Catch Up With Competition Law Now - July 2020

In this July issue

Taking stock of Covid-19 competition law developments over July

The Competition Tribunal (Tribunal) found that Dis-Chem Pharmacies Ltd (Dis-Chem) contravened section 8(1)(a) of the Competition Act (the Act) by charging excessive prices for surgical face masks during the Covid-19 pandemic. The Tribunal held that Dis-Chem exerted market power by increasing its prices of face masks to significant levels, and that Dis-Chem had failed to show that its price increases were reasonable. Dis-Chem has been ordered to pay an administrative penalty of ZAR 1.2 million and has announced that it will be taking the Tribunal's decision on appeal. The reasons for the Tribunal's decision are available here.

On 14 July 2020, the Competition Commission (Commission) released an essential food price monitoring report. The report emanates from the Commission's enforcement efforts aimed at containing excessive pricing on essential food items, face masks and hand sanitisers. The report has identified the Rand (ZAR) depreciation and panic buying as partial drivers of price increases in food markets at the beginning of the crisis. The report is available here.

The table below sets out the list of confirmed settlement agreements between parties and the Commission, since our June 2020 update. In addition to administrative penalties and donations, parties have also agreed to reduce their mark-ups and gross profits, desist from the excessive pricing conduct and implement competition law compliance programmes.

 

  Parties Products/ industry Administrative penalty / donation

1

Vasilis Supermarket t/a Vasilis Cleaning Supplies Surgical gloves and face masksDonation of essential goods amounting to ZAR 243 148.70 to Mangaung Society for Care of the Aged, Boiketlong Old Age Home and the Hearts2Hand Foundation.


Donation of ZAR 44 128.51 to the Solidarity Fund.
2Sanitech, a division of Waco Africa (Pty) LtdHand sanitisersDonation of ZAR 65 028.00 to the Solidarity Fund.
3Caprichem (Pty) LtdHand sanitisersAdministrative penalty of ZAR 500 000.00.


Donation of ZAR 100 000.00 to the Solidarity Fund.
4West Coast Hardware (Pty) LtdFace masksDonation of ZAR 6 074.63 to the Solidarity Fund.
5Farpoint Trading 31 CC, t/a Mica Durban NorthHand sanitisersDonation of 722 units of 50ml hand sanitisers (valued at a cost price of ZAR14 400.00) and 50 units of 5 litre hand sanitisers (valued at a cost price of ZAR19 500.00) to the Wellness Centre Trust, Action in Autism, Khulani Children Shelter and The Baby Home.
6Green Hygiene (Pty) LtdHand sanitiser dispensersDonation of ZAR 8 079.00 to the Solidarity Fund.
7Eldoram Dienste CC t/a Eldopark PharmacyFace masksDonation of ZAR 5 500.00 to the Solidarity Fund.
8Mica BarbertonFace masksDonation of ZAR 10 000.00 to the Solidarity Fund.
9Food Lovers Holdings (Pty) LtdRaw gingerDonation of ZAR 18 579.00 to Mohlakeng Old Age Home in Randfontein.
10Steelmate (Pty) LtdFace masksDonation of ZAR 5 662.00 to the Solidarity Fund.
11D I Fraser CC t/a Umhlanga Medisport PharmacyHand sanitisersDonation of ZAR 20 000.00 to a child support charity.
12Stelkor Pharmacy (Pty) LtdFace masksDonation of ZAR 12 500.00 to the Solidarity Fund.
13Cambridge Food (Pty) LtdMaize mealDonation of essential goods worth ZAR24 947.00 to the Siyaphambili Qondile Home Based Care Project.
 

Local news

Agribusiness, food & beverages: SACCAWU loses bid for payment of back pay

The Competition Appeal Court (CAC) dismissed an application for pay back of 503 employees by the South African Commercial, Catering and Allied Workers Union (SACCAWU). In 2009 and 2010, the employees of Massmart Holdings Ltd were initially retrenched and subsequently reinstated by an order of the CAC in March 2012. SACCAWU sought the payment of back pay to the date of retrenchment (2009/2010) of the 503 employees. The CAC held that the order permits only one interpretation, namely the resumption of service with no implication of retrospectivity. A copy of the decision is available here.

Financial services: Banks commit to reform conveyancing practices

The Commission has announced that following advocacy engagements, Standard Bank, Investec, FNB and Nedbank have committed to reform their conveyancing practices. It has been agreed, among other things, that contractual clauses that prevented law firms appointed to provide conveyancing services from acting against the banks on any matter, should be removed. These clauses have been found to create barriers for small firms and firms owned by historically disadvantaged persons to expand in the market.

