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Authorising
Anti-Competitive Conduct
The
ICCC may grant authorisation on public benefit grounds
to allow a person or a company to make business acquisition
or merges that would otherwise be prohibited by the
Act as it would have the effect of or likely effect
of substantially lessening competition.
The
test to grant authorisation is that, the ICCC must be satisfied
that the acquisition would result, or would be likely to result
in such a benefit to the public that it should be permitted. In
the case of an authorisation, both public benefits and effects of
lessening of competition are assessed before the acquisition is
permitted.
If the
ICCC decides that the proposed acquisition would not have the effect
or likely effect of substantially lessening competition, it must
grant a clearance instead of an authorisation.
In determining
whether the acquisition would have, or would likely to have the
effect of substantially lessening competition in a market, the Act
sets out these following factors to be taken into account:
(a)
the actual and potential level of import competition in the market;
(b) the nature and effect of barriers to entry to the market;
(c) the number of buyers and sellers in the market;
(d) the degree of countervailing power in the market;
(e) the likelihood that the acquisition would result in the acquirer being
able to significantly and sustainably increase prices or profit margins;
(f) the extent to which substitutes are available or likely to become available
in the market;
(g) the dynamic characteristics of the market, including growth, innovation
and product differentiation;
(h) the likelihood that the acquisition would result in the removal of a sustainable,
vigorous and effective competitor;
(i) the nature and extent of vertical integration in the market.
The
above factors must be considered when assessing the competitive
effect of the acquisition. However, other matters could also be
taken into account.
The
prohibitions of anti-competitive acquisitions are dealt with differently
from the prohibitions of other types of anti-competitive behaviours.
Companies wishing to merge or acquire competitors must first obtain
either a clearance or an authorisation from the ICCC.
Clearance
The
procedure for clearance on business acquisition or merger is outlined
under the ICCC Act. Similar to authorisation, this would enable
a person to proceed with a business acquisition without the fear
of contravening the Act. However, clearance process differs from
that of authorisation, as it does not involve any assessment of
public benefits.
The
clearance process is an application by the person or company proposing
a business acquisition, seeking the ICCC’s view whether, in its
opinion that the acquisition would result in a substantial lessening
of competition and thus, contravene the Act.
If the ICCC is satisfied that the proposed acquisition would not have, and
would not be likely to have the effect of substantially lessening competition
in the market, it shall give clearance. If it is not satisfied then it will
decline to give clearance.
Contraventions
If any
entity breaks the rules and does not have an authorisation from
the ICCC to engage in any market conduct, behaviour or trade practices,
and none of the particular exemptions available under the Act apply,
then it run the risk of incurring significant penalties. The ICCC
can take enforcement action with penalties if found guilty of up
to K500, 000 for an individual and K10 million for a corporation.
The
ICCC has the powers to stop any individual or company to engage
in any market conducts, market behaviours and trade practices that
are prohibited by the Act. Those who breach the Act on market conduct
rules risk legal action for damages or injunctions. In addition,
the court may order divestiture of assets and shares. It may, by
order give directions for the disposal by that person or company
of such assets or shares as are specified in the order.
It
would only be wise for any corporate bodies or individuals to
first seek the ICCC’s view before engaging in any market conduct,
behaviour or trade practices that are anti – competitive in nature.
Unfair Business
Practices
Anti-Competitive
Arrangements(s.50)
The
ICCC Act prohibits contracts, arrangements or understandings
that have the purpose or effect or likely effect of substantially
lessening competition in a market. That prohibition applies
both to making such contracts, arrangements or reaching
understandings and also to those who would give effect
to such a contract, arrangement or understanding that has
already been made or reached.
Anti-Competitive
Covenants (s.51)
Covenants
over land that have the purpose or effect or likely effect
of substantially lessening competition in a market are
prohibited by the Act. The prohibition extends to requiring
someone to give a covenant, giving one yourself or seeking
to enforce the covenant.
Exclusionary
Provisions (s.52)
Exclusionary
provisions which are also known as primary boycotts are
agreements between competitors that will prevent or limit
their dealings with a particular person or class of persons,
where the person who is the target of the boycott is a
competitor of one or both of those who agree not to deal
with him. These dealings are likely to lessen competition
in the market and ICCC prohibits such dealings.
Price
fixing (s.53)
An
agreement between competitors to fix price is an example
of anti-competitive market behaviour. Accordingly, price
fixing agreements between competitors are absolutely prohibited
under the Act because they are deemed to have the purpose,
effect or likely effect of substantially lessening competition.
Price fixing agreements are defined broadly to include contracts, arrangements
or understandings that have the purpose or effect or likely effect of fixing,
controlling or maintaining the price for goods or services or any discount,
allowance, rebate or credit.
There
are however, some exceptions to price fixing prohibition.
Firstly, agreements between the parties to a joint venture,
to market the joint venture’s products fixed prices. Secondly,
there is an exemption from the price fixing prohibition
for large group of retailers who wish to have uniform recommended
prices for products. It should be noted, however, that
these must be recommendations only, not an enforced price.
A third exception to the price fixing prohibition allows
competitors, for example retailers who are members of a
buying group, to collectively acquire goods at the same
price and to jointly advertise the price at which they
will then sell those goods.
Taking
Advantage of Market Power (s.58)
The
prohibition of such anti-competitive market behaviour may
apply in a case where a person or company has a substantial
degree of power in a market. They are prohibited from taking
advantage of that power for anti-competitive purposes which
are to restrict the entry of a competitor into that market
or another market, to prevent or deter someone from engaging
in competitive conduct, or to eliminate a competitor.
It should be noted that this prohibition only applies to most powerful firms
in the market – in order to breach this prohibition, the firm must have a substantial
degree of power in that market and take advantage of that power for any one
of the anti-competitive purposes discussed here.
An
example of someone taking advantage of their market power
may be where a new competitor enters the market which is
dominated by one large company, which immediately and drastically
reduces its price for the product which its new competitor
is selling, to a price below production cost, with the
intention of forcing new competitor out of the market,
at which stage the dominant market player can again raise
its price to a high level.
Resale
Price Maintenance (s.59)
Resale
price maintenance, the practice of a supplier requiring
its retail customers not to sell its products below a certain
price, is also prohibited. Thus, a manufacturer cannot
insist that its retailers do not sell the manufacturer’s
products for less than a certain price.
Resale price maintenance would also apply where a manufacturer threatens to
refuse to supply a retailer who was discounting the manufacturer’s products
while others were not.
Business
acquisitions (s.69)
The
acquisition of assets and shares of a business that would
have the effect or likely effect of substantially lessening
competition in a market are prohibited by the Act.
While this prohibition relates to the structure of the market rather than to
behaviour in that market, it is however, prohibited by the Act. Mergers between
competitors, or the acquisition of one competitor could have serious anti-competitive
consequences as can price fixing arrangements or arrangements that substantially
reduce competition. Thus, those anti-competitive acquisitions are also prohibited.
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