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AfCFTA Guide
Competition Policy refers to guidelines established to regulate the market and create a level playing field for businesses. In the absence of such policies anti-competitive practices such as cartels and monopolies that abuse their market position, arise. Competition policy through its implementation prevents patent misuse, predatory pricing, price fixing and anti-competitive mergers. This extends benefits to businesses, consumers and governments. These types of anti-competitive practices reduce choice, increase prices, and thus deny consumers and other excluded producers the benefits of trade liberalisation.
Competition policy is recognised as one of the key drivers of economic growth as it presents an avenue for markets to grow at the regional and international levels. The importance of competition policy becomes significant with the implementation of the AfCFTA. The current capacity of existing competition policies is restricted to a territorial basis that can address anti-competitive practices only by foreign actors in domestic markets. Hence, the primary objective of the AfCFTA’s Protocol on Competition is to establish an integrated and unified African continental competition regime for improved market efficiency, inclusive growth, and the structural transformation of the African economies. The Protocol also aims to promote economic integration and sustainable development in the AfCFTA Market and manage the interrelationships of competition regimes and sectoral regulatory laws at the national, regional, and continental levels.
Anti-Competitive Practices
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The AfCFTA is dedicated to countering anti-competitive business practices. The scope of application of the Protocol is comprehensive, spanning across different economic activities conducted by individuals or entities that have an impact on competition within the continental market. However, the Protocol does not apply to matters that fall under the jurisdiction of national competition authorities.
Labour-related issues aimed at advancing the terms and conditions of employment; or collective bargaining agreements on behalf of employees for the purpose of fixing terms and conditions of employment are also not under the purview of this Protocol.
Anti-Competitive Practices
The Protocol outlines specific practices that are considered incompatible with ensuring the effective functioning of the market. These include:
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Agreements between business entities or companies or an association of business entities or companies and concerted practices between them which have, as their objective or effect, the prevention, restriction or distortion of competition in the Market (Example: collusion between competing gas station owners to fix fuel prices at a certain level to eliminate price competition and maintain higher profits.)
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Abuse by one or more undertakings of a dominant position in the Market (Example: A large internet search engine intentionally manipulates its search results to prioritise its own services and products over competitors', thereby stifling competition and limiting consumer choice.)
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Mergers or acquisitions that are likely to prevent, restrict or distort competition in the Market, especially by giving rise to the creation or strengthening of a dominant position; (Example: A leading pharmaceutical company acquires a smaller competitor with a unique drug, effectively eliminating an alternative treatment option and leading to higher prices for consumers.)
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Abuse of economic dependence and any other anti-competitive practices. (Example: A dominant supplier of a critical raw material uses its position to dictate pricing and terms to manufacturers who rely on that material, inhibiting the ability of manufacturers to seek alternative sources.)
Prohibited Horizontal and Vertical Business practices: Horizontal business practices refer to circumstances where companies that are competitors or potential competitors make agreements or decisions that limit competition between them while vertical business practices involve agreements or actions between companies that are at different levels of the supply chain, for instance, a supplier and a retailer. These practices can affect how products are priced, sold, or distributed and thereby impact competitiveness in the market.
The Protocol outlines the prohibited horizontal business practices within the AfCFTA competition policy framework. The Protocol prohibits any agreements, decisions made by groups of businesses, or coordinated actions among business associations that are competitors or could compete in the market, which involve certain limiting practices. These practices include fixing prices, restricting production or sale, collusive bidding, market allocation, refusal to purchase or supply, and denial of access to essential arrangements.
As for vertical business practices, the Protocol prohibits setting a minimum resale price. However, a supplier or producer can suggest a minimum resale price to a reseller, as long as they clarify that it's not mandatory. If the product's price is displayed, it must include the label "recommended price" next to it. Moreover, restrictions on passive sales and other vertical practices can be deemed anti-competitive.
However, with regard to both horizontal and vertical business practices, the Protocol also allows for certain exemptions such as:
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cooperation on research and development;
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joint ventures intended to achieve economic development;
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measures to promote sustainable development, growth, transformation, or stability of any industry;
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measures fostering competitiveness and efficiency gains that promote employment or industrial expansion; and
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activities of professional associations designed to develop or enforce professional standards of competence reasonably necessary for the protection of the public.
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Abuse of dominant position: The Protocol highlights how abuse of a dominant position in the market by business entities is to be dealt with. To determine market dominance, factors like market share, concentration, and market power are considered. The Protocol prohibits the misuse of one’s dominant position in a way that harms competition. This can include actions such as eliminating competitors, imposing unfair prices, limiting production, or denying access to necessary resources.
Mergers and Acquisition: The provisions on mergers and acquisitions apply when the acquiring and target companies operate directly or indirectly in the AfCFTA market and meet certain turnover or asset thresholds to be specified in other regulations.
