Competition Law Developments in Africa Program

March 5, 2013

Overview

• Introduction • The COMESA Competition Regulations (2004) • Discussion • African Developments • Closing

THE COMESA COMPETITION REGULATIONS (2004)

‘ISSUES OF OPERATIONALISATION ‘

George K. Lipimile

DIRECTOR & CHIEF EXECUTIVE OFFICER COMESA Competition Commission 3

COMESA Competition Law and Policy

COMESA Members States:

• Burundi*, Comoros, Djibouti, DR Congo, Egypt*, Ethiopia*, Eretria, Libya, Kenya*, Madagascar *, Malawi*, Mauritius*, Rwanda*, Swaziland*, Seychelles*, Sudan*, Uganda, Zambia*, Zimbabwe*.

— — — 8 COMESA Countries are part of SADC and 4 part of EAC (Kenya, Uganda, Rwanda, Burundi).

A tripartite Taskforce has been setup to harmonize their programmes and the overall regional integration process for the three Regional Economic Communities .

*Member States with National Competition Laws.

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COMESA Competition Law and Policy

Why a regional Competition Law ?

• Conduct being examined in two (or more) jurisdictions • Conduct investigated by one authority that may have effects in another jurisdiction • Investigations where witnesses or evidence located in another jurisdiction • Remedies that may have impact in another jurisdiction 5

Need for the COMESA Competition Regulations

• The globalisation of the economy impacts on the work of National Competition Authorities – Impact of anti-competitive behaviour often goes beyond national borders, in particular in the case of international cartels ⇨ recent example: Fertilizer, Bread and construction cartels – Mergers & Acquisitions with a regional dimension and with competition effects in the Common Market Illovo Sugar; South African Breweries etc ⇨ recent examples: Acquisition of Game Stores by Wal-Mart; BP Acquisition by PUMA Energy; Acquisition of ZAIN by AIRTEL; Acquisition of CHOBE AGRI VISION by CLAYTON AFRICA; Lafarge in cement sector; • National Competition authorities face challenges to curb multi national anti-competitive behaviours given jurisdictional and practical limitations of their enforcement powers.

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COMESA Competition Law and Policy

Challenges presented by the Proliferation of National Competition Laws : • Knowledge of and compliance with complex filling rules; • Completion of an array of forms in accordance with various national requirements; • Payment of substantial fees to the reviewing authorities {often designed to subsidize the operation of the Competition Authority} • Knowledge of and compliance with review schedules and waiting periods.

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COMESA Competition Law and Policy

• Given the fact that the competition laws are national but markets extent beyond national boundaries - : — Are the respective national competition laws of Member States and their enforcement sufficient to deal with the market problems of the regional nature ?

— Is it prudent for the countries in the region to continue relying on the domestic laws, yet at the same time work towards the development of a more seamless regional system that facilitates the workings of regional markets?

— What new tools, tasks and concepts will be needed to address the competition issues that are emerging on the horizon of the regional and global economy ?

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Regulatory Frameworks

Most of the regulatory instruments for most sectoral cooperation are in the form of regulations and some of the regulations include the following: • COMESA Competition Regulations – for levelling the playing field in the Common Market; • COMESA Public Procurement Regulations; • COMESA Regulations on the Application of Sanitary and Phytosanitary Measures ; • COMESA Regulations on Non Tariff Barriers; • COMESA Customs Management Regulations; • Council Regulations on the COMESA Customs Union.

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COMESA Competition Law and Policy

COMESA Competition Regulations and Rules : • Having regard to Article 55 (1) of the COMESA Treaty: “ … To this end, the

Member States agree to prohibit any agreement between undertakings or concerted practice which has its objective or effect the prevention, restriction or distortion of competition within the Common Market”

• Article 55 (3) :

“The Council shall make regulations to regulate competition within the Member States”.

• The Regulations were ratified by the Council of Ministers on

17 th December, 2004

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COMESA Competition Law and Policy

What is the effect of Regulations on Member states

?

Effect of Regulations Article 10 (2) of the Treaty : “A Regulation shall be

binding on all the Member States in its entirety

” Entry into Force of Regulations Article 12 (1) of the Treaty : “ Regulations shall be published in the Official Gazette of the Common Market

and shall enter into force on the date of their publication

or such later date as may be specified in the Regulation”.

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COMESA Competition Law and Policy

Major Elements of the COMESA Competition Regulation - : • Anti-competitive Business Practices : — Vertical Restraints { Rule of Reason Approach} — Horizontal Restraints { Per se prohibition} — Abuse of Dominance • Mergers and Acquisitions — Pre- merger notification requirement • Consumer Protection 12

COMESA Competition Law and Policy

Institutional Arrangements -: • The Regulations provide for three institutions namely - : — COMESA Court of Appeal : Receives appeals against the decisions of the Board of Commissioners.

— Board of Commissioners :A non-executive Board consisting of 9/13 Members appointed by Council from the Member States. Determines Appeal cases it receives from the Committee of three Commissioners.

The Chairman shall assign three of the Commissioners to be full time members of the Board.

— Commission : Headed by the Director, responsible for the development of the regional competition policy and its responsibility extends to fact finding, taking action against infringements of the law, imposing penalties and granting exemptions under the Regulations.

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Competition Law and Policy

• • • • •

Application of the COMESA Regulations:

Application of the Regulations (Part 3,4,5) is limited to agreements , decisions, or concerted practices which may affect trade between Member States. The inter Member State trade clause is therefore of central importance in COMESA Competition Law, since it defines ‘the boundary between areas respectively covered by the COMESA Competition Regulations and the laws of Member States.

