Competition Regulators across Africa are increasingly investigating and prosecuting companies involved in contraventions of competition legislation. Compliance with the various regulatory regimes can be challenging but can be managed.
Here are six things to know about recent Competition Law enforcement in Africa:
1. Tanzania: Even less than 10% shareholding acquisition could trigger merger notification
On 5 August 2022, the Fair Competition Commission in Tanzania issued a provisional finding that the acquisition of a 7.93% shareholding amounted to a notifiable merger which required prior clearance from the Commission before implementation.
The proposed merger originally envisaged the acquisition of 40% of the shares to be implemented in three tranches, but ultimately only the first tranche, comprising 7.93% of the shares was implemented.
The Commission’s preliminary finding is that the acquisition of 7.93% of the shares changes the structure of the target firm from a ‘sole to a multiple-owned subsidiary’. The acquirer was entitled to one vote at the meeting of shareholders which the Commission viewed as conferring decisive influence over the business strategy irrespective of the number of shares held. In the usual course, a minority shareholding would only constitute decisive influence if the shareholder is able, with that vote, to block strategic decisions.
As this is a preliminary finding, the respondents have a right to respond. It remains to be seen whether it is ultimately found that the parties have contravened the Tanzanian Competition Act. The Commission is seeking an administrative fine of USD 6,380,328 (being 5% of the annual turnover of the respondents collectively) as well as payment of TZS 100 million (approx. USD 43,000), being the amount that would have been paid as a filing fee if the transaction was notified.
2. Mozambique: Gun jumping and price fixing
The Competition Regulatory Authority of Mozambique is a relatively new regulator, having become operational in 2021. In less than two years it has issued two infringement decisions.
The first decision involved the imposition of a fine of MT41.1 million (approx. USD 643,000) on CFAO Motors for implementing a merger without approval.
The second decision relates to a contravention of the price fixing provisions of the Mozambique Competition Law. The conduct involved fixing of prices for driving lessons by the industry association. As the prices had not been implemented no fine was imposed but the Association has been warned about engaging in further anticompetitive practices.
3. Zambia: Abuse of Dominance penalties on the rise
In the last half of 2022, the Zambian Competition and Consumer Protection Commission imposed penalties on six firms for contraventions of the abuse of dominance provisions of the Zambian Competition and Consumer Protection Act.
In December 2022, Airtel Money was fined 3% of its annual turnover for abusing its dominant position by increasing cash collection and cash disbursement fees amongst different sports-betting companies (unfair purchase prices) and applying dissimilar conditions to equivalent transactions.
Farm Depot was fined 3% of its annual turnover in December 2022 for tying the purchase of day-old chicks to buying chicken feed. In addition to the penalty, Farm Depot has been ordered to desist from bundling the purchase of day-old chicks with chicken feed.
In August 2022, Red Sea Import and Export Ltd, Prav Holdings Ltd and Jimuceci Enterprises Limited were fined 4%, 3% and 3% of their annual turnovers respectively for engaging in tying and bundling. Following an investigation, the entities were found to have bundled low demand clear beer products with high demand clear beer products. The three respondents were also directed to cease their tying practices.
4. South Africa and Botswana: Dawn raids in the insurance sector
In April 2022, the Botswana Competition Authority raided insurance companies for allegedly breaching the abuse of dominance provisions of the Botswana Competition Act. The investigation commenced in 2019 following a complaint lodged by panel beaters and includes allegations of refusal to deal.
In August 2022, the South African Competition Commission conducted dawn raids on eight insurance companies. The Competition Commission has alleged that the companies have engaged in collusive practices to fix prices and/or trading conditions in respect of fees for investment products. The dawn raid is part of the Competition Commission’s ongoing investigation which was initiated in January 2021. This is the first dawn raid conducted by the Competition Commission in several years.
The outcome of the dawn raids is awaited.
The increase in dawn raids marks a growing need for companies to ensure that they are dawn raid ‘ready’ across the continent.
5. Common Market for Eastern and Southern Africa: Timing of merger notification in COMESA is crucial
With effect from 20 February 2023, merging parties no longer enjoy the benefit of the COMESA Competition Commission’s Notice of Interim Measures in Merger Review which provided some reprieve from the obligation to submit a complete filing within 30 days of the decision to merge. In terms of the Notice, parties would not be penalised for failing to submit complete information within 30 days of the decision to merge provided they started engaging with the COMESA Competition Commission on the notification within the 30-day period.
Since parties to a merger no longer enjoy the benefit of a longer period to gather all the information required to finalise the merger filing, early engagement on a COMESA merger notification is crucial to avoid a penalty being imposed for failure to notify. The COMESA Competition Commission takes notification seriously and imposed its first penalty for failure to notify in September 2021. The penalty, which comprised 0.05% of the combined turnover in the Common Market, of Helios Towers Limited, Madagascar Towers S.A and Malawi Towers Limited was imposed for notification of the merger less than three months after it ought to have been notified. The COMESA Competition Commission observed that the merger should have been notified on 22 April 2021, but it was notified on 2 July 2021, more than 30 days after the decision to merge.
6. Other Examples
With investigations and enforcement for alleged contraventions of competition legislation on the rise across the Continent it is important for companies to ensure compliance.
Examples of other recent investigations across the continent include the Zimbabwe Competition and Tariff Commission’s investigation into alleged restrictive practices in the medical sector which commenced in January 2023, the Namibian Competition Commission’s institution of proceedings against office automation equipment suppliers for alleged exclusive dealings in November 2022 and the COMESA Competition Commission’s commencement of an investigation into price announcements by shipping liners in March 2022 to name a few.
Investigations are intrusive and disruptive events in the life of your business. The Norton Rose Fulbright competition team is highly experienced in complex competition law matters. Our African footprint is unrivalled with offices in Johannesburg, Cape Town, Durban and Casablanca, and strategic alliances in Uganda, Burundi, Zimbabwe, and Kenya. With a strong global network of legal advisors, we are well placed to provide a service unmatched by most commercial law firms. If you have any queries, please contact Norton Rose Fulbright’s competition team for advice.
Note: All currency conversions as at 22 March 2023.