AFRICA COMPETITION LAW NEWSLETTER

DEVELOPMENTS IN SOUTH AFRICA

1. Competition commission initiates a market inquiry into the online intermediation platform market
2. Competition commission publishes final guidelines for competition in the South African automotive market
3. The commission is consulting stakeholders in respect of proposed codes of conduct in the food supply chain
4. The CCSA finalises it’s inquiry into the land based public passenger transport sector
5. Supreme Court of appeal confirms that the High Court has jurisdiction to hear review applications concerning the validity of complaint initiations and referrals
6. The CCSA issues its first public interest merger prohibition

DEVELOPMENTS IN THE REST OF AFRICA

1. Namibia introduces a national competition policy
2. Competition authority of Kenya’s introduction of the informant reward scheme
3. Comesa competition commission issues cautionary notice
4. Nigeria’s FCCPC issues a merger control regulation and guidelines to establish a formal merger control framework
5. The economic community of West Africa takes further steps towards setting up its regional competition authority for operations
6. The Mozambican competition regulatory authority starts operations
7. Egyptian cabinet approves its first pre-merger notification regime

DEVELOPMENTS IN SOUTH AFRICA

COMPETITION COMMISSION INITIATES A MARKET INQUIRY INTO THE ONLINE INTERMEDIATION PLATFORM MARKET

The South African Competition Commission (CCSA) announced its intention to conduct a market inquiry into the market for online intermediation platforms (OIPMI) on 19 February 2021 by publishing, for stakeholder comments, the draft terms of reference for a market inquiry that the CCSA intends to conduct during the course of 2021. The inquiry was officially launched on 19 May 2021 and is set to run for 18 months (but this period could be extended).

The OIPMI focuses on online intermediation platforms, which the CCSA describes as digital platforms which intermediate goods and services between businesses and customers. The CCSA views these platforms as an important route to market for small and medium sized enterprises (SMEs) and firms owned by historically disadvantaged persons (HDIs), and for these business’ participation in the South African economy. The CCSA has accordingly prioritised these platforms for a narrow market inquiry, as opposed to a broader inquiry into various other digital platforms and markets.

The OIPMI is examining so-called online intermediation platforms across different service lines, including (i) eCommerce marketplaces, (ii) online classifieds, (iii) travel and accommodation aggregators, (iv) short term accommodation intermediators, (v) food delivery, (vi) mobile application stores and other platforms which may be identified during the course of the OIPMI.

It is the CCSA’s view that online intermediation platforms markets in South Africa may have features which impede, restrict or distort competition. These are said to include:

• features which may hinder online intermediation platform competition, such as (i) “most-favored-nation” or “price parity” clauses, (ii) exclusive contracts which prevent multi-homing for products or services, (iii) predation, and (iv) conglomeration where the online intermediation platform owner is active across multiple markets;
• features which may hinder competition between suppliers of goods or services, which relate mainly to circumstances where the platform owner also sells goods or services to consumers. These include (i) self-preferencing; (ii) pricing restrictions to avoid price competition, (iii) unauthorized use of business user transaction data to target the consumers of other business users, (iv) promoting the products of larger firms as opposed to SMEs and HDIs;
• the concern that online intermediation platforms may exploit SME or HDI suppliers of goods or services by imposing unfair terms and high trading charges.

All of these features and their alleged potential to harm competition, were also identified by the CCSA in its policy paper in respect of competition in the digital economy (Digital Economy Paper). The Digital Economy Paper set out the CCSA’s review of the potential theories of harm which may arise in and be exclusive to digital platforms, and its policy proposals to address those theories of harm. A first draft of the Digital Economy Paper was publish during September 2020 and was followed by a revised version on 19 February 2021.

COMPETITION COMMISSION PUBLISHES FINAL GUIDELINES FOR COMPETITION IN THE SOUTH AFRICAN AUTOMOTIVE MARKET

On 10 December 2020, the CCSA published the final version of its guidelines for competition in the South African automotive aftermarket (Guidelines). The final Guidelines came more than three years after the CCSA started public consultations with the relevant stakeholders in September 2017.

Having initially intended to publish a voluntary code of conduct to be signed by the relevant stakeholders in the automotive aftermarket supply chain, the CCSA eventually settled on non-binding guidelines following a failure to reach consensus with the stakeholders on the content of the proposed code of conduct.

