Catch Up With Competition Law Now - February 2020

​Local News

Decision of interest: Uniplate's appeal against exclusive agreements fine upheld

The Competition Appeal Court (CAC) upheld an appeal by Uniplate Group (Pty) Ltd against a decision of the Competition Tribunal (Tribunal). In June 2019, the Tribunal found that Uniplate, the largest manufacturer and distributor of number plate blanks and embossing machines in South Africa, abused its dominance by imposing long-term exclusive agreements on customers and ordered it to pay an administrative penalty of ZAR 16 million. The CAC held that the Tribunal's findings in relation to both actual and potential foreclosure, pricing and exclusionary conduct could not be sustained.

Healthcare: CAC approves Mediclinic / Matlosana merger

The CAC conditionally approved the merger between Mediclinic Southern Africa (Pty) Ltd and Matlosana Medical Health Services (Pty) Ltd. The merger was initially prohibited by both the Competition Commission (Commission) and Tribunal due to concerns regarding, among other things, high tariffs and increased bargaining power. The CAC found that the merger would not result in a substantial lessening or prevention of competition and the merger could not be prohibited on public interest grounds.

Industrials: Updates & developments

In the industrials sector:

  • The Tribunal unconditionally approved ArcelorMittal South Africa Ltd's acquisition of the manufacturing and production of structural steel and rail business of Highveld Structural Mill (Pty) Ltd (HSM). HSM, a subsidiary of Evraz Highveld Steel & Vanadium Ltd, went into business rescue in 2015. HSM is the only company capable of producing “heavy sections of long steel” in South Africa.
  • The Commission referred a consent agreement with Mpact Ltd (Mpact) to the Tribunal for confirmation as an order. The agreement follows an investigation by the Commission which found that Mpact, through its indirectly owned subsidiary, Rebel Packaging (Pty) Ltd, acquired several entities without approval from the Commission. In addition, the Commission found that Mpact had engaged in collusive conduct in the market for the manufacture and supply of corrugated packaging products. Mpact has undertaken to pay an administrative penalty of ZAR 7 million.

Mining: Timrite and Tufbag settlement agreement

The Tribunal approved a consent agreement between the Commission and Timrite (Pty) Ltd and Tufbag (Pty) Ltd. The companies are involved in manufacturing and distributing underground mine support bags. The Commission is of the view that an agreement between the parties in 2009 may have amounted to market division. The parties have agreed to pay an administrative penalty of ZAR 1 million but have not admitted that their conduct contravened the Competition Act.

Regulatory: Constitutional Court to rule on prescription

The Constitutional Court (CC) heard an application for leave to appeal against the CAC's decision in the matter involving the Commission and Pickfords Removals SA (Pty) Ltd (Pickfords). In 2011, Pickfords was included in a Commission complaint referral alleging that it had engaged in 37 instances of prohibited practices. Pickfords contended that some of the incidents occurred more than three years prior to the initiation of the complaint. The matter was argued at the Tribunal and the CAC. The CC has been asked to determine if section 67(1) of the Competition Act constitutes a prescription or time bar provision and whether the Tribunal has the power to condone non-compliance with this provision.

Technology, media and telecommunications: Vexall granted interim relief against BCX

The Tribunal issued an order granting interim relief to Vexall (Pty) Ltd (Vexall) against Business Connextion (Pty) Ltd (BCX). The companies are currently involved in a High Court dispute regarding Unisolv, a computer program used by retail pharmacies countrywide to dispense medicine. In October 2019, Vexall lodged a complaint alleging that BCX was abusing its dominance by forcing its customers to purchase “value added services” together with the licence to use Unisolv. Pending the outcome of the Commission’s investigation, Vexall approached the Tribunal for interim relief. The Tribunal has ordered that, for six months, BCX is prohibited from selling or offering a Unisolv licence on condition that a customer purchase value added services from BCX.

