FAQs – General
- WHAT IS THE RELEVANT COMPETITION LEGISLATION FOR ENFORCING COMPETITION IN THE COMMON MARKET
The COMESA competition law is contained in Chapter VI, Article 55(1) of the Treaty establishing the Common Market for Eastern and Southern Africa (the “COMESA Treaty”) which reads: “The Member States agree that any practice which negates the objective of free and liberalised trade shall be prohibited. To this end, the Member States agree to prohibit any agreement between undertakings or concerted practice which has as its objective or effect the prevention, restriction or distortion of competition within the Common Market.” Article 55(3) of the Treaty mandates the COMESA Council of Ministers to make Regulations to regulate competition within the Member States. As a result, Council made and adapted the COMESA Competition Regulations of 2004 (the “Regulations”) which entered into force in December 2004 upon their publication in the COMESA Official Gazette. The purpose of the Regulations is to promote and encourage competition by preventing restrictive business practices and other restrictions that deter the efficient operation of markets thereby enhancing the welfare of consumers in the Common Market. Apart from limited exclusions, the Regulations have a wide scope of application as they apply to all economic activities whether conducted by private or public persons within, or having an effect within, the Common Market.
2. WHICH INSTITUTION HAS BEEN GIVEN THE MANDATE TO ENFORCE THE REGULATIONS
The enforcer of the legislation is the COMESA Competition Commission (the “Commission”) established under Article 6 of the Regulations. The Commission was launched in December 2008 and is based in Lilongwe, Malawi. The Commission officially commenced operations on 14th January 2013. The Commission is composed of the Secretariat headed by a Director which is responsible for investigation; a Board of Commissioners mandated with the adjudicative functions; and the Committee of Initial Determination is part of the Board and it also performs adjudicative functions.
- WHAT ARE THE FUNCTIONS OF THE COMMISSION
The Commission’s main function is to promote competition and consumer welfare within the Common Market through the application of the provisions of the Regulations. The Commission is also mandated among other things:
- to monitor and investigate anti-competitive practices of undertakings within the Common Market;
- mediate disputes between Member States concerning anti-competitive conduct;
- regularly review regional competition policy to improve the effectiveness of the Regulations, cooperate with Member States national competition authorities; and
- promote harmonisation of the regional and national competition laws.
The Commission’s operations have significant impact in the COMESA region and affects all firms active in Member States, both in the ordinary course of business and in the context of acquisitions.
- WHAT ARE THE INVESTIGATIVE POWERS OF THE COMMISSION
In conducting its investigations, the Commission may in accordance with the applicable provisions of the Regulations and in keeping with the principles of natural justice:
- order any person to appear before it to give evidence
- require the discovery or production of any document or part thereof
- take any other reasonable action which may be necessary in furtherance of the investigation.
Further, in carrying out the duties assigned to it by the Regulations, the Commission may undertake all necessary investigations into undertakings and association of undertakings. The Commission officials are, to this effect, empowered to:
- examine the books and other business records;
- take copies or extracts from books and business records;
- ask for oral explanations on the spot;
- enter any premises, land and means of transport of undertakings.
- WHAT OBJECTIVES DOES THE COMMISSION PURSUE IN ITS ENFORCEMENT ACTIVITIES?
In enforcing the provisions of the Regulations, the Commission pursues the objectives of promoting competition by preventing restrictive business practices and other restrictions that deter the efficient operation of markets, enhancing the welfare of the consumers in the Common Market and protecting consumers against offensive conduct by market actors.
- WITH THE INTRODUCTION OF THE REGULATIONS, HOW DO THEY INTERACT WITH THE NATIONAL COMPETITION LAWS
With the commencement of the enforcement of the COMESA Competition Regulations on 14th January 2013 there are now two separate legal regimes which govern the enforcement of competition law and policy in the COMESA Member States, namely:
- The National Competition laws: these are the national legal orders comprising the respective bodies of legal rules within each of the COMESA Member States.
- The Regional Legal Framework: these comprise the body of legal rules created at COMESA level such as the COMESA Competition Regulations and Rules.
Given the two legal orders, the national order applies to the enforcement of anti-competitive practices emanating at national level hence, enforced by the national competition authorities in their respective Member States, whereas the regional framework is invoked generally where there is cross border impact. The impact of cross border trade is implicit prerequisite in light of the wording of Article 3(1) of the Regulations. Consequently, the Commission essentially can only intervene when there is an effect on trade between Member States. The Regulations do not apply unless the agreement or conduct has an appreciable effect on trade between Member States and restricts competition in the Common Market.
- WHAT IS THE WORKING RELATIONSHIP BETWEEN THE COMMISSION AND THE NATIONAL COMPETITION AUTHORITIES OF THE COMESA MEMBER STATES
The effective enforcement of the Regulations largely depends on an effective working relationship between the Commission and the national competition authorities of the Member States. One of the functions of the Commission under Article 7(d) of the Regulations is to cooperate with competition authorities in Member States. Rule 40 of the COMESA Competition Rules (“the Rules”) outlines the liaison process between the Commission and the competent authorities of the Member States in establishing existence of infringements on applications and notifications and in reaching decisions. The same Rule further stipulates that the competent authorities of the Member States shall have the right to express their views upon the procedure taken by the Commission.