The Guidelines are intended to provide guidance to firms in the automotive aftermarkets supply chain on the ways to promote competition through facilitating increased participation by SMEs and firms operated by HDIs, and increased transparency to consumers and consumer choice for the maintenance, servicing, repairs, spare parts and value-added products. The Guidelines seek to achieve these goals by introducing principles to be followed by market participants including those aimed at:

• removing barriers to consumers from sourcing in-warranty motor vehicle services, repairs and maintenance work from independent providers of these services;
• encouraging original equipment manufacturers (OEMs) to promote the entry of SME and HDI motor body repairers and appointing them to their panels of approved motor body repairers for providing in-warranty services;
• encouraging short term motor vehicle insurance providers to promote the entry of SME and HDI motor body repairers, appointing them to their approved panels of approved motor body repairers and prefering these firms for the allocation of services for insured motor vehicles;
• lowering the barriers to the entry or appointment of HDI firms as approved motor vehicle dealers by OEMs;
• preventing the exchange of the competitively sensitive information of competing OEMs in multi-brand motor vehicle dealerships, which exchanges of information may have an adverse effect on competition;
• improving access to, and fitment of, original and non-original spare parts by independent service providers for both in and out-of-warranty motor vehicle repairs;
• unbundling purchases of value-added products such as motor vehicle maintenance or service plans from motor vehicle purchases; and
• improving access to OEMs’ technical information in respect of motor vehicles by independent service provides to enable these providers to efficiently and effectively repair motor vehicles.

The Guidelines are set to take effect from 01 July 2021, giving parties which are affected by them an approximate 6 month period within which to amend their policies to ensure reasonable compliance with the Guidelines.

Of course, guidelines issued by the CCSA in terms of the Competition Act, 1998 do not have legal binding force on any parties, including the CCSA itself. They are merely an indication of the CCSA’s policy approach at any given moment in time, but it retains the discretion to deviate from that policy on a case-by-case basis. Similarly, non-compliance with the Guidelines will not itself automatically result in a contravention of any provisions of the Competition Act.

The Guidelines do however indicate that the CCSA intends to conduct periodic reviews of the conduct of parties which are affected by the Guidelines and monitor compliance by requiring parties that are affected by the Guidelines to provide information to the CCSA. The CCSA is within its rights to investigate and ultimately prosecute any conduct where it is able to establish that non-compliance with the Guidelines by any firm or firms also constitutes a contravention of the Act.

THE COMMISSION IS CONSULTING STAKEHOLDERS IN RESPECT OF PROPOSED CODES OF CONDUCT IN THE FOOD SUPPLY CHAIN

Since the conclusion of the market inquiry into the grocery retail market (GRMI) on 25 November 2019 the CCSA and the Department of Trade, Industry and Competition (DTIC) have engaged in a multipronged approach to addressing some of the competition concerns identified by the CCSA in the GRMI in the food and grocery supply chains in South Africa.

These include (i) the promulgation of the Buyer Power Regulations and the Buyer Power Guidelines, (ii) the publication of the draft Price Discrimination Regulations and Guidelines, and (iii) concluding consent orders or settlement agreements with Shoprite Checkers and Pick ‘n Pay in 2020.

The CCSA has also been engaged in consultations with various stakeholders in the food and grocery supply chains to publish voluntary codes of conduct applicable to various participants in those supply chains. These include a draft code of conduct for grocery retail suppliers (Grocery Supplier CoC), and another code of conduct applicable to retail leasing (Retail Lessor CoC).

The Grocery Supplier CoC is aimed at addressing some of the alleged discriminatory trade terms and conditions encountered by SMEs and HDI firms identified in the GRMI with a view to removing or lowering barriers to entry and increased participation in the food supply chain. The Grocery Supplier CoC is accordingly intended to operate in complementary tandem with the Price Discrimination Regulation and Guidelines. The draft Grocery Retail CoC sets out trading and contracting standards to be followed by manufacturers and suppliers of grocery in their dealings with grocery retailers and wholesalers to ensure transparency and uniformity of supply terms, conditions and prices. Like the Price Discrimination Regulations and Guidelines, the draft Grocery Supply CoC requires grocery product suppliers to ensure that terms and conditions are (i) clearly communicated, (ii) justified by an objective underlying commercial rationale, (iii) ensure efficient and equitable risk allocation, and (iv) refrain from impeding the effective participation of SME and HDI grocery retailers and wholesalers.

The Retail Lessor CoC is similarly aimed at levelling the playing field between SME and HDI retailers and established grocery retailers in South Africa by lowering the barriers to accessing retail space. The Retail Lessor CoC aims to do this by setting trading and contracting standards for retail space lessors to follow in their engagements and agreements with grocery retail space lessees at various stages of their relationships, including in pre-contract negotiation, while the contract is in effect, after it terminates and in the event of disputes. The principles envisaged by the Retail Lessor CoC similarly relate to the clear communication of rental terms and conditions and ensuring that similar terms and conditions are available to all retail grocery lessees unless clear and objective economic justifications exist where differences exist.

