Malawi Competition Policy and Law - An overview

1. Malawi Competition Policy and Law - An overview by Paul Kwengwere, Commissioner Malawi Competition Commission RSA Competition Conference

2. Outline of the presentation • Overview of Competition Policy and Law in Malawi • Background to Policy • Focus of the Policy • The Competition and Fair Trading Act • Highlights of Cases • Anti-competitive Practices • Mergers and Acquisitions • Benefits of Regional Interaction

3. Overview Of Competition Policy and Law in Malawi

4. Government adopted Competition Policy in September, 1997. Adoption of policy necessitated by globalisation and market oriented reforms i.e. deregulation, privatisation, and liberalisation of prices, trade, FDI. Major reason was to create an enabling environment for business and promote economic efficiency and consumer welfare 1. BACKGROUND

5. SCOPE OF COVERAGE OF THE COMPETITION POLICY • The Competition Policy covers three main areas: • reducing Restrictive Business Practices • counter unfair business practices and afford the consumer protection • establishment of an organ to lobby for change to legislation impeding competition and make appropriate recommendations to relevant institutions

6. Focus of the Policy • Business behaviour calculated to eliminate or reduce competition including price fixing, collusive tendering or customer allocation and tied sales; • Market structures which permit abuse by an entity in a position of market power; • Government legislation which may impact on the operation of the free market in Malawi; and • Unfair business practices which have an impact on consumers.

7. THE COMPETITION AND FAIR TRADING ACT As one way of implementing the Competition Policy, Government passed the Competition and Fair Trading Act in 1998. The Act came into force on 1st April 2000. The Act seeks to: • encourage competition in the economy by prohibiting anti-competitive trade practices; • establish the Competition and Fair Trading Commission; • regulate and monitor monopolies and concentrations of economic power; • protect consumer welfare;

8. continued’ • strengthen the efficiency of production and distribution of good and services; • secure the best possible conditions for the freedom of trade; • facilitate the expansion of the base of entrepreneurship and to provide for matters incidental thereto or connected therewith

9. THE ACT • The Act is in Six Parts: • Preliminary • Competition and Fair Trading Commission • The Secretariat • Financial Provision • Anti-Competitive Trade Practices, etc • Miscellaneous Provisions

10. Highlights of Some of the Cases Undertaken

11. Vertical anti-competitive trade practices & Merger Control Regulation • Section 32 (2) of the Act covers anti-competitive trade practices including: Predatory conduct e.g. below-cost pricing method; Discriminatory pricing and terms; Exclusive dealing; Tied-selling; Market/quantity restrictions; Resale price maintenance • Section 35 of the Act - control of mergers and takeovers. • A merger is present whenever a takeover (or a merger) is completed within Malawi (basically, an acquisition of the assets or the shares of a domestic enterprise)

12. Related to Section 32…. • Exclusive Dealing Arrangement and Resale Price Maintenance by Portland Cement Company (1974) Limited. • misuse of market power by Portland Cement Company (PCC) • PCC restricted the distribution system of cement to selected individuals and that the number of distributors in any given area was deliberately restricted • agent purchased cement at ex-factory prices and that PCC recommended selling price to agents as well as other distributors.

13. Resolution by the Commission: • PCC to substantially increase the number and spread of its agents in both the geographic and ethnic dimensions to ensure equitable access to this product of national importance • the determination of prices of cement on the market be left to market forces • The Commission requested PCC to amend the Standard Agency Agreement and furnish the Commission with a copy of the amended version of the Agreement for verifications

14. Cases Related to Section 35 • Cases that were of domestic effects, as both enterprises were already operating in Malawi before the merger either directly or through subsidiaries or branches. Two such cases that have been handled by the Commission are: • Takeover of SSI Holdings by G4S International • Takeover of Mobil Malawi by Total  

15. Related to Section 35 …Contd • Cases with domestic effects, as only one of the enterprises was operating in Malawi before the merger. • Takeover of Dulux Malawi Limited by Ergon Investment International • Takeover of Clark Cotton Malawi Limited By Cargill Incorporated

16. Related to Section 35 …Contd • Cases that involved acquisition of the assets or shares of a domestic enterprise by an international firm or between two domestically operating enterprises: • Takeover of Baobab Pensions By AoN Malawi Limited • Sale of Tobacco Processing Factory by Alliance One to Africaleaf Processors Limited • Takeover of Malawi Distilleries Limited (MDL) by the Bottling and Brewing Group Limited (BBGL) • Acquisition of 60 percent shareholding in Telekom Networks Malawi (TNM) by MTL Mobile Limited

17. The Benefits of Regional Interaction

18. Technical Expertise • Development of the Policy and Act • technical knowledge on how to handle some cases that were came to the commission. • Establishment of secretariat • Rolling of certain programs (advocacy program

19. Capacity Building • Training of staff • Induction of Commissioners • General Establishment

20. THANK YOU FOR YOUR ATTENTION