Competition regulation takes hold in Africa

The top ten economies by Gross Domestic Product (GDP) in Africa all have active competition regulation, save for Angola and Nigeria but those countries are in the process of establishing completion law regimes, which are expected to be up and running soon. About twenty countries currently have functional competition law regimes, several more have enacted legislation but have no enforcement structures in place. Approximately eighteen countries in Africa have no competition legislation.

This is according to Nick Altini, Partner and Head of the Competition and Antitrust Practice at Baker McKenzie in Johannesburg. Altini was discussing developments in competition law in Africa at the PE Africa Private Equity Annual Review and Outlook Seminar in London recently.

Altini explained that Africa’s top economies, including Egypt, Algeria, South Africa, Morocco, Ethiopia, Kenya and Tanzania, all had competition regulation.  

“The Federal Competition and Consumer Protection Bill of 2017 was recently passed by the House of Representatives of Nigeria and Nigeria's Senate, which was now only awaiting presidential assent. And the Angolan National Assembly recently voted in favour of the Draft Bill on Competition, which will establish Angola's Competition Regulatory Authority,” Altini explained.

He noted further that in the countries that are active in terms of their competition regulation, several have launched/concluded market inquiries into various sectors within the last year. 

“Market enquiries seem to be an emerging trend amongst Africa's competition regulators who perhaps recognize the need to prioritize the normalization of  competition in certain sectors,” he noted.

“In South Africa, market inquiries have been launched into data services and passenger transport services (following banking, healthcare, liquified petroleum gas and grocery retail inquiries). Mauritius is conducting an inquiry into the construction industry, Botswana is investigating the milling and retail property industries and in Kenya, the competition authorities have looked in to mobile phone technology services, banking and the branded retail (grocery market),” he said.

Altini noted that Egypt is a good example of a country with a regulator who is finding its stride, notching up a number of firsts.

“The country is investigating its first bid rigging case concerning the alleged conduct of firms who rigged bids for as many as ten tenders to supply heart valves and antioxidants to hospitals for heart and chest surgery between 2013 and 2015.

“As part of this bid rigging case, the Egyptian Competition Authority also recently conducted various dawn raids, during which direct evidence of cartel conduct was detected. After the raids, the head of the legal department of a company that failed to co-operate during a dawn raid was fined EGP 100 000 (US$ 5600).

“Egypt has also issued fines to pharmaceutical companies for colluding on discounts offered to pharmacists; and to Qatari broadcaster BeIN for abusing its dominant position in the market,” Altini said.

Competition law enforcement is also progressing well in other jurisdictions. In Zambia, four hatcheries were fined for fixing trading conditions and setting production quotas. In Malawi, a cartel investigation into the supply to the government of school text books was launched, showing that the country’s regulators were exerting jurisdiction over foreign based entities.

Altini noted that over and above specific country regulation, Africa had four regional competition regulators – the West African Economic Monetary Union, the East African Community, the Common Market for Eastern and Southern Africa and the Economic and Monetary Community of Central Africa.

He said that COMESA had been active in terms of regional enforcement. It recently initiated its first and second non-merger related investigations into the exclusive marketing practices of broadcasting rights and sponsorship agreements in relation to Confederation of African Football (CAF) football tournaments and to Coca-Cola Beverages Africa's distribution agreements in the region of Eastern and Southern Africa.

“In South Africa, where there has been an uptick in merger prohibitions and abuse of dominance investigations, draft guidelines on information exchange were recently issued and the new Competition Amendment Bill has been published for comment,” Altini said.

Altini explained that the South African Competition Amendment Bill, 2017 was likely to have an effect on three broad areas of competition enforcement going forward. Firstly, the Bill has increased the weight of the public policy considerations which the Competition Commission and Competition Tribunal are mandated to take into consideration when approving a merger. Secondly, the Bill will lower the bar on the burden of proof on the Competition Commission in proving abuse of dominance cases. The Bill will also give wider powers to the Competition Commission to address market concentration more directly. This will possibly enable the Commission to order firms to divest and reduce market share in instances where they have not abused their dominant position.

Altini noted that from a private equity, or other investment, perspective, special attention should be given to merger control.

“Merger filing requirements should not be bypassed or ignored. Also, the assessment of suspensory filing regimes should be undertaken early to understand the time and cost implications for transactions. Some jurisdictions will catch "foreign to foreign" mergers based on "revenue earned from….", and in this regard global turnover and asset values are often taken in to consideration. Merger filing fees should also be priced in as some are high. As an example of costs, COMESA’s fees are capped at US$ 200,000; Tanzania’s vary between US$ 110, 000 – US$ 440,000; and in Swaziland/Zimbabwe merger fees are US$ 50,000. In addition, due diligence is essential during mergers as inherited potential liabilities can be significant,” he noted.

“Investment decisions shouldn’t be made on balance sheets alone,” said Altini. “There must be thorough legal due diligences which examine whether target firms have traded lawfully in a competition law context, especially where competition law is a recent introduction to a market.  This presents investors with an opportunity to cater for and fairly apportion risk in the transaction agreements.”

Altini concluded by saying that it was clear that in Africa, competition regulators were gaining momentum and becoming more sophisticated in the analysis of mergers and understanding of horizontal conduct. He added that competition law must be understood to be part of the African investment paradigm.  

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