We understand that it is envisaged that both codes of conduct will operate in the manner initially planned for the automotive aftermarket code of conduct – where parties become bound by them when they become signatories to the codes of conduct. It is not clear at this stage whether the CCSA has or will receive agreement from industry stakeholders that they will enter into a binding code of conduct. Whether or not it ultimately receives that consensus, the CCSA may follow the same route it took in the automotive aftermarket and publish industry guidelines. While voluntary guidelines are in themselves a tool to shape market conduct, they would not have any binding effect and would, for that reason, be less desirable for the CCSA.

THE CCSA FINALISES IT’S INQUIRY INTO THE LAND BASED PUBLIC PASSENGER TRANSPORT SECTOR

Almost four years after it was initiated, the CCSA released its final report into the market inquiry into the land-based public passenger transport sector (PTMI) on 07 April 2021.

The PTMI was initiated during 2017 following public complaints and complaints submitted to the CCSA by affected stakeholders. The CCSA’s analysis of land-based transport only extended to buses, taxis (including mini-bus taxis, metered taxis and e-hailing rides) and commuter rail. The PTMI final report comprises two separate sections dealing with what the CCSA refers to respectively as (i) “traditional” land based transport markets (comprised of rail, buses and mini-bus taxis), which in its view are static in nature, and (ii) e-hailing markets which have been market disruptors, using technology and innovation.

Insofar as the traditional land-based transport markets are concerned, the CCSA raised multiple concerns primarily arising from inefficiencies at the government level. Some of the CCSA’s key findings and recommendations include:

• a lack of integration of the public transport system as a result of the fragmentation of roles by various government authorities at national, provincial and local levels which do not co-operate and have led to inefficiencies in the system. The CCSA made various recommendations for an integrated system including the implementation of an integrated public transport ticketing system with inter-operability across transport modes;
• that the government does not have a public transport subsidy policy with the result that there are fragmented and inconsistent subsidy regimes across the public transport systems which do not even cover minibus taxis, despite the fact that this is the most widely used mode of transport that also covers the largest portion of commuters. The CCSA accordingly recommended the finalisation and implementation of a national subsidy policy;
• various operational and governance inefficiencies in the public rail transport system including the duplication of services on some routes and inefficient and poor quality services on others; and
• that perpetual subsidised bus contracts which have led to de facto monopolies in some areas and created artificial barriers to entry for small operators also leading to other service issues.

Insofar as the market for metered taxis and e-hailing transport services is concerned, the CCSA in large parts found that the uneven de facto regulation between metered taxis and e-hailing services led to uneven competitive dynamics in the market. The CCSA accordingly made various recommendations, aimed largely at government, to address these regulatory inefficiencies, including:

• the removal of area restrictions for the operations of metered taxis and e-hailing services which should lead to cost efficiencies for metered taxis and consumer benefits in reduced waiting times as a result of increased competition;
• the removal of any regulatory provisions which allow for price regulation for metered taxi fares by the government, which would allow metered taxi fares to be determined by the market forces in the same manner that e-hailing fares are determined; and
• the separation of planning and licensing functions and more co-operation between licensing authorities to address current licensing backlogs which have led to illegal operations.

The CCSA did also raise some concern with the dynamic pricing methods applied by e-hailing operators, including the potential for abuse by operators to overcharge consumers. The CCSA noted that this concern has led to some voluntary price caps on dynamic pricing in some circumstances elsewhere, including in the USA where Uber entered into a voluntary agreement with the New York Attorney General to cap its dynamic pricing in cases of natural or man-made emergencies. That being said, the CCSA was not minded to recommend any regulations on dynamic pricing and was content that the market would efficiently regulate dynamic pricing once its recommendations on area restrictions and the likes are implemented.

SUPREME COURT OF APPEAL CONFIRMS THAT THE HIGH COURT HAS JURISDICTION TO HEAR REVIEW APPLICATIONS CONCERNING THE VALIDITY OF COMPLAINT INITIATIONS AND REFERRALS

On 8 April 2021, the Supreme Court of Appeal (SCA) handed down a decision in which it confirmed a finding of the High Court that the Competition Act, 1998 does not exclude the High Court’s jurisdiction to hear and decide matters which relate to whether the CCSA acted legally and within its powers in complaint initiations or referrals.

