Recent years have seen an effective and determined enforcement policy from the Egyptian Competition Authority (ECA), whch continued to pursue its strategic vision as the key instrument for ensuring free competition in the market and prohibiting anticompetitive practices, serving producer's and consumer's interests and enhancing the efficiency of the national economy. Therefore, the enforcement policy focused on markets of major strategic importance to both consumers and the overall economy. Accordingly, the ECA concentrated its competition enforcement in four main areas.
The ECA's enforcement policy has been prioritising the use of its available resources to encounter anticompetitive practices in key strategic economic sectors. As a result, cartel enforcement focused mainly on the health and fertiliser sectors, where it proved five cartel violations and it was also accompanied by extensive advocacy efforts in those sectors.
In this regard, the ECA proved its first bid-rigging case in the market of medical supplies. The case came as part of the ECA's strategic plan to prioritise bid rigging enforcement in government procurements. In this case, it was revealed that seven of the suppliers of heart valves to public hospitals have been engaging in a bid-rigging cartel by which they submit identical offers with overcharges so that each of the companies gets to supply a share of the required bid.
Furthermore, after the introduction of a more effective leniency programme in July 2014, the ECA put it into practice in early 2015 in the Pharmaceuticals Distribution cartel case. In this case, the ECA was able to prove that four pharmaceutical distribution companies in Egypt have been engaged in a marketing limitation cartel. This was through detecting a written agreement and also by the confessions made by the leniency applicants. This was an important development in the ECL as it was the first leniency case where several factors were tested and put into practice, which paved the way for further leniency applications to be accepted and submitted.
An important aspect of cartel enforcement policy is that while inspecting any market, the ECA screens the whole supply chain. It then takes notes of any anticompetitive practices it might come across and may later open fresh inspections therein as an initiation. For example, in the Fertilisers cartel case, while the ECA was inspecting the market of fertiliser production, it came across evidence on another cartel in the distribution of fertilisers. The ECA was then able to prove cartels at the producer/supplier level and another cartel at the distribution level.
Abuse of dominance
In the past year, the ECA was able to prove four major abuse of dominance cases. Most importantly, the ECA was able to prove that Telecom Egypt, which is the owner of the landlines and broadband infrastructure, was able to abuse its dominant position in the market of broadband services favouring its wholly subsidiary in the market of internet service providers TE Data. This case is of particular importance as it is the first case where the ECA was able to prove margin squeeze and constructive refusal to deal. Previously, the ECA did not prove any of those violations in any of its previous cases. However, due to the conduct of Telecom Egypt, the ECA was able to prove that it was raising rivals' costs through squeezing their profit margins and also refusing to supply them with access to the broadband infrastructure.
Furthermore, the ECA imposed numerous commitments on the infringing company in order to ensure that all the anticompetitive conduct come to an end. Soon afterwards, the infringing company accepted the said commitments and paid a settlement amount. Hence, the criminal case was dropped.
Another important area of focus was that of broadcasting sports events, which had special importance (ie, international and regional soccer tournaments). In this regard, the ECA tried to focus on markets that directly touch upon and relate to the masses of Egyptian people. It is estimated that millions of Egyptians watch these tournaments and therefore it was of particular interest to the ECA.
The ECA received complaints that BeIN Sports channels are abusing their dominant position in the market of broadcasting soccer tournaments of the EURO 2016 Cup and other tournaments. The ECA referred BeIn Sports as the exclusive broadcaster of various football events in Egypt to the prosecution for two abuse of dominance cases. The ECA also referred the Confederation of African Football (CAF) to prosecution for abuse of dominance position in selling the broadcasting rights of African football tournaments for the years 2017 until 2028. In view of that, the ECA continued its policy of ensuring a level playing field to all current and potential competitors.
Failure to notify merger transactions
To date, the ECL only has a post-merger notification regime. Although under this notification system the ECA does not have any power to block any mergers' or acquisitions' transactions, it enables the ECA to monitor mergers and acquisitions taking place or affecting the Egyptian economy.
In light of the ECA's plans to introduce a full-fledged pre-merger control regime, the ECA has started strengthening its merger notification system in order to send strong messages to all stakeholders on the existence of the ECA and that its rules must be followed strictly. As a result, the ECA has been applying its 30-day post-merger notification deadline sharply.
Consequently, the ECA delivered three infringement decisions against purchasing companies failing to notify the ECA of their purchased shares/assets within the set time frame. That said, the ECA still accepted the request of the three companies to settle the criminal cases. If the cases had been proceeded, the purchaser could have been subject to a criminal fine of up to 500,000 Egyptian pounds.
