Elements of the New Competition and Consumer Protection

Elements of the New Competition and Consumer Protection Act No. 24 of 2010 Presentation to CUTS Training Workshop on the Role of Trade Unions in Promoting Competition in Zambia Patrick Chengo Research Analyst CCPC

Outline Introduction Key Interpretations Establishment ◦ Scope of Application of CCPA ◦ Regulatory Relations ◦ Institutional Arrangement ◦ RBPs ◦ Consumer Protection CCPA and Labour Unions Conclusion

Introduction The Competition and Consumer Protection Act No. 24 of 2010 was passed by the National Assembly and subsequently assented to on 14 th August 2010. The Act came into operation on 8 th October 2010 when a Statutory Instrument was signed by Minister.

Preamble to the CCPA Preamble to the “Act” states that it is an Act: (i) to continue the existence of the Zambia Competition Commission and re-name it as the Competition and Consumer Protection Commission; (ii) safeguard and promote competition; (iii) protect consumers against unfair trade practices; (iv) provide for the establishment of the Competition and Consumer Protection Tribunal; (v) Repeal and replace the Competition and Fair Trading Act, 1994; and (vi) provide for matters connected with, or incidental to the foregoing

Key Interpretations These are contained under Section 2, of which key novel definitions are: Acquired Agreement Assets Bid-rigging Concerted Practice Enterprise Essential Facility Market Merger Negative Clearance Per se offences

Establishment- Scope of Application of CCPA n n The Act applies to all economic activity within, or having an effect within, Zambia – Section 3(1). The previous Act did not specify the scope of operation in this manner but just outlined the exemptions. The Act applies to all economic activity within, or having an effect within, Zambia The meaning of “having an effect within” may connote that an anti-competitive conduct may be exercised outside Zambia but if it has an effect in Zambia, then the CCPC can actually intervene. The practicality of this has been tested in other jurisdictions.

Establishment- Scope of Application of CCPA Cont’d Unlike in the previous CAP 417, CCPA under Section 3(2) binds the State in so far as the State is engaged in commercial activity. While this participation was interpreted by the High Court in CAP 417 as applying to “all economic activities of the State”, the new Section 3(2) has reversed this by limiting the application only to a market that is open to participation by other enterprises

Establishment-Functions of the Commission Under Section 5, the CCPC’s functions are to be expanded from the current nine functions to 12. Other than retaining or rearranging the previous functions, the new inclusions are substantially Section 5(f) which proposes the CCPC to “act as a primary advocate for competition and effective consumer protection in Zambia” Under Section 5(g), the CCPC shall advise Government on laws effecting competition and consumer protection and (j) advise the Minister on agreements relevant to competition and consumer protection and on any other matter relating to competition and consumer protection. The advocacy role of the Commission has clearly come up.

Establishment-Functions of the Commission Cont’d Section 7 grants power to Board to appoint inspectors to assist with some of the CCPC’s functions The appointment of inspectors shall assist the Commission to co-opt either experts such as those from DEC or ACC as well as other suitable persons in areas where the Commission does not have presence

RESTRICTIVE BUSINESS PRACTICES SECTION 8 is a general provision prohibiting agreements, decisions and concerted practices that prevent, restrict or distort competition SECTION 9 prohibits horizontal agreements (i. e. agreements between competitors commonly referred to as ‘cartels’) i. e. Agreements of such a nature are void by mere intention or presence of conduct. Ø E. g. Price Fixing, Market/Customer Allocation, Bid-rigging Ø Leniency Programme Setting production quotas Collective refusal to deal in or supply goods or services. This expands the previous provision under CAP 417 which only limited to “supply” while Current Act has included refusal to “deal in”.

RESTRICTIVE BUSINESS PRACTICES Cont’d Section 10 makes a vertical agreement in the form of “resale price maintenance” to be per se prohibited unless (a) the resale price is not binding (b) The product price label merely states “recommended price” Here liability is limited to the enterprise and not a person – does this mean a person would get away? See definition of enterprise in S 2.

RESTRICTIVE BUSINESS PRACTICES Cont’d Section 12 appears to give the CCPC a blank cheque that an agreement may be considered anticompetitive by the Commission even if it is not specified in the law? ? ? It is important to note that Sections 9 -10 and 12 shall not apply to enterprises operating under a single economic unit e. g. Zambeef, Zamchick, Zamleather, Zamegg, etc. – Section 13 For horizontal or vertical agreements not per se prohibited, parties may apply for authorisation to the CCPC following which the Commission is to carry out a competition assessment – Section 13 Under Section 14, there is a threshold for firms to seek the Commission’s authorisation when (independent) enterprises propose to enter into:

RESTRICTIVE BUSINESS PRACTICES Cont’d ◦ ◦ Section 15 - DOMINANT FIRM has been defined as a form with 30% market share or a combined market share of 60% of not more than three enterprises This is a major shift from the previous 50% in CAP 417 However, Section 16 of CCPA takes the issue further and requires CCPC to show the existence of and exercise of “market power” While dominance is not prohibited, “abuse of dominance” is under Section 16 and instances of this are outlined as: Imposing unfair prices or trading conditions Limiting market access, production, etc. Applying discriminatory conditions Unfair contractual obligations