Rule 43 of the Rules also stipulates that the competent authorities of the Member States shall undertake investigations at the request of the Commission and the officials of the Commission may assist the officials of a national competition authority in carrying out their duties. Conversely, under Rule 44 of the Rules, officials of the competent authority of a Member State in whose territory the Commission staff are conducting investigations may at the request of the competent authority or the Commission, assist the officials of the Commission in carrying out their duties.
- WHAT AREAS OF COMPETITION LAW ARE ADDRESSED BY THE REGULATIONS
The Regulations apply to all economic activities conducted by private or public persons within, or having an effect within, the Common Market and which have an appreciable effect on trade between Member States and restrict competition in the Common Market.
The Regulations cover the following major areas:
- Mergers and other forms of acquisitions where both the acquiring firm and target firm, or either the acquiring firm or target firm, operate in two or more COMESA Member States.
- Anti-competitive Business Practices which include: horizontal and vertical agreements, concerted practices and abuse of dominance which have cross boarder effect.
- Consumer protection violations which include false or misleading representation and product service standards among others having cross boarder effect.
9. DO THE REGULATIONS PROHIBIT THE ABUSE OF A DOMINANT POSITION?
Pursuant to Article 17 (a) of the Regulations, an undertaking holds a dominant position in a market if by itself or together with an interconnected company, it occupies such a position of economic strength as will enable it to operate in the market without effective constraints from its competitors or potential competitors. Article 17(c) alludes to a “dominant position” as meaning the ability to influence unilaterally price or output in the Common Market or any part of it.
The Regulations under Article 18 (1) prohibits any abuse by one or more undertakings of a dominant position within the Common Market or in a substantial part of it as incompatible with the Common Market.
10. WHAT CONDUCT AMOUNTS TO AN ABUSE OF A DOMINANT POSITION
Article 18 of the Regulations prohibits both exclusionary and exploitative abuse of a dominant position within the Common Market or in a substantial part of it as incompatible with the Common Market in so far as it may affect trade between Member States. Although not expressly pronounced in the Regulations, such prohibited practices include but not limited to exclusive dealing; conditional rebates; tying, bundling and multi product rebates; predation, margin squeeze, refusal to supply in the case of exclusionary conduct and excessive pricing in the case of exploitative abuses.
11. HOW DO THE REGULATIONS SPECIFICALLY PROHIBIT CARTEL CONDUCT?
The Regulations prohibits, as incompatible with the Common Market, all agreements between undertakings, decision by associations of undertakings and concerted practices which may affect trade between Member States and have their object or effect the prevention, restriction and distortion of competition within the Common Market. More specifically, the Article 19 (3) of the Regulations prohibits the following cartel conducts:
- agreements fixing prices, which agreements hinder or prevent the sale or supply or purchase of goods or services between persons, or restrict the terms and conditions of sale or supply or purchase between persons, or restrict the terms and conditions of sale or supply or purchase between persons engaged in the sale of purchased goods or services;
- collusive tendering and bid-rigging;
- market or customer allocation agreements;
- Allocation by quota as to sales and production;
- Collective action to enforce arrangements;
- Concerted refusal to supply goods or services to a potential purchaser, or to purchase goods or services from a potential supplier; or
- Collective denials of access to an arrangement or association which is crucial to competition
12. WHAT ARE THE PENALTIES FOR CARTEL AND ABUSE OF DOMINANCE CONDUCT? DO THE REGULATIONS IMPOSE CRIMINAL SANCTIONS?
The Regulations under Article 8(5) provides that any person who contravenes or fails to comply with any provision of the Regulations or any Rules made under the Regulations, or any directive or order lawfully given, or any requirement lawfully imposed, for which no penalty is provided, shall be determined to have breached the Regulations and shall be liable pursuant to that determination for a fine (in an amount to be determined by Rules) and/or such other penalty as may be assessed.
Rule 45(2) provides that the Commission may by decision impose on undertakings or associations of undertakings fines up to 10% of annual turnover units of account, in the Common Market in the preceding business year of each of the undertakings participating in the infringement where, either intentionally or negligently they infringe parts 3 and 5 of the Regulations……”. This provision, therefore, applies to cartel and abuse of dominance conduct which falls under part 3 of the Regulations.
The Regulations, however, do not provide for criminal sanctions for cartels or abuse of dominance conduct.
13. WHAT CONSUMER WELFARE VIOLATIONS ARE COVERED IN THE REGULATIONS
Part 5 of the Regulations is dedicated to consumer protection issues prohibited by law in relation to goods and services sold to consumers. The provisions in the relevant section covers a wide range of prohibitions including false or misleading representation; unconscionable conduct in consumer transactions; unconscionable conduct in business transactions; product safety standards and unsafe goods; product information standards; compulsory product recall, etc.
14. WHAT IS UNCONSIONABLE CONDUCT
The Regulations prohibits unconscionable conduct in both consumer related transactions as well as commercial conduct. The Regulations do not specifically define what constitutes unconscionable conduct but outlines some of the factors determined when determining unconscionable conduct. But in general terms, unconscionable conduct involves exploitation by the party in a stronger position taking advantage of the incapacity or disadvantage endured by the weaker party