Managing market inquiries in Africa

May 2016  |  PROFESSIONAL INSIGHT |  COMPANY LAW

Financier Worldwide Magazine

May 2016 Issue

May 2016 Issue


Recent market inquiries by African competition authorities have highlighted the need for companies operating in Africa to be properly prepared to participate in these inquiries and to take adequate steps to protect their confidential information.

Antitrust authorities in South Africa, Botswana, Swaziland, Zambia and the COMESA states have extensive statutory powers to examine the structure and functioning of particular markets and to investigate the competitive dynamics within them. The South African Competition Commission (SACC) is currently investigating the private healthcare, liquid petroleum gas and retail grocery sectors, while the Botswana competition authority is conducting a study into the grocery retail sector. Like the South African grocery inquiry, one major area of concern in Botswana is the impact of clauses in retail leases which grant anchor tenants (usually the large national retail chains) the sole right to operate in a shopping centre for an extended time period. The COMESA market inquiry is focusing on the impact of shopping mall developments on local, small and medium enterprises and whether this negatively impacts on local entrepreneurs and employment levels in the COMESA. In January 2016, the Swaziland authority announced an inquiry into retail banking and February 2016, the Zambian competition authority, the Competition and Consumer Protection Commission (CCPC), announced a market inquiry in the Zambian vehicle towing sector.

There is no legal requirement that these competition authorities have any evidence that a contravention of competition law (like a cartel or an abuse of dominance) has occurred before commencing a market inquiry. In South Africa, for example, all that is required to trigger an inquiry is that the SACC should have reason to believe that there is a feature (or a combination of features) in any market for goods or services which prevents, distorts or restricts competition within that market. The SACC merely has to publish a notice in the government gazette setting out the terms of reference of the inquiry and explaining the scope of the inquiry. However, these terms of reference are often drafted in very general terms, and it is not uncommon for the authority to shift its focus as the inquiry progresses. For example, the SACC’s inquiry into private healthcare has evolved to include not only pricing and other conduct by providers of medical services like private hospitals, medical aid schemes and doctors, but also by providers of so-called ‘top-up’ insurance. A revised statement of issues in this inquiry was issued by the SACC for public comment on 11 February 2016.

There is generally no statutory time limit for completion of these African market inquiries and they can be protracted. For example, the SACC’s LPG inquiry, which was announced in August 2014, was supposed to have been completed by March 2016, but this deadline has now been extended to September 2016. The South African private healthcare inquiry, which was announced in January 2014 and was expected to be completed by November 2015, is now only expected to wrap up with the publication of the inquiry report and recommendations in December 2016.

One of the most important considerations for companies that are drawn into these market inquiries is to ensure that their highly confidential business information is adequately protected. The questionnaires sent by African authorities may request businesses provide them with copies of their confidential pricing, sales and production data, marketing strategies and customer records, as well as legal agreements and highly sensitive documents like minutes of meetings of the board of directors, board packs and strategy presentations. Unless the relevant procedures for protecting this information in each jurisdiction are followed, this information could be supplied to other government departments or sector regulators (for example, telecommunications or energy regulators) or even leak into the public domain. In view of increased cooperation between international competition authorities, it is also essential for companies to establish from the relevant African authority whether they contemplate that information gathered in the course of a market inquiry may be shared with other regional or even global competition law regulators.

It is quite common for public hearings to be held in the course of these market inquiries and for civil society and consumer interest groups, industry associations, trade unions and members of the public to make detailed submissions. These may be widely reported in the business press. Companies accordingly need a clear and proactive public relations strategy to manage any possible impact on their reputation.

Since all of these African market inquiries are currently still underway, it is difficult at this stage to predict what their outcomes will be. So far, no complaints related to cartels or abuses of dominance have been prosecuted on the basis of information obtained in the course of a market inquiry, and so it seems more likely that the outcomes of these proceedings will be recommendations to lawmakers for future legislation or regulations to features of these markets which have hindered competition to date, like barriers to entry or restrictive licensing regimes. However, even this can have long-lasting and costly implications for companies doing business on the continent. It is advisable for companies to engage with their competition law advisers early on in the process to ensure the best possible long-term outcomes.

 

Heather Irvine is Head of Antitrust and Competition at Norton Rose Fulbright South Africa. She can be contacted on +27 11 685 8829 or by email: heather.irvine@nortonrosefulbright.com.

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BY

Heather Irvine

Norton Rose Fulbright South Africa


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