheauthorisation.
13. Who else can make submissions to the authorities when a merger is being considered? Are employees contacted as part of the process and can employees make submissions?ThelegislationdoesnotspecifywhetheremployeesmaymakesubmissionstotheCommission.
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otherentitiesdirectlyorindirectlycontrolledbythem.Assuch,thelegislationappearstoapplytojointventures.Moreover,theinvestigativepowersoftheCommissionmayextendtoajointventuretoensurethatthereisnoexistenceofadominantposition.AnexampleofthisisthecaseofZilAir(Pty)Ltd(ZilAir)andHelicopterSeychellesLtd(HelicopterSeychelles).InJuly2010,followingspeculationofacommercialjointventurebetweenZilAirandHelicopterSeychelles,theCommissionmadeanenquirytoZilAirregardingthenatureoftheventureinquestion.
Inlinewiththis,theCommissionsoughtfurtherinformationfromHelicopterSeychelles.TheCommissioneventuallyassessedthatHelicopterSeychellesheldadominantpositioninthehelicopterservicesmarket.ThisassessmentwassupportedbyHelicopterSeychelles’largemarketshare.ItwasthereforeadvisedthatanapplicationtoeffectthemergerinquestionwouldhavetobemadetotheCommissioninaccordancewithSection22oftheFCA.Section21oftheFCAprovidesthatallmergersinvolvinganenterprise,whichbyitself,orjointlywithanotherenterprise,controls40%ormoreofamarket,areprohibitedunlesspermittedbytheCommission.
17. Does the legislation specifically prohibit cartel conduct? If so, are there examples of the authorities pursuing firms for engaging in cartel conduct?
TheFCAprohibitscartelconductintheformofagreementsbetweenenterprises,tradepracticesordecisionsofenterprises,orundertakingsorconcertedpracticesofenterprisesthathaveorarelikelytohaveastheirobjectoreffecttheprevention,restrictionordistortionofcompetitionwhenthey:
• directlyorindirectlyfixpurchaseorsellingprices,ordetermineanyothertradingconditions;
• limitorcontrolproduction,markets,technicaldevelopmentorinvestment;
• providefortheartificialdividingupofmarketsorsourcesofsupply;
• affecttenderstobesubmittedinresponsetoarequestforbids,forexample:• apartyagreesnottosubmitabidin
responsetoacallorrequestforbidsortenders;or
However,theFCAprovidesthateverypersonaggrievedbyanactofanenterprisemaymakeacomplainttotheCommissionagainstthatenterprise.
14. Are merging parties given an opportunity to make representations before a decision is issued where the authority intends to prohibit a merger or impose conditions?
WhereitappearsduringtheCommission’sinvestigationofamergerthatsomeconcernshavearisen,orarelikelytoariseduetothemerger,theenterprisemayofferawrittenundertakingtotheCommissiontoaddressthoseconcerns.ThewrittenundertakingmaybesubmittedtotheCommissionbeforeorduringitsinvestigation.Iftheundertakingaddressesalltheconcerns(basedonthelesseningofcompetition,forexample)satisfactorily,theCommissionwillaccepttheundertaking.
15. What are the opportunities for judicial appeal or review of a decision in respect of a merger that the parties are dissatisfied with?IfanenterpriseisdissatisfiedwithanorderordecisionmadebytheCommission,itmayappealtotheTribunal.IftheenterpriseisdissatisfiedwiththedecisionoftheTribunal,theenterprisemayappealtotheSupremeCourt.
Onappeal,theSupremeCourtmay:
• affirm,reverse,amendoralteranorderordirectionoftheTribunal;
• remitthemattertobefurtherdeterminedbytheTribunalwithitsopiniononthematter;or
• makesuchorderasitdeemsfit.
NotethattheCommissionemphasisesmediationasafirststepinprovidingredresstoconsumers.
16. Does the legislation apply to joint ventures?
Thelegislationdoesnotspecificallyrefertojointventures.However,thelegislationappliesto‘enterprises’whicharedefinedas“anyperson,firm,partnership,corporation,company,associationorotherjuridicalperson,engagedincommercialactivitiesforgainorreward”.Thisincludestheirbranches,subsidiaries,affiliatesor
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• biddingpartiessubmit,inresponsetoacallorrequest,bidsortendersthatarereachedbyagreementbetweenoramongthemselves,unlesstheenterprisesarenotabletosubmittheirbidsindividually;
• applydissimilarconditionstoequivalenttransactionswithotherpartiesengagedinthesametrade,therebyplacingthoseotherpartiesatacompetitivedisadvantage;or
• maketheconclusionofanagreementsubjecttoacceptancebytheotherpartiesofsupplementaryobligations,which,bytheirnatureoraccordingtocommercialusage,havenoconnectionwiththesubjectofsuchagreement.
Anenterpriseshallnotconspire,combine,agreeorarrangewithanotherpersonto:
• limitthefacilitiesfortransporting,producing,manufacturing,storingordealinginanygoodsorsupplyinganyservice;
• prevent,limitorundulylessenthemanufactureorproductionofanygoodstounreasonablyenhancethepricethereof;
• undulylessencompetitionintheproduction,manufacture,purchase,sale,supply,rentalortransportationofanygoods;
• undulylessen,limitorpreventcompetitionintheprovisionofinsuranceonpersonsconcernedinorpropertyrelatedtotheproduction,storage,transportationordealinginanygoodsortheprovisionofservices;or
• otherwiseundulyrestrainorinjurecompetition.
AnexampleoftheCommission’senforcementistheDanImportsandExportscase.In2012,theCommissionreceivedacomplaintregardinganadvertisementbyDanImportsandExportsforthesaleofSunCool.Theadvertisementread“RS.6inallshopsonMaheandPraslin”.Itwasallegedthattheadvertisementconstitutedorindicatedpricefixing(whichconstitutesaprohibitedpracticeundertheFCA)inthesupplyofSunCooltoretailersandconsumers.TheCommissionfoundthattheadvertisementconstitutedacontraventionoftheFCA.
TheCommissionacknowledgedtheco-operationofDanImportsandExports,whichhadaccepteditsbreachoftheFCAandhadceasedtopublishtheadvertisementandagreedthatretailerswerefreetoselltheproductattheirchosenprice.TheCommissionrecommendedthatthe
managementofDanImportsandExportsattendatwo-houradvocacysessionontheFCAinordertobetterunderstandtherequirementsoftheFCA.TheadvocacysessionwaswellreceivedbytherepresentativeofDanImportsandExports.
AmorerecentexampleiswithregardtotheretailpriceofHeinekenBeerinSeychelles.UponreviewingthelocalnewspaperstoensurethatadvertspublishedbybusinessesareinconformitywiththeConsumerProtectionAct(CPA)2010and/ortheFairCompetitionAct(FCA)2009theFairTradingCommissioncameacrossanadvertpublishedbyISPCSeychelles.ThisadvertindicatedthepriceatwhichHeinekenbeerin25clbottlesweretobesold.AccordingtotheFCA2009,itisunlawfulforasuppliertoimposeormaintainaminimumpriceatwhichitssuppliesaretobesoldbyretailers.
Followingtheinspectionsconducted,theCommissionestablishedthatthemajorityofretailerswhoseshopswereinspectedwereobligedtochargetheretailpriceadvertisedbyISPCSeychelles.TheyhadaccordinglyengagedinresalepricemaintenancethusmaintainingthatthepriceofHeinekenbeerwillbethesameacrossMaheIsland.
FurthermoreduringthemeetingheldwiththerepresentativesfromISPCSeychelles,theydidnotdisputethefactthattheCommissionperceivedthemtobeincontraventionoftheFCA2009.Onthecontrary,theyoptedforanundertakingwiththeCommission.ItwasthereforeconcludedthatISPCSeychelleshadcontravenedtheFairCompetitionAct2009.
18. What are the authorities’ powers of investigation in relation to cartel conduct and other prohibited practices?
TheCommissionhastheabilitytoinvestigatewhetherenterprisesareengagedinrestrictivebusinesspractices.Forthispurpose,theCommissionmay:
• holdenquiries;• administeroaths;• summonandexaminewitnesses;• compeltheproductionofsuchbooks,records,
papersanddocumentsasitmayconsidernecessaryorproperforanyproceeding,investigationorhearingheldbyit;
• examineanydocumentsproduced;
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madeundertheFCAisliableonconvictiontoafinenotexceedingSCR400000and,inthecaseofacontinuingoffence,toafurtherfineofSCR10000foreachdayorpartthereofduringwhichtheoffencecontinues.WhereitisprovedthatanenterprisehasfailedtoobeyanorderoftheCommissionmadeundertheFCA,everydirectorandofficeroftheenterpriseisliableonconvictiontoafinenotexceedingSCR100000,ortoimprisonmentforatermnotexceedingtwoyears,ortoboth,unlessthatindividualprovesthatallnecessaryandpropermeansinhisorherpowerweretakentoobeyandcarryouttheorderoftheCommission.
ThereisnocorporateleniencypolicyinSeychelles.However,thelawiscurrentlyunderreviewandacorporateleniencypolicyisbeingconsidered.However,itshouldbenotedthatthereductionofapenaltyorimmunityfromtheimpositionofafinancialpenaltyisatthediscretionoftheCommission,whichshallweighuptherelevanceandimpactofthefactsprovided.
20. Is there a provision in the legislation providing for a mechanism to apply for exemption from certain parts of the legislation?
TheFCAprovidesforanenterprisetoapplytotheCommissionforauthorisationtoenterintoorcarryoutanagreementortoengageinabusinesspractice,whichinitsopinion,isanagreementorpracticeaffectedorprohibitedundertheAct.TheCommissionisauthorisedtoapprovetheapplicationwhereitissatisfiedthattheagreementorpracticeisreasonableandislikelytoresultinapublicbenefit.
TheCommissionmayapprovetheexemptionsubjecttoconditionsandtimeframes,whichitconsidersappropriateinthecircumstances.Beforeapprovingtheexemption,theCommissionmust:
• publishanoticeinthegazetteinformingthepublicoftheapplication;and
• adviseinterestedpersonsthattheymaysubmitwrittenrepresentationswithintheprescribedtimeperiod.
TheCommissionmustconsiderallwrittenobjectionssubmittedandsatisfyitselfthatit
• requirethatanydocumentsubmittedtotheCommissionbeverifiedbyaffidavit;
• seizedocuments;• adjourninvestigations;• maketestpurchases;• inspectgoods;and• doallnecessaryandproperactsinthe
lawfulexerciseofitspowersortheperformanceofitsfunctions.
Inaddition,theCommissionhasthepowertohearanypersonwhomayhaveinformation,whichmayassistaninvestigation.
Regardingseizures,iftheCommissionhasreasontobelievethattheLawshavebeenviolated(whetherintermsofconsumerprotection,faircompetitionoranyotherprovisionsoftheFCA)andthatanybook,documentorarticlerelatingtotheoffenceisbeingkeptorconcealedinabuildingorplace,theCommissionshallapplytoamagistrateforasearchwarranttosearchandseizethatbook,documentorarticle.
19. What are the penalties for cartel conduct? Is there a leniency policy in place? Does the legislation impose criminal sanctions?
WheretheCommissiondeterminesthatanenterprisehasenteredintoanagreementthathastheeffectofpreventing,restrictingordistortingcompetition(cartelconduct),theCommissionmayinstructtheenterpriseasfollows,inordertoremedy,mitigateorpreventtheadverseeffectsoncompetition:
• terminateoramendanagreement;• ceaseoramendapracticeorcourse
ofconductinrelationtoprices;• supplygoodsorservicesor
grantaccesstofacilities;• separateordivestitselfofany
enterpriseorassets;or• providetheCommissionwithspecified
informationonacontinuingbasis,withinsuchtimeasmaybespecifiedbytheCommission.TheCommissionmay,onacase-by-casebasis,insteadofgivinginstructions,imposeafinancialpenalty.
Alternatively,theCommissionmayprovidebothinstructionsandafinancialpenalty.Additionally,regardingsanctions,everyenterprisethatfailsorrefusestoobeyanorderoftheCommission
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isreasonableinthecircumstancestoapprovetheexemption.Subsequenttograntingtheexemption,theCommissionisempoweredtorevoketheexemptionif:
• theCommissionissatisfiedthattheexemptionwasgrantedonthebasisoffalseormisleadinginformation;
• theenterprisehasbreachedtheconditionsuponwhichtheexemptionwasgranted;or
• amendtheexemptionifitissatisfiedthatthemarketconditionsnecessitateanamendment.
TheCommissionisrequiredtonotifytheenterpriseinwritingoftheproposedamendmentorrevocationpriortoimplementationthereof.
AgreementsorpracticesexcludedfromtheFCA:
• Anypracticeofemployersoragreementtowhichemployersarepartiesinsofarasitrelatestotheremuneration,termsorconditionsofemploymentofemployees.
• AnypracticeoragreementapprovedorrequiredunderaninternationalagreementtowhichSeychellesisaparty.
21. Is minimum resale price maintenance prohibited?
Yes.Seequestion17forexamples.
22. In what circumstances are exclusive agreements unlawful? If exclusive agreements raise concerns in specific circumstances, what factors are relevant to their lawfulness or unlawfulness?SubjecttotheFCA,anyconductonthepartofanenterpriseamountingtoanabuseofadominantpositionisprohibited.Exclusiveagreementsformpartoftheconduct,whichgivesrisetoanabusivedominantpositionasdefinedbytheFCA.Forexample,adominantsuppliermighthaveaseriesofexclusivepurchasingagreementswithdealersinaparticulargeographicalmarket.Thismighthinderothersuppliersoperatinginand/orwishingtoenterthatmarket.
However,suchanagreementwouldnotbeunlawfulifthedominantenterpriseisabletoobjectivelyjustifyitsconductandshowthatithasbehavedinaproportionatemannerindefendingitslegitimatecommercialinterestandshowthebenefitsarisingoutofthatdominantposition.
However,iftheprimarypurposeoftheconductistocurbcompetition,itshallbeprohibitedbytheCommission.
23. Does the legislation prohibit the abuse of a dominant position? If so, what is the threshold for dominance and what conduct amounts to an abuse?
ItshouldbenotedthattheFCAmakesthedistinctionbetweenadominantpositionandabuseofadominantposition.Anenterpriseisdeemedtoholdadominantpositionifthatenterpriseoccupiessuchapositionofeconomicstrengththatenablesittooperateinthemarketindependentlywithouteffectivecompetitionfromcustomers,competitorsorpotentialcompetitors.
Conductwhichamountstoanabuseofadominantpositionisprohibitedifitadverselyorunfairlyrestrictstradewithinthejurisdiction.Conductspecificallylistedasconstitutinganabuseofadominantpositionconsistsof:
• restrictingtheentryofanyenterpriseintothatoranyothermarketthatsupplies,orislikelytosupply,asubstituteforthegoodsorservicessuppliedinthatmarket;
• preventingordeterringanyenterprisefromengagingincompetitiveconductinthatoranyothermarket;
• eliminatingorremovinganyenterprisefromthatoranyothermarket;
• directlyorindirectlyimposingunfairpurchaseorsellingpricesorotherunfairtradingconditionsthatareexcessive,unreasonable,discriminatoryorpredatory;
• limitingproduction,marketsortechnicaldevelopmenttotheprejudiceofconsumers;
• applyingdissimilarconditionstoequivalenttransactionswithothertradingparties,therebyplacingthematacompetitivedisadvantage;
• makingtheconclusionofagreementssubjecttoacceptancebytheotherpartiesofsupplementaryobligationswhich,bytheirnatureoraccordingtocommercialusage,havenoconnectionwiththesubjectofsuchagreements;or
• exclusivedealing,marketrestrictionortiedselling.
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However,theCommissionwillnottreattheenterpriseasabusingadominantpositionif:
• itisshownthatitsbehaviourwasexclusivelydirectedatimprovingtheproductionordistributionofgoodsorpromotingtechnicaloreconomicprogress,andconsumerswereallowedafairshareoftheresultingbenefit;
• theeffectorlikelyeffectofitsbehaviourinamarketistheresultofitssuperiorcompetitiveperformance;or
• theenterpriseenforcesorseekstoenforceanyrightunderorexistingbyvirtueofanycopyright,patent,registereddesignortrademarkexceptwheretheCommissionissatisfiedthattheexerciseofthoserights:• hastheeffectoflesseningcompetition
substantiallyinamarket;and• impedesthetransferanddissemination
oftechnology.
24. Are there examples of the authorities pursuing firms for abusing a dominant position?
Yes.Forexample,in2010,theCommissionreceivedacomplaintfromHuntDeltelLtd(HDL)againstLandMarineLtd(LML)foranallegedabuseintheportsectorbyLMLwhichenjoyedexclusiverightsintheshorehandlingandstevedoringmarketattheCommercialPortofVictoria.HDLarguedthatapartfromcarryingoutstevedoringandshore-handlingactivities,LMLalsoengagedininlandtransportationofcargowithinSeychellesandwasadirectcompetitorofHDLinthatactivity.HDLallegedthattheexclusivityenjoyedbyLMLallowedittodistortfaircompetitionamongallenterprisesprovidingcargotransportationservices.
Inparticular,HDLcomplainedthatLMLabuseditspositioninthefollowingmanner:
• LMLrefusedtoallowotherenterprisestoperformtheirownloadingandunloadingactivities,onthegroundsthatithadexclusivityinprovidingshore-handlingservices;and
• LMLimposedsevereandrestrictivetimeframeswithinwhichHDLhadtooperateattheport,unloadcargoorcompleteitstasks.LML’sconductresultedinHDL’sservicestoitscustomersbeinggreatlyconstrained,resultinginalossofclientsforHDL.
AfterassessingHDL’scomplaint,theCommissionfoundthatLMLheldadominantpositioninboththeupstreamanddownstreammarkets.ItconcludedthatLMLenjoyedexclusivityinessentialportservicesatthecommercialportandthattherewasnocompetitioninthesemarkets.
TheCommissionthenconsideredwhetherLML’sconductamountedtoanabuseofdominance.TheCommissionfoundthatLMLhadabuseditsdominantpositionbyapplyingdissimilarconditionstoequivalenttransactionsinfavourofthedownstreammarket.TheCommissionconsideredthefactthatthecommercialportisanessentialfacility,withoutaccesstowhichmarketoperatorsoperatinginthedownstreammarketcouldnotprovideservicestotheircustomers.Byrefusingtograntcompetitorsaccess,orbygrantingaccessonlessfavourabletermsthanthoseofitsownservices,LML’sconductamountedtoanabuseofdominancebyimposingacompetitivedisadvantageonitscompetitor.
Followingitsinvestigationandanalysis,theCommissionconcludedthatLMLinfringedtheFCAbyadoptingconductthatledtoabuseofitsdominantposition.
LMLprovidedanundertakingtotheCommissionaddressingtheseconcerns,whichtheCommissionfoundsatisfactory.
Amorerecentexampleisthe2014caseofFTCvFeroxAbattoir(Pty)Ltd,inwhichtheBoardofCommissionersreceivedacomplaintfromoneMrJeanagainstFeroxAbattoir(Pty)Ltdtotheeffectthatthecomplainantwasrefusedthesupplyofbroilerchicksatthehatcheryfacilitywhenheorshecametobuysomechickstorear,duetoanoutstandingbillowedbythecomplainanttotheabattoirfacility.
Bothfacilities–theabattoirandthehatchery–wereownedandmanagedbytherespondent.
AformalinvestigationwaslaunchedanditwasrecordedthroughatelephonecalldocumentedbytheCommissionthatthecomplainanthadbeencategoricallyrefusedthesupplyofbroilerchicksbythehatcheryfacility.
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Thecomplainantclaimedthatheorshehadsufferedlossofrevenueduetothenon-realisationoftwopotentialbroilercyclesandhadtoceasethebroilerfarmingbusiness,whichcausedadecreaseinhisorherfarmingbusinessearningsasawhole.
Beingunabletomediatethematterfurther,theCommissiondeemeditnecessarytobringacaseagainstFeroxAbattoir(Pty)Ltd(HatcheryFacility)beforetheBoardofCommissionersfordetermination.
DuringitsinvestigationtheCommissiondeterminedthatthehatcherywasanessentialfacilityastherewerenoviablesubstitutesfortheessentialinputbeingthesupplyofbroilerchicks.TheCommissionarguedthatgiventhattherespondentisthesoleproviderofbroilerchicksinthecountrytherespondentisconsideredthedominantserviceprovider;henceinrefusingtosupplybroilerchickstothecomplainant(anessentialinputinbroilerfarmingactivities),therespondentisdeemedtohaveabusedandwasstillabusingitsdominantposition.
Therespondentarguedthattheabattoirandthehatcheryformpartofonecompany,beingFeroxAbattoir(Pty)Ltd.Hence,thedebtowedbythecomplainantwasattributabletoboththehatcheryandtheabattoir,suchthatifthecomplainantpaidhisdebt,thecompanywouldbewillingtosellchickstohim.Assuchdenialofservicesbythehatcheryfordebtsowedattheabattoirshouldbemaintainedandifthatisallowedthenthebreachofsection7(3)(b)oftheFairCompetitionAct,2009shouldfall.
TheBoardofCommissionersultimatelyrejectedtherespondent’sargumentsandconcludedthattherespondenthadabuseditsdominantpositionincontraventionofSection7oftheFairCompetitionAct,2009.
25. Does the legislation impose penalties on firms for the abuse of a dominant position?
TheFCAempowerstheCommissiontoprovideremediestocompetitionissuesfollowingan
investigation,andinsomecases,theCommissionisempoweredtoimposefinancialpenalties.WheretheCommissiondeterminesthatanyconducthasconstitutedanabuseit:
• shallnotifytheenterpriseofitsfindingaccompaniedbyacopyofthereport;
• shalldirecttheenterprisetoceasetheabusiveconductwithinaspecifiedperiod;and
• mayrequiretheenterprisetotakesuchfurtheractionasinitsopinionisnecessary.
WheretheCommissionimposesafinancialpenalty,thefinancialpenaltyshallnotexceed10%oftheturnoveroftheenterpriseinSeychellesduringtheperiodofthebreachoftheprohibition,uptoamaximumperiodoffiveyears.
26. Are there rules in relation to price discrimination?
Yes.Pricediscriminationmayconstituteanabuseofdominance.PricediscriminationisregardedasabusiveifafterinvestigationbytheCommission,ithasbeenestablishedthatsuchconducthasharmedcompetition.
