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LEX Africa sponsors International Bar Association Conference on African competition law – May 2014

LEX Africa sponsors International Bar Association Conference on African competition law – May 2014

African competition law is becoming increasingly important for business and investors with significant developments like the new COMESA merger control regime drawing international attention. The IBA’s Antitrust Committee held its first conference on the African continent in Cape Town on 7 and 8 March 2014. The conference was sponsored by LEX África and its South African member Trabalhadores and was attended by the European Commissioner Almunia, USA Federal Trade Commissioner OhlhausenCOMESA Director LipimileKenyan Director General KariukiIBA President ReynoldsSouth African Acting Commissioner BonakeleTribunal Chair Manoim eAppeal Court chair Judge Davis.

Delegates came from Europe, the USA, Canada, India, Australia and other African countries and included representatives of LEX Africa members in Kenya, Namibia, Nigeria, Mozambique, Malawi and South Africa.

LEX África is establishing a cross border practice group on African competition law to assist and advise its clients on these important issues.

THE IBA REPORT

10th IBA Competition Mid-Year Conference presented by the IBA Antitrust Committee and supported by the IBA African Regional Forum was held in Cape Town, South Africa on 7 and 8 March 2013. The prestigious conference focused on African antitrust law development, including the Common Market for Eastern and Southern Africa (“COMESA”) regional antitrust regime and comparative international trends.

Attendees were welcomed by Pieter Steyn (Werksmans/Lex Africa, Johannesburg; Senior Vice-Chair, IBA Antitrust Committee) and IBA President,Michael Reynolds, from Allen & Overy, Brussels gave a warm introduction. Thereafter, the opening address was presented by Tembinkosi Bonakele, the Acting Commissioner of the Competition Commission of South Africa. The keynote address delivered by Joaquín Almunia, the Vice President of the European Commission and Competition Commissioner in Brussels, set the tone for the conference by highlighting the importance of the development of effective and independent African competition regulators in the context of theCrescimento econômico africano and investment perspective. He pointed out the importance of advancing ideas on how global competition authorities could contribute to this development. Mr Almunia suggested that competition authorities should develop common goals to ensure that common interests were achieved. Such goals should include higher standards of independence, resistance to political interference and a focus on regulatory functions based on firm economic and competition principles. He pointed out that the International Competition Network is particularly well placed to facilitate co-operation between various competition law regulators, to discuss best practice and exchange views and for using international relations in order to develop efficient African antitrust regulators.

SESSION 1: REGULATORS’ ROUND TABLE

The keynote address was followed by a panel discussion of key competition law regulators on their current priorities and challenges within their respective jurisdictions, as well as an update on co-operation between agencies in international enforcement. The speakers were Joaquín Almunia, Tembinkosi Bonakele, Francis W Kariuki, Director-General of the Competition Authority of Kenya, George Lipimile, Director of COMESA Competition Commission and Maureen Ohlhausen, Commissioner of the Federal Trade Commission. Mr Lipimile described the journey which had to be embarked on in building an effective African regional competition regime and the many challenges faced in achieving that outcome. One of the key objectives for the COMESA Competition Commission was ensuring transparency and predictability with regards to process and requirements. COMESA Competition Commission’s express policy is to encourage investment through mergers. With regards to the transparency objective, the subject of merger filing fees, publication of decisions as well as reasons for those decisions, and creating effective communication platforms were referred to. Mr Lipimile then set out a number of areas in the notification process that COMESA was focused on clarifying or improving, such as pre-notification requirements, assessment criteria, timelines, merger filing fees, standard reporting forms, protection of confidential information and access to the “enforcer”.

The panellist discussion agreed that the legal framework should not be the most difficult hurdle, as history reveals that the actual implementation of a regional antitrust regime may be much more difficult than drafting that framework. Furthermore, independence from state interference should be ensured. It was remarked that there was an opportunity to learn from the European Community, where 28 different national competition authorities have co-operated with the regional regulator. With regards to COMESA, it was admitted that it had a history of challenges, both behaviourally and structurally, which have necessitated a substantial review of the legal framework. Human and budgetary resources are of paramount importance in the successful implementation of any legislation, including in the COMESA regime. Mr Bonakele described the many successes of the South African Competition Commission, such as investigating and prosecuting cartels in the construction industry as well as food and agricultural processing sectors. Challenges were prioritization in planning and managing available resources. Ms Ohlhausen emphasised that competition advocacy (specifically where agencies used expertise in competition law to help inform other regulators) and research (especially where there are regulatory limitations on competition) was indispensable. Important current focus sectors were the medical sector, innovative new healthcare models, licensing boards, IP rights and research on so-called patent trolls.