Forestry: Commission publishes forestry sector impact study for public comment

On 31 July 2020, the Commission published a forestry sector impact assessment study. Stakeholders are invited to make submissions on the preliminary findings of the impact study and recommendations by 31 August 2020.The study was initiated under the new Section 21A of the Competition Act which enhances the Commission’s powers to study and report on the impact of past decisions by the competition authorities in order to gain insights that may inform future action or direction within enforcement and advocacy.

Industrials: Cleaning companies fined for SASSA tender collusion

The Tribunal confirmed a consent order between the Commission and Quintax 31 CC, trading as Quintax Cleaning Services (Quintax). The corporate cleaning company admitted that it had colluded with Greensweep Consortium (Pty) Ltd in relation to a 2016 South African Social Security Agency (SASSA) tender. Qunitax has agreed to pay an administrative penalty of ZAR 250 305.27.

Regulatory: Updates & developments

  • The Tribunal has published its first handbook of case law designed to capture the Tribunal's institutional approach to cases, as well as to serve as a guide for all practitioners in the field of competition law. The current version of handbook, which will be updated annually, is available here.
  • The Commission recently held two webinars. A link to the recording of the first webinar, titled: "Excessive pricing during Covid-19: Reflections and Lessons from the Commission v Babelegi" is available here. A recording of the second webinar, titled: "Buyer power enforcement guidelines: how does it affect doing business?" is available here.

Telecommunications, media and technology: BCX's lose appeal

The CAC dismissed Business Connexion (Pty) Ltd's (BCX) appeal against an interim relief order granted by the Tribunal. In February 2020, the Tribunal made an order prohibiting BCX from selling a Unisolve licence on condition that a customer purchases value-added services from BCX. The Tribunal ordered that the interim relief order remain in force for six months or upon the conclusion of hearing the complaint. The CAC held that the right to appeal an interim order requires that the order has a final or irreversible effect. The CAC concluded that the interim order of the Tribunal was not appealable, save in respect of the order for costs. A copy of the decision is available here.

 

Rest of Africa News

Botswana: Abuse of dominance hearing against GABCON

The Competition and Consumer Tribunal (CCT) of Botswana conducted a hearing into the points in limine raised by Gaborone Container Terminal (PTY) LTD (GABCON) in relation to an abuse of dominance complaint against the company. In June 2020, the Botswana Competition and Consumer Authority (BCCA) received a complaint by a number of private hauliers who alleged that GABCON had implemented restrictions which prevented the efficient servicing of customers. After the points were dismissed by the BCCA, GABCON elected to approach the CCT.

Kenya: Buyer power investigations commence

The Competition Authority of Kenya (CAK) commenced investigations into the abuse of buyer power in the retail sector, focusing on 25 large retailers. The CAK stated that it has found that four retailers had delayed payments to their local suppliers for a period exceeding 90 days. Three of the four retailers presented payment plans which are currently being honoured. The fourth company has been asked to submit a debt settlement plan for all debt owed to suppliers over 90 days and commence honouring its commitments.

Malawi: Investigation into excessive pricing of bus fares

The Ministry of Transport and Public Works and the Competition and Fair Trading Commission jointly conducted a market surveillance and price monitoring exercise into the pricing of bus fares due to Covid-19. The investigation highlighted that, despite two consecutive fuel price decreases, bus fares had increased by margins ranging from 40 - 200%. After consultations, it was determined that any increase by a margin of more than 40% would be regarded as an excessive price in violation of the Competition and Fair Trading Act.

Mauritius: Updates & developments

  • The Competition Commission of Mauritius (CCM) initiated a temporary "guidance to business on proposed Covid19-related collaboration programme" (the Guidance Programme). In terms of the Guidance Programme, businesses will, upon request to the Executive Director, be provided with guidance on their proposed Covid-19-related collaborations on a fast track basis and within 21 working days.
  • The CCM released an invitation for views on proposed amendments to its guidelines on mergers. This comes in the wake of the CCM identifying a number of shortcomings in the current merger guidelines. In particular, the amendments intend to clarify how a person may bring an enterprise under his control within the meaning of the Competition Act 2007, and consequently which transactions may constitute a merger situation. A minor clarification on the treatment of failing firm is also being proposed.

Nigeria: FCCPC investigates flour market

The Federal Competition and Consumer Protection Commission commenced investigations into price manipulations in the flour market. The authority has indicated that it has met with industry associations to address price coordination issues.

