The European, Middle Eastern and African Antitrust Review 2018

Mauritius: The Competition Commission of Mauritius.

11 August 2017

Executive director

The year 2017 marks the eighth year of competition law enforcement in Mauritius. The Competition Commission of Mauritius (CCM) has, in a very short period, established itself as a credible institution dealing with all forms of anticompetitive practices. The Commission has also been active on competition policy matters through market studies and advice to the government.

The CCM has scored fairly well in its competition enforcement and advocacy almanac, and has recently picked up much-needed momentum within the anti-cartel enforcement arena. The past few years have also seen the CCM open up its horizons: from scrutinising cross-border merger transactions to investigating complex abuse of dominance cases. The CCM has also forged deeper ties with its peers in the region through the conclusion of instruments of cooperation.

Emerging steps of a nascent competition agency

Like many of its peers, the CCM has had to navigate manifold challenges in the few years following its inception: scarce financial resources; limited trained human capital; and scant societal understanding of competition law and acceptance of its value. Despite these limitations, the CCM owes its achievements to two main features: an empowering legislation, and a consistent advocacy strategy aimed at promoting the legislative provisions both within national borders and at a regional level.

In effect, the legislative framework has rallied several provisions to equip a budding competition agency with the required autonomy to exercise its functions and make its decisions impartially, unhindered not just by political interests but also other external influence or pressures. The need for such impartiality is particularly relevant as the CCM has been vested with wide-ranging investigative powers to scrutinise, within its remit, all three core enforcement areas - cartels, mergers and review of monopoly situations - not just against private legal entities but also against state-owned enterprises in certain industries. The Competition Act 2007 (the Act) has gone a step further in limiting its exemptions.

As required under the Act, the CCM had, within the first six months of its establishment, published guidelines on the economic and legal analysis to be used for determining cases, including penalties or remedies, as well as the procedures to be followed when carrying out its functions under the Act. In the same vein, and to maximise its chances of success in anti-cartel detection, the CCM put in place, upon its inception, a leniency programme to incentivise cartel participants to disclose their participation in collusive business practices, in exchange for immunity or partial exemption from imposable financial penalties.

In its first year of operation, the CCM launched eight investigations and completed its first within six months. The investigation concerned the tying of retroactive volume-related discounts for Kraft, a popular brand of processed cheese (which at that time occupied a 70% share of the broader market for cheese in Mauritius and 90% or more of the narrower market for processed cheese) to the minimum shelf space and display requirements for Kraft cheese and other products commercialised by the same supplier. The CCM's decision requiring the distributor of Kraft Cheese to, inter alia, cease its practice of offering retroactive discounts on block Kraft cheese, had paved the way for more competition in the processed cheese market. In 2011, the CCM undertook an assessment of the likely impact of its first investigation related to the processed cheese market in Mauritius. The assessment indicated the market entry of two new brands within a year, with consumers benefiting from lower cheese prices.

The CCM has also been active at the state policy level, advocating in favour of competitive reforms for the advancement of the economy. The first market study into the cement market in Mauritius was motivated in view of state intervention through the importation of bulk cement and the fixing of the retail price for bagged cement. The study started in mid-2010 and by the time it was completed in April 2011, the government decided to fully liberalise the market for cement in Mauritius with effect from 1 July 2011. Subsequently, the CCM launched a follow-up study into the market for cement in view of a 21% increase in the retail price for bagged cement following the liberalisation of the market. The study highlighted the barriers to entry and recommended constant monitoring of the sector.

Another landmark intervention relates to the CCM's first cartel infringement decision handed down on 22 August 2014. This followed the CCM's investigation into a collusive agreement between two local beer manufacturers to exit the beer markets in Madagascar and Mauritius respectively. The investigation found that such an agreement could result in the exclusive allocation of the beer market in Mauritius to the incumbent beer manufacturer, in addition to restricting the supply of beer in Mauritius, after its competitor's business closed down. This case also marked the CCM's first acceptance of a leniency application submitted by the incumbent manufacturer in Mauritius. After the hearing, in a majority decision the CCM imposed financial penalties of approximately US$1 million on the two beer manufacturers.

As a young competition agency, the CCM relies heavily on building its investigative experience and expertise, gaining knowledge of the markets, and advocating the provisions of the law and raising awareness on the benefits of competition to consumers. The efforts invested by the CCM since its inception can be felt as it developed its capabilities and geared its interventions towards increasingly complex and sophisticated markets with concrete deliverables aimed at increasing consumer welfare.

Review of recent cases

Mergers

Thus far, the CCM has undertaken more than 20 inquiries and completed five investigations in relation to merger transactions. The markets investigated have spanned the automobile, insurance, entertainment and cement sectors. Out of the five merger investigations carried out by the CCM, no actions were recommended in three cases and two were settled after the parties provided undertakings to the Commission in view of addressing the concerns identified. The past three years have seen the CCM broaden its horizons to scrutinise cross-border merger transactions to the tune of the Holcim/LaFarge deal.