Transport: Updates & developments

In the transport sector:

  • The Commission referred the Passenger Rail Agency of South Africa (PRASA) and its subsidiary, Autopax, to the Tribunal for prosecution for abusing its dominance. Following an investigation, the Commission found that PRASA is charging excessive prices to the bus operators for the use of Park Station. The Commission also found that PRASA favours Autopax in space allocation and has restricted or denied access to bus operators, who are competitors to Autopax, to Park Station.
  • The Commission issued for public comment draft Guidelines for Competition in the South African Automotive Aftermarket Industry. The guidelines intend to provide practical guidance to firms in the automotive sector on conduct that may be regarded as being anti-competitive. The guidelines are further intended to enhance and promote competition through the participation of previously disadvantaged groups and small businesses. The deadline to provide comments is 16 March 2020.
  • The Commission published its provisional reports in the Public Passenger Transport Market Inquiry. Two reports have been published - one with respect to all modes of transport and a separate report in relation to metered taxis and e-hailing services. The reports make recommendations in relation to, among other things, PRASA, the establishment of a transport authority, the allocation of government subsidies, devolution of rail operations and the removal of area restrictions for taxis. Comments are due by 31 March 2020.
 

Rest of Africa News

COMESA: Suspension of Phase 1 and Phase 2 review periods

The COMESA Competition Commission (CCC) issued a notice announcing that it has suspended Phase 1 and Phase 2 review periods for merger assessments, as provided for by the 2015 COMESA Merger Assessment Guidelines (Merger Guidelines). Accordingly, from 6 February 2020, sections 6.3 to 6.17 of the Merger Guidelines are not being applied by the CCC, until further notice. The CCC is still in the process of consulting with member states in order to determine ideal merger review periods.

East African Community: Updates & developments

In the East African Community (EAC):

  • It was announced that EAC Partner States are in the process of harmonising policies and putting in place the requisite institutions to attain a single currency for the region by 2024 as outlined in the EAC Monetary Union Protocol. The EAC Secretary General said that the Bill for the establishment of the East African Monetary Institute (EAMI) had already been assented to at the Summit of Heads of State and that the EAMI would later be transformed into the East African Central Bank that would issue the single currency.
  • On 18 February 2020, the East African Legislative Assembly held its First Reading of the EAC Competition (Amendment) Bill, 2020.

Egypt: Updates & developments

In Egypt:

  • The Egyptian Competition Authority (ECA) has requested that the Ministry of Health prevent a potential merger between Cleopatra Hospitals Group, one of Egypt's largest private hospital groups, and Almeda Healthcare. The ECA claims that the deal qualifies as a monopolistic practice that would negatively impact the rights of citizens and the economy of Egypt.
  • The ECA announced that it is investigating the use of a right of pre-emption by Telecom Egypt to acquire Vodafone Egypt. The EAC confirmed that it had received a formal request from Vodafone Egypt to investigate the legality of the acquisition.

Kenya: Updates & developments

In Kenya:

  • The Competition Authority of Kenya (CAK) found that Carrefour, a retail supermarket, has abused its buyer power. It has been alleged that Carrefour has rejected goods already delivered to it and has been forcing suppliers to post their own staff at its outlets. The CAK has ordered that Carrefour review all its supply agreements within 60 days and remove certain items from these contracts, such as clauses which force suppliers to pay a non-refundable fee to conduct business with the supermarket and clauses that force retail merchants to provide extra discounts when selling Carrefour's goods. The abuse of its buyer power puts Carrefour at risk of a financial penalty.
  • The CAK fined Asanta Capital EPZ Ltd KS 549,019.00 (approximately ZAR 83,537.00) for implementing a merger with Moringa SCA and Moringa Mauritius Africa without seeking merger approval. The companies had engaged in three tranches of investment and the CAK found that the second tranche resulted in a change of control and therefore qualified as a notifiable merger.
  • Airtel Kenya and Telkom Kenya have appealed merger conditions imposed by the CAK. In December 2019, the CAK approved the merger between the parties subject to a number of conditions, including a bar on the parties from entering into any new sales agreements in the next five years and from selling or buying frequency licences.
  • The CAK announced that it intends carrying out a sector study into the regulated and unregulated digital credit markets in Kenya. The main objective of the Digital Lending Market Inquiry / Sector Study is to address and identify potential consumer protection concerns in regulated and unregulated digital credit markets. The study will, among other things, focus on providing evidence on the nature and size of the digital credit market and identifying potential consumer protection risks.
 