27. Does the authority publish its decisions and, if so, is there a website where such decisions are available?
TheCommissionpublishesitsdecisionsonitswebsite:www.ftc.sc.However,itistobenotedthatnotalldecisionsareimmediatelyavailable.
APPLEBYSuite2022ndfloor,EdenPlazaEdenIslandMahe,POBox1352SeychellesT:+2484295281
www.applebyglobal.com
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BOWMANS
Tamara Dini | Xolani Nyali | Sivuyise Lutshiti
South Africa
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1. What is the relevant competition legislation and who are the enforcers?
TherelevantcompetitionlegislationistheCompetitionAct,89of1998,asamendedandtheregulationspromulgatedintermsoftheAct.TheActisenforcedbytheCompetitionCommission,theCompetitionTribunalandtheCompetitionAppealCourt(theCAC).
2. Are there any proposed amendments or new regulations expected to come into force?
TheCompetitionAmendmentAct,1of2009(theAmendmentAct)waspassedintolawin2009buthasnotcomeintoeffectwiththeexceptionofSection6,relatingtomarketenquiries,andcertainpartsofSection12andSection13,relatingtothecriminalisationofcartelconduct.ThelatterrelatetocriminalliabilityforindividualsinrelationtocontraventionsoftheCompetitionAct.Inparticular,theyallowfordirectorsandmanagerstobeheldcriminallyliableforcausingacompanytoengagein,or“knowinglyacquiescing”to,acompany'sinvolvementincartels.IndividualsmayfacepersonalpenaltiesofuptoZAR500000and/or10years’imprisonment.TheCommissionanticipatesthattheprovisionsintheAmendmentActrelatingtocomplexmonopoliesandconcurrentjurisdictionwillbeimplementedby2020.
On1December2017,theMinisterofEconomicDevelopment(whoisassignedresponsibilityfortheAct)publishedtheCompetitionAmendmentBill2017(thedraftBill)forpubliccomment.AccordingtotheBackgroundNote,thedraftBillaimstostrengthentheprovisionsoftheActaimedataddressingtwokeystructuralchallengesintheSouthAfricaneconomy,namely(i)concentrationandtheraciallyskewedspreadofownershipoffirmsintheeconomy;and(ii)toenhancethepolicyandinstitutionalframework,andproceduralmechanisms
fortheadministrationoftheAct.Theproposedamendmentsaddressfivepriorities:
• strengtheningtheprovisionsoftheActrelatingtoprohibitedpracticesandmergers;
• emphasizingtheimpactofanti-competitiveconductonsmallbusinessesandfirmsownedbyhistoricallydisadvantagedpersons;
• strengtheningtheprovisionsoftheActrelatingtomarketenquiries;
• thealignmentofcompetition-relatedprocessesanddecisionswithotherpublicpolicies,programmesandinterests;and
• enhancingtheadministrativeefficacyandprocessesofthecompetitionregulatoryauthorities.
Somekeyproposedamendmentsinclude:
• theinclusionoftheallocationofmarketsharesasacollusiveactivityundersection4(1)(b)(ii)oftheAct;
• theintroductionofadditionalexclusionaryacts,i.e.prohibitingadominantfirmfrombuyinggoodsorservicesonconditionthattheselleracceptsanunreasonableconditionunrelatedtotheobjectofacontract;engaginginamarginsqueeze;orrequiringasuppliertosellatexcessivelylowprices;
• withrespecttomergercontrol,theintroductionofadditionalfactorsforassessingamerger,aswellasadditionalpublicinterestconsiderationsincludingtheabilityofsmallbusinessestoenterinto,participateinorexpandwithinthemarket;
• empoweringthecompetitionauthoritiestoconductimpactstudies;
• enhancingtheprovisionsregardingmarketenquiries;and
• imposingadministrativepenaltiesforallcontraventionsoftheAct,evenoffencesinrespectofnon-specificcontraventions.
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theproportionofLPGinSouthAfrica’senergymixinordertomeetthecountry’sobjectiveofasustainableenergysupply.TheLPGmarketenquirystartedinSeptember2014.Theenquiryhasbeenconcludedandthefinalreportwaspublishedon24April2017.Basedonthefindings,theCommissionhasmaderecommendationstointroducenewmeasurestoimprovecompetitionintheLPGsectortobeimplementedbetween2017and2019.
Athirdmarketenquiryisbeingconductedinrelationtothegroceryretailmarket.Theenquirywasinitiatedonthebackofconcernssurroundingthedisappearanceofthesmallandinformalretailsectorsintownships.Giventherelationshipbetweenthedecreaseininformaltradersandtheriseofshoppingcentres,theenquiryseekstoaddressboththeformalandinformalsectorsofthemarket.InJuly2016,theCommissionpublisheditsfinalstatementofissues.Atthetimeofwriting,theCommissionwasstillholdingpublichearingsinkeymetropolitanareasinSouthAfrica.
AfourthmarketenquiryinitiatedbytheCommissionrelatestothepublicpassengertransportsectorandfollowsnumerouscomplaintsreceivedbytheCommissionrelatingtopublictransportinthecountry.Thescopeoftheenquiryincludespricesettingmechanisms,priceregulation,transportplanning,allocationofsubsidies,routeallocation,licensingrequirements,etc.TheCommissionpublisheditsguidelinesforparticipationintheenquiryanditscallforsubmissionson13July2017.
ThemostrecentenquiryannouncedtodateistheDataServicesMarketInquiry,whichwasinitiatedbytheCommissionattherequestoftheMinisterofEconomicDevelopment.TheenquirywasestablishedinthecontextofconcernsthatperceivedhighdatacostsinSouthAfricaareconstrainingthefullpotentialofadata-driveneconomy,withanadverseimpactonusersofcellphonesandlaptops,aswellasbusinessesthatrequirehighvolumesofdata.Theenquirycommencedon18September2017andisexpectedtobeconcludedon31August2018.
5. What kind of transaction constitutes a notifiable merger?
AtransactionisrequiredtobenotifiedtotheCommissionifit(i)constitutesamerger(asdefinedintheAct);(ii)meetstherelevantthresholds;and
3. Is the law actively enforced?
Thelawisactivelyenforced,bothinrespectofmergersandprohibitedpractices(includingabuseofdominance).
4. What are the current priorities or focus areas of the competition authorities?
TheCommission’sprioritysectorsare(i)foodandagro-processing;(ii)healthcare;(iii)intermediateindustrialinputs;(iv)constructionandinfrastructure;(v)bankingandfinancialservices;(vi)informationandcommunicationtechnology;and(vii)energy.AccordingtotheCommission,thesesectorswereselectedtakingintoaccountSouthAfrica’seconomicpolicies,thevolumeofcomplaintsreceivedinthesectorandmarketfailureswhichtheCommissionhasidentifiedthroughpastinvestigationsandscopingexercises.Bothmergersandprohibitedpracticesinthesesectorsattractclosescrutiny.
AnotherareaofconcernfortheCommissionistheprivatehealthcaresector,inwhichtheCommissionisconductingitsfirstformalmarketenquirytodeterminethefactorsthatrestrictcompetitionandunderlieincreasesinprivatehealthcareexpenditureinSouthAfrica.TheCommissionhasbeenconductingtheenquirythroughaninquisitorialprocessofpublichearingsandthereviewofsecondarymaterialobtainedfrominformationrequests,consultationsandsummons.Theenquiryisledbyapanelcomprisingindustryexperts,undertheleadershipofpanelchairperson,formerChiefJusticeSandileNgcobo.TheenquirybeganinJanuary2014andinNovember2016,theCommission’sprivatehealthenquiryboardreleasedthreereportsinrelationtoitsinvestigationintheprivatehealthcaresector.ThereportshavebeenpublishedontheCommission’swebsiteinordertoprovideinformationtostakeholdersandtesttheanalysisandfindingsbeforeaconclusionisdrawn.Stakeholderswereinvitedtoprovidetheircommentsonthereportby19December2016.Atthetimeofwriting,aconclusivereportoftheenquiryhadnotbeenpublished.
Aseparatemarketenquirywasconductedintotheliquefiedpetroleumgas(LPG)market.LPGhasbeenrecognisedasbeingofstrategicimportanceasanalternativesourceofenergyforSouthAfricabyvariousgovernmentpolicies.Forexample,theNationalDevelopmentPlanalludestoincreasing
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(iii)constituteseconomicactivitywithin,orhavinganeffectwithin,SouthAfrica.ForpurposesoftheAct,a‘merger’occurswhenoneormorefirmsdirectlyorindirectlyacquireorestablishdirectorindirectcontroloverthewholeorpartofthebusinessofanotherfirm,whethersuchcontrolisachievedasaresultofthepurchaseorleaseoftheshares,aninterestorassetsoftheotherfirm,byamalgamationoranyothermeans.Thereisnoclosedlistofhowcontrolmaybeachieved.Broadly,apersoncontrolsanotherfirmifthatperson,interalia:
• beneficiallyownsmorethanone-halfoftheissuedsharecapitalofthefirm;
• isentitledtovoteamajorityofthevotesthatmaybecastatageneralmeetingofthefirm,orhastheabilitytocontrolthevotingofamajorityofthosevotes,eitherdirectlyorthroughacontrolledentityofthatperson;
• isabletoappointortovetotheappointmentofamajorityofthedirectorsofthefirm;
• isaholdingcompany,andthefirmisasubsidiaryofthatcompanyascontemplatedinSection1(3)(a)oftheCompaniesAct;or
• hastheabilitytomateriallyinfluencethepolicyofthefirminamannercomparabletoapersonwho,inordinarycommercialpractice,canexerciseanelementofcontrolreferredtointhefirstfourbulletpointsabove.
TheseexamplescitedintheActarenotaclosedlistofwhatconstitutescontrol.Forexample,theacquisitionofcontroloverabusiness,ortheassetsofabusiness,pursuanttoasaleofbusinessorsaleofassetsagreement,isnotspecificallyenumeratedasaclassofcontrol,butwillalwaysbeacceptedastheacquisitionofcontrolforthepurposesoftheAct.
Thefirstfourbulletpointsabovesetoutwhatarereferredtoasinstancesof‘brightline’or‘legal’control.Thelastbulletpointprovidesacatch-alltotheeffectthatapersoncontrolsafirmifthatperson“hastheabilitytomateriallyinfluencethepolicyofthefirminamannercomparabletothepersonwho,inordinarycommercialpractice,canexerciseanelementofcontrol,”referredtointhefirstfourbulletpoints.Thiscoversinstancesinwhichafirm,withoutacquiringbrightlinecontrol,mayacquiredefactocontrolbybeingabletomateriallyinfluencethepolicyofanotherfirminamannercomparabletoapersonwho,inordinarycommercialpractice,canexerciseanelementofbrightlineorlegalcontrol.
6. What are the thresholds for mandatory merger notification (e.g. assets, turnover and/ or market shares)?
Intheordinarycourse,onlyintermediateandlargemergersrequirepriornotificationandapproval.Intermediatemergersarethosethatmeetthefollowingthresholds:
• thecombinedannualturnoverin,intoorfromSouthAfricaoftheacquiringfirm/sandthetargetfirm/sarevaluedatZAR600millionormore;orthecombinedassetsinSouthAfricaoftheacquiringfirm/sandthetargetfirm/sarevaluedatZAR600millionormore;or
• theannualturnoverin,intoorfromSouthAfricaoftheacquiringfirm/splustheassetsinSouthAfricaofthetargetfirm/sarevaluedatZAR600millionormore;or
• theannualturnoverin,intoorfromSouthAfricaofthetargetfirm/splustheasset/sinSouthAfricaoftheacquiringfirmsarevaluedatZAR600millionormore.
Inaddition,theannualturnoverin,intoorfromSouthAfricaortheassetvalueofthetargetfirm/smustbeZAR100millionormore.
Alargemergerisonewhereoneofthefourcalculationsgivenaboveresultsinafigurethatisequalto,orexceeds,ZAR6.6billionandtheannualturnoverorassetvalueofthetargetfirm/sequals,orexceeds,ZAR190million.Theturnoverandassetsarecalculatedwithreferencetothepreviousfinancialyearoftheparties.
TheActdefinesanacquiringfirmbroadly,referringtotheentiregroupofwhichtheacquirerformsapart,whileatarget(ortransferring)firmisdefinednarrowly,referringtotheactualbusinessbeingacquired.
7. Is there a prohibition on the pre-implementation of a merger? If so, does the legislation make provision for a penalty?
Partiestoanotifiablemergermaynotimplementthemergerbeforeobtainingtherequisiteapproval.ImplementinganotifiablemergerpriortoapprovalbeingobtainedorfailingtonotifytheCommissionofamergerisacontraventionoftheAct,andexposesthepartiestoadministrativepenaltiesofupto10%ofturnover,aswellaspotentialinjunctionsonimplementation.Penaltieshavebeen
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arrangedwiththeCommissionshortlyafterfiling,whenacaseteamhasbeensetup.
11. To what extent are non-competition factors relevant to the assessment of a merger?
TheActspecificallyprovidesforpublicinterestconsiderationstobetakenintoaccount,inadditiontothebusinessandeconomicefficiencycriteriawhichareusedtoassesstheeffectthatamergerwillhaveoncompetition.AspartoftheassessmentthatthecompetitionauthoritiesarerequiredtomakeintermsoftheAct,theauthoritiesmustdeterminewhetherthemergercanorcannotbejustifiedonsubstantialpublicinterestgroundsbyassessing:
• theeffectthatamergerwillhaveonaparticularindustrialsectororregion;
• employment;• theabilityofsmallbusinesses,orfirms
controlledbyhistoricallydisadvantagedpersons,tobecomecompetitive;and
• theabilityofnationalindustriestocompeteininternationalmarkets.
TheCommissionhasshownconcernforissuessuchasemploymentwithregardtobothmergersandcomplaintsofprohibitedpractices.Insomerecentmergerdecisions,theCommissionhasbeenunwillingtoacceptmerger-relatedjoblosses.
Further,theCommissionhasrecentlyindicatedthatitrequirescertaintyfrommergingpartiesastowhetherjoblosseswilloccurasaresultofamergerornot.Notwithstandingtheabove,inthevastmajorityofcases,competitionargumentsaretheCommission’sfocusandthebasisonwhichdecisionsaremade.However,publicinterestconsiderationsremainsignificant.
12. Do the authorities contact customers and competitors of the merging parties as part of the merger review process? To what extent are the submissions of customers and competitors influential?
TheCommissioncasehandlerappointedtoinvestigateamergercontactsthelargestcustomersandcompetitorsofthemergingpartiesduringthecourseoftheCommission’sreview.Generally,thesepartieswillbeaskediftheyhaveanyconcernswiththeproposedmergerand,ifso,thebasisfortheseconcerns.Shouldtheywishtodoso,thecustomers
appliedbytheauthoritiesforpriorimplementation.Thelevelofpenaltiesappliedhasvaried,dependingonthecircumstances.
8. What filing fees are required?
FilingfeespayableforalargemergerareZAR500000.FilingfeespayableforanintermediatemergerareZAR150000.Therearenofilingfeespayableforsmallmergers.
9. Is it necessary to obtain approval for foreign-to-foreign mergers?
TheActappliesto“alleconomicactivitywithinorhavinganeffectwithin”SouthAfrica.However,insofarasthenotificationofmergersisconcerned,thethresholdsarecalculatedinrelationtocombinedturnoverorassetsinrelationtoSouthAfricaonlyandinpractice,notificationisrequiredifacompany’sSouthAfricanassetsorSouthAfrican-derivedturnovermeetsthethresholds.Assuch,theActisapplicabletoforeign-to-foreignmergersonlytotheextentthatthepartieshaveassetsinSouthAfricaorturnovergeneratedin,intoorfromSouthAfrica.TheCommission’sapproachisthatneitherpartyrequiresapresenceinSouthAfricaandthatitwillsufficeifthetargetalonehasturnoverinSouthAfricasoastomeetthethresholds.Arguablythisgoestoofarandisagainstthelegalprinciplethatstatutesdonotapplyextraterritorially.However,sincetheActcameintoeffectin1999,theTribunalhasconsideredandapprovedmanyforeign-to-foreigntransactionsand,asamatterofgeneralpractice,foreign-to-foreignmergers,wherethetargethasasubsidiaryorbusinessactivitiesinSouthAfrica,arenotifiedtotheauthoritiesiftherelevantthresholdsaremet.
10. Are pre-notification contacts with the authorities permitted and are pre-notification meetings normal practice?
Thevastmajorityofmergersarenotifiedwithoutpre-notificationcontacts.However,theCommissionpermitspre-notificationmeetingsandapractitioner’snoticeissuedbytheCommissionmentionsthatifmergingpartieswishtoengageinapre-notificationmeetingtodiscussmergerfilingrequirementsforaspecificproposedmerger,therelevantcontactpersonisthemanageroftheMergersandAcquisitionsDivision.Inpractice,pre-notificationcontactstendtobeheldinrelationtocontentiousmergersonly.Meetingscanalsobe
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andcompetitorsmayclaimconfidentialityinrespectoftheirwrittensubmissionstotheCommission.Theirsubmissionsareinfluential,althoughtotheextentthattheirconcernsarenotrelevanttotheassessmentthattheCommissionisrequiredtomake,theCommissionwillgenerallydisregardsuchinput.ThesubmissionswillneverthelessformpartoftheCommission’srecordandremainonfile.
13. Who else can make submissions to the authorities when a merger is being considered? Are employees contacted as part of the process and can employees make submissions?
IntermsofSection13A(2)oftheAct,thepartiestoamergermusteachprovideanon-confidentialversionofthemergernotificationtoanyregisteredtradeunionthatrepresentsasubstantialnumberofitsemployees,ortheemployeesconcernedorrepresentativesofsuchemployees,intheabsenceofaregisteredtradeunion.
TheActrequiresproperserviceonthetradeunionsand/oremployeerepresentatives.Proofofservicemustbesubmittedaspartofthenotification,failingwhichthenotificationwillnotberegardedascomplete.Notably,thetimeperiodfortheCommission’sreviewdoesnotcommenceuntilserviceofthemergernotificationiscomplete.
AnypersonmayvoluntarilysubmitinformationtotheCommissioninrelationtoamerger.However,tradeunionsand/oremployeerepresentativesareaffordedamoreprominentroleinthemergerreviewprocessthanotherthirdpartiesandtheyareentitledbylegislationtoparticipateinmergerproceedings.Atradeunionoremployeerepresentative,uponwhomanon-confidentialversionofthemergerfilingisrequiredtobeserved,maynotifytheCommissionofitsintentiontoparticipateinmergerproceedingswithinfivebusinessdaysafterreceivingnoticeofthemerger.
Inadditiontotherightsoftradeunionsandemployeerepresentativestointervene,anypersonwhohasamaterialinterestinamergermayapplytointerveneinTribunalproceedingsbyfilingaNoticeofMotion.TheNoticeofMotionmustincludeaconcisestatementofthenatureoftheperson’sinterestintheproceedings.AnapplicationtointervenemustbeservedonallpartiestotheproceedingsandtheTribunalisrequiredtodeterminewhetherornotthepersonassertingamaterialinterestispermittedtointervene.
Althoughtradeunionsand/oremployeerepresentativesareaffordedamoresignificantplaceinthemergerreviewprocess,thegovernmentandotherinterestedpartieshaveintervenedincertainsignificantmergercases.
14. Are merging parties given an opportunity to make representations before a decision is issued where the authority intends to prohibit a merger or impose conditions?
TheActdoesnotrequirethattheCommissiongrantmergingpartiesanopportunitytomakerepresentationsbeforeadecisionisissuedwheretheauthorityintendsto(i)prohibitamergerorimposeconditions(inthecaseofintermediatemergers);or(ii)recommendaprohibitionorconditionalapproval(inthecaseoflargemergers).However,intheordinarycourse,theCommissioncasehandlerappointedtoinvestigatethemergerwillcontactthelegalrepresentativesofthemergingpartiestodiscussanypreliminaryconcernsthattheCommissionmayhaveidentifiedduringitsinvestigation.Intheordinarycourse,theCommissionwouldinvitethemergingparties’legalrepresentativestomakesubmissionsontheconcernsithaswiththeproposedmergerand,ifappropriate,toofferanybehaviouralorstructuralremediestoaddresstheCommission’sconcerns.
15. What are the opportunities for judicial appeal or review of a decision in respect of a merger that the parties are dissatisfied with?
TheCommission’sdecisionsmaybeappealedtotheTribunal.TheTribunal’sdecisions,whetheratfirstinstanceorinappealsfromdecisionsoftheCommission,maybetakenonrevieworappealtotheCAC.
TheActmakesitclearthatthepartiestoamerger,interveninggovernmentbodies,tradeunionsandthirdparties(asthecasemaybe)whohaveestablishedthattheyhaveamaterialinterestinthemergerhavearighttoappealthedecisionsoftheTribunal.
TheMinisterofEconomicDevelopmentmayparticipate,intheprescribedmanner,inmergerproceedingsbeforetheCommission,theTribunalortheCAC,inordertomakerepresentationsonanyofthepublicinterestgroundslistedintheAct.AtradeunionoremployeerepresentativemayappealadecisionoftheTribunaltotheCAC,
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providedthatthetradeunionoremployeerepresentativewasaparticipantintheTribunalproceedings.Further,subjecttotheprovisionsoftheActandtherulesoftheCAC,apersonaffectedbyadecisionoftheTribunalmayappealagainst,orapplytotheCACtoreviewtheTribunal’sdecision.Thisallowscompetitors,customersandotherthirdpartiestoappealdecisionsoftheTribunal.
TheissueofwhetherornottheCommissioncanappealaTribunaldecisionhasbeenraisedanddiscussedbythecourts.ThiswasconsideredbytheCACforthefirsttimeinCommission/DistillersCorporation(SA)LtdandStellenboschFarmersWineryGroupLtd.ThemergerhadbeenapprovedbytheTribunalconditionally.TheCACreferredtoSection17oftheAct,whichregulateswhomayappealagainstmergerproceedings,andprovidesthatanappealtotheCACmaybemadeby(i)anypartytothemerger;or(ii)apersonwho,intermsofSection13A(2),isrequiredtobegivennoticeofthemerger,providedthepersonhadbeenaparticipantintheproceedingsoftheTribunal.Section13A(2)relatestotheregisteredtradeunionsrepresentingasubstantialnumberofemployeesoftheacquiringortargetfirms,ortheemployeesconcernedorarepresentativeoftheemployeesconcerned,iftherearenosuchregisteredtradeunions.TheCACnotedthatitisclearfromthiswordingthatonlytwocategoriesofpersonsarepermittedintermsoftheActtoappealagainstdecisionsbytheTribunalinmergerproceedingsandthattheCommissiondoesnotfallwithineitherofthesecategories.
