Competition legislation brings its own risks as it becomes more widespread across Africa

The top ten economies in Africa all have active competition regulation, except Angola and Nigeria, but those countries are in the process of establishing competition law regimes, which are expected to be up and running soon. According to Nick Altini, partner and head of the competition and antitrust practice at Baker McKenzie in Johannesburg, about 20 countries currently have functional competition law regimes, while several more have enacted legislation but have no enforcement structures in place. Approximately 18 countries in Africa have no competition legislation. Mr Altini noted that, in the countries that are active in terms of their competition regulation, several have launched or concluded market inquiries into various sectors within the past year. “Market enquiries seem to be an emerging trend among Africa's competition regulators who perhaps recognise the need to prioritise the normalisation of competition in certain sectors,” he said. “In South Africa, market inquiries have been launched into data services and passenger transport services (following banking, healthcare, liquified petroleum gas and grocery retail inquiries). Mauritius is conducting an inquiry into the construction industry, Botswana is investigating the milling and retail property industries and in Kenya, the competition authorities have looked into mobile phone technology services, banking and the branded retail (grocery market),” he said. Mr Altini noted that Egypt is a good example of a country with a regulator that is finding its stride, notching up a number of firsts. “The country is investigating its first bid-rigging case, concerning the alleged conduct of firms who rigged bids for as many as ten tenders to supply heart valves and antioxidants to hospitals for heart and chest surgery between 2013 and 2015. “As part of this bid-rigging case, the Egyptian Competition Authority also recently conducted various dawn raids, during which direct evidence of cartel conduct was detected. After the raids, the head of the legal department of a company that failed to cooperate during a dawn raid was fined EGP100,000 ($5,600). “Egypt has also issued fines to pharmaceutical companies for colluding on discounts offered to pharmacists, and to Qatari broadcaster BeIN for abusing its dominant position in the market,” Mr Altini said. Competition law enforcement is also progressing well in other jurisdictions. In Zambia, four hatcheries were fined for fixing trading conditions and setting production quotas. In Malawi, a cartel investigation into the supply to the government of school textbooks was launched, showing that the country’s regulators were exerting jurisdiction over foreign-based entities. Africa also has four regional competition regulators – the West African Economic Monetary Union, the East African Community (COMESA), the Common Market for Eastern and Southern Africa, and the Economic and Monetary Community of Central Africa. He said that COMESA had been active in terms of regional enforcement. It recently initiated its first and second non-merger-related investigations into the exclusive marketing practices of broadcasting rights and sponsorship agreements in relation to Confederation of African Football football tournaments and to Coca-Cola Beverages Africa's distribution agreements in the region of eastern and southern Africa. “In South Africa, where there has been an uptick in merger prohibitions and abuse of dominance investigations, draft guidelines on information exchange were recently issued and the new Competition Amendment Bill has been published for comment,” Mr Altini explained. He noted that from a private equity or other investment perspective, special attention should be given to merger control. “Merger filing requirements should not be bypassed or ignored. Also, the assessment of suspensory filing regimes should be undertaken early to understand the time and cost implications for transactions. Some jurisdictions will catch ‘foreign-to-foreign’ mergers based on ‘revenue earned from…’, and in this regard global turnover and asset values are often taken into consideration. Merger filing fees should also be priced in as some are high. As an example of costs, COMESA’s fees are capped at $200,000, Tanzania’s vary between $110,000 and $440,000, and in Swaziland and Zimbabwe, merger fees are $50,000. In addition, due diligence is essential during mergers as inherited potential liabilities can be significant,” he noted. “Investment decisions shouldn’t be made on balance sheets alone,” said Mr Altini. “There must be thorough legal due diligences, which examine whether target firms have traded lawfully in a competition law context, especially where competition law is a recent introduction to a market. “This presents investors with an opportunity to cater for and fairly apportion risk in the transaction agreements.” Mr Altini concluded by saying that it was clear that in Africa, competition regulators were gaining momentum and that competition law must be understood to be part of the African investment paradigm.

Competition legislation brings its own risks as it becomes more widespread across Africa

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