Following the notification for guidance filed jointly by Holcim Ltd and Lafarge SA, the CCM launched an investigation on 1 September 2014 to conduct a more in-depth assessment of the said transaction and its effects on competition in the Mauritian market. Both Holcim Ltd and Lafarge SA supplied cement to Mauritius, through their local subsidiaries, namely Holcim (Mauritius) Ltd and Lafarge (Mauritius) Cement Ltd respectively.

During the investigation Holcim Ltd and Lafarge SA offered undertakings to the CCM. Eventually, Holcim Ltd and Lafarge SA merged into LafargeHolcim Ltd and they disposed of their shares in Holcim (Mauritius) Ltd to Gamma-Civic Ltd. Holcim (Mauritius) Ltd is now known as Kolos Cement Ltd, and LafargeHolcim Ltd does not have any shareholding in Kolos Cement Ltd.

Given that Gamma-Civic Ltd was also active in markets where cement is used as an input, and was not active in the manufacturing, trading or export of cement to Mauritius (the market from which importers such as Kolos Cement Ltd and Lafarge (Mauritius) Cement Ltd procure cement), the CCM expressed certain competition concerns resulting from Gamma-Civic Ltd's acquisition of the shares of Kolos Cement Ltd. In turn, Gamma-Civic Ltd offered undertakings to the CCM which satisfactorily addressed the concerns identified. Consequently the transaction was cleared on 8 December 2015.

Monopoly abuse

With respect to anti-monopoly enforcement, since inception, the CCM has so far reviewed 16 abuse of monopoly cases. Of these, 10 were referred to the CCM for adjudication. In three cases, the CCM issued infringement decisions; and in the remaining seven cases, the enterprises offered undertakings which were accepted by the CCM.

Recently, the CCM completed its investigation into the merchant discount rates charged by CIM Finance Ltd. It was found that the consumer finance company charged significant merchant discounts on the cash value of a good or service for which a hire-purchase facility was sought. The rate varied from merchant to merchant, whereby, on average, relatively small suppliers were charged more than large ones, without any obvious justifications in terms of cost differences.

It was a matter of concern that the significant difference in the merchant discount rates could distort competition in markets where hire purchase was used as an input as this could have a significant effect on the competitiveness of small merchants by hindering their ability to compete with large merchants.

CIM Finance Ltd offered commitments in response to the concerns raised by the CCM, undertaking inter alia to change its conduct of charging significantly different merchant discounts by bringing down the maximum difference between the highest and lowest levels of merchant discounts to residual levels (which covered justified differences in costs). It also undertook to ensure that its new merchant discount mechanism would not result in an increase in total merchant discount levels which were being levied prior to the offer of commitments.

Cartels

From 2009 to date, the CCM has completed three cartel investigations. It has issued infringement decisions in two of those cases, which relate to the local beer and chicken sectors. The executive director is currently administering a further five cartel cases.

In 2017, the Commissioners sent a strong signal to firms involved in vertical restraints, following the imposition of record fines totalling more than 29 million Mauritian rupees on a local chicken producer and distributor, Panagora Marketing Co Ltd (Panagora) for its involvement in resale price maintenance (RPM). The impugned conduct involved Panagora affixing resale price labels on certain products without the words ‘recommended price' next to those prices, as required under the Act. The CCM also took into consideration the fact that Panagora had, prior to May 2014, prevented the resellers who accepted its promotional offers from selling certain products below a certain price, effectively setting a minimum price to be observed by those resellers.

Disputing the CCM's findings, Panagora's arguments focused mainly on the absence of ‘agreement' on the part of resellers to Panagora's conduct, and on efficiency gains accruing to resellers from the impugned conduct. The Commission rejected both arguments, finding the existence of agreement on the part of resellers that implicitly acquiesced to Panagora's offers with the affixed resale prices. The case is presently under appeal before the Supreme Court and time will tell whether the CCM's factual assessment stands the test of judicial scrutiny.

Enhanced detection of cartels

Anti-cartel enforcement: A key strategic objective

In past years, the CCM has time and again shone the spotlight on its leniency programme in detecting other forms of collusion by playing cartelists (including cartel initiators) against each other and incentivising them to blow the whistle on their cartel activity in exchange for total immunity from financial liability. In order to do so, the CCM has run time-limited amnesty programmes for cartel initiators on two occasions, in May 2012 and May 2017.

More specifically, trading practices across certain local industries may well have established RPM as part of normal supplier-reseller negotiations, with either limited understanding of the competitive harm resulting thereof or little risk that the business partners would want to defect and blow the whistle at the expense of their commercial relationship.