TheCommissionhadreliedonSection61(1)oftheAct,readwithSection37(1)(b)(i).TheCACstatedthatSections61(1)and37oftheActshouldnotbereadasalteringorderogatingfromtheprovisionsofSection17inrespectofappealsagainstTribunalmergerdecisions.ItfollowsthatthecategoriesofpersonswhichmayappealagainstTribunalmergerdecisionsarethoselimitedcategoriesspecificallysetoutinSection17(1)andnottheclassof‘affected’personsreferredtoinSection61(1).
Thepartieswhomayparticipateinmergerproceedingsare(i)anypartytothemerger;(ii)theCommission;(iii)anypersonwhowasentitledtoreceiveanoticeintermsofSection13A(2)andwhoindicatedtotheCommissionanintentiontoparticipate,intheprescribedmanner;(iv)theMinisterofEconomicDevelopment,iftheministerhasindicatedanintentiontoparticipate;and(v)any
otherpersonwhomtheTribunalhasrecognisedasaparticipant.TheCACfoundthatnotalltheseparticipantsmayappealagainstadecisionoftheTribunal.ThosewhomayappealarespecificallyreferredtoinSection17(1)oftheAct.TheCACheldthattheomissionoftheotherparticipantsisclearlyindicativeofthelegislature’sintention.
ThereremainsuncertaintyastotheCommission’spositioninrespectofappeals.InthePioneerHi-Bred/PannarSeedmerger,whichwasprohibitedbyboththeCommissionandtheTribunal,themergingpartiesappealedtheTribunal’sdecisiontotheCACandtheCACoverturnedtheTribunal’sprohibition,approvingthemergersubjecttoanumberofconditions.However,in2012,theCommissionfileditsleavetoappealagainsttheCAC’sdecision.TheSCA,however,deniedtheCommission’sapplicationforleavetoappeal.
16. Does the legislation apply to joint ventures?
Thelegislationdoesnotspecificallyrefertojointventures.JointventuresthatareclassifiedasmergersfalltobenotifiedtotheCommissioniftheymeetthethresholdsformandatorynotificationand,iftheyfallbelowthethresholds,mayinanyeventbenotifiedvoluntarily.TheCommissionhaspublishedanon-bindingpractitioners’notetohelpdeterminewhetherajointventureshouldbenotified.Totheextentthatajointventureisnotamerger,theprohibitedpracticesprovisionsoftheActmayneverthelessapply.
17. Does the legislation specifically prohibit cartel conduct? If so, are there examples of the authorities pursuing firms for engaging in cartel conduct?
TheActregulatesprohibitedpracticesandspecificallyprohibitscertainhorizontalrestrictivepractices(unlawfulconductbetweencompetitors).TheActprohibitsprice-fixing(eitherdirectorindirect,andwhichmayrelatetoapurchaseorsellingpriceoranyothertradingcondition);dividingmarkets(byallocatingcustomers,suppliers,territories,orspecifictypesofgoodsorservices);andcollusivetendering.
TheCommissionhasprosecutedfirmsacrossawiderangeofindustriesforengagingincartelconduct,includingtheconstruction,cement,concrete,bread,milling,glassandairlineindustries.
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18. What are the authorities’ powers of investigation in relation to cartel conduct and other prohibited practices?
Chapter5:PartBoftheActconfersbroadinvestigativepowersontheCommission,includingthepowertosummonanypersonwhoisbelievedtobeabletofurnishinformationortobeinpossessionorcontrolofanyinformation,documentorobjectthatmayassisttheCommissioninperformingitsfunctions.Apersonwhoissosummonsedisrequiredtoanswereachquestiontruthfullyandtothebestofthatperson’sabilityexcepttotheextentthatansweringanyonequestionmaybeself-incriminating.Intheordinarycourse,theCommissionrequiresthatapersonwhohasbeenrequestedtoappearbeforeitforquestioning,orwhohasbeensummoned,providehisorherresponsesunderoath.
TheCommissionalsohasbroadpowersofsearchandseizureandhasconductedanumberofdawnraids.Sections46and47oftheActauthorisetheCommissiontoenterpremises(withorwithoutawarrant,respectively)forthepurposeofconductingasearchandseizureoperation.TheCommissionisnotrequiredtonotifythepersoninpossessionorcontrolofthepremisestobesearchedpriortoobtainingasearchwarrantorpriortoarrivingatthepremises.Intheordinarycourse,theCommissionconductssearchandseizureoperationsonasurprisebasisandhasconducteddawnraidsoncompaniesinvariousindustries,includingcement,furnitureremoval,scrapmetal,tyres,LPG,vehicleglass,particleboard,fibreboard,packagingmaterial,cargoshipping,edibleoilsandmargarine.
19. What are the penalties for cartel conduct? Is there a leniency policy in place? Does the legislation impose criminal sanctions?
Cartelconductisperseunlawfulandafirmengagingincartelconductisexposedtoapenaltyforafirstinfringement.TheCommission’spursuitofcartelsisvigilant.Administrativepenaltiesofupto10%ofturnovermaybeimposedonthefirmconcerned.TheCommissionhasinplaceacorporateleniencypolicy(theCLP)forcartelwhistleblowers.UndertheCLP,aself-confessingcartelmember(CLPapplicant)canobtainimmunityfromprosecutionforitsinvolvementincartelactivity.
Whereanapplicationismadeforleniency,theCLPapplicantmustco-operatefullywiththeCommissioninordertobenefitfromtheleniencypolicybyprovidingtheCommissionwithallinformationinrespectofthecartel,includinginformationaboutthoseinvolved.OncetheCommissionreceivesanapplicationforleniencyitwillinitiateaninvestigationand,inconductingitsinvestigation,maysubpoenaanypersonforquestioning.
TheActprovidesforcriminalliabilityofdirectorsandotheremployeeshavingmanagementauthoritywheretheyhavecausedthecompanytoengageincartelconductorwheretheyhaveknowinglyacquiescedtotheconduct.
20. Is there a provision in the legislation providing for a mechanism to apply for exemption from certain parts of the legislation?
Yes.IntermsofSection10oftheAct,andSchedule1PartAoftheAct,afirmmayapplytotheCommissionforexemptionfromtheapplicationofChapter2oftheAct,whichdealswithprohibitedpractices.Thecircumstancesinwhichexemptionsmaybegrantedarelimited.IntermsofSection10oftheAct,theCommissionmaygrantanexemptioniftheagreementorpracticeconcernedcontributesto(i)themaintenanceorpromotionofexports;(ii)thepromotionoftheabilityofsmallbusinesses,orfirmscontrolledbyhistoricallydisadvantagedpersons,tobecomecompetitive;(iii)changeinproductivecapacitynecessarytostopdeclineinanindustry;or(iv)theeconomicstabilityofanindustrydesignatedbytheMinisterofEconomicDevelopmentafterconsultingtheministerresponsibleforthatindustry.Further,anyrestrictionimposedonthefirmsconcernedbytheagreementorpracticemustberequiredtoattaintheobjectiveinquestion.IntermsofSchedule1PartAoftheAct,tradeassociationsmayapplytotheCommissionforexemptionif,havingregardtointernationallyappliednorms,anyrestrictioncontainedintherulesoftheassociationsisreasonablyrequiredtomaintainprofessionalstandardsortheordinaryfunctionoftheprofession.Exemptionapplicationsarepermittedforbothagreementsandconductandmaybegrantedconditionallyorunconditionally.
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21. Is minimum resale price maintenance prohibited?
Minimumresalepricemaintenanceisperseunlawful.Section5(2)theActspecificallyprovidesthat“thepracticeofminimumpricemaintenanceisprohibited”.Section5(3)oftheActprovidesthatdespitesection5(2),asupplierorproducermayrecommendaminimumresalepricetothere-sellerofagoodorservice,providedthat(i)thesupplierorproducermakesitcleartothere-sellerthattherecommendationisnotbinding;and(ii)iftheproducthasitspricestatedonit,thewordsrecommendedpricemustappearnexttothestatedprice.
22. In what circumstances are exclusive agreements unlawful? If exclusive agreements raise concerns in specific circumstances, what factors are relevant to their lawfulness or unlawfulness?
WithintheframeworkoftheAct,exclusiveagreementstypicallyfallwithintheambitofSection5,whichappliestoagreementsbetweenpartiesinaverticalrelationship(i.e.afirmanditscustomers,itssuppliers,orboth).Section5(1)prohibitsagreementsbetweenpartiesinaverticalrelationshipiftheagreementhastheeffectofsubstantiallypreventingorlesseningcompetitioninarelevantmarket,unlessthepartiestotheagreementcanshowtechnological,efficiencyorotherpro-competitivegainsoutweightheanti-competitiveeffect.Whereanexclusiveagreementhasananti-competitiveeffect,factorstypicallyrelevantinassessingthelawfulnessoftheagreementincludethedurationoftheagreement,thedegreeofforeclosureresultingfromtheagreementandthelevelsofconcentrationinthemarket.
Inaddition,whereoneofthepartiesisdominantintherelevantproductmarket,exclusivearrangementsmayalsofalltobeinvestigatedundertheabuseofdominanceprovisionsoftheAct,particularlyiftheexclusivearrangementconstitutesan‘exclusionaryact’.Anexclusionaryactisdefinedasanactthatimpedesorpreventsafirmenteringinto,orexpandingwithin,amarket.
23. Does the legislation prohibit the abuse of a dominant position? If so, what is the threshold for dominance and what conduct amounts to an abuse?
TheActprohibitstheabuseofadominantposition.Afirmisconsideredtobedominantinamarketif(i)ithasatleast45%ofthatmarket;(ii)ithaslessthan35%ofthatmarket,buthasmarketpower(asdefinedintheAct)or(iii)ithasatleast35%butlessthan45%ofaparticularmarket,unlessitcanshowthatitdoesnothavemarketpower.‘Marketpower’isdefinedintheActasthepowerofafirmtocontrolprices,ortoexcludecompetitionortobehavetoanappreciableextentindependentlyofitscompetitors,customersorsuppliers.
TheActincludesperseprohibitionswhichpreventadominantfirmfrom(i)charginganexcessiveprice(asdefinedintheAct)tothedetrimentofconsumers;or(ii)refusingtogiveacompetitoraccesstoanessentialfacility(asdefinedintheAct)whenitiseconomicallyfeasibletodoso.
Withregardtoprohibitionsthatarenotperseunlawful,adominantfirmisprohibitedfromengaginginanyexclusionaryact(asdefinedintheAct)iftheanti-competitiveeffectofthatactoutweighsitstechnological,efficiencyorotherpro-competitivegain.
Further,theActprohibitsafirmfromengaginginthefollowingexclusionaryacts,unlessthefirmcanshowtechnological,efficiencyorotherpro-competitivegainsthatoutweightheanti-competitiveeffect:
• requiringorinducingasupplierorcustomertonotdealwithacompetitor;
• refusingtosupplyscarcegoodstoacompetitorwhensupplyingthosegoodsiseconomicallyfeasible;
• sellinggoodsorservicesonconditionthatthebuyerpurchasesseparategoodsorservicesunrelatedtotheobjectofacontract,orforcingabuyertoacceptaconditionunrelatedtotheobjectofthecontract;
• sellinggoodsorservicesbelowtheirmarginaloraveragevariablecost;
• buying-upascarcesupplyofintermediategoodsorresourcesrequiredbyacompetitor;and
• discriminatingbetweenpurchasersinrelationtoequivalenttransactionsofgoodsorservicesoflikegradeandquality.
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AnexampleofanabuseofdominancecaseinthetelecommunicationsectoristhatfollowingacomplaintbytheSouthAfricanVANSAssociation(SAVA)againstSouthAfrica’sincumbenttelecommunicationscompany,TelkomLtd(Telkom).Afterinvestigatingthecomplaint,theCommissionfoundthatTelkomhadabuseditsmonopolypositioninthefixedlinetelecommunicationmarketbyexcludingcompetingvalue-addednetworkservice(VANS)providersfromthedownstreamVANSmarket.TheTribunalsupportedtheCommission’sfindingand,in2012,ruledthatTelkom’spracticesofi)refusingtosupplyaccesstoessentialfacilitiestoindependentVANSproviders;ii)inducingcustomersnottodealwiththem;iii)chargingcustomersexcessivepricesforaccessservices;andiv)discriminatinginfavourofitsowncustomersbygivingthemadiscountondistance-relatedchargeswhichitdidnotadvancetocustomersoftheindependentVANSproviders,constitutedanabuseofdominance,whichresultedinasubstantiallesseningandpreventionofcompetitionintheVANSmarket.
TheTribunalfoundthatthepracticaleffectofTelkom’sstrategyofnotcompetingonmeritwiththeindependentVANSprovidersbutclaiminginsteadthattheindependentVANSproviderswereconductingbusinessillegallyandtherebyjustifyingitsactionsoffreezingtheirnetworks,impededthegrowthofTelkom’scompetitorsandretardedinnovationinthemarket.Theharmtocompetitionwaslikelytobeexacerbatedinanindustrycharacterisedbynetworkeffects.Further,theTribunalagreedwiththeCommissionthatTelkomhadrefusedtosupplyessentialfacilitiestoindependentVANSprovidersandhadinducedcustomersnottodealwiththem.
24. Are there examples of the authorities pursuing firms for abusing a dominant position?
AnumberofabuseofdominancecaseshavebeenadjudicatedbytheSouthAfricancompetitionauthorities.Forexample,in2001,NationwideAirlineslodgedacomplaintagainstSouthAfricanAirways(SAA).Afterinvestigatingthecomplaint,theCommissionfoundthatSAAwasabusingitsdominantpositionandreferreditsfindingstotheTribunal.In2005,theTribunalruledthatthetwoincentiveschemesthatSAAhadusedtocompensatetravelagentsfortheirservicesprovidedacompellingcommercial
incentivefortravelagenciestosellSAAticketsinpreferencetothoseofitsrivals,andthatSAA’sExplorerscheme—asystemofrewardingtravelagencystaffwithSAAticketsonthebasisofthenumberofSAAticketstheysold—reinforcedtheexclusionaryeffectsoftheincentiveschemes.TheTribunalconcludedthatthepracticaleffectoftheincentiveschemeswastoinducesuppliersnottodealwithSAA’scompetitorsandSAAwasfinedZAR45millionfortheabuseofitsdominantposition.
IntheTelkomcasereferredtoabove,TelkomwasfinedZAR449millionfortheabuseofitsdominantpositionbetween1999and2004,whenitwasamonopolyprovideroftelecommunicationsservices.
Ina2015decisionbytheCAC,theCACupheldanappealbySasolChemicalIndustriesLtd(SCI)againstadecisionbytheTribunalthatSCIhadchargedexcessivelyforpropyleneandpolypropylenebetween2004and2007.
Duringthecourseof2010,theCommissionhadpursuedSCIbeforetheTribunalforallegedexcessivepricingintwoverticallyrelatedmarketsoveraperiodoffouryearsfromJanuary2004toDecember2007.TheCommissionallegedthatSCIhadchargedexcessivepricestodomesticcustomersofpurifiedpropyleneandpolypropyleneincontraventionofSection8(a)oftheActwhichprovidesthat“[i]tisprohibitedforadominantfirmto—(a)chargeanexcessivepricetothedetrimentofconsumers”.TheTribunalfoundthatSCIhadcontravenedSection8(a)oftheActinthat:
“[i]npurifiedpropyleneithasbeenabletochargeitsonlycustomer,Safripol,acompetitorinthedownstreampolypropylenemarket,apricethatcounter-intuitivelyincreaseswithincreasesinvolumeandhasalsobeenabletorestrictthemonthlyvolumeofthelowerpriced‘Tier1’purifiedpropylenesoldtoSafripol.Inthepolypropylenemarket,SCIhassegmentedthemarketbetweenthehigh-pricedlocal(domestic)andthelower-pricedexportmarketbysellingexportsonadeliveredbasis,thuspreventingarbitrageinthedomesticmarketbyre-entryofitscheaperpolypropylene".
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TheTribunalfoundthatSCI’sexcessiveprices,maintainedbyanexerciseofmarketpowerbySCI,resultedinamissedopportunityforinnovationanddevelopmentforthedomesticmanufactureofdownstreamplasticgoods.Cheaperpolypropylenepricesforlocalplasticconverterscouldenhancelocalproductiontherebyenablingthemtocompetemoreeffectivelywithimportedfinalplasticproducts,manufacturelocallyratherthanoverseasandintroducenewproductstoSouthAfricanconsumers.
TheTribunalsentencedSCIasfollowsforitscontraventionsrelatingtopurifiedpropylene:
• SCIwasrequiredtopayanadministrativepenaltyofZAR205.2million;
• SCImaynotdiscriminatebetweenthepurifiedpropylenepricechargedinternallywithinSasolandthepricechargedtothird-partycustomers;and
• SCIandtheCommissionmustsubmitaproposedpricingremedytotheTribunalwithin90daysofthedecisionoftheTribunal.
Inrelationtopolypropylene,SCIwassentencedasfollows:
• SCIwasrequiredtopayanadministrativepenaltyofZAR328.8million;and
• SCIwasrequiredtosellpolypropyleneonanex-worksbasiswithoutdiscriminatinginpricebetweenanyofitscustomersnomatterwheretheyarelocated.
InJune2015,theCACpublisheditsjudgmentinwhichitupheldSCI’sappealagainsttheTribunal’sdecision.
Inreachingitsdecision,theCACemphasised:
• thateveryexcessivepricingcasewouldhavetobedeterminedonitsownfacts;
• asthefactsoftheappealdifferedsignificantlyfromtheMittaldecision,theappropriatetestwasnotwhetherornotthepricewasexcessive,butrathertheproductioncosttoSCI;and
• ifthecostofanessentialcomponentoftheproduct,whosepricesareunderscrutiny,canbejustifiedonrationalgrounds,thisshouldbetheyardstickagainstwhichthecomplaintisassessed.
TheCommissionsoughtleavetoappealtheCAC’sdecisiontotheConstitutionalCourt.However,inNovember2015,theCommission’sapplicationwasdismissedbytheConstitutionalCourt.
MorerecentandongoingabuseofdominancecasesincludeinvestigationsintheconstructionsectorwheretheCommissionhasinitiatedcomplaintsagainstAfrimatLtdanditssubsidiaryforallegedexcessivepricingofclinkerashaggregate,BlurockQuarries(Pty)LtdandProconPrecastCCforallegedabuseofdominanceinthesupplyofcrusherdustandthemanufactureandsupplyofbricksandblocks.AcomplainthasalsobeeninitiatedagainstTransnetSOCLtdforallegedexcessivepricingandpricediscriminationintheprovisionoffreightrailservicesandexcessivepricingintheprovisionofportservices.TheCommissionalsoallegesthatTransnethasengagedinexclusionaryconductintheprioritisationofcargoandberthingatportterminals.
25. Does the legislation impose penalties on firms for the abuse of a dominant position?
Yes.Conductwhichisunlawfulattractsapenaltyforafirstinfringement.Conductwhichisnotperseunlawfulissubjecttoa‘ruleofreason’analysis,intermsofwhichtheanti-competitiveeffectsofafirm’sconductareweighedupagainstthepro-competitivegainsandthelattermustbegreaterthan,andoff-set,theanti-competitiveeffects.Conductwhichisnotperseunlawfulattractsapenaltyonlyforarepeatofconductinrespectofwhichthefirmwaspreviouslyfoundguilty.TheTribunalmayimposeanadministrativepenaltyonfirmsfortheabuseofadominantpositionwhichmaynotexceed10%ofthefirm’sannualturnoverinSouthAfricaanditsexportsfromSouthAfricaduringthefirm’sprecedingfinancialyear.
26. Are there rules in relation to price discrimination?
Yes.However,pricediscriminationisprohibitedonlywhereafirmisdominantinarelevantmarketandonlywherespecificcriteriaareestablished.Section9oftheActsetsouttheelementsofprohibitedpricediscrimination,aswellas
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certainjustificationsthatmayberelieduponbyadominantfirm,evenwherealltheelementsofprohibitedpricediscriminationarepresent.
Inordertoestablishthatadominantfirm’sactionsconstituteprohibitedpricediscrimination,theCommission(oracomplainant,asthecasemaybe)isrequiredtoshowthattheconduct:
• relatestothesale,inequivalenttransactions,ofgoodsorservicesoflikegradeandqualitytodifferentpurchasers;or
• islikelytohavetheeffectofsubstantiallypreventingorlesseningcompetition;and• involvesdiscriminatingbetweenthose
purchasersintermsofthepricecharged;• anydiscount,allowance,rebateorcredit
givenorallowed;• theprovisionofservicesinrespectof
thegoodsorservicesinquestion;or• thepaymentforservicesprovidedin
respectofthegoodsorservices.
Wherethesecriteriaaremet,certainjustificationsmayneverthelessberaisedbythedominantfirmasadefencetotheallegationofunlawfulpricediscrimination.Specifically,thedominantfirm’sconductwillnotbeunlawfulifthefirmcanestablishthatthedifferentialtreatment:
• makesonlyreasonableallowancefordifferencesincostorlikelycost;
• isconstitutedbydoingactsingoodfaithtomeetapriceorbenefitofferedbyacompetitor;
• isinresponsetochangingconditionsaffectingthemarketforthegoodsorservices,including:• anyactioninresponsetoactualorimminent
deteriorationofperishablegoods,• anyactioninresponsetotheobsolescence
ofgoods;• asalepursuanttoaliquidationor
sequestration;or• asaleingoodfaithindiscontinuance
ofbusinessinthegoodsorservicesconcerned.
27. Does the authority publish its decisions and, if so, is there a website where such decisions are available?
TheTribunal’sdecisionsareavailableonitswebsite(www.comptrib.co.za).TheCommissionisthedecision-makerinrespectofintermediatemergersandisrequiredbylawtopublishintheGovernmentGazettereasonsfortheprohibitionorconditionalapprovalofmergers.InformationismadepubliclyavailableontheCommission’swebsiteinrespectofmergersthathavebeennotifiedtotheCommission.Italsopublishesmediastatementsinrespectofsignificantdecisionsandotherdevelopmentsonitswebsite.