In the view of the ECA, such enforcement policy paves the way for the introduction of the pre-mergers and acquisitions control regime that ECA is aiming to introduce.
Furthermore, the ECA has issued a guidance paper requesting a specific set of documents. The enforcement policy indicates that failing to comply with this set of documents may lead to the rejection of the submission and a risk of missing the 30-day deadline, which might lead to criminal fine risks. As a result, the ECA urges all companies to submit the said notification (which is free of charge) to the ECA within the said time frame and complying with all of the requested documents.
In order to develop an effective enforcement policy, the ECA had to deliver cases after thorough inspections and in a timely manner. Without the full cooperation of all stakeholders, the ECA's effectiveness would have been highly threatened, and the accuracy of its analysis and throughput would have been undermined.
As a result, the ECA developed a strict enforcement policy when it comes to failing to cooperate with data requests sent to companies or when inaccurate data is knowingly submitted or a dawn raid is obstructed. During 2016 and 2017, the ECA referred several companies for the previously noted obstructions. For example, in the Fertiliser case, several companies were referred to the Prosecutor's Office for failing to provide the ECA with the requested data. Others were also referred for intentionally submitting misleading information to the ECA. In another vital case, a legal manager at a company was criminally fined by the Court for obstructing the dawn raid and refusing to allow access by the ECA's case handlers to the company's premises.
What is also notable in the above cases is that courts have taken a very supportive position to the ECA and in most of the cases ruled in favour of the ECA by fining the infringing persons. Moreover, even though the ECA was able to prove the case without relying on the information they have requested, the ECA was still keen to refer the infringing persons to the court and to fine them.
This sends a strong message to the whole market that full compliance with ECA's requests must be taken seriously.
Advocacy is the main tool used by the ECA alongside its competition enforcement tools. Advocating for competitive markets through regulatory interventions and enhanced collaboration and communication with different stakeholders was a main focus of the ECA in recent years. For example, the ECA is currently working closely with entities responsible for drafting laws and regulations that could affect competition in order to guarantee their compliance with the ECL.
Accordingly, the ECA, in collaboration with the OECD, held a workshop for various governmental entities to ensure the use of competition assessment while drafting regulations. Furthermore, the ECA gave an opinion on several laws that may have an effect on competition such as tenders and auctions draft law, regulating as sector's activities draft law and the preference for Egyptian industrial products in government contracts draft law. Recently, the ECA concluded a two-year long EU twinning project, where it benefited from EU input in various advocacy initiatives such as drafting a number of guidelines. The dissemination of competition culture was kept as a main priority to ECA's advocacy efforts. Accordingly, the ECA continued its successful Competition Authority Simulation Initiative targeting university students with economics and legal majors. Furthermore, the ECA signed a memorandum of understanding with UNCTAD for the establishment of a regional training centre for the Middle East and North Africa, in order to disseminate free competition culture.
From the above, it is clear that the ECA has been able to intensify its enforcement efforts by detecting and revealing more than eight anticompetitive practices in several strategic factors in the economy. This increase in enforcement rate multiplies the throughput of the ECA by more than 100% when compared with previous periods.
Yet the ECA believes there is still a lot to accomplish in the coming period. On top of ECA's priorities is the introduction of pre-merger and acquisition control to the Egyptian Competition Law. The ECA has been able to prepare a solid draft of this regime and discuss it with several stakeholders. The draft will soon be sent to the Cabinet of Ministers for their approval.
The ECA has continued to work closely with COMESA within their merger and acquisition framework. This works as good practical training for ECA case handlers on merger assessment that would foster them to be ready when the merger control is finally enacted.
Moreover, the ECA aims to increase its enforcement rates in cartel cases through the use of the leniency programme. This will be achieved by publishing guidelines and materials that would provide further guidance and clarify to market players to facilitate the pre-submission discussions with the ECA.
Furthermore, the enhancement of the ECA's efficiency, effectiveness and transparency have been further enhanced through close cooperation with various international institutions such as the World Bank and UNCTAD, and the increase of international and regional cooperation to enforce competition law on cross-border undertakings involved in anticompetitive practices that affect competition in the Egyptian market; publishing a series of guidelines in order to further enhance the transparency of ECA's enforcement policy.
The ECA's advocacy work will continue to be at the top of the its priorities in the upcoming period, alongside the Authority's enforcement role. The ECA will continue to advocate increasing competition among various stakeholders and will do so in areas where the impact is greatest on the Egyptian people. The ECA strongly believes that it is within its mandate to do so and that, through advocacy, it can advance the notion of greater competition much more than it ever could through enforcement alone.