The SCA appeal is the culmination of an interlocutory application brought by the CCSA to dismiss a review application in the High Court initiated by Group Five Construction Limited (Group Five) to review and set aside the CCSA’s complaint referral against Group Five for cartel conduct in respect of the construction and refurbishment of stadia for the 2010 FIFA World Cup.

In the main review application, Group Five alleged that the CCSA had referred a reviewable complaint against it on 12 November 2014 in which the CCSA alleged that Group Five and other firms had engaged in cartel conduct in that they agreed, among others, to allocate construction projects amongst themselves, submit cover prices, and recover net profits of 17,5%. Group Five alleged that the complaint referral was reviewable for various reasons including because it had been granted immunity from prosecution by the CCSA in terms of its Corporate Leniency Programme in exchange for Group Five’s cooperation to uncover prohibited practices in the construction industry.

Group Five alleged that its immunity extended to, among others, an alleged cover pricing and bidding agreement that Group Five had concluded with another firm relating to the construction of the Greenpoint World Cup stadium in respect of which the CCSA now sought to prosecute it. Group Five accordingly sought an order reviewing and setting aside the complaint referral.

Instead of answering Group Five’s review application, the CCSA raised a procedural objection and sought a dismissal of Group Five’s review application as an irregular step on the grounds that the High Court did not have jurisdiction to adjudicate the dispute, which it submitted falls within the exclusive jurisdiction of the Competition Tribunal (CTSA). The CCSA also submitted that the High Court could not determine Group Five’s review application because the issues raised in that application were the subject of the complaint referral that was pending before the CTSA. The High Court dismissed the CCSA’s objection on procedural grounds, but nevertheless also dismissed the CCSA’s jurisdictional objection on the merits. The High Court also dismissed the CCSA’s lis pendens submissions, holding that the CTSA was determining the issue of whether Group Five engaged in cartel conduct, while the High Court was being asked to determine the legality of the CCSA’s complaint initiation and referral against Group Five.

Dissatisfied with the High Court’s ruling, the CCSA appealed to the SCA. The main issue before the SCA was the question as to whether the High Court had jurisdiction to determine Group Five’s review application, or whether the issues raised in that application fell within the exclusive jurisdiction of the CTSA and the Competition Appeal Court in terms of the Act. The SCA similarly dismissed the CTSA’s appeal, holding that:

• the Act only confers exclusive jurisdiction on the CTSA and the CAC in respect of the interpretation and application of the substantive provisions of the Act relating to prohibited practices, merger control, and the investigation and adjudicative procedures of the CCSA and the CTSA;
• the Act confers jurisdiction only upon the CAC in respect of, among others, issues relating to whether (i) any action taken by the CCSA or CTSA fall within their powers as set out in the Act, and (ii) any matter falls within the exclusive jurisdiction of the CTSA or CCSA. The Act specifically states that the CAC’s jurisdiction to decide any of these questions is neither final nor exclusive;
• accordingly, the Act does not exclude the High Court’s jurisdiction to determine questions as to whether any action taken by the CCSA or the CTSA was taken legally and within their statutory powers. This includes questions relating to the legality and validity of the CCSA’s decisions to initiate or refer complaints, which are inherently issues within the jurisdiction of the superior courts.

The CCSA will now have to answer Group Five’s review application on the merits, which, if successful, may force the CCSA to withdraw its complaint against Group Five at least insofar as it concerns the conduct in respect of which Group Five was granted immunity.

THE CCSA ISSUES ITS FIRST PUBLIC INTEREST MERGER PROHIBITION

On 01 June 2021, the CCSA announced that it has prohibited a proposed transaction in terms of which ECP Africa, a private equity fund, would acquire Burger King South Africa (“BKSA”) and Grand Foods Meat Plant (Pty) Ltd (“Grand Foods”) from Grand Parade Investments (“GPI”).

