Competition law enforcement has intensified across Africa in the last 18 months with significant developments occurring in several countries, as well as at a regional level. These developments will pave the way for more intensive enforcement in 2016.
Increased focus on cartels
Initially, newer African competition authorities have tended to focus on merger review. Efforts to detect and prosecute cartels have largely been left to the more established authorities, like the South African Competition Commission (SACC), which has been in operation since 1999. The SACC has reached cartel settlement agreements that have raised more than R4 billion in fines. The SACC has cracked major cartels in the cement, construction, bread and milk industries. In 2015 alone 35 consent orders were confirmed by the Competition Tribunal in which companies involved in price-fixing and bid rigging in South Africa agreed to pay more than R318 million in fines.
Over the last 18 months, several other African authorities have also actively pursued cartels. These investigations have tended to build on the experience gained in South Africa and other international jurisdictions. For example, authorities in Botswana and Namibia have focussed on price-fixing and bid-rigging in concentrated sectors that have been investigated elsewhere in Africa and abroad, such as the construction, health, financial services and agricultural industries. Recent examples include the investigations by the Botswana Competition Authority into alleged bid-rigging of public tenders for school rations, sugar beans, infant formula milk and building materials; the Kenyan investigation into price fixing by maize traders and millers; probes by the Zambian authority into alleged over-pricing of cement, baked goods and sugar, as well as investigations by the Tanzanian authority into alleged anti-competitive practices in the cement and petroleum industries.
African authorities are increasingly using their statutory powers to execute dawn raids as part of cartel investigations. For example, the Zambian Competition and Consumer Protection Commission (CCPC) conducted three dawn raids in the maize milling sector in 2015, and the South African Commission conducted four separate search and seizures in the fire control, recruitment advertising, furniture removal and liquid petroleum gas industries. These investigations were still underway at the time of writing.
Many of the SACC’s successful cartel prosecutions have been sparked or bolstered by an application for leniency in terms of the SACC’s corporate leniency policy (CLP), including the cement, construction and bread prosecutions. The CLP has been a hugely effective weapon in the South African Commission’s arsenal since it was amended in 2008, with 126 applications for leniency in the Commission’s 2013 and 2014 financial years alone.
This positive experience has prompted other African authorities to adopt their own leniency policies. For example, Mauritius introduced a CLP in 2012, and recently, the authority imposed its first fines on a cartel as a result of an application for leniency by Phoenix Beverages, which admitted that it had agreed with its competitor Stag Beverages that it would exit the Mauritian beer market, and in exchange, Phoenix Beverages would not sell beer in Madagascar. Phoenix Beverages paid a reduced fine of Rs20 million and Stag Beverages paid Rs6 million. Botswana, Zambia and Kenya have now also adopted leniency programmes, whilst Tanzania, Namibia and Madagascar are still at the drafting stage.
As has occurred in more established jurisdictions, an initial round of cartel enforcement has generated challenges before the courts based on constitutional or administrative law grounds. For example, in South Africa, challenges have been brought to the SACC’s power to expand its complaints after they have been referred to the Competition Tribunal for adjudication, as well as to implement a leniency policy. In Swaziland alleged poultry cartelists have contested the powers of the Swaziland Competition Commission to impose administrative penalties. This case is still pending. In 2015, the Namibia Association of Medical Aid Funds (NAMAF) was accused by the Namibian authority, the NaCC, of conducting its affairs in a collusive manner. NAMAF brought an application alleging that the NaCC has no jurisdiction over NAMAF and its member funds, which it also argues are not ‘undertakings’ for gain. A decision is expected soon. These procedural challenges are crucial to establish the limits on the power wielded by these new competition authorities, and will determine the shape of enforcement on the African Continent for many years to come.
Proliferation of national competition authorities and increased regional enforcement
Over 20 African countries now have national competition laws and in the last 18 months, several countries have taken steps towards enacting competition legislation, including Ethiopia and Mozambique.
In 2013, Mozambique adopted its long awaited competition regulations, which will for the first time introduce a merger control regime in that country. In light of the current high levels of investment into Mozambique, particularly in the energy sector, businesses should take particular note of the low thresholds for compulsory merger filings and the high filing fees.
Ethiopia passed a proclamation in March 2014 to establish the Trade Competition and Consumer Protection Authority, which is set to implement new laws to address abuse of market dominance, anti-competitive agreements and other practices that lessen competition.1
The last 18 months have also witnessed the establishment of several regional African competition law agencies by organisations like the Common Market for Eastern and Southern Africa (COMESA) and the Central African Economic and Monetary Community (CEMAC), which seem set to operate alongside and in some cases, in parallel to, national regulators.
The most prominent regional body is the COMESA Competition Commission (CCC), which has attempted to overcome initial negative reactions to its unclear merger regulations and high filing fees and to establish itself as a credible body in the African competition domain. In April 2015, the CCC announced that a merger in COMESA is only notifiable if both the acquiring firm and the target firm, or either the acquiring firm or the target firm, operate in two or more COMESA Member States; the combined annual turnover or combined value of assets, whichever is higher, in COMESA of all parties to a merger equals or exceeds USD50m; and the annual turnover or value of assets, whichever is higher, in COMESA of each of at least two of the parties to a merger equals or exceeds USD10m, unless each of the parties to a merger achieves at least two-thirds of its aggregate turnover or assets in COMESA within one and the same COMESA Member State. The maximum filing fee has been substantially reduced – the filing fee is now the higher of 0.1% of the combined annual turnover or combined asset value in COMESA, capped at a maximum of USD 200,000.2
In just over 24 months, the CCC has already reviewed 49 phase two mergers (those which are classified by the CCC as likely to raise substantive concerns or which indicate a need for extensive evidentiary enquiries). The CCC also referred one merger in 2015 to a national competition authority, in the Holcim/Lafarge merger, which was referred for investigation by the Competition Commission of Mauritius (CCM) because of concerns about the particular impact of the merger in that country. This merger highlights the complexities of the referral process, as the CCM only approved this proposed merger after almost 320 days and imposed the condition that Holcim must divest its shares in its local Mauritian entity to an independent purchaser.