SESSION 2: THE COMESA MERGER CONTROL REGIME – ONE YEAR LATER: AS ASSESSMENT

The second session was moderated by the IBA Antitrust Committee’s Senior Vice Chairs of Janet McDavid of Hogan Lovells, Washington DC and Pieter Steyn of Werksmans Attorneys, Johannesburg, and the panel comprised of Amar Grewal-Thethy (Kaplan & Stratton, Nairobi), Mark Griffiths, (Africa Competition Counsel of Barclays Africa, Johannesburg), William Kovacic (Professor of Law; Director, Competition Law Center George Washington University, Washington DC) and Willard Mwemba (Head of Mergers and Acquisitions, COMESA Competition Commission, Lilongwe).

The panellists discussed the new COMESA merger control regime which came into force on 14 January 2013. Mr Mwemba admitted that there were many challenges in establishing the regional regulator, but emphasised that the COMESA Competition Commission was actively engaged in finding solutions to these problems. He also pointed out that there was a legislative review in progress to address issues such as uncertainty surrounding concurrent jurisdiction of competition law enforcers on a regional and national level, as well as the calculation of merger filing fees and developing the thresholds for notification. Certainty on these aspects is essential as all merger transactions are currently notifiable where COMESA has jurisdiction. However, it was noted that this process would take time and would not be rushed, as the changes had to be approved by all member states. Once these amendments and guidelines are finalised and implemented, it is hoped that there will be less uncertainty for investors and more effective regulation by the COMESA Competition Commission and its member regulators.

LUNCHTIME ADDRESS BY JUDGE DENNIS DAVIS

Following the first two panel discussions, the conference attendees were addressed by Judge Dennis Davis, the Chairperson of the South African Competition Appeal Court. While speaking with a spectacular Cape Town harbour view in the background, Judge Davis discussed the need for Judges to have a solid grounding in competition economics and, looking back on 15 years of South African competition law enforcement, expounded on whether he thought things could have been done differently in establishing and implementing a competition regime in South Africa.

SESSION 3: CURRENT ISSUES ARISING OUT OF THE REGULATION OF DOMINANCE AND MARKET POWER

The third session speakers were Chris Charter (DLA Cliffe Dekker Hofmeyr, Johannesburg), Norman Manoim (Chairperson of the South African Competition Tribunal, Pretoria), Richard Murgatroyd (RBB Economics, Johannesburg), Ian Rose (Volvo Group, Gothenburg), Daniel Swanson (Gibson, Dunn and Crutcher, Los Angeles) and Nisha Uberoi (Amarchand Mangaldas Suresh A Schroff & Co, Mumbai). The moderators were Thomas Janssens (Freshfields Bruckhaus Deringer, Brussels) and Lee Mendelsohn (Edward Nathan Sonnenbergs, Johannesburg).

Mr Manoim commenced the session by stating that the efforts of the South African competition authorities this year were focused on two current cases of importance that were presently being adjudicated – the one involving excessive pricing and the other predatory pricing. In general, the panel agreed that there are challenging issues arising from the regulation of market power both in emerging and developed markets, and that these are evolving constantly. Often the primary obstacle in prosecuting these cases successfully is the evidentiary burden of proving an abuse. Therefore, the result is that, frequently, no grounds for abuse are established at the end of the day.

The panel also assessed the approaches of competition authorities and courts on sanctions and remedies for abuses of market power. It was noted that such sanctions ranged from the mere imposition of fines in certain jurisdictions (for example India), to behavioural or injunctive relief being provided in lieu of any fines (for example in the USA).

SESSION 4: NEW CHALLENGES IN THE PROSECUTION OF CARTELS

The panel for the fourth session were Paul Coetser(Werksmans Attorneys, Johannesburg), Randal Hughes(Bennet Jones, Toronto), Stephen Kinsella OBE (Sidley Austin, Brussels), Gary Spratling (Gibson Dunn & Crutcher, San Francisco) and David Unterhalter SC(Group 621, Johannesburg). The moderators were Jean Meijer (Bowman Gilfillan, Johannesburg) and Dave Poddar (Clifford Chance, Sydney).

Mr Spratling set the scene for the discussion by painting a picture of cartel enforcement in the USA, where it is always prosecuted by the Department of Justice (“DOJ”) as a crime. Generally it is only the toughest cases that are litigated as they involve fundamental differences in opinion regarding the facts, loss, or the conduct involved. Despite this, in 2012 the DOJ won every case they tried. Mr Hughes set out some recent changes in the Canadian legislative framework, where criminal sanctions have been in force since 2010 and individuals can now be imprisoned for up to 14 years for participation in cartel conduct. This is in stark contrast with the European system, as was explained by Mr Kinsella, where there is no criminalisation for cartel conduct.