The CCSA’s investigation of the proposed transaction concluded that while it would not lead to any competition concerns, the proposed transaction would lead to a reduction of the shareholding in BKSA and Grand Foods by historically disadvantaged persons from more than 68% to zero. The CCSA therefore prohibited the proposed transaction on the basis that it could not be justified on public interest grounds. The Competition Act, 2008 (Act) requires the South African competition authorities to conduct a two stage analysis in their assessment of notifiable mergers as follows:

• a competition analysis which seeks to determine whether or not the merger is likely to result in a substantial prevention or lessening of competition (the “SLC”). In this analysis, the Commission and the Tribunal will focus on whether the merger is likely to lead to unilateral effects (i.e concentration), input or customer foreclosure and whether the merger is likely to facilitate co-ordination between competitors; and
• a public interest analysis which must determine whether or not the merger can or cannot be justified on a set of narrow public interest grounds identified in the Act, irrespective of whether or not the merger is likely to result in the SLC. In this analysis, the relevant authority must consider the effects that the merger will have on (a) a particular sector or industry, (b) employment, (c) the ability of small and medium businesses, or firms controlled or owned by historically disadvantaged persons, to effectively enter into, participate in or expand within the market, and (d) the ability of national industries to compete in international markets; and (e) the promotion of a greater spread of ownership, in particular to increase the levels of ownership by historically disadvantaged persons and workers in firms in the market.

Until this decision, no previous transaction had been prohibited by a South African competition authority on purely public interest grounds. The common practice where proposed transactions raised public interest concerns was for the merging parties and the competition authorities to reach a mutually agreed set of remedies to address any such concerns, which remedies would subsequently be confirmed as conditions for the merger clearance.

It remains to be seen whether the CCSA’s decision will withstand scrutiny if it is taken by the merging parties to the CTSA for reconsideration. This notwithstanding, the decision signals a policy shift within the CCSA to the extent that the dilution in ownership or exit of HDIs from potential targets may increasingly become a roadblock to merger clearance. Investors, sellers and acquiring firms may therefore have to create transaction structures which do not result in the dilution of HDI ownership, or indeed which lead to net increases in HDI ownership as part of their transaction planning for a smoother merger control process.

DEVELOPMENTS IN THE REST OF AFRICA

NAMIBIA INTRODUCES A NATIONAL COMPETITION POLICY

Namibia’s Ministry of Industrialisation and Trade (MIT) published a national competition policy (Policy) during December 2020 in which it outlined the Namibian government’s five year plan to address regulatory, institutional and infrastructure challenges to competition between 2020 and 2025.

The Policy was drafted to address the absence of an express policy document from the government setting out how it plans to use competition regulation to achieve Namibia’s documented development plans and industrial policy.

The Policy aims to achieve various objectives including:

• the preservation of the competition process, and consumer welfare;
• providing guiding principles to the government for effective competition policies, legislation and programmes;
• providing a framework of the parameters to guide legislative reviews;
• addressing regulatory and institutional infrastructure challenges to the implementation of competition policy and regulation;
• promoting a culture of competition through awareness and targeted advocacy initiatives;
• fostering competition even in regulated sectors and promoting institutional coherence and synergies between sectoral regulators and the Namibia Competition Commission (NaCC); and
• to protect SME’s from the effects of anti-competitive practices.

In addition, the policy is underpinned by various competition regulation guidelines including the following notable principles:

• limiting anticompetitive practices including in particular, the abuse of dominant positions and collusive conduct which the policy proposes should be prohibited by national legislation;
• statutory requirements and rules for firms that enjoy a legal monopoly or state-owned enterprises with a dominant position or a natural monopoly to grant access to their “dominant infrastructure” and intellectual property rights to third parties;
• a general prohibition on mergers and acquisitions which substantially lessen competition in a market, based on a rule of reason assessment;
• market investigations by the NaCC into markets where particular features may give rise to anti-competitive effects that may not be regulated by other competition regulation;
• developing a framework to assess state support measures’ effects on competition and frameworks to limit any consequent distortion in competition;
  the development of sectoral codes of conduct; and
• cooperation mechanisms between the NaCC and other sectoral regulators.

In addition to the pure competition objectives and principles of the Policy, it also aims to promote some public interest objectives including safeguarding investment and employment, the promotion and protection of SMEs and promoting a greater spread of the Namibian economy for historically disadvantaged individuals. This is resonant with provisions of the South African Competition Act, 1998.

In its current format, the Policy says that the MIT is the party responsible for its formulation, review and ensuring that the Policy and related legislation are implemented by the relevant stakeholders. The NaCC is appointed as the party that will implement the Policy. The Policy implementation was planned around various action items scheduled to be completed during or about December 2020, or in the case of developing a mechanism for co-operation between the NaCC and the Public Procurement Board, by March 2021. These action items include a legislative review and the adoption of a new competition statute targeted for completion by October 2020. The NaCC published a draft Competition Act on 21 August 2020 pursuant to the Policy, but this has not yet been passed into law as far as we are aware.