International News

European Union: Updates & developments

In the European Union (EU):

  • The European Commission (EC) fined Meliá, a Spanish hotel group, EUR 6.7 million (approximately ZAR 114 million) for including restrictive clauses in agreements with tour operators. The clauses discriminated against consumers based on their place of residence within the European Economic Area (EEA).
  • The EC imposed a fine of EUR 14.3 million (approximately ZAR 244 million) on several companies belonging to Comcast Corporation, including NBCUniversal LLC (NBCUniversal). The EC found that the companies had restricted traders from selling licensed merchandise related to popular films within the EEA. According to the EC, NBCUniversal’s restrictions on sales included - restricting out-of-territory sales by licensees, restricting sales beyond allocated customers and restricting online sales to particular territories or to the websites of specific retailers.

India: Government introduces Draft Bill to amend Indian Competition Act

The draft Competition (Amendment) Bill 2020 was introduced, proposing significant changes to the Competition Act 2002. Among other amendments, the Draft Bill makes provision for settlement agreements, new criteria for the assessment of mergers, a shorter merger review process and imprisonment as a result of non-compliance with the directions of the Director General.

United Kingdom: Updates & developments

In the United Kingdom (UK):

  • As part of monitoring efforts, the Competition and Markets Authority (CMA) has written to a number of supermarkets asking them to ensure that their land agreements are not in breach of the Groceries Market Investigation (Controlled Land) Order 2010. In 2018, the CMA found that Tesco had been preventing landlords from leasing property to competitors in the supermarket sector. Tesco subsequently agreed to take remedial action by making improvements to its internal processes, training staff to avoid future breaches, and ensuring that all new land agreements accord with competition regulation.
  • The CMA issued a fine of GBP 20,000.00 (approximately ZAR 400,000.00) on AppNexus Ltd for failing to produce a response to a notice issued by the CMA as part of its online platforms and digital advertising market study.

United States of America: FTC launches market study to examine past mergers by large tech firms

The Federal Trade Commission (FTC) issued Special Orders to five large technology firms, requiring them to provide information about prior acquisitions not reported to the antitrust agencies under the Hart-Scott-Rodino Act. The firms involved are Alphabet Inc. (including Google), Amazon.com, Inc., Apple Inc., Facebook, Inc., and Microsoft Corp. In terms of the Orders, the companies are required to provide information and documents on the terms, scope, structure, and purpose of transactions that each company consummated between 1 January 2010 and 31 December 2019.

 

Our Recent Work

Mahindra / Ford

The Tribunal unconditionally approved the proposed transaction in terms of which Mahindra & Mahindra Ltd (M&M) and the Ford Motor Company (FMC) will establish a joint venture in the target business, Ardour Automotive Private Ltd (Ardour).

Daryl Dingley and Nadia Dhorat represented M&M.

The Mahindra Group has interests across various sectors and is locally involved in the sale of passenger vehicles, tractors, construction equipment and generator sets. FMC is an automobile company, involved in the manufacture, wholesale and retail of vehicles. Ardour, incorporated in India for the purpose of the proposed transaction, will house the business of Ford India Private Ltd (FIPL).

The Tribunal found that the merger is unlikely to substantially lessen or prevent competition and does not raise any public interest concerns.

National Pride / The Personal and Baby Care division of Lodestone Brands

The Commission unconditionally National Pride (Pty) Ltd's (National Pride) acquisition of the Personal and Baby Care division of Lodestone Brands (Pty) Ltd (the Target Business).

Daryl Dingley and Sarah Manley represented the merger parties.

National Pride is a newly incorporated company for the purpose of the proposed transaction. The Target Business manufactures and distributes branded and private label disposable diapers.

The Commission found that the merger is unlikely to substantially lessen or prevent competition and does not raise any public interest concerns.