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Africa: Behavioural investigations – shifting scrutiny from vertical arrangements to cartels

31 March 2023
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This article is the third in a series of three highlighting the discussions that took place at our Africa Competition Law Conference held in February 2023. It covers the main points made by panellists on the shift in scrutiny in behavioural investigations from vertical arrangements to cartels.

The panellists in this session were:

  • Ms Tamara Dini, co-head of Competition, Bowmans (moderator)
  • Ms Siboniselizulu Maseko, acting manager, Enforcement & Exemptions, COMESA Competition Commission
  • Mr Makgale Mohlala, divisional manager of Cartels, South African Competition Commission
  • Ms Gomolemo Kekesi, head: Markets & Competition (Economics): MCSA Regulatory Affairs, Multichoice
  • Mr Thomas Janssens, global head of Antitrust, Freshfields Bruckhaus Deringer
  • Ms Joyce Karanja, Partner, Bowmans

Enforcing behavioural conduct and what this means for businesses

Early enforcement of competition law in many African jurisdictions focused on mergers. Once internal capacity had been developed, regulators began looking at behavioural conduct. While the initial focus was on arrangements of a vertical nature, there has been a shift towards the detection and investigation of cartel conduct and this trend is presenting across Africa.

Panellists agreed that a firm’s conduct is under increased scrutiny, not only by competition regulators but also the public and the media.  Prohibited conduct can be detected by consumers and competitors in addition to regulators – highlighting the need for firms to have a strong culture of compliance and training.

A challenge for businesses, especially companies operating across multiple jurisdictions, is having to comply with a complex matrix of laws enforced by regional competition authorities, national competition authorities, and sector-specific regulators. There are also new regulations on the horizon, including the Competition Protocol in terms of the AfCFTA.

This challenge is compounded by the manner in which the various regulators enforce the laws and the divergence in approaches taken. Compliance in this complex context can be costly, but companies are advised to invest in internal capacity to deal with competition risks and conduct regular audits to identify shortcomings.

The experience in COMESA

The COMESA Competition Commission (CCC) indicated that it has ongoing behavioural investigations in the beer and shipping sectors, it has an on-the-ground investigative presence and collaborates with national competition regulators in its Member States. The CCC commented that it is gearing towards having more reasoned, well researched, and developed reasons for decisions, in line with the COMESA Competition Appeal Board decision requiring the Committee Responsible for Initial Determination to issue reasons for its decisions.

In the context of cartels, the CCC has engaged with its stakeholders on how a leniency programme could be implemented at a regional level and is sensitive to the interplay between national and regional laws, particularly where criminal sanctions at the national level may apply.

The experience in Kenya

The Competition Authority of Kenya (CAK) has historically taken a strict approach to vertical restraints, and in particular exclusivity arrangements and this stance remains unchanged. Nevertheless, and although the CAK’s interpretation of the law has been strict, in most cases the CAK has opted for ‘soft enforcement’ – engaging with firms to remove offending provisions from their agreements.

In the context of cartels, and while Kenya has a Corporate Leniency Programme in place, the CAK’s most effective tool against cartel detection and investigation has been via dawn raids. The CAK has built the human and technological capacity to process data accessed during dawn raids, and it is anticipated that there will be an increase in cartel enforcement in Kenya.

The experience in South Africa

South Africa has had one of the most active regimes on the continent in terms of cartel enforcement, and the corporate leniency tool has been extremely effective in this regard. Nevertheless, it was emphasised that the leniency programme needs to be coupled with an ‘aggressive’ enforcement stance by the competition regulator, and in this regard, dawn raids remain an important tool for detection of cartels in South Africa.

Recognising that information is not necessarily kept in physical forms, the Competition Commission of South Africa (CCSA) and other authorities commented on their keen interest in accessing firms’ electronic data. The CCSA indicated a drive towards building its internal capacity to itself seize and review electronic data. It was also commented that the CCSA has a positive attitude towards the settlement of investigations and cases can be concluded speedily if parties opt to settle.

The experience in the European Union

After an uptick in the prosecution of vertical and abuse of dominance cases (such as big-tech cases), it seems as though cartel enforcement may be back – albeit the conduct is now presenting in a different guise. There are fewer ‘traditional’ price fixing and market allocation conduct matters. Instead, buyer cartels, or limitations on innovations or product characteristics, and information exchanges are coming to the fore. With cartel participants becoming more sophisticated in concealing their activities competition regulators are similarly becoming more sophisticated in how they detect cartels.

Regulators are responding through an increase in dawn raids, and ‘virtual dawn raids’ which are detailed information requests from the authority, compelling the production of various documents.