COMPETITION AUTHORITY OF KENYA’S INTRODUCTION OF THE INFORMANT REWARD SCHEME

The Competition Authority of Kenya (CAK) has developed an Informant Reward Scheme (Scheme) to promote and enforce compliance with the Competition Act, No. 12 of 2010 (Competition Act). The External Guidelines on the Informant Reward Scheme Policy (Guidelines), which give effect to the Scheme, are intended to (i) improve the efficient detection of, and enforcement against, restrictive trade practices, abuse of dominance, and control of mergers, and (ii) maintain consumer welfare.

The Guidelines, which took effect on 1 January 2021, are generally applicable in circumstances where a person provides useful and credible information to the CAK regarding violations of the Competition Act and its regulations, and from whom the CAK intends to obtain further information for the purposes of an investigation.

Significantly, persons engaging with the CAK in terms of its Leniency Program are not eligible under the Scheme. In addition, only confidential informants who are privy to inside information, but have not participated directly in the alleged violation qualify for the Scheme. The scheme is intended to apply to neutral third parties, or those playing a more peripheral role in the contravening conduct. Indeed, informants under the Scheme do not receive immunity or protection from prosecution to the extent that they have engaged in any criminal activity.

In order to qualify for a reward under the Scheme, the informant must provide truthful information which has material value and is relevant to the investigation. The informant will be subject to an initial suitability assessment aimed at ensuring that the quality of the information and verifying the informant’s motivation for making the disclosure. Where informants volunteer information, they will be obliged to follow the instructions of the case investigator, refrain from taking any independent action on behalf of the CAK, and may be required to testify as a witness in any subsequent hearing.

In addition, there are various obligations imposed on the relevant case investigator to ensure that the informant’s identity is kept confidential. This includes (i) ensuring that all information that may identify the informant is stored securely and accessible to identified CAK employees only, and (ii) using a pseudonym when referring to the informant in all communications relating to the investigation.

The informant will only be entitled to the reward at the end of the investigation once the informant has cooperated with the CAK and provided credible, relevant and accurate information during the process of the investigation. The monetary reward will be calculated on the material value of the information and be paid in a once-off lump sum at the end of the investigation. The reward payable to an informant may not exceed one per cent of the administrative penalty, and in any event has a cap of one million Kenyan shillings (approximately EUR7,500).

The Scheme is a novel addition to the CAK’s enforcement tools and is another incentive for informants, alongside the existing leniency programme. It remains to be seen whether the Scheme will achieve significant uptake. Similar incentive schemes elsewhere on the continent did not result in any significant increase in whistle-blower reports.

COMESA COMPETITION COMMISSION ISSUES CAUTIONARY NOTICE

On 15 February 2021, the COMESA Competition Commission (CCC) issued a cautionary notice in which it noted with concern that certain undertakings operating within the Common Market have been engaging in agreements which include, amongst other things, restrictive territorial clauses and market allocation, the effect of which is to impede regional trade and undermine the efficient operation of markets. This follows the CCC’s invitation to undertakings operating within the Common Market to apply for authorisation of existing and contemplated agreements at the commencement of its operations in 2013.

The CCC has to date employed ‘soft’ enforcement measures by engaging with various undertakings and requesting them to notify the relevant agreements in accordance with Article 20 of the COMESA Competition Regulations, 2004 (Regulations). Article 20 of the Regulations empowers the CCC to grant authorisation to undertakings to enter into or give effect to contracts or arrangements that are anti-competitive, provided that there are public interest benefits outweighing the anti-competitive effects of the restrictive agreements.

The CCC has indicated that affected undertakings have had sufficient time to seek authorisation for their agreements in terms of Article 20. It will accordingly shift its focus towards more proactive enforcement measures which include screening, detection, investigation and sanctions for undertakings that are found to have contravened the Regulations. Agreements in contravention of Part 3 of the Regulations can attract severe sanctions, including fines of up to 10 per cent of annual turnover in the Common Market.

This shift in approach may signal an overall change of enforcement strategy for prohibited practices by the CCC, which does not have an extensive record of prohibited practice prosecutions and fines. The CCC has only conducted five published investigations into prohibited practices since 2016.

NIGERIA’S FCCPC ISSUES A MERGER CONTROL REGULATION AND GUIDELINES TO ESTABLISH A FORMAL MERGER CONTROL FRAMEWORK

During the latter parts of 2020, the Federal Competition and Consumer Protection Commission (FCCPC) of Nigeria issued its Merger Review Regulations, 2020 (Regulations) together with various ancillary instruments to establish a composite framework for the notification and review of mergers under Part XII of the Federal Competition and Consumer Protection Act, 2018 (FCCPA). The FCCPC simultaneously published various other documents which will form part of the composite merger control regime including merger review guidelines, gun-jumping guidelines and merger control forms.

