1. ‘COMPETITION REGULATION IN THE COMON MARKET‘ George K. Lipimile DIRECTOR & CHIEF EXECUTIVE OFFICER COMESA Competition Commission

2. 1. General Remarks on what is Common Market for Eastern and Southern Africa (COMESA). 2. Challenges presented by the proliferation of National Competition Laws. 3. Need for the Regional Competition Policy under COMESA. 4. COMESA Treaty Provisions. 5. Obligations of Member States under the COMESA Treaty. 6. Major elements of the COMESA Competition Regulations. 7. Conclusive Remarks. 2

3. What is COMESA ?  The Common Market for Eastern and Southern Africa - promoting regional economic integration through trade and investment. With its 19 member states, population of 430 million (2008) and an annual import bill of around US$ 152 billion (2008) and an export bill of over US$ 157 billion (2008), COMESA forms a major market place for both internal and external trading. Its area is impressive on the map of the African Continent covering a geographical area of 12 Million (sq km). 3

4.  Burundi*, Comoros, Djibouti*, DR Congo, Egypt*, Ethiopia*, Eretria, Libya, Kenya*, Madagascar *, Malawi*, Mauritius*, Rwanda*, Swaziland*, Seychelles*, Sudan*, Uganda, Zambia*, Zimbabwe*.  8 COMESA Countries are part of SADC and  4 part of EAC (Kenya, Uganda, Rwanda, Burundi).  A tripartite Taskforce has been setup to harmonize their programmes and the overall regional integration process for the three Regional Economic Communities. *Member States with National Competition Laws. 4

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7. 7 The Global Spread of Antitrust: 1980

8. 8 The Global Spread of Antitrust: 2000

9.  Conduct being examined in two (or more) jurisdictions  Conduct investigated by one authority that may have effects in another jurisdiction  Investigations where witnesses or evidence located in another jurisdiction  Remedies that may have impact in another jurisdiction  Knowledge of and compliance with complex filling rules;  Completion of an array of forms in accordance with various national requirements;  Payment of substantial fees to the reviewing authorities {often designed to subsidize the operation of the Competition Authority}  Knowledge of and compliance with review schedules and waiting periods. 9

10.  The globalisation of the economy impacts on the work of competition authorities ◦ Impact of anticompetitive behaviour often goes beyond national borders, in particular in the case of international cartels ⇨ recent example: Fertilizer, Bread and construction cartels ◦ Mergers & transactions often have an international dimension and produce effects in various markets ⇨ recent example: acquisition of Game Stores by Wal-Mart; Lafarge in cement sector; Illovo Sugar; South African Breweries etc  National Competition authorities face challenges to curb multinational anticompetitive behaviours given jurisdictional and practical limitations of their enforcement powers. 10

11.  Given the fact that the competition laws are national but markets extent beyond national boundaries - :  Are the respective national competition laws of Member States and their enforcement sufficient to deal with the market problems of the regional nature?  Is it prudent for the countries in the region to continue relying on the domestic laws, yet at the same time work towards the development of a more seamless regional system that facilitates the workings of regional markets?  What new tools, tasks and concepts will be needed to address the competition issues that are emerging on the horizon of the regional and global economy ? 11

12. Having regard to Article 55 (1) of the COMESA Treaty: “ … To this end, the Member States agree to prohibit any agreement between undertakings or concerted practice which has its objective or effect the prevention, restriction or distortion of competition within the Common Market”  Article 55 (3) : “The Council shall make regulations to regulate competition within the Member States”.  The Regulations were ratified by the Council of Ministers on 17 th December, 2004. 12

13. Effect of Regulations Article 10 (2) of the Treaty : “ A Regulation shall be binding on all the Member States in its entirety “ Entry into Force of Regulations Article 12 (1) of the Treaty : “ Regulations shall be published in the Official Gazette of the Common Market and shall enter into force on the date of their publication or such later date as may be specified in the Regulation”. COMESA Gazette Volume 9 No. 2; Decision No. 43 in Notice No.2 of 2004 13

14. Polytol Paints & Adhesives Manufactures Co. Ltd V. The Republic of Mauritius (CCJ – August, 2013 ) Effects of CCJ Decision with Respect to the COMESA Competition Regulations 1.Failure by COMESA Member States to domesticate the Regulations by giving them the force of law and the necessary legal effect within their territories constitutes a breach of the COMESA Treaty. 2.Member States can be taken to the CCJ by other Member States or the Secretary General for breaching the Treaty by failing to fulfill their obligations under the Treaty. 3.Legal or natural persons have enforceable rights to take their Member State governments to the CCJ in respect of conduct or measures that prejudices them and constitutes a breach of the Treaty obligations. 4.That Member States cannot use their internal laws as an explanation or defence for not implementing the COMESA Treaty obligations. 14

15.  Article 5 of the Regulations:  Article 5 of the Regulations: Pursuant to Article 5(2)(b) of the Treaty, Member States shall take all appropriate measures, whether general or particular, to ensure fulfillment of the obligations arising out of these Regulations or resulting from action taken by the Commission under these Regulations. They shall facilitate the achievement of the objects of the Common Market. Member States shall abstain from taking any measure which could jeopardize the attainment of the objectives of these Regulations.  Article 5 (2) (b) of the Treaty : “Each Member State shall take steps to secure the enactment of and the continuation of such legislation to give effect to this Treaty and in particular : to confer upon the Regulations of the Council the force of law and the necessary legal effect within its territory “. 15

16.  The supra – national merger control regime of COMESA came into force on the 14 th of January, 2013;  It offers a “One – Stop Shop” for the filings in the Common Market;  All transactions with an appreciable effect on trade between Member States must be filed at the COMESA Competition Commission – no need to file with individual Member States. 16

