Competition

The Competition Act [Chapter 14:28] lists two main types of restrictive business practices:-

(i) restrictive practices that are considered using the rule-of-reason approach; and

(ii) unfair business practices that are per se prohibited.

 

(i) Restrictive Practices

Restrictive practices as defined in terms of section 2(1) of the Competition Act [Chapter 14:28] include anti-competitive agreements, and other concerted action, and unilateral conduct of an abusive nature. Abuse of dominance, or monopolisation is implied in the definition. Section 32(2) of the Act provides that “… the Commission shall regard a restrictive practice as contrary to the public interest if it is engaged in by a person with substantial market control over the commodity or service to which the practice relates …”. Prohibited restrictive practices are of both exclusionary and exploitative nature, and include:-

  • restricting the production or distribution of any commodity or service;
  • limiting the facilities available for the production or distribution of any commodity or service;
  • enhancing or maintaining the price of any commodity or service;
  • preventing the production or distribution of any commodity or service by the most efficient or economical means;
  • preventing or retarding the development or introduction of technical improvements in regard to any commodity or service;
  • preventing or restricting the entry into any market of persons producing or distributing any commodity or service;
  • preventing or retarding the expansion of the existing market for any commodity or service or the development of new markets therefor; and
  • limiting the commodity or service available due to tied or conditional selling.

 

The de minimus non viral lex rule is covered in the definition of the term ‘restrictive practice’ in the Act in that the practice must materially restrict competition for it to be prohibited. The rule-of-reason approach used by the Commission in investigating restrictive practices is crucial in that an attempt is made to evaluate any efficiency or pro-competitive features of the restrictive practice against its anti-competitive effects to decide whether or not the practice should be prohibited.

The stages involved in investigation of restrictive practices:

  • Step 1: Allegation considered by the initial screening committee.
  • Step 2: Commencement of an investigation by the Directorate’s Competition Division upon receipt of a competition complaint, referrals from other authorities, or at the Commission’s own initiative.
  • Step 3: Information and evidence gathering.
  • Step 4: Assessment of the competitive effects of the alleged or suspected restrictive practices to determine their materiality.

 

 

 

Step 1

Initial Screening

An Allegation is considered by the Initial Screening Committee in order to establish a prima facie case on the alleged infringement of the Competition Act [Chapter 14:28].

Step 2
Commencement of Preliminary InvestigationAn investigation in terms of section 28(1a) of the Competition Act [Chapter 14:28] into an alleged restrictive practice commences

Source of Investigation

  • Complainants affected by the conduct (Who initiates the investigation).
  • Findings of Competition Studies carried out.
  • Whistle blowers.
Step 3
Information and Evidence GatheringThe Commission undertakes stakeholder consultations to gather information and evidence on the alleged restrictive practices.

Besides the complainants, stakeholders consulted include competitors, customers, suppliers, trade/consumer associations, industry representative bodies, sector regulators, and other interested third parties.

Desk research based on similar cases investigated by the Commission may also be undertaken.

 

Step 4
Assessment of Competitive EffectsThe competitive effects of the alleged restrictive practices are assessed to determine their materialism. The assessment report is submitted to the Commission’s Mergers & Restrictive Practices Committee with appropriate recommendations:

  • If no competition concerns are found, or if the Commission lacks jurisdiction over the matter, the case is closed;
  • If there are some competition concerns, but not of a serious nature, negotiations in terms of section 30 of the Competition Act [ Chapter 14:28] may be held with the offending parties on the discontinuance of the restrictive practice(s).
  • If competition concerns are established, the Commission issues an order in terms of Section 31 of the Act.

(ii) Unfair Business Practices

Under the Competition Act [Chapter 14:28], unfair business practices are a form of restrictive practices that are per se prohibited in terms of section 32(3) of the Act. Section 42(3) of the Competition Act provides that “any person who enters into, engages in or otherwise gives effect to an unfair business practice shall be guilty of an offence and liable:

(a) to a fine not exceeding level twelve or to imprisonment for a period not exceeding two years or to both such fine and such imprisonment; or

(b) to a fine not exceeding level fourteen.

The First Schedule to the Act lists the following acts or conduct as unfair business practices:-

(i) misleading advertising;

(ii) false bargains;

(iii) distribution of commodities or services above advertised price;

(iv) undue refusal to distribute commodities or services;

(v) bid-rigging;

(vi) collusive arrangements between competitors;

(vii) predatory pricing;

(viii) resale price maintenance; and

(ix) exclusive dealing.

 

Mergers and Acquisitions

Mergers and acquisitions are assessed using the rule-of-reason approach, the substantive examination test in terms of section 32(4) of the Act being substantial lessening of competition, or creation of a monopoly situation contrary to public interest, in any part of Zimbabwe.

It is therefore no wonder that most mergers are approved by competition authorities, or are approved with conditions aimed at eliminating their harmful effects or enhancing their efficiency and public interest benefits..

The term ‘merger’ as defined in terms of section 2(1) of the Competition Act [Chapter 14:28] includes horizontal mergers (i.e., those that take place between two or more firms that are actual of potential competitors in that they sell the same products or close substitutes), vertical mergers (i.e., those that take place between firms at different levels in the chain of production and distribution in that firms that have actual or potential buyer-seller relationships) and conglomerate mergers (i.e. those that are neither vertical nor horizontal).

Merger control by the Commission is done in three basic steps, as follows:-

  • Step 1: Notification of mergers and acquisitions in terms of section 34A of the Competition Act [Chapter 14:28].
  • Step 2:Examination and assessment of mergers and acquisitions in line with the provisions of Part IVA and section 32(4) and (4a) of the Competition Act.
  • Step 3:Determination of mergers and acquisitions.

 

Step 1

Notification of Mergers and Acquisitions

Notifiable mergers are notified to the Commission in terms of section 34A of the Competition Act [Chapter 14:28]. ‘Notifiable mergers’ refers to transactions with a value at or above the prescribed threshold. At present, the merger notification threshold as prescribed in SI 195 0f 2002 as amended by SI 110 0f 2011 is 1.2 million for the parties combined annual turnover or value of assets (whichever is higher).

The merger notification fees is therefore calculated as 0.5% of the combined annual turnover/asset value (whichever is higher). The minimum fee level is $50 000.00 as stated in SI 270 of 2002 as amended by SI 109 of 2011.

A completed and signed Merger Notification Form is submitted to the Commission in hard or soft copy.

 

Step 2

Examination and Assessment of Mergers and Acquisitions

The substantive test used is “the substantial lessening of competition or the creation of a monopoly situation that is contrary to the public interest”.

The investigation includes stakeholder consultations and economic analyses.

Besides the competitive effects of the transactions, public interest considerations are also taken into account.

Step 3

Determination of Mergers and Acquisitions

Merger assessment reports are considered by Commission’s Mergers & Restrictive Practices Committee. The Committee then presents the report to the Main Board for a resolution

Mergers are approved with or without conditions, or are prohibited. In the case of conditional approvals or prohibitions, the merging parties are given opportunities to make representations to the Commission on the intended decision in terms of Section 33(5) of the Act.