TheCommission’swebsiteiswww.compcom.co.za
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HENWOOD & COMPANY
John Earl Henwood
Swaziland
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1. What is the relevant competition legislation and who are the enforcers?
TherelevantcompetitionlegislationistheCompetitionAct,8of2007andtheCompetitionCommissionRegulationsof2010,promulgatedintermsoftheAct.TheActandtheRegulationscameintoforceon1April2008andJune2010,respectively,andareenforcedbytheSwazilandCompetitionCommission(theComission)andtheHighCourtofSwaziland.
2. Are there any proposed amendments or new regulations expected to come into force?
TherearenoproposedamendmentstotheAct,noraretherenewRegulationswhichareeitherbeingdebatedbyParliamentorexpectedtocomeintoforce.However,theCommissionhasdevelopedExternalMergerGuidelines,availableontheCommission’swebsite(www.compco.co.sz),toamplifywhatisprovidedintheActandRegulationsaswellastogiveapracticalperspectiveonwhatisrequiredofpartieswhensubmittingmergernotificationstotheCommission.ThereisanewCartelConductandCorporateLeniencyPolicythathasbeenadoptedbytheCommissionandisnowinforce.ThepolicyhasnotbeentestedorchallengedinCourtorappliedonapracticalcasebytheCommission.
TheCommissionhasindicatedthattherewillbeanamendmenttotheActinordertodoawaywithanumberofconflictingprovisions.TheseprovisionshavebeenhighlightedinapaperpublishedbytheCommissiontitled:DomesticationoftheCOMESACompetitionRegulationsbyAmendingtheSwazilandCompetitionActof2007andAssociatedCompetitionRegulationsNoticeof2010(thePaper).
InthePaper,theCommissionrecognisedthatanumberofamendmentshadtobeeffected
inaccordancewiththeCOMESARegulationsstartingwiththeneedtoamendanumberofdefinitions,includingthedefinitionof:
i) Jointventure;ii) Merger;iii) Dominantposition;iv) SecretariatandCommission;v) Person;andvi) Enterprise
ThePaperalsorecognisesthattheActandRegulationsthereofdonotexplicitlyconsiderjointventuresastransactionsthatmayaffectcompetitionasthoseareknowntohavecompetitiveconsequences.
Proposalsinthepaperalsorelatetointellectualproperty,andhowsuchshouldnotbewhollyexemptfromtheAct’sapplication,thatthelegislationshouldbebroadenedsothatconfidentialinformationisalsocoveredoutsideofthemergercontext,thatpricefixingandothercartelbehaviourshouldbedeemedillegalwithoutextrinsicproofofanysurroundingcircumstancessuchaslackofscienter(knowledge)orotherdefencesandwithoutanyneedfordiscussionofeconomiceffect.
ThePaperalsoseekstorecognisetheeffectoflackofthresholdsinSwazilandasthatislikelytoaffectinvestmentintheKingdom,andalsothatthefinesthatmaybeimposedundertheActarenotlikelytoproducethedesiredeffect.Theauthorshaveproposedthatafinebeimposedandcalculatedfromthedateonwhichthetransactionisimplemented.
ThePaperismerelyaproposalofchangestotheActanddoesnotentailthatthechangeswillbeeffectedasproposed.
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andenforcementofmergercontrol,curtailmentofcartelsandabuseofdominanceaswellasotheranti-competitivepracticesprohibitedundertheAct.Thedocumentsetsout,interalia,aproposedstrategythattheCommissionintendstoadoptinidentifyingprioritymarketsthatrequiretheCommission’sinterventioninordertoensuretheprotectionofconsumerwelfare.
5. What kind of transaction constitutes a notifiable merger?
AtransactionisrequiredtobenotifiedtotheCommissionifit(i)constitutesamerger(asdefinedintheAct);and(ii)constituteseconomicactivitywithin,orhavinganeffectwithin,Swaziland.Currently,therearenothresholdsinplace,whichmeansthatanyacquisitionofcontrol,includingrestructuringandre-organising,thatfallswithinadefinitionofamergermustbenotified.However,theCommissionhasstatedthatthereisnoneedtonotifyatransactionwhereneitherpartyhasapresenceinSwaziland.
ForthepurposesoftheAct,a‘merger’isdefinedastheacquisitionofacontrollinginterestin:
• anytradeinvolvedintheproductionor distributionofanygoodsorservices;or
• anassetwhichis,ormaybe,utilisedfororinconnectionwiththeproductionordistributionofanycommodity.
TheActdoesnotdefinewhatacontrollinginterestis,buttheRegulationsprovidethatapersonwillbedeemedtohaveacontrollinginterestifthatperson:
• beneficiallyownsmorethanone-halfofthevotingrightsand/ormorethanhalfoftheeconomicinterestofthetargetfirm;
• isentitledtovoteamajorityofthevotesthatmaybecastatageneralmeetingofthefirm;
• isabletoappointorvetotheappointmentofamajorityofthedirectorsofthefirm;or
• hastheabilitytoexercisedecisiveinfluenceoverthepoliciesofthefirmanditsstrategicdirection.
Anyoftheaboveelementsqualifiesasacontrollinginterestandwillthereforeconstituteanotifiablemergerandcapturehorizontal,verticalandconglomeratemergers.Atransactionconstitutingajointventure,saleofbusinessoranyotherarrangementwhichresultsintheacquisitionofdefactoordejurecontrolofafirm,constitutesanotifiablemerger.
3. Is the law actively enforced?
CompetitionlawenforcementisveryrobustatpresentinSwaziland.SincetheappointmentofthefirstBoardofCommissionersin2008,theCommissionhasdevelopeditsownpoliciesandguidelinessuchastheExternalMergerGuidelines,LeniencyPolicy,guidanceonmarketenquiries,SCCInternationalguidelines—complaintsandinvestigations,andcontinuestodevelopitselfinlinewithregionalandinternationalbestpracticeincompetitionenforcementandpolicy.Eachyear,theCommissionrecordsasignificantincreaseinthenumberofmergernotificationsreceivedvaryingbothinsizeandcomplexity.
EnforcementisatitspeakwithtwomatterstakenuptotheHighCourt(NgwaneMills(Pty)LtdvSwazilandCompetitionCommissionandOthers:HighCourtCivilCaseNo.2589/2011)andtheSupremeCourt(EaglesNestandFiveOthersvSwazilandCompetitionCommissionandAnother:SupremeCourtCaseNo.1/2014)levelwherecompetitionlawandpolicyhavebeenchallenged.Inbothcases,theCommissionhasbeensuccessfulindefendingitsapplicationandinterpretationofthecompetitionlawsinSwaziland.
4. What are the current priorities or focus areas of the competition authorities?
GenerallytheCommissiondoesnotmakeknowntothepublicitspriorityareas;however,theydofromtimetotimeinformthepublicofcertainsectorsthatareunderinvestigation.Therehavebeeninvestigationsinthemedicalandhealthsectorswithparticularreferencetomedicalaidschemes,theinsurancesectorwithspecificreferencestoexclusivityclauses,aswellasthepoultryandanimalfeedmillingindustries.
Theseinvestigationshavebeeninstitutedfromanumberofdifferentavenuesrangingfromconsumercomplaints,competitorsandindustryplayerstogeneralpublicconcerns.ItisdifficulttoascertainhowfartheseinvestigationshavebeencarriedoutinlightofthefactthattheCommissiondoesnotissueclearandconcisereportsinthatregard.
TheCommissionhas,however,entrencheditspositiononexclusivityclausesasexpoundedintheAct.TheCommissionpublishedadocumenttitledGuidanceonMarketEnquiriesinFebruary2015togiveinternalstakeholderssomeguidanceonhowtheCommissionconductsmarketenquiries,inordertocomplementtheCommission’sfunction
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6. What are the thresholds for mandatory merger notification (e.g. assets, turnover and/ or market share)?
TheActandRegulationscouchthedefinitionofamergerinwidetermswiththeresultthatanyeconomicactivitywhichfallswithinthedefinitionofamergerwithinthecountry,orhavinganeffectinthecountry,requirespriornotificationtoandapprovaloftheCommission.Therearecurrentlynofinancialthresholdsinplace.
7. Is there a prohibition on the pre-implementation of a merger? If so, does the legislation make provision for a penalty?
PartiestoanotifiablemergermaynotimplementthemergerbeforeobtainingtherequisiteapprovaloftheCommission.AnimplementationofanotifiablemergerpriortoobtainingapprovalfromtheCommissionisviewedasaseriouscontraventionoftheActandanypartyfoundtohavesocontravenedtheAct,attractspenalandcriminalsanctionsofafinenotexceedingSZL250000,orimprisonmentforatermnotexceedingfiveyears,orboth.
TheActfurtherprovidesthatwheretheoffenceiscommittedbyabodycorporate,everydirectorandofficerofsuchbodycorporateor,ifthebodyofpersonsisafirm,everypartnerofthatfirm,shallbeguiltyofthatoffence,providedthatsuchdirector,officerorpartnershallnotbeguiltyoftheoffenceifheorsheprovesonabalanceofprobabilitiesthatsuchoffencewascommittedwithouthisorherknowledgeorconsentor,thatheorsheexercisedallduediligencetopreventtheoffence.Theliabilityextendstoagentsorattorneysrepresentingthecorporateentitiesinthetransaction.
TheCommissionnowadoptsastrictapproachtowardsentitiesthatimplementnotifiabletransactionswithoutthepriorapprovaloftheCommissionandinadditiontoissuingademandfornotificationtotheentities;theCommissionfurtherimposesafineagainsttheentitiesinaccordancewithSection35(1)oftheCompetitionAct.
8. What filing fees are required?
Thefilingfeeforamergerisbasedonthevalueofthecombinedannualturnoverorassetsofthemergingenterprises.Forthepurposesoffees,mergersfallintotwocategories:small
andlarge.Asmallmergerisonewheretheparties’combinedassetsorturnoverisvaluedatSZL8millionorless.Smallmergersarenotifiablebutareexemptfromthepaymentofnotificationfees.IntermsofArticle11oftheRegulations,thefilingfeeforallothermergersbetweenentitieswhoseassetsorrevenueoverSZL8millionis0.1%ofthecombinedannualturnoverorassetsoftheentities,whicheverisgreater,accordingtoArticle11(8)oftheCompetitionRegulations,2010.
Putdifferently,theRegulationsdonotenvisagethecombinationoftheannualturnoverofonefirmandtheassetsoftheotherfirmtodeterminethefilingfee.TheamountchargedfornotificationofamergeriscappedatSZL600000foranysinglemergernotified.
9. Is it necessary to obtain approval for foreign-to-foreign mergers?
Ifaforeign-to-foreignmergerconstituteseconomicactivitywithinorhavinganeffectwithinSwaziland,notificationisrequired.IntermsoftheRegulations(Regulation21),themergingpartiesarerequiredtoring-fencethetransactionandsetoutintheirfilinghowtheirinterestinSwazilandwillbeinsulatedfromtheimplementationoftheworldwidetransaction.TheyarealsoexpectedtomakelegallyenforceableundertakingsthatwillensurethattheirinterestinSwazilandwillnotbeaffectedbytheclosingofthetransactioninotherjurisdictions.Thering-fencingprocedureisnotpersedoneinapplicationformrequestingauthorisationfromtheCommissiontoring-fence.Rather,itismoreofaninformativepositioncommunicatedtotheCommissionbythepartiesfornotice.
10. Are pre-notification contacts with the authorities permitted and are pre-notification meetings normal practice?
TheCommissionhasadoptedandencouragespre-notificationmeetings,thepurposeofwhichisfirstlytoguidethepartiesonthefilingwherethepartiesseeksuchdirection;andsecondly,toascertainifalltherequirementsoftheActandRegulationshavebeencompliedwithbythenotifyingpartiesbeforetheCommissionacceptsthefilingandsignsaCompletenessofFilingform(Form6,oranaffidavit,asprovidedforinRegulation24)withtheappointedrepresentativeoftheparties.Thereisnoobligationonthepartiestoholdapre-notificationmeetingforguidance,
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atanytimebeforetheconclusionofthemergerinvestigation.Regulation26alsoprovidesforthird-partyinterventions,whichmaybemadeorallyorinwriting.Onrareoccasions,employeesofthemergingentitiesareallowedtomakesubmissionsontheproposedmergerand,ifvalidemploymentconcernsarise,theLabourCommissionisrequiredtointerveneandlookintothese.
14. Are merging parties given an opportunity to make representations before a decision is issued where the authority intends to prohibit a merger or impose conditions?
Regulation28makesprovisionfororalhearings.Apartytoamergermayrequestanoralhearingaftertheinvestigatorhasfinalisedthereportonthemergerinvestigation,butbeforetheCommissionhastakenadecisiononthemerger.
15. What are the opportunities for judicial appeal or review of a decision in respect of a merger that the parties are dissatisfied with?
Section40oftheActprovidesthatapartywhoisaggrievedbythedecisionoftheCommissionmadeundertheActortheRegulationscanappealtotheHighCourt.IntermsoftheConstitutionofSwaziland,theHighCourtisempoweredtoreviewdecisionsoftheCommission.Theappealmustbelodgedwithin30daysofserviceofnoticeofthatdecisiontotheparty.AnappealagainstadecisionoftheCommissiondoesnotautomaticallystaythedecisionoftheCommissionunlesssuchstayisgrantedbytheHighCourt.
16. Does the legislation apply to joint ventures?
TheCompetitionActisnotclearaboutjointventures;however,transactionsconstitutingajointventure,saleofbusinessoranyotherarrangementwhichresultsintheacquisitionofdefactoordejurecontrolofafirm,constitutesanotifiablemerger.Accordingly,theActcoversallagreementsorarrangementsbetweenpartiesinaverticalmerger,suchas:
• jointventures;• distributionarrangements;• franchiseagreements;and• exclusivesupplyarrangements.
butitisnowmandatorytomeetwiththeCommissionandsigntheCompletenessofFilingformbeforetheCommissionwillacceptthatatransactionhasbeennotified.
11. To what extent are non-competition factors relevant to the assessment of a merger?
WhiletheCommission’sfocusisonanti-competitivepracticeswhichhave,astheirobjectoreffect,theprevention,restrictionordistortionofcompetitiontoanappreciableextentinthecountry,non-competitionfactorsarerelevant.TheCommissionhaspreviouslyconsideredissuesofpublicinterestandpolicysuchasemployment(i.e.whetherornottheemployeeswillberetainedbythemergedentity)andtechnologicalbenefits,whenconsideringwhetherornottoapproveamerger,withorwithoutconditions.
12. Do the authorities contact customers and competitors of the merging parties as part of the merger review process? To what extent are the submissions of customers and competitors influential?
InPart4ofForm3,inwhichthepartiesarerequiredtosubmitanotificationofatransaction,theCommissionrequiresfromeachoftheparties,alistoftheirfivelargestcustomersandtheircontactdetails.TheCommissioncontactsthesecustomerstorequesttheirsubmissionsregardingtheproposedtransactionwhicharetakenintoconsiderationinsofarastheyarerelevanttoanycompetitionconcernsthattheCommissionmayneedtolookintoinassessingwhetherthetransactionshouldbeapprovedwithoutconditions,withconditions,orprohibitedaltogether.TheCommissionmayalsocontactcompetitorsormarketplayersforinformationwhichmayormaynotbetakenintoaccountdependingonitsnatureandrelevance.
13. Who else can make submissions to the authorities when a merger is being considered? Are employees contacted as part of the process and can employees make submissions?
Regulation22providesthatanyperson,includingapersonnotinvolvedasapartyinaproposedmerger,mayvoluntarilysubmitanydocument,affidavit,statementorotherrelevantinformation
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17. Does the legislation specifically prohibit cartel conduct? If so, are there examples of the authorities pursuing firms for engaging in cartel conduct?
TheAct,atSection30(5),specificallyliststhefollowingasprohibitedconduct:
• pricefixing;• collusivetendering;• bid-rigging;• marketandcustomerallocationagreements;• salesorproductionquotaallocation
arrangements;and• anycollectiveactiontoenforcearrangements.
TheCommissionhasnotinthepastconductedanyinvestigationsoncartelconduct.ItsCartelConductandCorporateLeniencyPolicyhasbeenfinalisedandpublished.
18. What are the authorities’ powers of investigation in relation to cartel conduct and other prohibited practices?
TheActconfersbroadinvestigativepowersontheCommission,includingpowersofentryandinspection(dawnraid)tosearchforinformationinrelationtocartelconduct.TheCommissionmayalso,forthepurposesofcarryingoutitsfunctions,summonandexaminewitnessesandcallforandexaminedocuments,hearoralevidence,andcalluponanycompanytoprovideinformationinrelationtoanindustryunderinvestigation.Thishastobedoneunderanissuedsearchwarrant.Furthertothesepowers,thenewleniencypolicylaysoutconditionsprecedenttoagrantofimmunitytoapartyinvolvedincartelconductaswellasrequirementsthatmayqualifythatpartyforareducedpenalty.ThishasyettobeexercisedinSwaziland.
19. What are the penalties for cartel conduct? Is there a leniency policy in place? Does the legislation impose criminal sanctions?
AnyconductthatisincontraventionoftheActattractscriminalandpenalliabilityofafineofSZL250000orimprisonmentnotexceedingfiveyears,orboth.Cartelconductfallswithinsuchprohibitedconduct.
TheActfurtherprovidesthatwheretheoffenceiscommittedbyabodycorporate,everydirectorandofficerofsuchbody
corporateor,ifthebodyofpersonsisafirm,everypartnerofthatfirm,shallbeguiltyofthatoffence,providedthatsuchdirector,officerorpartnershallnotbeguiltyoftheoffenceifhe/sheprovesonabalanceofprobabilitiesthatsuchoffencewascommittedwithouthis/herknowledgeorconsent,orthathe/sheexercisedallduediligencetopreventtheCommissionoftheoffence.TheCommissionhaspublishedaleniencypolicyonitswebsite.
20. Is there a provision in the legislation providing for a mechanism to apply for exemption from certain parts of the legislation?
TheCommissionisempoweredtoauthoriseanyactifitconsidersthattheadvantagestothecountryoutweighthedisadvantages.However,itisnotempoweredtoauthoriseconductwhichisprohibitedintermsoftheAct.
21. Is minimum resale price maintenance prohibited?
Yes,resalepricemaintenanceisspecificallyprohibitedinSection31(f)oftheAct.
22. In what circumstances are exclusive agreements unlawful? If exclusive agreements raise concerns in specific circumstances, what factors are relevant to their lawfulness or unlawfulness?
ExclusiveagreementsarenotperseprohibitedundertheActunlesstheylimitaccesstomarketsorotherwiseundulyrestraincompetitioninthecountry.NeithertheActnortheRegulationsspecifythefactorstobeconsideredwhendeterminingthelawfulnessorunlawfulnessofexclusiveagreements.However,theCommissionconsiderspro-competitivefactorsandiftheseoutweightheanti-competitiveeffectstheagreementswillbeallowed.Section30(1)oftheActprohibits“anycategoryofagreements,decisions,concertedpracticeswhichhave,astheirobjectoreffect,theprevention,restrictionordistortionofcompetitiontoanappreciableextentinthecountryorinanypartofit…”.
TheCommissionhasinpracticeappliedandenforcedthisSectioninonematterinvolvingaleaseagreementbetweenTheGablesandHammondBrotherst/aeZulwiniPicknPaySupermarket.Theleaseagreementcontained
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anexclusivityclausebetweenthepartiesandtheCommissionconcludedinitsfindingsthatsuchaclausecontravenedSection30(1)andwasthusprohibited.Applyingtheruleofreasonprinciple,theCommissioninitsinvestigationsoughttoascertainwhetherthecompetitivegainoftheclauseoutweigheditsanti-competitiveeffectandconcludedthattheclausewasinvalidandofnoforceoreffectasitwasinconsistentwiththespiritoftheAct.
23. Does the legislation prohibit the abuse of a dominant position? If so, what is the threshold for dominance and what conduct amounts to an abuse?
DominanceofafirmisnotperseprohibitedbuttheActprohibitstheabuseofadominantposition.Althoughtherearenothresholdsdeterminativeofdominance,theActdefinesadominantpositionasapositioninamarketinwhichanenterpriseasasupplieroranacquirerofgoodsandservices,eitheraloneortogetherwithanyinterconnectedbodycorporate,isinapositiontoactindependentlyofcompetitorsandconsumersovertheproduction,acquisition,supply,orpriceofgoodsorservicesinthatmarket.
Further,theActprohibitsafirmfromengaginginspecificactsiftheylimitaccesstomarketsorotherwiseundulyrestraincompetition,orhaveorarelikelytohave,adverseeffectsontradeortheeconomyingeneral,suchas:
• predatorybehaviourtowardscompetitors;• discriminatorypricinganddiscriminationin
thesupplyandpurchaseofgoods;• makingthesupplyofgoodsorservices
dependentupontheacceptanceofrestrictionsonthedistributionormanufactureofcompetingorothergoodsortheprovisionofcompetinggoodsorotherservices;
• makingthesupplyofparticulargoodsorservicesdependentuponthepurchaseofothergoodsorservicesfromthesupplier;
• imposingrestrictionsastowhereortowhomorinwhatformorquantitiesgoodssuppliedorothergoodsmaybesoldorexported;
• resalepricemaintenance;• tradeagreementsfixingprices
betweenpersons;• refusalstosupplygoodsorservicesto
potentialpurchasers;and• denialsofaccesstoarrangementsor
associationswhicharecrucialtocompetition.
Theseprohibitionsappeartoapplytoallfirms,notonlytofirmsholdingadominantposition.
TheActspecificallyprohibitsdominantfirmsfromengaginginconductwiththeobjectoreffectofpreventingorrestrictingcompetition,including:
• pricefixing;• collusivetenderingandbid-rigging;• marketorcustomerallocationagreements;• collectiveactiontoenforcearrangements;and• theallocationbyquotaofsalesorproduction,
subjecttoanylawtothecontrary.
24. Are there examples of the authorities pursuing firms for abusing a dominant position?
Therearecurrentlynoongoinginvestigationsthatweareawareof,butitisonlyamatteroftimebeforethecompetitionauthoritiesturnthespotlightontothepositionofdominantplayersintheeconomy.
25. Does the legislation impose penalties on firms for the abuse of a dominant position?
TheActgenerallycoversallconductthatisincontraventionoftheAct(anti-competitivetradepractice)andimposesapenalsanctionofuptoSZL250000orimprisonmentforaperiodnotexceedingfiveyears,orboth.
