Introduction
This article is addition to the two I wrote on “Competition Act and Implications on Mergers and Acquisitions”, 8 September 2022 and “Competition Act on restrictive practices”, 15 September 2022. Here I look at factors considered by the Competition and Tariff Commission (“the Commission”) in making orders in terms the Competition Act (Chapter 14:28) (“the Competition Act” or “the Act”) on restrictive practices, mergers and monopolies.
Factors considered by the Commission
According to section 32(1) of the Act in determining whether or not any restrictive practice, merger or monopoly situation is or will be contrary to the public interest, the Commission shall take into account everything it considers relevant in the circumstances, and shall have regard to the desirability of—
(a) Maintaining and promoting effective competition between persons producing or distributing commodities and services in Zimbabwe; and
(b) Promoting the interests of consumers, purchasers and other users of commodities and services in Zimbabwe, in regard to the prices, quality and variety of such commodities and services; and
(c) Promoting, through competition, the reduction of costs and the development of new techniques and new commodities, and of facilitating the entry of new competitors into existing markets.
Restrictive practices
Section 32(2) 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, unless the Commission is satisfied as to any one or more
of the following:
(a) That the restrictive practice is reasonably necessary, having regard to the character of the commodity or service to which it applies, to protect consumers or users of the commodity or service, or the general public, against injury or harm;
(b) That termination of the restrictive practice would deny to consumers or users of a commodity or service to which the restrictive practice applies, other specific and substantial benefits or advantages.
(c) That termination of the restrictive practice would be likely to have a serious and persistently adverse effect on the general level of unemployment in any area.
(d) That termination of the restrictive practice would be likely to cause a substantial reduction in the volume or earnings of any export business or trade of Zimbabwe;
(e) That the restrictive practice is reasonably required to maintain an authorized practice or any other restrictive practice which, in the Commission’s opinion, is not contrary to the public interest;
Mergers
In terms of section 32(4) the Commission shall regard a merger as contrary to the public interest
if the Commission is satisfied that the merger:
(a) Has lessened substantially or is likely to lessen substantially the degree of competition in Zimbabwe or any substantial part of Zimbabwe; or
(b) Has resulted or is likely to result in a monopoly situation which is or will be contrary to the public interest.
When determining whether or not a merger is likely to substantially prevent or lessen
competition the Commission shall consider any of the following factors as may be relevant:
- The actual and potential level of import competition in the market,
- The ease of entry into the market, including tariff and regulatory barriers,
- The level, trends of concentration and history of collusion in the market;
- The degree of countervailing power in the market;
- The likelihood that the acquisition would result in the merged parties having market power.
- The dynamic characteristics of the market including growth, innovation and product differentiation;
- The nature and extent of vertical integration into the market;
- Whether the merger will result in the removal of efficient competition.
Monopoly situation
According to section 32(5 the Commission shall regard a monopoly situation as contrary to the
public interest unless the Commission is satisfied as to any one or more of the following:
(a) That the monopoly situation, through economies of scale or for other reasons, has resulted in or is likely to result in a more efficient use of resources in any business, trade or industry.
(b) That the monopoly situation is or is likely to be necessary for the production, supply or distribution of any commodity or service in Zimbabwe.
(c) That termination or prevention of the monopoly situation would deny to consumers or users of any commodity or service, other specific and substantial benefits or advantages.
(d) That the monopoly situation is or is likely to be reasonably necessary to enable the parties to it to negotiate fair terms for the distribution of a commodity or service.
(e) That termination or prevention of the monopoly situation would be likely to have a serious and persistently adverse effect on the general level of unemployment in any area.
(f) That termination or prevention of the monopoly situation would be likely to cause a substantial reduction in the volume or earnings of any export business or trade of Zimbabwe.
Conclusion
The Competition and Tariff Commission considers public interest in making order on restrictive practices, mergers or monopoly situations.
Disclaimer
This simplified article is for general information purposes only and does not constitute the writer’s professional advice.
Godknows (GK) Hofisi, LLB(UNISA), B.Acc(UZ), CA(Z), MBA(EBS,UK) is a legal practitioner / conveyancer, chartered accountant, corporate rescue practitioner, registered tax accountant, consultant in deal structuring and business valuer. He is also a director with Investacare International (Private) Limited. He writes in his personal capacity. He can be contacted on +263 772 246 900 or gohofisi@gmail.com