The CCM leniency programme may not facilitate the detection of RPM practices, as leniency is not presently available to enterprises involved in RPM unless it results in a horizontal collusion. The CCM launched a special amnesty for RPM in June 2017 offering time-limited immunity to any enterprise involved in RPM, notwithstanding the form or nature of the RPM, so long as it: comes forward and admits its participation in the reported activity; cooperates actively and fully with the CCM in bringing to term its infringement; and gives the necessary behavioural undertakings to address the relevant competition concerns. In order to ensure the effectiveness of its programme, immunity will be made available to subsequent applicants for the same RPM conduct.

Cross-border cooperation

ACF and MoU with the CCSA

In 2016, the CCM started its second mandate as co-chair of the African Competition Forum (ACF). As a member of the ACF, the CCM is contributing to the ongoing cross-country market study of the construction industry. This study aims to review the conditions of competition in the construction sector. Its scope covers a review of the market structure, pricing, regulatory framework (permits, norms and standards), state support and public procurement.

As co-chair, the CCM also hosted the second ACF biannual meeting in October 2016. In addition to reporting on key ACF activities and proceeding with the election of a new Steering Committee, the ACF biannual meeting also saw the years of bilateral relations and informal agency assistance between the CCM and the Competition Commission of South Africa (CCSA) culminate in the signing of a Memorandum of Understanding (MoU) between the CCM and the CCSA, thereby deepening the ties and formalising avenues of cooperation between the two agencies.

MoU with the COMESA Competition Commission

Cognisant of the long-term objectives of Mauritius to foster regional trade, the CCM signed an MoU with the COMESA Competition Commission (CCC) on 24 March 2017. The signing ceremony was held at the Voila Hotel in Bagatelle, where the heads of no less than 10 African competition authorities had convened for the event.

The vital role played by cooperation between competition agencies, was highlighted by Mr Matthews Chikankheni, chair of the CCC, and Mr Ariranga Pillay, chair of the CCM.

Prior to the signing of the MoU, the CCM had already cooperated with the CCC on 30 merger notification cases. The formalisation of the working arrangement between the institutions would entrench cooperation between the sister agencies. Especially important is the fact that the MoU establishes the relevant safeguards for sharing case-related information without breaching rules of confidentiality.

Instilling a competition culture

With a declining rate of complaints coming in from the public, the CCM has raised significant resources to foster awareness among the legal profession and business community, in particular trade associations, in recent years. The idea is, of course, to encourage self-compliance on the part of businesses.

Since February 2016, the CCM has embarked on a series of monthly workshops aimed at trade and professional associations (TPAs) and major operators across various economic sectors. Combining competition law theory with industry-specific hypothetical scenarios, these half-day workshops have focused on drawing participants' attention to the relevance of the Competition Act to certain practices/agreements of trade associations and their members, while highlighting simple yet useful safeguards which may be employed during a trade association meeting/discussion to ensure compliance with the Act.

The advocacy programme has reached around 100 participants from more than 20 trade associations in the tourism, construction, food retailing, IT, agro-industry, healthcare, media and communications, and financial services sectors.

Going forward

Review of laws

While the passing of the law came about as part of a package to boost economic growth and get businesses to toe the line for a level-playing field, enforcing the Act has not been without its share of challenges. The current legislative framework may be showing its first signs of wear in the wake of its first decade. The Act may well need some updating if it aspires to continue paving the way for an effective competition regime.

In this context, the CCM has set out to review the legislative framework for the enforcement of competition law in Mauritius and to make subsequent recommendations for amendments to the National Assembly. The initiative was primarily guided by the need to correct inadequacies that have been identified over the years but the scope broadened to a thorough examination of the existing framework.

The CCM aims to advocate amendments to correct legal ambiguities and loopholes to better support enforcement and deterrence. Possibilities for institutional reform are also on the agenda. With a national competition policy, the CCM hopes to build a broad framework of consensus between stakeholders and the manner in which government should best respond to anticompetitive challenges in the marketplace.

The project is due to start in 2017 and it is anticipated that amendments will be recommended to the National Assembly by the end of 2018.

Restructuring enforcement activities

Recognising that human resources are a driving force of agency effectiveness, and in view of the characteristic complexity of competition law enforcement, the CCM is in the process of re-engineering its organisational structure, which has been driving the authority for the past eight years. With the setting-up of dedicated enforcement units, the CCM aims at boosting enforcement capacity. The refreshed organisational structure will also see the CCM engage more regularly with industry stakeholders through ongoing market-screening.

Conclusion

The CCM looks to the future with a renewed sense of hope in the wake of the foreseen legislative revamping. The task ahead remains daunting as the CCM strives to continue honing its enforcement tools, strategies and resources in digging up the most pernicious competition harms that taint our economy's competitiveness, be it within or across borders. In doing so, the CCM is bent on driving its mission to promote competition, by proactively enforcing the Act, in the interest of consumers, businesses and the Mauritian economy.

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