The Regulations deal with various matters including prescriptions on the specific transactions that will constitute mergers, exceptions to its merger control jurisdiction, negative clearance procedures, notification procedures, filing fees, time-lines for review, relevant factors for substantive assessments, remedies for transactions which raise competition concerns and the appeals process. Some notable aspects of the Regulation include:

• an express exclusion for internal restructurings;
• an express exclusion for R&D joint ventures and other transitory agreements; and
• express presumptions of material influence for shareholdings of above 25% and a converse presumption for shareholdings of less than 15%, when taken with various other relevant factors.

The Guideline sets out the FCCPC’s non-binding policy approach to various aspects of merger control assessments to provide affected parties some level of certainty on the FCCPC’s approach and interpretation of the statutory provisions. This includes guidance on the types of mergers or acquisitions of minority interests that the FCCPC will take to raise potential competition concerns, its review processes and phases, the issues it will consider in each phase and the relevant timelines for each, the circumstances under which the simplified and negative clearance procedures will be applied, the standard of review or assessment and relevant factors to each type of merger (i.e. horizontal, vertical or conglomerate mergers) as well as the investigative tools, tests and theories of harm available to the FCCPC in respect of each type of merger.

The FCCPC held a subsequent stakeholder meeting to discuss the Regulations and Guidelines on 10 December 2020 in which it set out its policy approach to stakeholders, including:

• confirming that the basic standard of review in its substantive assessments will be to determine whether a proposed transaction is likely to result in a substantial lessening or prevention of competition. This is a shift in focus from the assessments conducted by the Securities and Exchange Commission of Nigeria, which are more investor focused;
• confirming that a merger that raises competition issues may be justified by merger specific public interest grounds. These relate to the effects of the proposed merger on (i) a particular industry or sector, (ii) employment, (iii) the ability of national players to compete internationally and (iv) the ability of SMEs to become competitive;
• confirming what the FCPCC will consider at each phase of review, including:
• • that the phase one detailed review will involve a consideration of the information supplied by the merging parties. It may include third party engagements and “state-of-play” meetings with the merging parties to and the issuing of an “issues paper” where more serious concerns arise;
  • the FCCPC may issue a decision approving the merger with or without conditions at phase 1, or if it raises substantial competition issues, a decision with reasons moving the investigation to a phase 2 review. The merging parties will have an opportunity to tender remedies before the investigation moves to phase 2;
  • the phase 2 review is a more intensive investigation which may involve more engagements between the FCCPC and the merging parties, oral hearings including third party oral testimony, site visits, surveys;
  • the FCCPC will publish a final decision either approving the merger with or without conditions or prohibiting it at the end of a phase 2 review.

The Regulations make allowance for any merging parties or a party that made written representations to the FCCPC to appeal any decision of the FCCPC to the Competition and Consumer Tribunal if they are dissatisfied with a decision of the FCCPC.

It is anticipated that the Regulations, Guidelines and this clearer merger control regime will lead to more effective merger control in Nigeria.

THE ECONOMIC COMMUNITY OF WEST AFRICA TAKES FURTHER STEPS TOWARDS SETTING UP ITS REGIONAL COMPETITION AUTHORITY FOR OPERATIONS

During March 2021, members of the advisory committee of the ECOWAS Regional Competition Authority (ERCA) participated in a 5 day workshop in Lome, Togo, to discuss, among others, a presentation of the advisory body’s activity report and the ERCA’s legal and institutional framework which will govern the ECRA’s powers and processes once it commences operations.

Members of the advisory panel also considered applicable sanctions, penalties and modalities for waivers, directives on merger control, standard terms for cooperation agreements between the regional regulator and domestic regulators and a draft comparative study on competition frameworks in ECOWAS member states.

The workshop, and all issues considered during the workshop are another positive step taken by the ECOWAS to bringing the ERCA into operation. The ERCA was officially established in May 2019 to implement the ECOWAS Regional Competition Rules which were adopted by the ECOWAS in 2008. The Rules were intended by the ECOWAS to promote, maintain and encourage competition and enhance economic efficiency in production, trade and commerce in the region. The ECOWAS statutes, regulations and the Rules do not provide for a suspensory or mandatory merger control regime. The statutes do, however, enable the ERCA to investigate and prohibit transactions, including mergers, if they result in the abuse of a dominant position which leads to a reduction of competition in the region, or if it is the public interest for those transactions to be prohibited.