TheActfurtherprovidesthatwheretheoffenceiscommittedbyabodycorporate,everydirectorandofficerofsuchbodycorporateor,ifthebodyofpersonsisafirm,everypartnerofthatfirm,shallbeguiltyofthatoffence,providedthatsuchdirector,officerorpartnershallnotbeguiltyoftheoffenceifhe/sheproves,onabalanceofprobabilitiesthatsuchoffencewascommittedwithouthis/herknowledgeorconsentor,thathe/sheexercisedallduediligencetopreventtheCommissionoftheoffence.
26. Are there rules in relation to price discrimination?
Yes.Section31(b)oftheActcontainsprovisionswhichprohibitpricediscrimination.
27. Does the authority publish its decisions and, if so, is there a website where such decisions are available?
TheCommissiondoesnotpublishitsdecisionsonitswebsite(www.compco.co.sz);however,other
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information,includingtheAct,Regulations,policiesandpressstatements,ispublishedthere.TheCommissionhasalsoestablishedanAdvocacydepartmentthroughwhichithopestointeractwiththepublicandstakeholders.Occasionally,thepresspublishestheoutcomesofapprovedtransactionstogetherwiththeconditionsattachedtothetransactionbytheCommission.
28. General Itisproposedthatthecurrentlegislationbeamendedtoprovideinteralia;
• tochangethemethodofcalculatingfilingfeetomovefromapercentagebasedtoasetamountratherthanaslidingscalebasedonturnover;
• specificexemptionsbesetoutfrompremergernotification,e.g.purchasesintheordinarycourseofbusiness,inheritancetransfersbespecificallyexempted;and
• thatthecriminalsanctionsprovidedforinthecurrentActberemovedandreplacedwithpenalsanctionstiedtoturnover.
TheseandotheramendmentsareintheprocessofbeingformulatedintoaBillwhichweexpectwillbecirculatedforcommentduringthecourseofthisyear.
HENWOOD & COMPANYMantambeHouseLot1/649,BenDunnStreetPOBoxA972SwaziPlaza,H101MbabaneSwazilandT:+26824050385
www.triplec.co.za
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BOWMANS Wilbert Kapinga
Tanzania
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1. What is the relevant competition legislation and who are the enforcers?
TherelevantcompetitionlegislationincludestheFairCompetitionAct,2003(theFCA),theFairCompetitionProcedureRules,2013andtheFairCompetitionTribunalRules,2012.TheFCAdealswithbothcompetitionlawandconsumerprotectionlaw,andisenforcedbytheFairCompetitionCommission(theFCC).ThedecisionsoftheFCCmaybetakenonappealorreviewtotheFairCompetitionTribunal(FCT),establishedundertheFCA(althoughcertaindecisionsrelatingtotelecommunicationspectrummanagementandlicensingthereofmaybetakenonappealtotheHighCourtofTanzania).DecisionsbytheFCTmaybereviewedbytheCourtofAppealofTanzania(theCAT),whiledecisionsoftheHighCourtmaybetakenonappealorreviewtotheCAT.TheCATisthefinalappellatecourtinTanzania.
CompetitionandconsumerprotectionintheenergyandwatersectorsareregulatedbytheEnergyandWaterUtilitiesRegulatoryAuthority(EWURA)undertheEnergyandWaterUtilitiesRegulatoryAuthorityAct,2001.DecisionsoftheEWURAmayalsobetakenonappealtotheFCT.
TheSurfaceandMarineTransportRegulatoryAuthority(SUMATRA)dealswithcompetitionandconsumerprotectioninthesurfaceandmarinetransportsectorundertheSurfaceandMarineTransportRegulatoryAuthorityAct,2001.DecisionsoftheSUMATRAmayalsobetakenonappealtotheFCT.
MergersandacquisitionsinthebankingsectorarenotifiabletotheFCC.However,theprimaryregulatorandapprovingauthorityofmergersandacquisitionsofbankingandfinancialinstitutionsistheBankofTanzaniaintermsoftheBankingFinancialInstitutionsAct,2006.
Decisionsofotherregulators,suchastheTanzaniaCivilAviationAuthorityestablishedundertheCivilAviationAct,2006maybetakenonappealtotheFCT.
MergersandacquisitionsintheelectronicandpostalsectorarenotifiabletotheFCC.However,theprimaryregulatoroftheelectronicandpostalcommunicationssectoristheTanzaniaCommunicationsRegulatoryAuthorityas
establishedundertheElectronicandPostalCommunicationsAct,2010.
2. Are there any proposed amendments or new regulations expected to come into force?
AdraftamendmentoftheFCAispendingparliamentaryprocess;ifpassedtheFCAwillberenamedastheFairCompetitionandConsumerProtectionAct.TheamendmentisintendedtoaddressinstitutionalweaknessesintheFCC,introduceagencyeffectivenessandstrengthenanti-competitivetradeclauses.Itisexpectedthatcriminalsanctionsforcartelbehaviourwillbeincludedandreferencestointentionandnegligenceindetermininganti-competitiveconductwillberemoved.
3. Is the law actively enforced?
TheFCCisanactiveregulatorinrelationtothecontroloftransactionsrequiredtobenotifiedtoitundertheFCA’smergercontrolprovisions.Inrecentyears,theFCChasvigorouslypursuedinvestigationsofpotentiallyanti-competitivebehaviourandconsumercomplaints,andhasimposedvarioussanctionsforviolationsofthelaw.Somerecentinvestigationsincludethoseinthemining,beer,oilmarketing,andinsuranceindustries.
4. What are the current priorities or focus areas of the competition authorities?
ThecurrentprioritiesofthecompetitionauthoritiesaretoensurealevelplayingfieldinthemarketandtoshowcaseTanzaniaasaviableinvestmentenvironmentwithanefficientregulatoryframeworkempoweredtorestraincounterfeittrade,cartelsandmonopolistictendencies.
5. What kind of transaction constitutes a notifiable merger?
AmergerisrequiredtobenotifiedtotheFCCifit(i)constitutesamerger;and(ii)meetstherelevantpecuniarythresholds.ForthepurposesoftheFCA,a‘merger’isdefinedasanacquisitionofshares,abusinessorotherassets,whetherinsideoroutsideTanzania,resultinginthechangeofcontrolofabusiness,partofabusinessoranassetofabusinessinTanzania.
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• formergingpartieswithanannualturnoverexceedingTZS25billionbutlessthanTZS100billion,thefeeisTZS50million;and
• formergingpartieswithanannualturnoverofTZS100billionorabove,thefeeisTZS100million.
ThefeeforfilinganapplicationforexemptionofanagreementissetatTZS8millionplusanannualfeeofTZS2millionmultipliedbythenumberofyearsrequestedforexemption.ThefeepayabletotheFCCforreviewinganagreementisTZS8million.ThefeeforfilingacomplaintundertheFCAisTZS500000.
Butnofeeischargeableto:
• apersonsubmittinginformationconcerninganallegedprohibitedpractice;or
• aconsumersubmittingacomplaintagainstanallegedprohibitedpractice.
ThereisafeeofTZS3millionforawithdrawalofacomplaint.Incaseanapplicationisrefused,thefilingfeepaidinfortheapplicationisnon-refundable.
Butnofeeischargeableto:
• apersonsubmittinginformationconcerninganallegedprohibitedpractice;or
• aconsumersubmittingacomplaintagainstanallegedprohibitedpractice.
ThereisafeeofTZS3millionforawithdrawalofacomplaint.Incaseanapplicationisrefused,thefilingfeepaidinfortheapplicationisnon-refundable.
9. Is it necessary to obtain approval for foreign-to-foreign mergers?
Itisnecessarytoobtainapprovalforaforeign-to-foreignmergerifsuchamergerinvolvesanacquisitionofshares,abusinessorotherassets,resultinginthechangeofcontrolofabusiness,partofabusinessoranassetofabusinessinTanzania,anditmeetstheapplicablethreshold.
10. Are pre-notification contacts with the authorities permitted and are pre-notification meetings normal practice?
TheTanzanianfaircompetitionlegalregimedoesnotprovideforpre-notificationcontactswiththe
6. What are the thresholds for mandatory merger notification (e.g. assets, turnover and/ or market share)?
AccordingtotheFairCompetition(ThresholdforNotificationofaMerger)(Amendment)Order,2017(GNNo.222),whichcameintoeffecton2June2017,thecurrentpecuniarythresholdsareTZS3.5billiondeterminedfromthecombinedturnoverofthemergingparties.Theturnoverisbasedonthelatestauditedfinancialstatementsofthemergingparties.
7. Is there a prohibition on the pre-implementation of a merger? If so, does the legislation make provision for a penalty?
ThemergerregimeinTanzaniaissuspensory.Anotifiablemergerisprohibitedunlessatleast14dayshavelapsedafteracertificateofcompletefilinghasbeengivenbytheFCCfollowingthefiling.TheFCChastodecidewithinthe14dayswhethertheproposedmergershouldbeinvestigated.Ifitisdeterminedthatthemergershouldbeexamined,suchmergeroracquisitionisnotpermittedtotakeplaceforaperiodof90daystoallowtheFCCtoconductandcompleteitsexaminationoftheproposedmerger.TheFCCmayextendtheperiodofinvestigationforafurther30daysafterthefirst90days.ItisanoffencetogiveeffecttoanotifiablemergerthathasnotbeennotifiedtotheFCCatleast14dayspriortoitsimplementation.
Thefailuretonotifyanotifiablemerger,orthepriorimplementationofanotifiablemerger,constitutesanoffenceintermsoftheFCA.TheFCAgrantstheFCCpowertoimposeafineofbetween5%and10%ofanentity’sannualturnoverforfailuretonotifyamerger.TheFCCRulesofProcedure,2013createanobligationontheacquiringfirmtonotifyanotifiablemerger.TheFCCmayimposeapenalty“whereapersoncommitsanoffenceagainsttheAct…”oris…“involvedinsuchanoffence”.
8. What filing fees are required?
ThefeesforfilingmergernotificationsarecalculatedbasedonthecombinedturnoverofthemergingpartiesinTanzaniaassetoutintheirlatestauditedaccountsasfollows:
• formergingpartieswithanannualturnoverofTZS800milliontoTZS25billion,thefeeisTZS25million;
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competitionregulatoryauthorities.ButtheFCCmaybeapproachedforguidanceandconsultationincircumstanceswherethemergersareconsideredcomplex.
11. To what extent are non-competition factors relevant to the assessment of a merger?
Non-competitionfactorssuchasmarketandlabourefficienciesofatransactionmaybetakenintoaccountbytheFCCintheassessmentofamerger.SuchconsiderationsmayleadtheFCCtoapprovemergerssubjecttoconditionsrelatingtothesefactors.
12. Do the authorities contact customers and competitors of the merging parties as part of the merger review process? To what extent are the submissions of customers and competitors influential?
Thecompetitionauthoritiesprocuresubmissionsfromthepublic,andindustryandconsumerorganisationswhichtheauthoritiesmayconsidertohaveaninterestintheproposedtransaction.Theinterventionsofinterestedpersonsandotherstakeholdersaretakenintoconsiderationintheauthorities’decision-makingprocess.
13. Who else can make submissions to the authorities when a merger is being considered? Are employees contacted as part of the process and can employees make submissions?
Anyotherperson,includingcompetitors,consumers,employeesandsupplierswhodemonstratessufficientinterestinthemergermaymakesubmissionstothecompetitionauthorities.
14. Are merging parties given an opportunity to make representations before a decision is issued where the authority intends to prohibit a merger or impose conditions?
InpracticetheFCC,ofitsownvolitionoruponrequest,givesmergingpartiesanopportunitytomakesubmissionsinsupportofthemergernotificationpriortoprohibitingamergerorapprovingamergerwithorwithoutconditions.
15. What are the opportunities for judicial appeal or review of a decision in respect of a merger that the parties are dissatisfied with?
AnypartyaggrievedbythedecisionoftheFCCmaylodgeanappealwiththeFCT.
16. Does the legislation apply to joint ventures?
TheFCAappliestojointventuresthatarecaughtbythedefinitionofamergerandmeetthethresholdsformandatorynotificationtotheFCC.TheFCAprohibitsgivingeffecttoanagreementiftheobject,effectorlikelyeffectoftheagreementistoappreciablyprevent,restrictordistortcompetition.
17. Does the legislation specifically prohibit cartel conduct? If so, are there examples of the authorities pursuing firms for engaging in cartel conduct?
TheFCAregulatesprohibitedpracticesandspecificallyprohibitscertainhorizontalrestrictivepractices(unlawfulconductbetweencompetitors).TheFCAprohibitsanyagreement(whetheranarrangementorunderstanding,formalorunwritten)thathastheobject,effectorlikelyeffectofappreciablypreventing,restrictingordistortingcompetition,including:
• pricefixingbetweencompetitors;• collectiveboycottbycompetitors;• restrictingoutputbetweencompetitors;or• collusivebiddingortendering.
ThereareexamplesofpendingproceedingsbeforeFCCpursuingfirmsforallegedcartelconduct.
18. What are the authorities’ powers of investigation in relation to cartel conduct and other prohibited practices?
Section71oftheFCAempowerstheFCCtosummonanypersonwhoitbelievesisabletoprovideinformation,produceadocumentorgiveevidencethatwillassistintheinvestigationandwillrequiretheperson(s):
• tofurnishtheinformationinwritingsignedbyhimorher,orinthecaseofabodycorporate,signedbyacompetentauthorisedofficeroralegalofficerofthebodycorporate;
• toproducethedocumenttotheFCC;or• toappearbeforetheFCCtogive
evidenceorally.
SearchesandseizuresmaybeconductedbytheauthoritiesuponobtainingawarrantfromtheFCT.Upongrantingofthewarrant,thepoliceandmembersoftheFCCareentitledtoentertherelevantpremisesandconductasearchandmakecopies,ortakeextractsofdocumentstherein.
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19. What are the penalties for cartel conduct? Is there a leniency policy in place? Does the legislation impose criminal sanctions?
AnypersonwhocommitsanoffenceundertheFCAisliabletoafineofnotmorethan10%butnotlessthan5%oftheoffender’sannualturnover.TheFCAalsoempowerstheFCCtoissuecomplianceandcompensatoryorders.Inaddition,iftheFCCissatisfiedthatamonetaryvaluecanreasonablybeplacedonthedamageincludinglossofincomesufferedbyapersonasaresultofanoffenceundertheFCA,theconvictedpersonmaybeliabletoafineoftwicesuchmonetaryvalue,whichtheFCCmayordertobepaidtothepersonsufferingthedamage.WhereapersonchargedwithanoffenceundertheFCAisacorporateentity,everypersonwho,atthetimeofthecommissionoftheoffence,wasadirector,managerorofficerofthecorporateentity,maybechargedjointlyinthesameproceedingswithsuchcorporateentity;andwherethecorporateentityisconvictedoftheoffence,everysuchdirector,managerorofficershallbedeemedtobeguiltyofthatoffenceunlessheorsheprovesthattheoffencewascommittedwithouthisorherknowledgeorthatheorsheexercisedallduediligencetopreventthecommissionoftheoffence.
ThereisnoleniencypolicyinplaceinTanzania.
20. Is there a provision in the legislation providing for a mechanism to apply for exemption from certain parts of the legislation?
ThereisamechanismundertheFCAtoapplytotheFCCforanexemptionofanagreementormerger.Onapplicationbyapartytoagreementsaffectingcompetition,orapplicationbyapartytoamerger,theFCCmay,uponsatisfactionthattheagreementormergerresultsorislikelytoresultinbenefitstothepublic,grantaconditionalorunconditionalexemption.Butincaseofanexemptionforanagreement,theexemptionshallnotexceedaperiodoffiveyears.Asforapplicationsforamergerexemption,theperiodofexemptionsisnottoexceedoneyearfromthedatetheexemptionisgranted.
21. Is minimum resale price maintenance prohibited?
TheFCAdoesnotrefertominimumresalepricemaintenancespecifically.However,minimumresalepricemaintenancemayamounttopricefixing,pricerestricting,orthecontrolofprices,tariffs,surchargesorotherchargeswhichconstitutecontraventionsintermsoftheFCA.
22. In what circumstances are exclusive agreements unlawful? If exclusive agreements raise concerns in specific circumstances, what factors are relevant to their lawfulness or unlawfulness?
Exclusiveagreementswhoseobject,effectorlikelyeffectistoappreciablyprevent,restrictordistortcompetitionareunlawful.Butsuchagreementswouldnotbeunlawfulif(i)noneofthepartiestotheagreementhasadominantpositioninamarketaffectedbytheagreement;and(ii)eitherthecombinedmarketsharesofthepartiestotheagreementofeachmarketaffectedbytheagreementislessthan35%ornoneofthepartiestotheagreementarecompetitors.IncircumstanceswhereanexclusiveagreementisunlawfulonaccountofviolatingtheFCA,theagreementwillstillbelegallyenforceableiftheclausesoftheagreementcreatingexclusivityareseverablefromtherestoftheagreement.
23. Does the legislation prohibit the abuse of a dominant position? If so, what is the threshold for dominance and what conduct amounts to an abuse?
TheFCAprohibitstheabuseofadominantposition.Apersonisregardedasdominantinamarketif(i)actingalone,thatpersoncanprofitablyandmateriallyrestrainorreducecompetitioninthatmarketforasignificantperiodoftime;and(ii)thatperson’sshareoftherelevantmarketexceeds35%.
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Indeterminingwhetherapersonholdsadominantpositioninamarket,thefollowingfactorsaretakenintoaccount:
• competitionfromimportedgoodsorservicessuppliedbypersonsnotresidentorcarryingonbusinessinTanzania;and
• theeconomiccircumstancesoftherelevantmarket,including:• themarketsharesofpersonssupplyingor
acquiringgoodsorservicesinthemarket;• theabilityofthosepersonstoexpandtheir
marketshares;and• thepotentialfornewentriesintothemarket.
Adominantpersoninamarketisprohibitedfromusingthatpositionofdominanceiftheobject,effectorlikelyeffectoftheconductistoappreciablyprevent,restrictordistortcompetition.
24. Are there examples of the authorities pursuing firms for abusing a dominant position?
TherearenopubliclyreportedcasesoftheFCCpursuinganyfirmsforallegedabuseofadominantposition.
25. Does the legislation impose penalties on firms for the abuse of a dominant position?
TheFCAimposesfinesuponpersonswhocommitanoffenceundertheFCA.ThefineleviedundertheFCAisnotmorethan10%butnotlessthan5%ofthatperson’sannualturnover.WhereapersonchargedwithanoffenceundertheFCAisacorporateentityeverypersonwho,atthetimeofthecommissionoftheoffence,wasadirector,managerorofficerofthecorporateentity,maybechargedjointlyinthesameproceedingswithsuchcorporateentity;andwherethecorporateentityisconvictedoftheoffence,everysuchdirector,managerorofficershallbedeemedtobeguiltyofthatoffenceunlesshe/sheprovesthattheoffencewascommittedwithouthis/herknowledgeorthat
he/sheexercisedallduediligencetopreventthecommissionoftheoffence.
26. Are there rules in relation to price discrimination?
Therearenorulesrelatingtopricediscrimination.
27. Does the authority publish its decisions and, if so, is there a website where such decisions are available?
TheFCCwebsitedoesnotcurrentlypublishtheauthorities’decisions.ButanypersoninterestedinadecisionoftheFCCmayrequestacopyofthedecisionfromthedirectorgeneraloftheFCC.
TheFCC’swebpageiswww.competition.or.tz
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Uganda
BOWMANS David FK Mpanga
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ThereisnogenerallawthatcurrentlyprescribesthresholdsformandatorymergernotificationinUganda.
1. What is the relevant competition legislation and who are the enforcers?
Todate,nolegalregimehasbeenputinplacegoverningcompetitionlawinUganda.ThereistheCompetitionBill,2004,whichisyettobetabledbeforeParliament.However,specificlawsregulatecompetitioninparticularsectors.Examplesinclude:
SECTOR LAW REGULATOR
Banking FinancialInstitutionsAct,2004(FIA)CentralBankofUganda(CentralBank)
CapitalmarketsCapitalMarkets(TakeoverandMergers)Regulations,2012
CapitalMarketsAuthority
CommunicationsCommunicationsAct,2013,andtheCommunications(FairCompetition)Regulations,2005(collectively,theCommunicationsAct)
UgandaCommunicationsCommission
Energy/electricity ElectricityAct,1999(Cap.145)(ElectricityAct)ElectricityRegulatoryAuthority(ERA)
Insurance InsuranceActNo.6of2017InsuranceRegulatoryAuthority
Petroleum PetroleumSupplyAct,2003(PSA)MinistryofEnergyandMineralDevelopment
Pharmaceuticals NationalDrugPolicyAndAuthorityActCap.206 NationalDrugAuthority
Otherproducts TheUgandaNationalBureauofStandardsActCap.327TheUgandaNationalBureauofStandards
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• anti-competitivemergers,take-overs,consolidations,acquisitionsorsuchanti-competitivechangesinthemarketstructureresultingfromchangesinownership,control,compositionandstructureofoperators;and
• allotherpracticesandactswithaneffectonfaircompetitionincludingunfairmethodsofcompetition,unfairordeceptiveactsorpractices,thepurposeoreffectofwhichistodistortcompetitioninthecommunicationsmarket.
5. What kind of transaction constitutes a notifiable merger?
Generally,mostofthesectorspecificlawsestablisheswhatconstitutesamergerwithoutprejudicetothecommonlegalunderstandingorhallmarksofamergerbutdonotfocusonestablishingwhatconstitutesanotifiablemerger.
Wenotesomeconsiderationsofwhatconstitutesanotifiablemergerintheexistinglegalframeworks.Forinstance,Article23(5)oftheCOMESACompetitionRegulationsof2004providesthatanotifiablemergerisonewitharegionaldimensionwithavalueatorabovetheprescribedthreshold.
Thelawdoesnotspecificallysetoutwhichtransactionsconstituteanotifiablemerger.Mostlegislationstipulateactivitiesandtransactionsthatwillrequirescrutinyforanti-trustelementsbuthardlysetoutwhatconstitutesanotifiablemerger.
6. What are the thresholds for mandatory merger notification (e.g. assets, turnover and/ or market share)?
ThereisnogenerallawthatcurrentlyprescribesthresholdsformandatorymergernotificationinUganda.However,certainsectorspecificlegislationregulatesthis.