It is likely that the CCC will attempt to play a more assertive role in competition law enforcement in Africa in the future, with more in-depth merger investigations and more referrals of proposed mergers involving potentially anti-competitive effects to national competition authorities, particularly in jurisdictions with experienced authorities in operation like Kenya and Zambia.
CEMAC was founded in 1994 and is composed of six Central African States – Cameroon, the Republic of Congo, the Central African Republic, Chad, Gabon and Equatorial Guinea. It has enacted merger control regulations but so far, there has been little case law of interest and no action seems to have been taken against companies who have failed to notify transactions.
The East African Community (EAC) is another regional African economic organization that has enacted antitrust regulations, although it is not yet fully operating. The EAC Secretariat is in the final stages of setting up the organizational structure of the EAC Competition Authority, which will regulate competition in Burundi, Kenya, Rwanda, Tanzania, and Uganda. The authority is expected to commence operations soon. Notification of mergers will be mandatory, although the thresholds for filings and the applicable filing fees have not yet been published. It is unclear how this regime will interface with COMESA and apply in states like Tanzania and Kenya (a COMESA member state) that have their own local authorities.
These new regional antitrust regulators will play a valuable role in preventing anti-competitive conduct and concentrations which may result in a prevention or lessening of competition on the Continent—particularly in countries like the DRC, Djibouti, Eritrea, Libya, and Uganda that do not yet have a national competition authority. There is the potential for regional bodies to act as a cheaper and faster one-stop-shop for merger clearances and to build up significant economic and technical expertise, particularly in dealing with cartels and monopolies that impact cross-border trade. Countries with insufficient resources may find it more effective to rely on antitrust enforcement by these regional authorities, than to establish their own national authorities. However, particularly in relation to merger control, there currently is no attempt to clarify the relationship between the national and the regional authorities, or between the various regional authorities. Kenya, for example, belongs to both the EAC and COMESA, and Tanzania has its own local competition authority and belongs to the EAC.
Increasingly interventionist merger control
The last 18 months have witnessed African authorities playing an increasingly interventionist role in merger control across the Continent. Merging parties can expect increased scrutiny and a greater likelihood of concerns being raised by African authorities.
For example, in the last 18 months, African authorities raised substantive competition concerns in a number of proposed mergers. In November 2015, the Competition Authority of Kenya (CAK) expressed concerns about the acquisition by Kenyan retailer Tusky of six additional retail supermarkets stores from Ukwala and only approved the transaction on condition that the number of acquired stores was limited to one. Meanwhile, the Botswana Competition Authority (BCA) recently approved the merger between Botswana casino operators Peermont and Sun International subject to a range of conditions, including the requirement for operational separation between Sun International’s existing Botswana businesses and the target.
However, in many African countries, competition authorities can examine not only the impact of a proposed deal on competition - such as whether a proposed merger will reduce consumer choices or enable suppliers to raise prices - but also whether a merger raises any concerns from a ‘public interest’ perspective. In South Africa, ‘public interest’ grounds mentioned by the legislation include whether the merger may result in job losses or otherwise impact on employees, and whether the merger may be to the detriment of local suppliers. In January 2016, the SACC drafted a revised version of guidance on these issues, which we expect to be published in the course of 2016. In the event that substantial amendments are not made, the investigation of these public interest issues in South Africa in line with the guidance is likely to protract merger reviews and force merging parties to disclose significant volumes of information to the SACC. A number of other African authorities have similar powers to investigate public interest issues arising from mergers in their competition laws, including Botswana, Kenya, Namibia, Zambia and Zimbabwe. Use of these powers is on the rise. For example, the NaCC recently imposed a two year moratorium on merger-related retrenchments in Namibia as a result of the merger of AngloGold Ashanti Namibia and Guinea Fowl Investments Twenty Six Limited.
Authorities are also becoming more vigilant in ensuring that conditions imposed on mergers are adhered to. For example, in 2015, the Tanzanian Fair Competition Commission announced that it was considering reversing its approval of the merger between East African Breweries and Serengeti Breweries because these two companies had allegedly failed to comply with the condition that Serengeti Breweries achieve a particular growth target. In August 2012, the Zambian CCPC announced a challenge to whether the conditions imposed by it on the BP Global (now Puma Zambia)/Castrol merger had been complied with. BP Global allegedly failed to comply with the condition to appoint local and independent distributors for Castrol products. The CCPC fined Puma Zambia and Dana Oil 50 billion Kwacha, which is 2% and 0.1% of their respective annual turnovers for the breach. Puma appealed and the fine was overturned because the Competition and Consumer Protection Tribunal (Tribunal) held that the CCPC may not impose a fine on parties who fail to comply with such conditions without first approaching the Tribunal.
These developments signal that competition law will increase in Africa over the next 18 months, as the newer authorities gain experience and additional national and regional enforcement regimes come online. Companies need to tailor their training and compliance programs to ensure that they are not at risk of substantial fines for cartel conduct and are ready to deal with a dawn raid in multiple jurisdictions across the Continent.
Businesses planning acquisitions will need to take into account the complexities of merger regulation across the Continent. In particular, merging parties will have to address potential public interest concerns in their merger filings and interactions with competition authorities on the Continent. Adequate time to obtain clearances from African competition law authorities needs to be built into transaction timetables at the outset of negotiating a transaction.
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