17.  Anti-competitive Business Practices :  Vertical Restraints { Rule of Reason Approach}  Horizontal Restraints { Per se prohibition}  Abuse of Dominance  Mergers and Acquisitions  Pre- merger notification requirement  Consumer Protection/Welfare 17

18. The Regulations provide for three institutions namely - :  COMESA Court of Justice : Receives appeals against the decisions of the Board of Commissioners.  Board of Commissioners :A non- executive Board consisting of 9/13 Members appointed by Council from the Member States. Determines cases it receives from the Commission. The Chairman shall assign three of the Commissioners to be full time members of the Board to be carrying out initial determination of the cases.  Commission : Enjoys international legal personality and in in the territory of each Member States the legal capacity required for the performance of its functions, Headed by the Director, responsible for the development of the regional competition policy and its responsibility extends to fact-finding, taking action against infringements of the law, imposing penalties and granting exemptions under the Regulations. 18

19. Scope of Application (Art. 3) :  “…apply to all economic activities whether conducted by private or public persons within, or having an effect within, the Common Market…”  “…apply to conduct covered by Parts 3, 4, and 5 which have an appreciable effect on trade between Member States and restrict competition in the Common Market”  “…shall have primary jurisdiction over an industry or a sector of an industry which is subject to the jurisdiction of a separate regulatory entity…”  “… does not apply to conduct expressly exempted by national legislation” 19

20. Scope of Application (Art. 3) : Jurisdictional Limit :  In order to come within the prohibition imposed by the Regulations, the agreement practice must affect trade between Member States and the free play of competition to an appreciable extent.  Jurisdiction of the Regulations requires fulfillment of three concepts namely:-  Appliciability: Quantitative element criterion – the Regulations limit jurisdiction to agreements and practices capable of having effects on trade of a certain magnitude.  Effect on trade Between Member States: The application of the Regulations confined to agreements having a minimum level of cross-border effects within the Common Market.  Restriction of Competition in the Common Market : The concept of appreciability is thus distinct from but related to the requirement that the practice should restrict competition. 20

21. Determination of Parameters under Article 3 (1)  De minimis principle applies  EU : Commission has over the years issued a series of notices indicating when, in their view, an agreement is likely to be considered to be of minor importance.  Each notice has been intended to enable undertakings to be able to judge for themselves whether their agreements fall outside the scope of the Regulations.  The Commission is working on a quantitative criteria to be determined by reference to market share threshold, what is not applicable*.  Remember : Anti-competitive conduct confined to the territory of a single Member State is capable of having repercussions on patterns of trade and competition in the Common Market. Hence, the fact that the parties to an agreement are from the same Member State does not mean that there can be no effect on trade between Member States. The Regulations may apply to agreements between undertakings in the same Member State. * And to free up the Commission’s resources to allow it to concentrate on serious infringement of the regulations. 21

22.  Based on Article 23 (3) : Applies - :  Both the acquiring firm or target firm or either the acquiring firm or target firm operate either in two or more Member States of COMESA (Regional Dimension)  The Zero threshold makes all mergers notifiable under Article 23 (4) of the Regulations.  Article 24 (1) Obligation to notify the Commission of the proposed merger within 30 days of the decision to merger – fine under Article 23 (5) (a).  Article 23 (6) Commission may require the parties to a non-notifiable merger to file a notification. 22

23. Positives -:  High degree of convergence between COMESA Competition Regulations and domestic competition laws i.e. -:  Most member states have systems of competition law modeled upon Article 16 and 18 of the Regulations.  Where there is a conflict between the COMESA and domestic competition law, the COMESA Competition Regulations take precedence over national law, so that where a clash occurs it is the former which must be applied. 23

24. The main dispute resolution mechanism under the COMESA Treaty is the COMESA Court of Justice. The Court Consists of two chambers these being the Court of First Instance and the Appellate Division; The main function of the COMESA Court of Justice is to ensure adherence to law in the interpretation and application of the Treaty; Its jurisdiction is to adjudicate upon all matters referred to it under the COMESA Treaty; References to the Court can be by Member States, the Secretary General, legal and natural persons. 24

25.  The need for a clear indication in the Regulations of thresholds to determine what constitutes a firm holding a dominant position in the Common Market.  The interpretation of Article 23(3) which requires all transactions to be notified to the Commission as long as both or either the acquiring firm or target firm operate in two or more Member States even where there is no appreciable effect on trade and competition within the Common Market contrary to Article 3(1) of the Regulations in view of the current zero threshold. 25

26.  The current zero notification threshold is unrealistic and a burden especially on small transactions.  The 120 days period for merger examination provided for in Article 25 of the Regulations is too long.  The wording of Article 23 (4) must be interpreted under the general rule of Article 3 e.g. by setting up one threshold for the acquired and another for the target so that the Commission can exclude transactions without any local effect. 26

27. “In 1974, in one of the first cases to come before the English courts which questions of Community law were raised, Lord Denning described the implications of Community law for the English legal system as ‘an incoming tide. It flows into the estuaries and up the rivers. It cannot be held back’”. The 1985 Commission’s white paper “’completing the internal market’, suggest that even Lord Denning may not have foreseen the full force of the oncoming tide of Community law. UK businesses that fail to take account of its implications, as part of their business strategy to remain competitive in the single market, do so at their own peril”. 27

28. THANK YOU Any comments to - : George K Lipimile Director and Chief Executive Officer COMESA Competition Commission Lilongwe, Malawi glipimile@comesa.int 28