TheCapitalMarkets(TakeoversandMergers)Regulationsof2012prescribethethresholdforamergerbyprohibitingapersonfromexercisingeffectivecontrolinthelistedcompanytheyintendtotakeover.TheseRegulationsprohibitapersonfromacquiringvotingrightsofalistedcompanywhichtogetherwithvotingrightsalreadyheldbythatpersonwouldentitlethatpersontoexercise
Inadditiontosector-specificlegislation,tworegionaltreatiesarerelevanttocompetitionlawinUganda:
• theEastAfricanCommunityCompetitionAct,2006whichhastheforceoflawinUgandabyvirtueoftheEastAfricanCommunityAct,2002(includingtheEastAfricanCommunityCompetitionRegulations,2010);and
• theCOMESACompetitionRegulations,2004andtheCOMESACompetitionRules,2004.
TherearenoinstitutionsinplacecreatedundertheEastAfricanCommunityActtoenforcetheEastAfricancommunitycompetitionregime.
SeetheseparatesectiondealingwithCOMESA.
2. Are there any proposed amendments or new regulations expected to come into force?
Therearenoproposedamendmentsornewregulationsthathavecomeintoforce.
3. Is the law actively enforced?
No,thelawisnotactivelyenforcedandisstillundergoingseveraldevelopmentstocreateenforcementframeworks.
Thereisnodedicateddomesticcompetitionlawregimeinplace.Ourapplicationofanti-trustlawisrestrictedtosector-specificlawsandregulatorsliketheUgandaCommunicationsCommissionunderthecommunicationsindustry.
4. What are the current priorities or focus areas of the competition authorities?
Ugandastillhasn’tdevelopedauniformdomesticcompetitionlegalregimeandassuch,thereisnoregulatorybodyinplace.Theanti-trustregulationfallsbacktosectorspecificregulatorswhichfocusonanyareathattriggersunfaircompetitionintheirrelevantindustries.
Forinstance,theUgandaCommunicationsCommissionfocuseson:
• anti-competitiveagreements,decisionsorconcertedpractices;
• abuseofadominantposition;
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effectivecontrolinthelistedcompanywithoutcomplyingwiththetakeoverprocedure.Effectivecontrolisexercisedwhereaperson:
• holdsmorethan15%butlessthan50%ofthevotingrightsofalistedcompany,andwhoacquiresinanyoneyearmorethan5%ofthevotingrightsofsuchcompany;
• holds50%ormoreofthevotingrightsofalistedcompanyandacquiresadditionalvotingrightsinthelistedcompany;
• acquiresacompanythatholdseffectivecontrolinthelistedcompanyortogetherwiththevotingrightsalreadyheldbyanassociatedpersonorrelatedcompany,resultinginacquiringeffectivecontrol;or
• acquiresashareholdingof20%ormoreinasubsidiaryofalistedcompanythathascontributed50%ormoretotheaverageannualturnoverinthelastthreefinancialyearsofthelistedcompanyprecedingtheacquisition.
ThisisenhancedbytheCapitalMarketsAuthority(Amendment)Actof2016,accordingtowhichtheCapitalMarketsAuthoritymaymonitortakeoversandmergersinrespectoflistedcompaniesinUgandaandadoptmeasuresforthesupervisionandregulationoftakeoversandmergersinordertoprotecttheinterestsofinvestorsandprovidefororderlyandwell-informedcapitalmarkets.Thesameauthoritymaymakeregulationsprovidingfortakeovers,mergersandacquisitionsofsecuritiesinlistedcompanies.
Additionally,regionallawsprovidespecificrulesinrelationtothresholdsformandatorymergernotification.Rule4oftheCOMESARulesontheDeterminationofMergerNotificationThreshold(asamended)providesthatthresholdsformergernotificationarethatthecombinedannualturnoverorcombinedvalueofassets(whicheverishigher)intheCommonMarketofallpartiestoamergershouldbeequaltoorexceed(COMESAdollars)COM$50million;andtheannualturnoverorvalueofassets(whicheverishigher)intheCommonMarketofeachofatleasttwoofthepartiestoamergershouldbeequaltoorexceedCOM$10million,unlesseachofthepartiestoamergerachievesatleasttwo-thirdsofitsaggregateturnoverorassetsintheCommonMarketwithinoneandthesamememberstate.
7. Is there a prohibition on the pre-implementation of a merger? If so, does the legislation make provision for a penalty?
Exceptasrequiredbyparticularsectorlegislation,thereisnogenerallawinUgandathatprohibitsthepre-implementationofamerger.Forinstance;
• InsuranceRegulatoryAuthority–Section75and100ofthenewActrequiresnotificationtotheauthorityanditsapprovalbeforeanychangeincontrolandthisincludesmergers.
• UgandaCommunicationsCommission–Operatorsarenotallowedtoengageinactivitiesthatmayleadtounfaircompletionlikemergers.Regulation6(6)oftheFairCompetitionRegulationprohibitspre-implementationofmergerpriortoauthorisationbytheCommission.
8. What filing fees are required?
ThereisnogenerallawinUgandathatprovidesforthepaymentoffilingfees.However,regionallegislationsuchastheCOMESACompetition(Amendment)Rules,2014requirenotificationofamergertobeaccompaniedbyafeecalculatedat0.1%ofthecombinedannualturnoverorcombinedvalueofassetsintheCommonMarketofthepartiestoamerger,whicheverishigher:providedthatthefeedoesnotexceedCOM$200000(COMESAdollars).
9. Is it necessary to obtain approval for foreign-to-foreign mergers?
Wheretheoperationsofpartiesorownershipofalocallyoperatingcompanyareaffectedbyaforeign-to-foreignmerger,notificationwillberequired.Foraslongasthemergerwillaffecttheownership,structureandmanagementofacompanyoperatinginUganda,approvalisrequired.Byoperation,wefocusonlicensedsectorssuchasinsurance,communication,etc.Forinstance,asubstantialforeignshareholdermergingwithaforeignentitywilltriggernotificationrequirements,sincethatforeignpartyisacontrollingmemberofthelocallylicensedentity.
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competition.Wearenotawareoftheextenttowhichsectorregulatorshavecontactedcustomersorcompetitorsinmergerinvestigations.
13. Who else can make submissions to the authorities when a merger is being considered? Are employees contacted as part of the process and can employees make submissions?
NocompetitionauthorityisinplaceinUgandaasthereisnotyetagenerallawapplicabletocompetition.Wearenotawareoftheextenttowhichsectorregulatorshavecontactedotherthirdparties(includingemployees)inmergerinvestigations.
14. Are merging parties given an opportunity to make representations before a decision is issued where the authority intends to prohibit a merger or impose conditions?
SavefortheUgandaCommunications(FairCompetition)Regulations2005,therearenoprovisionsinsector-specificlawsdetailingtheprocedureformakingrepresentationsbeforeadecisionisissuedininstanceswheretheauthorityintendstoprohibitamerger.Regulation2(2)(d)oftheUgandaCommunications(FairCompetition)Regulations2005providesfortheapplicationoftheCommunications(PracticeandProcedure)Regulations2005infaircompetitionproceedings.PursuanttoRegulation5oftheCommunications(PracticeandProcedure)Regulations2005,mergingpartiesaregiventheopportunitytomakerepresentationsbeforetheCommunicationsCommission.SuchpartiesmayappearbeforetheCommunicationsCommissioneitherinpersonorthroughanadvocate.
15. What are the opportunities for judicial appeal or review of a decision in respect of a merger that the parties are dissatisfied with?
Whereamergerhasbeenprohibitedintermsofasector-specificlaw,anaggrievedpartycanchallengethedecisionoftherelevantauthoritybywayofappealtotheHighCourt.
16. Does the legislation apply to joint ventures?
Yes,anti-trustlegislationscoverjointventuressincetheychangethestructureofacompany.
10. Are pre-notification contacts with the authorities permitted and are pre-notification meetings normal practice?
Thevarioussector-specificlawsdonotprovideforpre-notificationmeetings.However,subjecttoconfidentialityagreementsthatmayrelatetotheproposedtransaction,itispossibletoapproachauthoritiestoholdapre-notificationmeetinginrespectofaproposedtransaction.
11. To what extent are non-competition factors relevant to the assessment of a merger?
Mergerassessmentcriteriaarenotprovidedforinanygenerallaworsectorspecificlaws.Notwithstandingthis,competitionfactorsarerelevanttotheassessmentofamerger.Forinstance,theEastAfricanCommunityActof2006specificallyprohibitsanti-competitivemergersandacquisitionsbyprovidingthatamergeroracquisitionshallnotbeapprovedbytheAuthorityifthemergeroracquisitionleadstothecreation,orstrengtheningofanalreadysubsistingdominantposition,andtherebysubstantiallylesseningcompetitionintherelevantmarket.
Tothisend,therelevantcompetitivefactorstobeconsideredare:
• Thecompetitivestructureofallmarketsaffectedbythemergeroracquisition.
• Thenatureofthemarketsaffectedsuchastheirundertakings,controlofessentialfacilities,integrationandfinancialresources.
• Thecompetitorsandthealternativesavailabletosuppliersandconsumers.
• Anypro-competitiveeffectsofthemergeroracquisitionthatmayoutweightheharmfuleffectsoncompetition.
Noexpressprovisionhasbeenmadefornon-competitionfactors.
12. Do the authorities contact customers and competitors of the merging parties as part of the merger review process? To what extent are the submissions of customers and competitors influential?
NocompetitionauthorityisinplaceinUgandaasthereisnotyetagenerallawapplicableto
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17. Does the legislation specifically prohibit cartel conduct? If so, are there examples of the authorities pursuing firms for engaging in cartel conduct?
Ugandadoesnothavespecificlegislationdefiningwhatconstitutesacartelandsettingoutrestrictionsoncartels.However,somesectorspecificlegislationrestrictindustryoperatorsfromengaginginpracticesthatmayamounttocartelpractices.
WhilethePSAregulatesprohibitedpracticesandspecificallyprohibitscertainhorizontalrestrictivepractices(unlawfulconductbetweencompetitors),theCommunicationsActandElectricityActeachcontainanumbrellaprovisionwithinwhichhorizontalrestrictivepracticesmayfall.
ThePSAstipulatesthatparticipantsinthepetroleumsupplychainshallnotformcartelsorattempttocontrolpricesorcreateartificialshortagesofproductsorservices,orengageinanyotherrestrictivepracticesoranyotheractsoromissionswhicharecontrarytotheprinciplesoffaircompetitionorareintendedtoimpedethefunctioningofthefreemarketforpetroleumproductsinUganda.
TheCommunicationsActprovidesthatanoperatorshallnotengageinanyactivities,whetherbyactoromission,whichhave,orareintendedtoorlikelytohave,theeffectofunfairlypreventing,restrictingordistortingcompetitioninrelationtoanybusinessactivityrelatingtocommunicationservices,includingenteringintoanyagreementorengaginginanyconcertedpracticewithanyotherparty,whichunfairlyprevents,restrictsordistortscompetition.
TheElectricityActprovidesforabreachoffaircompetition.Alicenseeisinbreachoffaircompetitionifthelicenseeconductsanyactivity,aloneortogetherwithotherswhich,intheopinionoftheERA,isintendedtoorislikelytohavetheeffectofrestricting,distortingorotherwisepreventingcompetitioninconnectionwithanyactivitylicensedundertheElectricityActorisprejudicialtotheinterestsofconsumers.
WearenotawareofanyinstancesinUgandawheretheauthoritiesinagivensectorhavepursuedfirmsforengagingincartelconduct.Further,wearealso
notawareofanyspecificcomplaintsthatmayhavebeenmadetoauthoritiesinrespectofcartelconductbyoperatorsinregulatedindustries.
18. What are the authorities’ powers of investigation in relation to cartel conduct and other prohibited practices?
Thereisnogenerallawthatspecificallyconfersinvestigativepowersonanyauthoritytoinvestigatecartels.However,sector-specificlegislationconferssomepowersofinvestigationonofficialswithregardtoanti-competitiveconductingeneral.
IntermsoftheElectricityAct,theERAmayinvestigateanylicenseeorsystemsoperatorwhocommitsanyactoromissioninbreachoffaircompetition.UnderSection74(2)oftheElectricityAct,anypersonwithacomplaintofbreachoffaircompetitionagainstalicenseeshalllodgeacomplainttotheERAandtheERAshall,ifitappearsthatabreachofcompetitionhasbeencommitted,investigatetheactoromissionandwhereappropriateissueanordertoremedythebreach.
TheERAmayappointinspectorsforthepurposesofverifyingcompliancebyalicenseewiththeElectricityAct.Aninspectormay,interalia,enterandinspectatanyreasonabletimeanypremisesownedbyorunderthecontrolofalicenseeinwhichtheinspectorbelievesonreasonablegroundstheretobeadocumentorinformationrelevanttotheenforcementoftheElectricityActandexaminethedocumentorinformationorremovethedocumentorinformationforexaminationorreproduction,asthecasemaybe.
UnderSection8oftheFIA,theCentralBankmay,ifithasreasontobelievethatapersonistransactingorcarryingoutaprohibitedpractice,authoriseanofficeroftheCentralBankto:
• enterintoanypremiseswhichtheCentralBankhasreasontobelieveareoccupiedorusedbyanypersonforanunauthorisedpurpose;
• searchanybook,recordstatement,documentorotheritemused;
• seizeormakeacopyofanybook,recordorstatement;
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• questionanypersonwhoispresentonthepremises,auditors,directors,membersorpartnersofanypersonconductingbusinessonthepremises;
• examineanybook,record,statement,document;or
• requireanypersontoproducethebook,record,statement,documenttotheofficeroftheCentralBankissuingthenotice.
TheCommunicationsActempowerstheCommunicationsCommissiontoappointinspectorswhoarefurnishedwithpowersofsearchandseizureforthepurposesofverifyingcompliancewiththeprovisionsoftheCommunicationsAct.Aninspectormay,interalia,enterandinspectatanyreasonabletimeanyplaceownedbyorunderthecontrolofanoperatorinwhichtheinspectorbelievesonreasonablegroundstheretobeanydocument,information,orapparatusrelevanttotheenforcementoftheCommunicationsActandaninspectormayexaminethedocument,informationorapparatusorremoveitfromexaminationorreproduction,asthecasemaybe.
19. What are the penalties for cartel conduct? Is there a leniency policy in place? Does the legislation impose criminal sanctions?
PSA
ThePSAimposescriminalsanctionsagainstanypersonwhobreachesitsfaircompetitionprovisions(seequestion17).ThePSAprescribesafinenotexceedingUGX2.4million,orimprisonmentnotexceedingfiveyears,orboth,uponconvictionforacontravention.ThelegislationalsoprovidesthatwhereapersonchargedwithanyoffenceunderthePSAisabodycorporate(althoughthedefinitionofabodycorporateisunclear),everypersonwho,atthetimetheoffencewascommitted,wasadirector,manager,secretaryorsimilarofficeroragentofthatbodycorporate,maybechargedjointlyorseverallyinthesameproceedingswiththebodycorporateandonconviction,isliabletothepenaltyprescribedfortheoffence.Inaddition,anypartnerinanunincorporatedenterprise,firmorjointventureshallbejointlyandseverallyliablefortheactsoromissionsofanyotherpartnerinsofarastheactsconcerntheenterprise,firmorjointventure.
Notwithstandingtheabove,adirector,manager,secretaryorsimilarofficer,partneroragent,willnotbeliableifheorsheprovestothesatisfaction
ofthecourtthattheactinquestionwascommittedwithouthis/herknowledge,consentorconnivance,andthathe/shetookallnecessarystepstopreventthecommissionofthatact,havingregardtoallthecircumstances.
Anemployerwhoemploysinorforhis/heroperationorplaceofbusinessanyagent,clerk,servantorotherperson,isanswerableandliableforanyactoromissionofanemployeewhichconstitutesacontraventionofthePSA,insofarasitconcernsthebusinessoftheemployer.Anyholderofapermitorlicence,anyconsumerofapetroleumproductoranyrecognisedconsumerorganisation,mayinitiatecivillegalproceedingsbeforeacourtofcompetentjurisdiction.
CAPITAL MARKETS (TAKEOVER AND MERGER) REGULATIONS 2012
Althoughnotspecificallypenalisingcartelconduct,intermsofRegulation35oftheCapitalMarkets(Takeover&Merger)Regulations2012,whereapersonrefusesorfailstofurnishanydocument,paperorinformationrequiredundertheRegulations,theCapitalMarketsAuthoritymay,ifitissatisfiedaftergivingthepersonanopportunitytobeheardthattherefusalorcontraventionwaswilful,imposeacivilpenaltyorsumofmoneynotexceeding200currencypointsasmaybespecifiedintheorder.AcurrencypointisworthUGX20000.
COMMUNICATIONS ACT
TheCommunicationsActdoesnotimposespecificpenaltiesonfirmsfortheirparticipationincartelactivities.However,itimposesageneralsanctionofafinenotexceedingUGX600000uponconvictionforacontravention.Inaddition,apersonwhosustainslossordamageasaresultofanyactoromissionthatiscontrarytotheCommunicationsActmay,inacourtofcompetentjurisdiction,sueforandrecoverthelossordamagesufferedfromanypersonwhoengagedin,directed,authorised,consentedtoand/orparticipatedintheactoromission.
ELECTRICITY ACT
TheElectricityActprovidesthatalicenseefoundtobeinbreachoffaircompetitionbytheERA
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shallpaysuchamountofcompensationastheERAmaydeterminetotheconsumerforanylosscausedtohimorher.
ThereiscurrentlynoleniencypolicyinplaceforcartelconductinUganda.
20. Is there a provision in the legislation providing for a mechanism to apply for exemption from certain parts of the legislation?
Thereiscurrentlynospecificlegislationinthisregard.However,sector-specificlegislationmakesprovisionforexemptionsoflimitedcircumstances:
• ThePSAprovidesforexemptionfromitsprovisionsinthecaseofadeclarationofapetroleumsupplyemergency.Saveforthis,pricesforpetroleumproductsthroughthesupplychainaregovernedbyforcesofsupplyanddemandinafreeandcompetitivemarket.
• TheCommunicationActprovidesforanexemptiontocarryoutcertainprohibitedactstotheextentthattheCommunicationsCommissionissatisfiedthattheActcontributestotheimprovementofgoodsandservicesinUgandaandgenerallypromotescommunicationsservicesasstipulatedintheCommunicationsAct.
21. Is minimum resale price maintenance prohibited?
Thereiscurrentlynospecificlegislationprovidingfortheprohibitionofminimumresalepricemaintenance.
22. In what circumstances are exclusive agreements unlawful? If exclusive agreements raise concerns in specific circumstances, what factors are relevant to their lawfulness or unlawfulness?
Thereisnospecificlegislationprovidingfortheunlawfulnessorlawfulnessofexclusiveagreements.Wearenotawareofanyfactorsrelevanttoanyauthority’sdeterminationofthelegalityofanexclusiveagreement.
TheUgandaCommunicationsActunderthesectorrestrictpracticesandagreementsthatmayleadtoadistortionoftheindustry.Thatis,undersection53anyabusebyanoperator,independentlyor
withothers,ofadominantpositionwhichunfairlyexcludesorlimitscompetitionbetweentheoperatorandanyotherparty;orenteringintoanagreementorengaginginanyconcertedpracticewithanyotherparty,whichunfairlyprevents,restrictsordistortscompetition;oreffectinganti-competitivechangesinthemarketstructureand,inparticular,anti-competitivemergersandacquisitionsinthecommunicationssector.
Exclusivecontractsmaybeperceivedasagreementsthatdistortthemarketunfairly.
23. Does the legislation prohibit the abuse of a dominant position? If so, what is the threshold for dominance and what conduct amounts to an abuse?
Sector-specificlawsregulateabusesofadominantposition:
• inthecommunicationssector,theCommunicationsActprohibitstheabuseofadominantposition.TheCommunicationsActstipulatesthatanoperatorshallnotengageinanyactivities,whetherbyactoromission,whichhave,orareintendedtoorarelikelytohave,theeffectofunfairlypreventing,restrictingordistortingcompetitioninrelationtoanybusinessactivityrelatingtocommunicationservices.Prohibitedactivitiesincludeanyabuseofadominantpositionbyanoperator,eitherindependentlyorwithothers,whichunfairlyexcludesorlimitscompetitionbetweensuchoperatorandanyotherparty.TheCommunicationsActdoesnotprovideathresholdfordominance;
• withoutexpressreferencetotheabuseofadominantposition,thePSAprovidesthatparticipantsinthepetroleumsupplychainshallnot,interalia,attempttocontrolpricesorcreateartificialshortagesofproductsorservices,orengageinanyotherrestrictivepracticesoranyotheractsoromissionswhicharecontrarytotheprinciplesoffaircompetitionorareintendedtoimpedethefunctioningofthefreemarketforpetroleumproductsinUganda;and
• inasimilarvein,withoutexpresslyreferringtotheabuseofadominantposition,theElectricityActstipulatesthatalicenseeisinbreachoffaircompetitioniftheyconductanyactivity,aloneortogetherwithothers,whichintheopinionoftheERAisintendedtohaveorislikelytohave
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theeffectofrestricting,distortingorotherwisepreventingcompetitioninconnectionwithanyactivitylicensedundertheElectricityAct.
24. Are there examples of the authorities pursuing firms for abusing a dominant position?
Wearenotawareofanyinstanceinthisjurisdictionwheresectorregulatorshavepursuedfirmsforabusingadominantposition.However,weareawareofacasefiledintheCommercialDivisionoftheHighCourtofUganda,thegistofwhichwaswhetherornotamobiletelecommunicationsfirmwithadominantpositioninthetelecommunicationsmarketinUgandawasabusingthatdominantposition.
InEzeeMoney(Uganda)LtdvMTNUgandaLtdHighCourtCivilSuitNo.330of2013,theplaintiffhasinstitutedasuitagainstthedefendantallegingthatthedefendanthas:
• engagedinactivitiesintendedtohavetheeffectofrestrictingordistortingcompetitioninrelationtothebusinessactivityofcommunicationservicescontrarytoSection53(1)oftheUgandaCommunicationsAct,2013;and
• breachedthestatutorydutynottodenycustomersservicesunfairlycontrarytoSection56oftheUgandaCommunicationsAct,2013.