It is possible that the ERCA may also issue directives and policy approaches for a de facto merger control regime once it commences its operations. It is not clear when the ERCA will be in a position to fully start operations but it is unlikely to do so before the end of 2021.

THE MOZAMBICAN COMPETITION REGULATORY AUTHORITY STARTS OPERATIONS

The Autoridade Reguladora da Concorrência (ARC), Mozambique’s competition regulator, commenced operations in the first quarter of 2021, almost seven years after the promulgation of the Competition Law (No. 10/2013 of11 April 2013) (Law) in terms of which it was established. The Law has since been amended twice including making some reforms to the ARC’.

It is not clear whether or not all of the ARC’s different functions have become operational. All indications are that the ARC does not currently have the capacity to conduct restrictive practice investigations. However, the ARC is receiving and assessing merger notifications and dealing with exemption/exception applications. The ARC has indeed published short and long form merger notification forms for use by parties to transactions which meet the thresholds for a notification or which seek to make voluntary filings.

Given the fact that the ARC is certainly reviewing merger notifications, it is important to note that the Law establishes a suspensory merger control regime which requires the prior notification and approval of transactions that meet the following thresholds:

• the combined turnover of all the undertakings concerned in Mozambique in the preceding year is equal to or exceeds MZN900 million (approximately EUR13.4 million);
• the transaction results in the acquisition, creation or strengthening of a market share of at least 50%; or
• the transaction results in the acquisition, creation or reinforcement of a market share of at least 30%, and at least two parties to the transaction have turnover in Mozambique that exceeds MZN100 million (approximately EUR1.5 million) in Mozambique.

The prior implementation of a notifiable transaction without the ARC’s approval could result in, among others, an administrative penalty of up to 5% of the turnover of each involved party in Mozambique from the preceding financial year or a declaration of invalidity of the transaction insofar as its effects in Mozambique are concerned.

We note, however, that a Ministerial Order issued on 5 June 2015 sets the fee payable for a merger notification at 5% of turnover for the year preceding the merger notification. The Ministerial Order does not specify whether the filing fee should be calculated as a proportion of the merging parties’ combined turnover, the acquiring firm’s turnover or the target firm’s turnover. It is also not clear whether the filing fee should be calculated as a proportion of local or global turnover. Irrespective of the relevant computation, this potentially high administrative fee may serve to deter firms from notifying the ARC of mergers. Such a filing fee is, after all, equivalent to the maximum administrative penalty that can be imposed on any single party for a failure to notify.

We also note that while the ARC’s operations are currently focused on merger control, all the provisions of the Law remain binding and should be followed irrespective of whether the ARC is fully operational. Firms should take measures to ensure that their conduct in Mozambique complies with the Law given the indications that the ARC may imminently be fully operational and able to enforce compliance with restrictive practice provisions to the extent necessary.

EGYPTIAN CABINET APPROVES ITS FIRST PRE-MERGER NOTIFICATION REGIME

On 25 November 2020, the Egyptian Competition Authority announced that the Egyptian cabinet had approved the Prime Minister’s draft legislation to amend the Law on Protection of Competition and Prohibition of Monopolistic Practices No. 3 of 2005 (the Egyptian Competition Law).

The draft proposal includes amendments which would require the prior notification of transactions which qualify as or create an “economic concentration” as defined in the proposed amendments. Egypt currently operates a post-notification merger control regime where parties are required to notify the ECA of economic concentrations for market transparency purposes, however, parties can implement transactions without the ECA’s approval. The ECA’s intention to introduce a pre-completion and suspensory merger control regime was put on the table in 2017 when the ECA presented the draft proposal to the Prime Minister.

The Egyptian government has not published any dates for when the draft amendments will be made public. We understand that the Parliament’s Economic Committee preliminary passed a first reading of the amendments in February 2020, however, Parliament is still debating and has not yet passed the amendments. It is therefore not clear when the draft amendments will take effect. Once they do, however, they will give the ECA the authority to block transactions which may result in limiting, restricting or harming competition and which create or entrench a dominant position or facilitates any other violation of the Egyptian competition law.

Despite the fact that the ECA does not have these powers under the current merger control regime, the ECA’s recent practice is to use the cartel prohibition under Article 6 of the Egyptian Competition Law to investigate certain transactions involving competitors where their combined share accounted for a large percentage or all of the market and where the market was considered to be of special importance. The ECA has followed this approach in two recent mergers where it requested the parties to apply for an exemption and imposed conditions, one involving the ride-hailing app sector and another involving the healthcare sector. This approach has been criticised as going beyond the ECA’s authority but has not been tested in the courts.