RESTRICTIVE BUSINESS PRACTICES Cont’d ◦ ◦ Denying any person access to an essential facility Charging excessive prices to the detriment of consumers or Selling goods below their marginal or variable cost Enterprises (and not persons) shall be liable to pay 10% of their annual turnover if found wanting. Under Section 17, the Commission is required to recommend to the Minister on determination and procedure thereto of “relevant market” Under Section 18, an enterprise may apply for exemption for conduct that is not per se prohibited under Section 12, and the Commission may allow such where there is a justification e. g. small farmers with a common price selling to an out-grower dominant firm.

RESTRICTIVE BUSINESS PRACTICES Cont’d The previous CAP 417 arguably exempted the application of competition law to professional associations (PAs). Under the CCPA, there is no express exemptions for PAs as under Section 22 a PA whose rules contain a restriction that has the effect of lessening competition in a market may apply to the CCPC for an exemption.

RESTRICTIVE BUSINESS PRACTICES Cont’d UNDER Section 22(5), the CCPC may exempt all, or part, of the rules of the PA from prohibitions in the Act having regard to internationally applied norms, any restriction contained in those rules that has the effect of preventing or substantially lessening competition in a market is reasonably required to maintain— Ø (a) professional standards; or Ø (b) the ordinary function of the PA

Consumer Protection The new law on Competition and Consumer Protection is more detailed and has also enhanced the Commission’s enforcement powers on Consumer Protection. The effective and reasonable implementation of the law by the CCPC would be greatly assisted if there is a well-informed business and legal community CCPC is clothed with admin. powers to fine both individuals and business. The Commission anticipates more intense interaction with the business houses, legal & consumer groups.

CCPA and Labour Unions The CCPA shall expressly not apply to employers activities in relation to terms and conditions of employment (Section 3(3)(b) This means that Employers, e. g. under the Zambia Employers Federation, can actually choose to agree and fix that every graduate starting salary shall be fixed at K 5 m gross across all member organisations Equally, Trade Unions and other associations dealing with terms and conditions of their members are expressly exempted.

Worker’s Role in a Cartel The worker is expected to inform the Commission in the event there are “suspicions” about the agreement their employer(s) is entering into with other Competitors. Cartels are considered as a criminal matter( Jail awaits if convicted) Leniency Programme is available to parties that voluntarily discloses information on existence of an agreement.

Worker’s Role in a Merger Issues of public interest arise here. Thus a worker should be able to understand what the implications of the merger could be in relation to employment CCPC conducts market assessment, competition assessment, public interest assessment (section 31)

Worker’s Role in Abuse of Dominant Position Workers have a responsibility to report any abuse of dominance by any firm. Issues of predatory behaviour need to be reported so that job losses for example are avoided. CCPC will protect whistle blowers. It is important for any worker with information to come forward and submitdisclose such practices.

CCPA and Labour Unions Cont’d Thus trade unions can decide to have collective bargaining, form mergers or alliances, collude or proceed on a national strike across the whole economy and set a common negotiating platform without offending the CCPA Thus in terms of CCPA and Labour Movements, among the key areas of interest would be; ◦ Regulating abuse of Dominance e. g. Case of ZB and Metro Wholesalers handled by CCPC (in 2001) ◦ Mergers and Acquisitions i. e. issues of public interest are important ◦ Vertical Agreements e. g. Case of Hybrid Poultry and Galuania Holdings handled by CCPC (in 1998)

CCPA and Labour Unions Cont’d ◦ Cartelisation – may lead to high prices which then would affect workers disposable income/wages. Thus Labour/Trade Unions have a key role to play in the Enforcement of the CCPC such as; ◦ Being Watchdogs monitoring RBPs/Anti-Competitive Practices. ◦ Helping CCPC’ awareness on Competition and Consumer Protection through their Union structures in Provinces where CCPC faces challenges reaching them. ◦ Ensuring that Mergers & Acquisitions do no escalate job losses ◦ Using the Unions platform when engaging businesses to register displeasure of any spots of Anti-Competitive practices

Conclusion The new law on Competition and Consumer Protection is perhaps at face value, clearer than the previous Competition and Fair Trading Act The effective and reasonable implementation of the law by the CCPC would be greatly assisted if there is a well-informed labour Union, business and legal community CCPC is clothed with admin. powers to fine both individuals and business.

Conclusion Cont’d Intense interaction with the CCPC and the business, labour unions, legal & consumer groups are greatly anticipated. It is Important (trite) that there is a fine balance between the reasonable, fair, transparent and accountable exercise of power by the CCPC to ensure that business growth and development is not threatened Ultimately, CCPC’s role is to ensure the “peaceful” and “gainful” co-existence of both business and consumer interests.

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