Tocountercompetition,amongotherthings,MTNforcedmobilemoneyagentstosignexclusivityagreementsprohibitingthemfromofferingEzeemoneyservices,itpunishedthosewhobreachedtheseagreementsbyconfiscatingtheirimplements,anditalsoinfluencedanaggregatortodeclineofferingaggregationservicestoEzeemoney.EzeemoneyclaimedthatthesebreachedseveralprovisionsundertheCommunicationsAct,2013thatprohibitedabuseofdominantpositionandalsoprohibitedunfaircompetition.TheCourtfoundinfavourofEzeemoneyandawardeditdamagesofUGX2.3billion.
25. Does the legislation impose penalties on firms for the abuse of a dominant position?
Sector-specificlegislationdoesnotimposespecificpenaltiesonfirmsforabuseofadominantposition.However,thegeneralpenaltiesintheCommunicationsActandthePetroleumAct(describedinquestion19)mayapplytoactswhichconstituteabuseofadominantposition.
26. Are there rules in relation to price discrimination?
TheElectricityActprovidesthatalicenseeshallnot,infixingtariffsandtermsofsupply,showunduepreferenceordiscriminationamongcustomerssimilarlysituatedorinsimilarcircumstances.ThePSAalsoprovidesthatparticipantsinthesupplychainshallselltheirproductstoallpersonswithoutanyformofdeliberatediscriminationbymeansofquality,quantityandprice.
TheCommunicationsindustryrestrictspricediscriminationthroughtheFairCompetitionRegulationswhichshowwhatchangestopricearenotacceptableandconstituteunfairconduct.ThisissetoutintheScheduletotheRegulation.
27. Does the authority publish its decisions and, if so, is there a website where such decisions are available?
Wearenotawareofanyspecificwebsitehostedbyanyofthevarioussectorregulatorsthatmaycontaintheirdecisions.
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Zambia
CORPUS LEGAL PRACTITIONERS Sydney Chisenga
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1. What is the relevant competition legislation and who are the enforcers?
TherelevantlegislationistheCompetitionandConsumerProtectionActNo.24of2010,andvariousguidelines/regulationsissuedfromtimetotime,whichareenforcedbytheCompetitionandConsumerProtectionCommission(theCCPC).AlldisputesareadjudicateduponbytheCompetitionandConsumerProtectionTribunal,which,generally,hasjurisdictiontohearappealsfromapersonwho,oranenterprisewhich,isaggrieved,withanorder,decisionordirectionoftheCCPC.
2. Are there any proposed amendments or new regulations expected to come into force?
TherearecurrentlynoproposedamendmentstotheAct,nortotheCompetitionandConsumerProtection(General)Regulations,2011.However,theCCPCrecentlyinvitedthepublictocommentonitsdraftGuidelinesonAbuseofDominance(whichwilloutlinetheCCPC’sgeneralapproachtoenforcingtheabuseofdominanceprovisionsintheAct)anddraftGuidelinesforIssuanceofFines(whichshalloutlinetheprinciplesandpracticesforissuanceoffinesundertheAct).
TheCCPCissuedtheCompetitionandConsumerProtectionCommissionSettlementProcedureGuidelinesin2016,whichsetouttheframeworkforrewardingco-operationintheconductofproceedingscommencedforcontraveningtheprovisionsoftheActconcerningabuseofdominanceandrestrictivebusinesspractices.Further,theleniencyprogrammehascomeintoeffect.
3. Is the law actively enforced?
TheCCPCactivelyenforcestheAct.Sinceitsinceptionunderprecedinglegislation,theCCPChasconductedinvestigationsintoprohibitedrestrictiveandanti-competitivepractices,conducteddawn
raidsandfinedcompaniesforfailuretonotifymergers.TheActgivestheCCPCthepowertoundertakeaninvestigation,eitheruponreceiptofacomplaintoratitsowninstigation,wheretherearereasonablegroundstobelievethatthereisorislikelytobeacontraventionoftheAct.
In2013,theCCPCstatedbeforetheParliamentaryCommitteeonEconomicAffairs,EnergyandLabour,thatithademployednewstrategiesforinvestigatinganti-competitivetradepractices,includingcarryingoutunannouncedsearchestocollectevidence(i.e.dawnraids);introducingaleniencyprogramme;andappointinginspectorsfromlocalauthoritiesacrossthecountry.Furthermore,theCCPChassignedMemorandaofUnderstandingwithsectorregulatorswherethereisanelementofcompetitionandconsumerprotectioninthesectorallegislation.Thismeasureisaimedatenhancingthemonitoringofcompetitioninthedomesticeconomythroughco-ordinationandharmonisationofmattersrelatingtocompetitionwithsectorregulators.
4. What are the current priorities or focus areas of the competition authorities?
ThecurrentfocusareasoftheCCPCarecartelregulation,mergercontrol,restrictivebusinesspracticesandabuseofdominancecases.TheCCPCisalsofocusingonthesensitisationtothegeneralpublicoftheirconsumerrightsundertheAct.
5. What kind of transaction constitutes a notifiable merger?
TheActessentiallydefinesamergerastheacquisitionofalegalinterestbyanenterpriseinanotherenterprise.Therefore,amergeroccurswhereanenterprisedirectlyorindirectlyacquiresorestablishesdirectorindirectcontroloverthewholeorpartofthebusinessofanotherenterprise,orwhentwoormoreenterprisesmutuallyagreetoadoptarrangementsforcommonownershiporcontroloverthewholeorpartoftheirrespectivebusinesses.
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AmergerascontemplatedundertheActoccursinthefollowinginstances:
• whereanenterprisepurchasessharesorleasesassetsin,oracquiresaninterestin,anysharesorassetsbelongingtoanotherenterprise;
• whereanenterpriseamalgamatesorcombineswithanotherenterprise;or
• whereajointventureoccursbetweentwoormoreindependententerprises.
Apersonorentitywillbeconsideredtohavecontroloveranenterpriseifthatperson:
• beneficiallyownsmorethanhalfoftheissuedsharecapitaloftheenterprise;
• isentitledtovoteamajorityofthevotesthatmaybecastatageneralmeetingoftheenterprise,orhastheabilitytocontrolthevotingofamajorityofthosevoteseitherdirectlyorthroughacontrolledentityofthatenterprise;
• isabletoappointorvetotheappointmentofamajorityofthedirectorsoftheenterprise;
• isaholdingcompanyandtheenterpriseisasubsidiaryofthatcompany;
• hastheabilitytomateriallyinfluencethepolicyoftheenterpriseinamannercomparabletoapersonwho,inordinarycommercialpractice,canexercisetheelementofcontrolreferredtointhefirstfourbulletpoints;or
• hastheabilitytovetostrategicdecisionsoftheenterprise,suchastheappointmentofdirectorsandotherstrategicdecisionswhichmayaffecttheoperationsoftheenterprise.
TheCompetitionandConsumerProtectionCommissionGuidelinesforMergersstatethattherearethreetypesofmergerstypicallyassessedbytheCommission,namelyhorizontal,verticalandconglomeratemergers.Horizontalmergersarethosebetweenenterprisesoperatinginthesamerelevantmarket(s)atthesamelevelofbusinessandareofconcernbecausetheyresultdirectlyintheeliminationofcompetition.VerticalmergerstakeplacebetweenenterprisesoperatingatdifferentlevelsoftheproductionorsupplychainofanindustryandmostlyconcerntheCommissionwhenoneofthemergingpartieshasadominantpositionofmarketpowerineithermarket.Conglomeratemergersarebetweenundertakingsindifferentmarkets,withnofunctionallink,butmayinsomecasesresultinreducedcompetition.
6. What are the thresholds for mandatory merger notification (e.g. assets, turnover and/ or market share)?
AmergertransactionrequiresauthorisationbytheCCPCinanyinstancewherethecombinedturnoverorassets(whicheverishigher)ofthemergingpartiesinZambiaisatleast50millionfeeunits(ZMW15000000)inthemergingparties’mostrecentfinancialyearinwhichthesefiguresareavailable.
7. Is there a prohibition on the pre-implementation of a merger? If so, does the legislation make provision for a penalty?
EnterprisesmaynotimplementamergerbeforeobtainingtherequisiteapprovalfromtheCCPC.IfamergerisimplementedwithoutthepriorapprovaloftheCCPC,themergerisvoidandtheenterprisecommitsanoffence.Theenterprisemaybeliableforafinenotexceeding10%ofitsannualturnoverandthedirectorscanbeprosecuted.
8. What filing fees are required?
AccordingtotheRegulations,theprescribedfeeforanapplicationforauthorisationis0.1%oftheturnover/assets(whicheverishigher)withamaximumcapof16666667feeunits(ZMW5000000).
ThecombinedturnoverorassetsreferstothecombinedannualturnoverorcombinedassetsoftheentitylocatedinZambiainwhichthetargetentityhasaninterest.ThenotificationfeeisbasedonthetotalvaluesoftheturnoverorassetsoftheeconomicentityinZambia,evenifproportionsoftheseamountsaregeneratedoutsidethemarket(s)forthemergerassessment.ForpartieswhollydomiciledoutsideZambia,thenotificationfeewillbebasedonthetotalvalueofturnovergeneratedinZambia.ItshouldfurtherbenotedthatitisthepositionoftheCCPCthatifamergingpartyhassubsidiarieslocatedinZambia,theyformasingleeconomicunit.
Further,theRegulationsprovidethatanapplicationfornegativeclearance(wherethevalueoftheapplicant’sturnoverorassetsislessthanorequalto100millionfeeunitsorZMW30million),isapproximatelyZMW21000.Iftheapplicant’sturnoverorassetsexceed100millionfeeunits
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(ZMW30million),thefilingfeeforanapplicationfornegativeclearanceisapproximatelyZMW45000.
9. Is it necessary to obtain approval for foreign-to-foreign mergers?
Foreign-to-foreignmergersthathaveanindirectordirecteffectonthestructureoflocalmarketsarenotifiable.Theeffectsdoctrineappliesinthisrespectandtheforeign-to-foreignmergermustbenotified.
TheCCPCfocusesonforeign-to-foreignmergerswherethemergingforeignentitieshaveasubsidiaryorinterestinanundertakingoperatingorlocatedinZambia.AnenterpriseinZambiathatcomeswithinthecontrolofaforeignenterprisewillbesubjecttonotificationandreviewasfarastheoperationhasaneffectoncompetitioninZambia.Insuchacase,theturnoverorassetsthatwillbeassessedwillbethoseofanenterprisepresent(i.e.theenterpriseisdulyregisteredinaccordancewithZambianlawandgeneratesturnoverwithinZambia)orwithapresenceinZambia(i.e.theenterpriseisnotdulyregisteredinaccordancewithZambianlawbuthassalesinZambia).IntheeventthatthecontrolofaZambianenterprisecomesaboutpurelyasaresultofamergeroracquisitioninvolvingenterpriseswhollydomiciledoutsideZambia,theCCPCwillnonethelessassessthemergerifithasalocalnexus.TheCCPCwillassertjurisdictionoversuchtransactionsonlyiftheforeignenterprisehasalocalnexusofsufficientmateriality,suchashavingsubsidiariesinZambiaorhavingmade10%ofitssalesinZambiaoverthelastthreeyears.
10. Are pre-notification contacts with the authorities permitted and are pre-notification meetings normal practice?
AlthoughtheActdoesnotprovideforpre-notificationcontactwiththeCCPC,theCCPCdoes,inpractice,encouragesuchmeetings.ForpartiesapplyingtotheCCPCtoeitherauthoriseahorizontalorverticalagreementormerger,ortograntanexemptionornegativeclearanceforatransaction,theCCPCencouragespre-applicationmeetings.Duringsuchmeetings,theCCPCandthepartiestothetransactiondeterminetheprecise
amountofinformationrequiredinanotification,whichmayresultinasignificantreductionoftheinformationrequired.Itisnormalpracticetoholdpre-notificationmeetingswiththeCCPCformergersinordertoconcludethetransactionefficiently.
11. To what extent are non-competition factors relevant to the assessment of a merger?
TheCCPCappliesthepublicinteresttest(weighingbothpublicbenefitandpublicdetriment)inalmostallmergerevaluations.However,thereisnodefinitionintheActnorintheRegulationsofwhat’publicinterest‘is.Thereisnoexhaustivelistoffactorsthatfallunderthepublicinteresttestbutfundamentallyissuessuchasemploymentandtheeffectoftheproposedmergerontheeconomyintherelevantmarketorregionaffectedbythemergerareofparamountconsideration.
12. Do the authorities contact customers and competitors of the merging parties as part of the merger review process? To what extent are the submissions of customers and competitors influential?
Aspartofitsassessmentprocess,theCCPCtypicallyconductspublicconsultationsbyseekingcommentsfromrelevantindustryplayersandotherstakeholderswithrespecttoproposedmergers.Totheextentthatcompetitorsandcustomersmaybeconsulted,competitorsandcustomersplayaroleinthereviewprocess.TheActdoesnotdefinethemeaningof‘public’andthereforebothcustomersandcompetitorsareconsideredtofallwithintheambitofpublicascontainedintheAct.
13. Who else can make submissions to the authorities when a merger is being considered? Are employees contacted as part of the process and can employees make submissions?
Asindicatedabove,aspartofitsassessmentprocess,theCommissiontypicallyconductspublicconsultationsseekingcommentsfromthepublicwithrespecttoproposedmergers.TheActdoesnotdefinethemeaningofpublicandthereforeemployeesareconsideredtobepartofthepublicundertheActandcanaccordinglymakesubmissionsduringtheassessmentprocess.However,inpracticethisrarelyhappens.
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14. Are merging parties given an opportunity to make representations before a decision is issued where the authority intends to prohibit a merger or impose conditions?
NeithertheActnortheRegulationsprovideforthemergingpartiestobeaffordedanopportunitytomakerepresentationsbeforeadecisionisissued.Insomeinstances,atthediscretionoftheCCPC,partiesmayberequestedtomakerepresentationsorclarifycertainaspectsofthemerger.
15. What are the opportunities for judicial appeal or review of a decision in respect of a merger that the parties are dissatisfied with?
TheActprovidesforappealstotheTribunal.Therefore,anypersonoranenterprisethatisaggrievedbyanorderordirectionoftheCCPCmayappealtotheTribunalwithin30daysoftheorderordirection.AnypersonwishingtoappealagainstadecisionoftheTribunalmayappealtotheHighCourtwithin30daysoftheTribunal’sdetermination.
16. Does the legislation apply to joint ventures?
ThemergerprovisionsoftheActapplytojointventurearrangementswhereajointventureoccursbetweentwoormoreindependententerprisesandthejointventurefallswithinthedefinitionofamerger.TheMergerGuidelinesstatethatajointventureoccursbetweentwoormoreindependententerprises,witheachenterprisemakingasubstantialcontributiontotheimplementationofacommonprojectwhichisaseparatebusinessbutisjointlyownedandcontrolledbytheparententerprises.TheMergerGuidelinesdistinguishbetweenfullfunctionjointventures(whichrequiremergerapproval)andauxiliaryjointventures(whichdonotrequiremergerapproval).Afull-functionjointventureperformsonalastingbasisallthefunctionsofanautonomouseconomicentity,competingwithotherenterprisesinarelevantmarketwithsufficientresourcesandstafftooperateindependentlyontherelevantmarket.Auxiliaryjointventures,ontheotherhand,fulfilaspecificpurposefortheirparententerprises(e.g.insales,productionorresearchanddevelopment).
17. Does the legislation specifically prohibit cartel conduct? If so, are there examples of the authorities pursuing firms for engaging in cartel conduct?
Section8oftheActprohibits,andviewsasanti-competitive,anycategoryofagreement,decisionorconcertedpracticewhichhasasitsobjectoreffect,theprevention,restrictionordistortionofcompetitiontoanappreciableextentinZambia.Section9oftheActspecificallyprohibitshorizontalagreementsbetweenenterpriseswhich:
• fix(directlyorindirectly),apurchaseorsellingprice,oranyothertradingcondition;
• dividemarketsbyallocatingcustomers,suppliersorterritories;
• involvebid-rigging;• setproductionquotas;or• provideforcollectiverefusaltodealin,or
supply,goodsorservices.
Inviewoftheforegoing,cartelconductisprohibited.
Forexample,in2013,theCCPC’sBoardofCommissionersfinedOmniaFertilizerZambiaLtdandNyiomboInvestmentsLtd,5%oftheirrespectiveannualturnoversforcontraveningSection9(3)oftheAct.TheBoardfoundthatOmniaandNyiomboparticipatedincartelisticbehaviourwhilesupplyingfertiliserundertheFarmerInputSupportProgramme(FISP)between2007and2011.TheBoardfurtherdecidedthatbothOmniaandNyiomboshouldbeprosecutedinaccordancewithSection9oftheAct,astheyhadenteredintoananti-competitiveagreementaimedatdividingthemarketsforthesupplyoffertiliserundertheFISP.TheBoardfurtherheldthatOmniaandNyiombo’sagreementhadexpresslystatedthattheywouldco-operateinthedistributionandsupplyoffertiliserinZambiaandthattheprimaryobjectivewasforeachcompanytofocusonsupplyinganddistributingfertiliserintheallocatedzoneswhereithadasustainablecompetitiveadvantage.
TheBoardnotedthatthetrendhadbeenthatwhereoneofthecompaniessubmittedatender,theotherdidnot,leadingtoonlyoneofthemwinningthetender.TheBoardalsoobservedthatthetwocompanieswereexchanginginformationrelatingtothepricesoffertiliserandappearedto
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haveengagedinbid-riggingduringthetenderingprocessforfertiliserundertheFISP.Thereafter,thecompaniesappealedandtheTribunalfoundtheCCPC’sdecisiontobenullandvoidandsetitasideforirregularity.InSeptember2014,theHighCourtforZambiaupheldtheTribunal’sdecision.
18. What are the authorities’ powers of investigation in relation to cartel conduct and other prohibited practices?
Section55oftheActpermitstheCCPCtoconductinvestigations,eitheratitsowninitiativeoruponreceiptofacomplaint,wheretherearereasonablegroundstobelievethatthereis,orislikelytobe,acontraventionofanyprovisionoftheAct.Uponcommencingtheinvestigation,theCCPCgiveswrittennoticetothepersonunderinvestigationandmayalsocarryoutpublicconsultationsduringtheinvestigation.Forpurposesofaninvestigation,theCCPCmay,bynoticeinwritingservedonanyperson,requirethatpersontoeither:
• furnishtotheCCPC,inastatementsignedbythatpersonordirector,memberorothercompetentofficer,employeeoragentofthebodycorporate(asthecasemaybe),anyinformationpertainingtoanymatterspecifiedinthenoticewhichtheCCPCconsidersrelevanttotheinvestigation;
• producetotheCCPC,orthepersonspecifiedinthenotice,anyotherdocumentorarticle,asspecifiedinthenotice,whichrelatestoanymatterwhichtheCCPCconsidersrelevanttotheinvestigation;or
• appearbeforetheCCPC,orthepersonspecifiedinthenotice,togiveevidenceorproduceanydocumentorarticlespecifiedinthenotice.
Uponcommencinganinvestigation,theBoardmay,pursuanttoSection7oftheAct,appointasuitablepersontobeaninspectoronsuchtermsandconditionsastheBoardmaydetermine.SuchinspectorhastheauthoritytoapplytotheHighCourtforawarrantthatwouldenablehimorhertoconductasearchandseizure.Section7(4)oftheActprovidesthataninspectormay,withawarrant,atanyreasonabletime:
• enterandsearchanypremisesoccupiedbyanenterpriseoranyotherpremises,includingaprivatedwelling,whereinformationor
documentswhichmayberelevanttoaninvestigationmaybekept;
• searchanypersononthepremisesiftherearereasonablegroundsforbelievingthatthepersonhaspersonalpossessionofanydocumentorarticlethathasabearingon
• theinvestigation;• examineanydocumentorarticlefoundonthe
premisesthathasabearingontheinvestigation;• requireinformationtobegivenaboutany
documentorarticleby:• theownerofthepremises;• thepersonincontrolofthepremises;• anypersonwhohascontrolofthe
documentorarticle;or• anyotherpersonwhomayhave
theinformation;• takeextractsfromormakecopiesofanybook
ordocumentfoundonthepremisesthathasabearingontheinvestigation;
• useanycomputersystemonthepremises,orrequireassistanceofanypersononthepremisestousethecomputersystem,to:• searchanydatacontainedin,oravailable
tothecomputersystem;• reproduceanyrecordfromthedata;• seizeanyoutputfromthecomputerfor
examinationandcopying;and• attachand,ifnecessary,removefromthe
premisesforexaminationandsafeguardinganydocumentorarticlethatappearstohaveabearingontheinvestigation.
19. What are the penalties for cartel conduct? Is there a leniency policy in place? Does the legislation impose criminal sanctions?
TheActempowerstheCCPCtosetoutguidelineswithrespecttoaleniencyprogramme.TheCCPChasaleniencyprogrammepolicyinplace.Theleniencyprogrammeallowsforpartialortotalexemptionfromanyprescribedpenaltiesthatwouldotherwisebeapplicabletoaparticipantofaprohibitedagreement(i.e.anyagreementsdeemedasanti-competitiveorrestrictiveofcompetitionundertheAct)whichconfirmstheexistenceoftheprohibitedagreementandself-reportsitsparticipationthereintotheCCPC.
Anenterprisewhichisfoundtohaveengagedincartelactivitiesisliableforafinenotexceeding10%ofitsannualturnover.TheActalsoprovidesforcriminalsanctionsforcartelconduct.TheCCPCmayimposeafinenotexceeding500000penalty
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units(ZMW150000)orimprisonmentforaperiodnotexceedingfiveyears,orboth,onanydirectorormanagerofanenterprisethatisfoundtohaveengagedincartelactivities.
TheActfurtherprovidesthatwhereapenaltyisnotspecificallyprovidedfortheoffence,thepunishmentuponconvictioninrespectofapersonwhocommitsthatoffenceisafinenotexceeding100000penaltyunits(ZMW30000)orimprisonmentforaperiodnotexceedingoneyear,orboth.
20. Is there a provision in the legislation providing for a mechanism to apply for exemption from certain parts of the legislation?
TheActcontainsaprovisionforamechanismtoapplyforexemptionfromcertainpartsoftheAct.Forinstance,anenterprisethatwishestobeexemptedfromaprohibitionunderSection12(whichrelatestotheprohibitionofhorizontalagreements)mayapplytotheCCPCforexemptionintheprescribedmannerandformuponpaymentoftheprescribedfee.