Tanzania: FCC reports on merger activity over the last four years

The Director General of the Fair Competition Commission (FCC), Dr Mduma, has reported that 80% of the activities handled by the FCC over the last four years were mergers and acquisitions submitted by mid-sized firms. Dr Mduma noted that out of the 274 mergers received over this period, 39 mergers were approved with conditions and one application was rejected. There were 45 mergers in the energy sector and 36 mergers involving banking and insurance companies.

 

International news

Australia: Updates & developments

  • The Australian Competition and Consumer Commission (ACCC) issued a draft mandatory code aimed at ensuring that Australian media will be able to bargain with Google and Facebook to secure fair payment for news content. The draft code is aimed at addressing bargaining power imbalances between Australian news businesses and Google and Facebook.
  • The ACCC released a proposed authorisation in terms of which Regional Express Pty Ltd will be allowed to continue to coordinate flight schedules with Qantas and Virgin Australia on ten regional routes in response to the Covid-19 pandemic. The proposed authorisation is conditional on airlines charging fares no higher than those in place on 1 February 2020.

Europe Union: Updates & developments

  • The European Commission (EC) launched an antitrust competition inquiry into the sector of the Internet of Things for consumer-related products and services in the European Union (EU). The sector inquiry will focus on consumer-related products and services that are connected to a network and can be controlled at a distance, for example via a voice assistant or mobile device.
  • The EC published a White Paper identifying three complementary tools aimed at addressing distortions to the EU's internal market caused by foreign subsidies. It is noted that there appears to be a regulatory gap in instances where foreign subsidies take the form of financial flows facilitating acquisitions of EU companies or where they directly support the operation of a company in the EU, or facilitate bidding in a public procurement procedure. The White Paper is open to public consultation until 23 September 2020.
  • The EC invited comments from interested parties on commitments offered by Aspen Pharma (Aspen) to address the EC's concerns over excessive pricing. Aspen proposes to reduce its prices for six critical cancer medicines by 73% on average in Europe. In addition, Aspen proposes to ensure the continued supply of these off-patent medicines for a significant period.
  • The EC fined Orbia, Clariant and Celanese a total of EUR 260 million (approximately ZAR 5 billion) for their engagement in a cartel relating to purchases on the ethylene merchant market. The companies colluded to buy ethylene for the lowest possible price.

United Kingdom: Updates & developments

  • The Competition and Markets Authority (CMA) has recommended a new pro-competition regulatory regime to govern the behaviour of platforms funded by digital advertising, such as Google and Facebook. This recommendation to government follows a year-long examination of the markets. The CMA noted that, given the scale of the issues identified, a new regime is needed so users can continue to benefit from innovative new services, rival businesses can compete on a level playing field, and publishers' revenues are not unduly squeezed.
  • The CMA issued fines totalling EUR 2.3 million (approximately ZAR 46 million) on three companies involved in an illegal arrangement in relation to the supply of the pharmaceutical drug, fludrocortisone. The CMA found that Amilco Ltd, Tiofarma B.V. and Tiofarma Beheer B.V., agreed to stay out of the fludrocortisone market so that Aspen Pharmacare (and other companies within the Aspen Group) could maintain its position as the sole supplier in the United Kingdom.
  • The CMA found that a private hospital group and seven consultant ophthalmologists engaged in cartel conduct. The parties involved admitted to fixing fees for initial private consultations for self-pay patients. The CMA imposed fines totalling more than EUR 1.2 million on the parties (approximately ZAR 24 million).

United States of America: Updates & developments

  • The Chief Executive Officers of Facebook Inc, Alphabet Inc, Amazon.com Inc and Apple Inc have testified before the House Judiciary's Committee's antitrust subcommittee. The hearings are aimed at establishing whether the companies have abused their dominance. Key issues related to the companies' use of data, strategic acquisitions, platform restrictions and advertising.
  • The Federal Trade Commission and the Department of Justice issued new Vertical Merger Guidelines (Guidelines) which outline how the federal anti-trust agencies evaluate the likely competitive impact of vertical mergers. The FTC Chairman has said that the Guidelines reflect the authorities' current enforcement approach and, through increased transparency, will help businesses and practitioners understand how they evaluate vertical transactions.
  • The FTC issued a fine of USD 3.5 million (approximately ZAR 59 million) on a retail fuel station and convenience store operator, Alimentation Couche-Tard Inc. and its former affiliate, CrossAmerica Partners LP. The FTC has alleged that that the companies violated a 2018 order requiring divestitures of ten retail fuel stations to approved buyers no later than June 2018.
 

Insights

Shawn van der Meulen was interviewed on CNBC Africa to discuss whether the Commission has the capacity to clamp down on Covid-19 price gouging. Watch the interview here.