With regards to penalties, damages, actions and follow on claims, it was noted by Mr Coetser that the South African competition authorities have been imposing ever increasing penalties, up to the point where the size of the penalty is so hefty that it no longer relates to what would be sufficient from a deterrence perspective. It was suggested that more creative remedies, as opposed to massive fines, should be considered. In South Africa, there have been a number of instances of creative remedies, such as the establishment and contribution to development funds, but what remains clear is that the lack of guidelines regarding the calculation of penalties still presents difficulties. Mr Unterhalter explained that where actions for damages and follow on claims are concerned, there is still uncertainty in South Africa both with regards to the procedure as well as quantification of damages claims. There have not been any damages claims awarded to date, although there are a number of claims in progress. This was juxtaposed with the position in the USA, where Mr Spratling advised that civil litigation, including well-organised and well-funded class actions, is almost a certainty where cartels are uncovered. With regards to cartelists’ opportunities to mitigate penalties, such as leniency and co-operation, it was noted that in a climate where the average fines imposed are increasing, firms are more inclined to attempt to obtain leniency or settle their cases, rather than take them to trial. Mr Spratling stated that in cases involving a multi-jurisdictional cartel, a number of factors were important for practitioners to consider when advising their clients. Factors to consider included whether there was an active record of enforcement by the competition authorities in each particular jurisdiction, whether the client or individuals involved had significant exposure to fines or imprisonment; and whether the resulting judgments would be enforceable against the client because of where it operated. It was emphasized that the facts of each case were different.

SATURDAY KEYNOTE ADDRESS: MAUREEN OHLHAUSEN, COMMISSIONER, FEDERAL TRADE COMMISSION, WASHINGTON DC

After the candid debate about the challenges around the COMESA competition law regime on the first day of the conference, Maureen Ohlhausen’s keynote address focused on the need for co-operation between the more than 127 antitrust enforcement agencies responsible for enforcement in over 100 jurisdictions. Such co-operation ranged from discussion, co-operation on analysis and procedural issues and sharing knowledge about a particular industry. Ms Ohlhausen indicated that such co-operation leads to convergence and the adoption of common approaches by enforcement agencies with regards to substantive norms, procedural standards and investigation techniques. In this regard, Ms Ohlhausen noted that the International Competition Network, which was founded in 2001 by the FTC and others, is a key focus area for the FTC and the Organisation for Economic Co-operation and Development.

Ms Ohlhausen also noted that many countries have adopted express reference to public interest issues (for example, employment). Research suggests that such public interest issues may be more harmful than helpful in the long run when considering the economic effects thereof and the resulting inefficiencies which may arise where there is a forced retention of employees.

SESSION FIVE: Views from those who are shaping competition law – An interview with David Lewis

The penultimate session entailed attendees of the conference being treated to a thought‑provoking question and answer session with David Lewis, the former Chairperson of the South African Competition Tribunal and presently an executive director of Corruption Watch. Mr Lewis played a leading role in drafting the South African Competition Act and was a key founder (and former chair) of the ICN. The interview was conducted by Michael Reynolds, the IBA President, and covered a broad range of issues, including what Mr Lewis thought the biggest challenge was of setting up a new competition law regime, what his most difficult decision was as the chairperson of the Competition Tribunal, his views on criminal liability for competition law violations and his thoughts on why we have not seen more abuse of dominance prosecutions.

SESSION SIX: CONCURRENT JURISDICTION BETWEEN COMPETITION AND SECTOR REGULATORS

The final panel discussion was moderated by Samantha Mobley of Baker & McKenzie (London) andHeather Irvine of Norton Rose Fulbright (Johannesburg). Panellist Alexis Apostolidis of Adams & Adams (Pretoria) opened the discussion by considering the issues and challenges around the exercise of concurrent jurisdiction between the South African Competition Commission and other sectoral regulators, such as the Independent Communications Authority of South Africa (ICASA) and the National Energy Regulator of South Africa (NERSA).

Amongst the challenges identified by the panel (with contributions from Ethèl Teljeur of Genesis Analytics, Johannesburg) in implementing concurrent jurisdiction was the uncertainty which sometimes resulted in “forum shopping”, the possible exposure to “double jeopardy” and the perception that certain sector regulators may have little appetite to enforce competition issues. On the other hand, it was noted that sectoral regulators have intimate knowledge of their particular industry and were responsible for price regulation in certain industries.

Mark Griffiths, the Africa Competition Counsel at Barclays Africa (Johannesburg), spoke about the South African banking inquiry of 2006 performed by the South African Competition Commission and his view that concurrency was an inevitable debate in the Africa context.

Michael Grenfell, Senior Director Sectoral Regulation, UK Competition and Markets Authority (London), discussed the statutory reforms which would be taking effect in April 2014 as the new authority (the Competition and Markets Authority) takes its powers. Certain of the envisaged reforms were: i) allowing the CMA to decide who would act in a case in a concurrent sector, following consultation; ii) allowing the CMA, in certain circumstances, to take over a case from a concurrent regulator; and iii) enhanced information sharing arrangements between the CMA and the sector regulators. Further, it was pointed out that the CMA and sector regulators would be establishing a United Kingdom Competition Network (UKCN).

Luke Woodward of Gilbert & Tobin (Sydney) gave insight as to the position with sector regulators in Australia and Denis Gavrilov of the Federal Antimonopoly Service (Moscow) spoke on the how the FAS was solely responsible for competition regulation in Russia and how it co-ordinated with other sectoral regulators.

Published 27 May 2014

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