21. Is minimum resale price maintenance prohibited?
TheActprohibitsresalepricemaintenancewithrespecttoverticalagreements.Itisaperseprohibition.However,asupplierorproducermayrecommendaminimumresalepricetothere-sellerofagoodorserviceif:
• thesupplierorproducermakesitcleartothere-sellerthattherecommendationisnotbinding;and
• theproducthasapricestatedonitandthewords‘recommendedprice’appearnexttothestatedprice.
22. In what circumstances are exclusive agreements unlawful? If exclusive agreements raise concerns in specific circumstances, what factors are relevant to their lawfulness or unlawfulness?
Thereisnospecificprohibitionofexclusiveagreementsunlesstheagreementviolatesoneoftheprohibitionsintheverticalandhorizontal
provisions.TheActprohibitscertainhorizontalagreementsbetweenenterprises.Ahorizontalagreementbetweenenterprisesisprohibitedperse,andvoid,iftheagreement:• directlyorindirectlyfixesapurchaseorselling
priceoranyothertradingconditions;• dividesmarketsbyallocatingcustomers,
suppliersorterritories,specifictypesofgoodsorservices;
• involvesbid-rigging,unlessthepersonrequestingthebidisinformedofthetermsoftheagreementpriortothemakingofthebid;
• setsproductionquotas;or• providesforcollectiverefusaltodealin,or
supply,goodsorservices.
Further,theActprohibitsperseverticalagreementsthatprovideforminimumresalepricemaintenanceunlesstheagreementmakesitclearthatarecommendedpriceisnotbindingandistherecommendedpriceonly.
23. Does the legislation prohibit the abuse of a dominant position? If so, what is the threshold for dominance and what conduct amounts to an abuse?
TheActprovidesthatanenterprisemustrefrainfromanyactorconductif,throughabuseoracquisitionofadominantpositionofmarketpower,theactorconductofthatenterpriselimitsaccesstomarketsorotherwiseundulyrestrainscompetition,orhasorislikelytohaveanadverseeffectontradeortheeconomyingeneral.
Thethresholdfordominancerelatestothesupplyofgoodsorservicesif30%ormoreofthosegoodsorservicesaresuppliedoracquiredbyoneenterpriseor60%ormoreofthosegoodsorservicesaresuppliedoracquiredbynotmorethanthreeenterprises.
Abuseofdominanceincludes:
• directlyorindirectlyimposingunfairpurchaseorsellingpricesorotherunfairtradingconditions;
• limitingorrestrictingproduction,marketoutletsormarketaccess,investment,technicaldevelopmentortechnologicalprogressinamannerthataffectscompetition;
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• applyingdissimilarconditionstoequivalenttransactionswithothertradingparties;
• makingtheconclusionofcontractssubjecttoacceptancebyotherpartiesofsupplementaryconditionswhichbytheirnatureoraccordingtocommercialusagehavenoconnectionwiththesubjectmatterofthecontracts;
• denyinganypersonaccesstoanessentialfacility;
• charginganexcessivepricetothedetrimentofconsumers;or
• sellinggoodsbelowtheirmarginalorvariablecost.
24. Are there examples of the authorities pursuing firms for abusing a dominant position?
In2016,undertheAct,accordingtoamediaoutlet,theCCPCfinedtheZambiaAirportsCorporationLtd(ZACL)3%ofitsannualturnoverforabusingitsdominantpositionofmarketpower.ThemediaoutletfurtherreportedthattheCCPC’sexecutivedirector,ChilufyaSampa,statedthatZACLwasdominantandhadmarketpoweranditsabilitytoapplydifferentialratestoairlineclientsandgroundhandlersforequivalenttransactionswasaviolationofSection16(1)andSection16(2)(c)oftheAct.Accordingtothemediaoutlet,SampafurtherstatedthatZACL’sthreatstowithdrawconcessionstoZambeziAirlinesandtheapplicationofexcessivechargestoZEGALtdforwaterandthehandlingofEmiratesAirlinesconstitutedanabuseofdominance,asithadaneffectonhowtheseenterprisestradeandtheeconomyingeneral.ThismatterisnowbeforetheTribunal.
25. Does the legislation impose penalties on firms for the abuse of a dominant position?
TheCCPCmayimposeafineonanenterprisefortheabuseofadominantposition.Thefineimposedmaynotexceed10%oftheenterprise’sannualturnover.
26. Are there rules in relation to price discrimination?
Theprovisionsinrelationtopricediscriminationrelatetotheabuseofdominancewheredirectlyorindirectlyimposingunfairpurchaseorsellingprices,orotherunfairtradingconditions,isunlawful.
27. Does the authority publish its decisions and, if so, is there a website where such decisions are available?
BoarddecisionsrelatingtomergerreviewsissuedbytheCCPCaretypicallymadeavailableonlytothepartiesinvolvedandarenotpublishedontheCCPC’swebsite(www.ccpc.org.zm).However,theCCPChaspublishedcertainmergerdecisionsonitswebsite(www.ccpc.org.zm/press-releases/).MembersofthepublicmaysubmitwrittenrequestsforcopiesofBoarddecisionstotheCCPC’sexecutivedirector.
CORPUS LEGAL PRACTITIONERS ElundaOfficePark,ElundaII,GroundfloorStandNo.4645AddisAbabaRoundaboutRhodesparkPOBox32115LusakaZambiaT:+260211372303
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Zimbabwe
SCANLEN & HOLDERNESS Nellie Tiyago-Jinjika
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1. What is the relevant competition legislation and who are the enforcers? ThemainlegislationistheCompetitionAct(Chapter14:28)whichwasadoptedin1996andbecameoperationalin1998.ThisActappliestoalleconomicactivitieswithinorhavinganeffectwithinZimbabwe(includingtheactivitiesofthegovernmentandotherstatutorybodiesorparastatalorganisations).TheCompetitionAmendmentActNo.29of2002wasthenlaterenacted.Notably,theAmendmentActmadepre-mergernotificationofmergersmandatoryformergersoveracertainthreshold.
Thefollowingregulationshavealsobeenputinplace:Competition(NotificationofMergers)Regulations(StatutoryInstrument270of2002);Competition(AuthorisationofMergers)Regulations(StatutoryInstrument295/1999);Competition(FeesforApplicationforAuthorisationofMergersandRestrictivePractices)StatutoryInstrument97of2001;Competition(NotifiableMergerThresholds)Regulations(StatutoryInstrument195of2002);Competition(Anti-dumpingandCountervailingDuties)(Investigation)Regulations(StatutoryInstrument266of2002);Competition(FeesforInspectionandCopyingofDocuments)Regulations(StatutoryInstrument266of2001);Competition(Safeguards)(Investigation)Regulations(StatutoryInstrument217of2006);andCompetition(AdvisoryOpinion)Regulations(StatutoryInstrument26of2011).
EnforcementofthecompetitionlawsisbytheCompetitionCommission(theCommission),abodycorporateestablishedbytheAct.
2. Are there any proposed amendments or new regulations expected to come into force?
ThedecisionthathasnowbeentakenistoamendthecurrentlegislationandisconsideringtheratificationoftheCOMESAcompetitionlawswhichwillthereafterbecomepartoftheZimbabwean
CompetitionLaws.AnamendmentratherthanarepealoftheActwillalsoresultinthemaintenanceofthepresenttradetariffsprovisions.
3. Is the law actively enforced?
BelowisasummaryofthemattersthathavebeenattendedtobytheCommissionduringtheperiod2009to2016.
4. What are the current priorities or focus areas of the competition authorities?
TheCommissionhasbeen,overtheyears,quiteactiveinitsmergerregulationfunction;however,thecurrentfocusareaisnowinvestigationofcartels.ThedraftamendmentActincludesdeterrentadministrativepenaltiesforengagingincartelconduct.
5. What kind of transaction constitutes a notifiable merger?
Mergersaredefinedasthedirectorindirectacquisitionorestablishmentofacontrollinginterestbyoneormorepersonsinthewholeorpartofthebusinessofacompetitor,supplier,customerorotherpersonwhetherthatcontrollinginterestisachievedasaresultofthepurchaseorleaseofthesharesorassetsofacompetitor,supplier,customerorotherperson;theamalgamationorcombinationwithacompetitor,supplier,customerorotherperson;oranyothermeans.Inorderforamergertobenotifiable,thetransactionmustmeettheprescribedthresholdwithcontrollinginteresttobevestedintheacquiringfirm.
YEAR 2009 2010 2011 2012 2013 2014 2015 2016
MERGERS/ACQUISITIONS
15 14 16 11 13 8 25 20
RESTRICTIVE PRACTICES (COMPLAINTS)
15 8 21 16 24 7 5 3
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6. What are the thresholds for mandatory merger notification (e.g. assets, turnover and/ or market share)?
ThecurrentthresholdfornotifiablemergersisUSD1.2million.Thisisdeterminedthrough(i)combiningtheannualturnoveroftheacquiringfirmandthetargetfirminrelationtoanyparty,whoisin,intoorfromZimbabwe;or(ii)combiningtheassetsinZimbabweoftheacquiringfirmandthetargetfirm.InternationalAccountingStandardsareusedforcomputation.
7. Is there a prohibition on the pre-implementation of a merger? If so, does the legislation make provision for a penalty?
ApartytoanotifiablemergerisrequiredtonotifytheCommissioninwritingoftheproposedmergerwithin30daysofeithertheconclusionofthemergeragreementbetweenthemergingpartiesortheacquisitionbyanyoneofthepartiestothatmergerofacontrollinginterestinanother.ImplementationofamergerwithouttheapprovaloftheCommissionmayresultinapenaltyof10%ofeitherorbothofthemergingparties’annualturnoverinZimbabweasreflectedintheaccountsofanypartyconcernedfortheprecedingfinancialyear.Thereis,therefore,onlyacaponthepercentageapplicable.TheCommissionmayrecoverthispenaltythroughcivilproceedings.
8. What filing fees are required?
Currentlythenotificationfilingfeeis0.5%ofthecombinedannualturnoverorcombinedvalueofassetsinZimbabweofthemergingpartieswhicheverishigher.TheminimumpayablebeingUSD10000andmaximumbeingUSD50000.Theannualturnoverofafirmatanygiventimeshallbebasedontheincomestatementfortheimmediatepreviousfinancialyear,andtheassetvalueofafirmatanytimeshallbebasedonthegrossvalueofthefirm'sassetsasrecordedonthefirm'sbalancesheetasattheendoftheimmediatepreviousfinancialyear.Wheretheacquiringfirmisasubsidiarycompany,thecombinedturnoverofthegroupofcompaniesinwhichtheacquiringfirmisasubsidiaryshallbeincluded.Wherethetargetfirmcontrolsanyotherfirmorbusinessthecombinedturnoverofsuchfirmshallbeincluded.Paymentofthefilingfee
shallbeinanyconvertiblecurrencycalculatedattheofficialexchangerateprevailingattheendoftheimmediatepreviousfinancialyear.
9. Is it necessary to obtain approval for foreign-to-foreign mergers?
ThemergerthresholdappliestothecombinedannualturnoverorassetsinZimbabwewithnoqualificationwithregardtotheoriginoftheparticipants.IftwoforeigncompanieswhicharemerginghaveacombinedannualturnoverorassetsinZimbabweabovethethreshold,thensuchamergerrequirestheapprovaloftheCommission.
10. Are pre-notification contacts with the authorities permitted and are pre-notification meetings normal practice?
TheCommissionwelcomespre-notificationcontactandisevenwillingtoprepareawrittenopinionontheintendedmerger.
11. To what extent are non-competition factors relevant to the assessment of a merger?
TheCommissionwilltakeaholisticviewoftheeffectofaproposedmerger.Theinformationsoughtfromthepartiesfocusesonmattersdirectlyorindirectlyrelatedtocompetition.Factorssuchastheimpactofamergeronemployment,branddevelopment,consumerprotectionandpricecontrolarealsoconsidered.
12. Do the authorities contact customers and competitors of the merging parties as part of the merger review process? To what extent are the submissions of customers and competitors influential?
TheCommissionhasextensivepowerstoinvestigatewhetheranymergerhasbeen,isbeingorisproposedtobemadeand/orthenatureandextentofanycontrollinginterestthatisheldormaybeacquiredinanymergerorproposedmerger.Theinvestigationcanincludecallingforwrittensubmissionsandholdinganenquiryintothematter.Inthecourseofsuchaninvestigation,customersurveysmaybeconductedandcompetitorsmaybeinterviewed.TheextenttowhichthesecommentsandsubmissionswillbeinfluentialiswithinthediscretionoftheCommission.
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13. Who else can make submissions to the authorities when a merger is being considered? Are employees contacted as part of the process and can employees make submissions?
AnypersonwhomtheCommissiondeemsnecessarycanbeinterviewed.Additionally,unlessthemergerwillbeprejudicedorwhereitisunlikelythatinformationthatwillmateriallyassisttheCommissionwillbeobtained,theCommissionisrequiredtopublishanoticeinthegazetteandinsuchnewspaperastheCommissionconsidersappropriatecallinguponanyinterestedpersonwhowishestodosotosubmitwrittenrepresentationstotheCommissionwithregardtotheauthorisationsought.
14. Are merging parties given an opportunity to make representations before a decision is issued where the authority intends to prohibit a merger or impose conditions?
Mergingpartiesmayberequiredtoprovideadditionalinformationwhichcouldbeusefulforasuccessfulapplication.
15. What are the opportunities for judicial appeal or review of a decision in respect of a merger that the parties are dissatisfied with?
AnappealagainstthedecisionoftheCommissionmaybefiledbyanypersonaggrievedbythedecision.TheappealisfiledwithAdministrativeCourtatwhichpointtheAdministrativeCourtRulesapplywithrespecttotheformofthenoticeofappealandthemannerinwhichtheproceedingswillcontinuethereafter.
16. Does the legislation apply to joint ventures?
Thedefinitionofmergeriswideenoughtoincludejointventuresasitexpresslystatesthatmergerincludesamalgamationorcombinationwithacompetitor,supplier,customerorotherperson.
17. Does the legislation specifically prohibit cartel conduct? If so, are there examples of the authorities pursuing firms for engaging in cartel conduct?
Certainpracticesthatareakintocartelswithinthefollowingbroadlydefinedcategoriesofunfairbusinesspracticeandrestrictivepracticeareprohibited;an‘unfairbusinesspractice’which
includescartel-likeactivitysuchaspredatorypricing,bid-riggingandcollusivearrangementsbetweencompetitors;a‘restrictivepractice’whichisdefinedinbroadtermsandistakentomeananyofthefollowingthatrestrictscompetitiondirectlyorindirectlytoamaterialdegree:(i)agreement,arrangementorunderstandingwhetherenforceableornotbetweentwoormorepersons;(ii)anybusinesspracticeormethodoftrading;(iii)anydeliberateactoromissiononthepartofanyperson,whetheractingindependentlyorinconcertwithanyotherperson;or(iv)anysituationarisingoutoftheactivitiesofanypersonorclassofpersons.
Collusivearrangementsbetweencompetitorsleadingtopricefixingand/ormarketdivisionandanti-competitivepracticeshavenotbeentolerated.Investigationsintocollusivearrangementshavebeenundertakeninanumberofindustriesandsectors,includingthecommercialbankingservicessector,thecementindustry,thedrycleaningservicessectorandtherealestateindustry.
18. What are the authorities’ powers of investigation in relation to cartel conduct and other prohibited practices?
TheCommissionhasthepowertoinvestigateanyrestrictivepractice,businessagreement,arrangement,understandingormethodoftradingwhichcreatesormaintainsarestrictivepractice.ApreliminaryinvestigationmaybeconductedbytheCommission'sinvestigatingofficerswhomayarriveatthepremisesofthepartieswithoutnotice.InvestigatingofficersandtheCommissionitselfarepermittedto,atreasonabletimes,enteranypremiseswherethereisareasonablesuspicionthatthereisabook,recordordocumentrelatingtoanyrestrictivepracticeorunfairtrade-practiceoranyactualorpotentialmergermonopolysituation.Anypersonwhodoesnotco-operateorhindersaninvestigation,commitsanoffenceforwhichafineand/orimprisonmentofsixmonthsmaybeimposed.
TheCommissionmayrequirethatduringtheprocessofinvestigation,therestrictivepracticeinquestionceasesandthatpersonsmakewrittensubmissiontoassistwiththeinvestigation.NoticeofthiswillbepublishedintheGovernmentGazetteandalocalnewspaper.Thenoticeremainsvaliduntilcompletionoftheinvestigationorsixmonths,whicheveristheshorter.
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19. What are the penalties for cartel conduct? Is there a leniency policy in place? Does the legislation impose criminal sanctions?
Administrativepenaltiesofupto10%oftheannualturnoverofeitherorboththeacquiringandtargetundertakingsinZimbabwe,intheprecedingyear,maybeimposed.
Further,anyindividualwhoentersinto,engagesin,orotherwisegiveseffecttoanunfairtradepracticeshallbeguiltyofanoffenceandliabletoafinenotexceedinglevel12(USD2000)ortoimprisonmentforaperiodnotexceedingtwoyears,ortoboth;orinanyothercase,toafinenotexceedinglevel14(USD5000).
20. Is there a provision in the legislation providing for a mechanism to apply for exemption from certain parts of the legislation?
ThereisnoprovisionprovidingforexemptionfrompartsoftheAct.
21. Is minimum resale price maintenance prohibited?
Yes,asthisisanunfairbusinesspractice.
22. In what circumstances are exclusive agreements unlawful? If exclusive agreements raise concerns in specific circumstances, what factors are relevant to their lawfulness or unlawfulness?
Theseareunlawfulwheretheyinclude(i)supplyingorofferingtosupplygoodsorservicesataparticularprice;or(ii)givingorallowing,orofferingtogiveorallow,adiscount,allowance,rebateorcreditontheconditionthattheotherpersonagreesnottoacquiregoodsorservicesofaparticularkindordescription,ornotacquirefromacompetitorofthesupplierornottore-supplyspecifiedpersonsorplaces.
23. Does the legislation prohibit the abuse of a dominant position? If so, what is the threshold for dominance and what conduct amounts to an abuse?
Abuseofadominantpositionortheabuseofsubstantialmarketcontrolisprohibitedunlessitisprovedthatthereexistpro-competitive
features.Pro-competitivefeaturesincludethefactthatthepracticedoesnotinanywayrestrictordiscouragecompetitiontoamaterialdegreeinanybusiness,tradeorindustryandisunlikelytodoso;orthepracticeisreasonablynecessarytoprotectconsumersagainstinjuryorharm;orthattheterminationofthepracticewoulddenyconsumersotherspecificandsubstantialbenefitsoradvantagesenjoyedbythem.
24. Are there examples of the authorities pursuing firms for abusing a dominant position?
IntheCigaretteDistributionCasetheCommissionreceivedcomplaintsfromBritishAmericanTobaccoZimbabwe(Holdings)Ltd(BAT)thatCutRagProcessors(Pvt)Ltd,anewentrantintothecigarettemanufacturinganddistributionindustry,wasdistributingitsnewcigarettebrandwithahealthwarningclausethatdidnotconformwiththeclausestipulatedbytheMinistryofHealthandChildWelfare,andthiswasharmingthesaleofBATproductsonthemarket.TheCommissionnotedthatBATdominatedtherelevantmanufacturedcigarettemarketwithamarketshareofabout96%,whileCutRagProcessors’shareofthemarketwasmarginalcomprisingofonly2.5%ofthemarketandtheremaining1.5%comprisingofimports.Interestingly,eventhoughBATwasthefirmthathadlaidthecomplaint,itwasBATthatwasfoundtobeabusingitsdominantpositioninthesensethatitwasengaginginpredatorybehaviourwhichhadtheeffectofdrivingCutRagProcessorsoutofthecigarettedistributionmarketorpreventingtheeffectiveentryofthecompanyintothecigarettemanufacturingindustry.
25. Does the legislation impose penalties on firms for the abuse of a dominant position?
TheCommissionmaydeclarethemonopolytobeunlawful;requirethepersonexercisingcontroloverthebusinessoreconomicactivityconcernedtotakestepstoterminatethemonopolywithinaspecifiedperiod;prohibitorrestricttheacquisitionbythepersonofanyundertakingorassetswhichintheCommission’sopinionwillleadtoamonopolyormerger;requirethepersontosecuredissolutionofanyorganisationorterminationofanyassociation;andgenerallymakesuchprovisionthatis,intheopinionoftheCommission,reasonablynecessarytoterminateorpreventamonopolysituationoralleviateitseffects.
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26. Are there rules in relation to price discrimination?
Therearenospecificrulesrelatingtopricediscrimination.
27. Does the authority publish its decisions and, if so, is there a website where such decisions are available?
OrdersthataremadebytheCommissionmaybepublishedintheGovernmentGazetteofZimbabwe.
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Key Contacts
ROBERT LEGHChairmanandSeniorPartnerJohannesburg,SouthAfrica T:+27116699352E: [email protected]
ASHLEIGH HALECo-HeadofCorporateJohannesburg,SouthAfrica
T: +27116699342E: [email protected]
CLAIRE REIDYPartnerJohannesburg,SouthAfrica
T: +27116699547E: [email protected]
GOMOLEMO KEKESIPartnerJohannesburg,SouthAfrica
T: +27116699360E: [email protected]
IONA DHLADHLAPartnerJohannesburg,SouthAfrica
T: +27116699326E: [email protected]
WILLIAM KASOZIManagingPartner,UgandaKampala,Uganda T: +256414254540E: [email protected]
DEREK LÖTTERHeadofCompetitionJohannesburg,SouthAfrica
T: +27116699357E: [email protected]
WILBERT KAPINGAManagingPartner,TanzaniaDaresSalaam,Tanzania
T: +255768988642E: [email protected]
JUDD LURIEPartnerJohannesburg,SouthAfrica T: +27116699651E: [email protected]
JOYCE KARANJA-NG'ANG'APartnerNairobi,Kenya:CoulsonHarney
T:+254202899000E: [email protected]
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LUCINDA VERSTERPartnerJohannesburg,SouthAfrica
T: +27116699422E:[email protected]
MARYANNE ANGUMUTHOOPartnerJohannesburg,SouthAfrica
T: +27116699395E: [email protected]
RUDOLPH LABUSCHAGNEPartnerCapeTown,SouthAfrica T: +27214807908E: [email protected]
TAMARA DINIPartnerCapeTown,SouthAfrica
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