The effect on inter-state trade is satisfied where conduct brought about an alteration in the structure of competition in the Common Market.

Remember : Anti-competitive conduct confined to the territory of a single Member State is capable of having repercussions on patterns of trade and competition in the Common Market. Hence, the fact that the parties to an agreement are from the same Member State does not mean that there can be no effect on trade between Member States. The Regulations may apply to agreements between undertakings in the same Member State. Regulated Sector

: shall have primary jurisdiction over regulatory entity, unless conduct is

expressly exempted

by national legislation.

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Competition Law and Policy

• MERGER CONTROL PROCEDURE : — Based on Article 23 (3) : Applies - :  Both the acquiring firm or target firm for either the acquiring firm or target firm operate either in two or more Member States of COMESA (Regional Dimension)  The Prescribed Zero threshold makes all mergers notifiable under Article 23 (3) of the Regulations.

 Article 24 (1): Obligation to notify the Commission of the proposed merger within 30 days of the

decision to merger

– fine under Article 24 (3) .



CAUTION : Any notifiable merger carried out in contravention of this part shall have no legal effect and no rights or obligations imposed on the participating parties by any agreement in respect of the merger shall be legally enforceable in the Common Market

.

 Article 23 (6) Commission may require the parties to a non-notifiable merger to file a notification.

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COMESA Competition Law and Policy

Obligations of Member States ( Article 5 of the Regulations):

• Pursuant to Article 5(2)(b) of the Treaty , Member States shall take all appropriate measures, whether general or particular, to ensure fulfilment of the obligations arising out of these Regulations or resulting from action taken by the Commission under these Regulations. They shall facilitate the achievement of the objects of the Common Market.

Member States shall abstain from taking any measure which could jeopardize the attainment of the objectives of these Regulations.

• Article 5 (2) (b) of the Treaty : “Each Member State shall take steps to secure the enactment of and the continuation of such legislation to give effect to this Treaty and in particular :

to confer upon the Regulations of the Council the force of law and the necessary legal effect within its territory”.

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COMESA Competition Law and Policy

The relationship between the COMESA Competition Regulations and the National Law :

• Positives -: High degree of convergence between COMESA Competition Regulations and domestic competition laws i.e. -: — Most member states have systems of competition law modeled upon Article 16 and 18 of the COMESA Regulations.

— Article 7 calls upon the Commission to cooperate with NCA, exchange information etc — Rule 44 refers to the investigation Powers of the Commission and stipulates instances for cooperation.

— Where there is a conflict between the COMESA and domestic competition law, the COMESA Competition Regulations take precedence over national law, so that where a clash occurs it is the former which must be applied. 17

COMESA Competition Law and Policy

Enforcement of the Competition Rules

• The Commission shall apply the Regulations with regard to trade between Member States and be responsible for promoting competition within the Common Market. • The Regulations require national courts to give an adequate remedy to those injured by breach of the regulations (Article21 (13) ) • National Courts may request the COMESA Court of Justice for a ruling on the interpretation of community law or the validity of subordinate legislation.

• The Commission operates formally through the decisions of its Board of Commissioners which must be adopted collegiately.

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Dispute Resolution Mechanism

• The main dispute resolution mechanism under the COMESA Treaty is the COMESA Court of Justice.

• The Court Consists of two chambers these being the Court of First Instance and the Appellate Division; • The main function of the COMESA Court of Justice is to ensure adherence to law in the interpretation and application of the Treaty; • Its jurisdiction is to adjudicate upon all matters referred to it under the COMESA Treaty; • References to the Court can be by Member States, the Secretary General, legal and natural persons.

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Challenges

• • • • • Despite having a comprehensive legal framework, there are a number of Challenges that are encountered in implementing the COMESA Regional Economic Integration Agenda , the main one being the transpositioning or domestication of the legal instruments made under the Treaty at the National Level; Some of the reasons behind this challenge are differences in legal systems, lack of capacity, especially in the area of drafting, poor or lack of engagement with legislative authorities and other stakeholders in Member States; Lack of effective enforcement mechanism at the national level.

Lack of appropriate structures for implementing decisions; Lack of dedicated budgets in national budgets for implementation of regional programmes

COMESA Competition Law and Policy

Changes to domestic law as a result of the COMESA Competition Regulations - :

• The adoption of the COMESA Competition Regulations requires or makes desirable a number of changes to domestic competition laws, for the purpose of eliminating or reducing any differences.

• Article 7 (2) (c) of the Regulations : “ … objective of the harmonization of those national laws with the regional Regulations to achieve uniformity of interpretation and application of competition law and policy within the Common Market” 21

THANK YOU Any comments to - :

George K Lipimile.

Director and Chief Executive Officer.

COMESA Competition Commission.

Lilongwe, Malawi.

[email protected]

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Discussion • Nicholas Franczyk - FTC • Nkonzo Hlatshwayo – Webber Wentzel • Martin Versfeld – Webber Wentzel

African Developments • Daryl Dingley – Webber Wentzel

Closing • Lesley Morphet – Webber Wentzel

Questions

Lesley Morphet Partner, Webber Wentzel +2711 530 5359 [email protected]

Nkonzo Hlatshwayo Partner, Webber Wentzel +2711 530 5295 [email protected]

Martin Versfeld Partner, Webber Wentzel +2711 530 5322 [email protected]

Daryl Dingley Partner, Webber Wentzel +2711 530 5285 [email protected]