Any companies, meeting the conditions, seeking to merge must notify the AfCFTA Competition Authority to obtain its approval. A merger happens when there's a lasting change of control due to amalgamation, acquisition, or joint ventures. If a merger lessens competition substantially or strengthens dominance, it will contravene the provisions of the AfCFTA. To determine whether a merger has the potential to distort competition, the AfCFTA Competition Authority considers factors like market structure, barriers to entry, and public interests. Following a review, the AfCFTA Competition Authority can approve a merger with or without conditions or outrightly deny it. Moreover, the AfCFTA Competition Authority can also revoke its decision if the information provided for review is found to be incorrect, the approval is deceitful, or the business entity is found to be in breach of its obligations.
Abuse of economic dependence
The Protocol equally addresses the abuse of economic dependence and other anti-competitive practices. Economic dependence occurs when suppliers or buyers of certain goods or services are dependent on certain business entities and cannot easily switch to other options, and there's an imbalance in power.
It's prohibited for businesses in a dominant position to abuse their power over customers or suppliers in a way that harms competition. In the event of such a dependence, anticompetitive practices can arise if the gatekeeper or core platform (dominant firm in the relationship) exploits its position vis-a-vis a supplier and if such conduct affects the structure of the market. It is prohibited for gatekeepers and core platforms to:
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imposing price or service parity clauses on business users;
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imposing anti-steering provisions, or otherwise preventing business users from engaging consumers directly outside of a core platform;
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using business user data to compete against the business user;
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self-preferencing of services or products offered by the gatekeeper on a core platform;
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differentiation in fees or treatment against small and medium enterprises;
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placing restrictions on the portability of data or other actions that inhibit switching platforms for business and end-users;
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failing to identify paid ranking as advertising in search results and to allow paid results to exceed organic results on the first results page;
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combining personal data sourced from different services offered by the gatekeeper; or
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requiring the pre-installation of gatekeeper applications or services on devices.
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Responsibilities of State Parties
Each State Party must inform other State Parties about their laws, regulations, and international commitments related to the Protocol's matters. If State Parties amend or implement new laws, regulations, or commitments linked to the Protocol, they should inform the Secretariat within six months of these changes taking effect.
As for Member States where there are no existing competition laws, Member States are required to adopt such regulations when this Protocol comes into effect or upon acceding to the AfCFTA Agreement. All Member States are encouraged to align their competition laws with this Protocol for consistency and the laws must adhere to the principles of transparency, independence, and fairness.
Institutional Arrangements
The institutional set-up to guide and monitor competition policy under the AfCFTA comprises a two-tier system, namely the AfCFTA Competition Authority and the Board of Commissioners of the AfCFTA Competition Authority. As an independent legal body that is funded by the AfCFTA Secretariat, the AfCFTA Competition Authority comprises a decision-making body headed by a Chairperson of the Board of Commissioners of the AfCFTA Competition Authority and an Investigative Body headed by an Executive Director.
The AfCFTA Competition Authority is governed by a Board that sets policies, makes decisions on prohibited conduct, approves exemptions and mergers, and supervises the Authority’s administration. The Board is composed of three members from each of the five African Union regions, appointed by the Council of Ministers based on the Secretary-General's proposal. It thus aims to accommodate the diverse interests of participating countries while maintaining a formal hierarchy to ensure transparency and accountability. The Chairperson and Vice-Chairperson are elected by the Board and must be from different regions. A representative of the AfCFTA Secretariat is also expected to participate in the meeting of the Board, although they do not hold any voting rights. Board members are nominated based on their expertise in competition policy, economics, commerce, or public policy and must be citizens of AfCFTA State Parties.
The Investigative Body, for its part, is tasked with the enforcement of the Protocol. Some of its core responsibilities include:
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Assessing mergers and acquisitions
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Investigating anti-competitive practices
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Conducting market studies and advising the Council of Ministers
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Reviewing exemption applications
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Regularly evaluating and suggesting improvements to the Protocol
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Supporting State Parties in enhancing national competition laws and bodies
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Collaborating with national and regional competition authorities; non-African competition authorities; and sector regulators, whether they handle competition matters or not.
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The AfCFTA Competition Authority has the prerogative of imposing sanctions on business entities in response to any anti-competitive actions undertaken. These include:
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Stopping anti-competitive agreements or practices
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Ordering remedies for anti-competitive practices
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Approving or disapproving mergers with or without conditions
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Granting, denying, or attaching conditions to exemption applications
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Imposing fines up to 10% of an undertaking's turnover (continental or worldwide)
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Concluding matters through administrative settlements
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Issuing administrative directives
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Fines can be imposed for violations of Article 6, Article 7, Article 9, and Article 11 and for failing to notify a merger meeting specified thresholds. Repeated offences will lead to aggravated sanctions. These sanctions are imposed if an undertaking or person fails to comply with any decision of the Board. Moreover, in cases where a violation is suspected, the AfCFTA Competition Authority can issue interim orders to prevent harm to competition during ongoing investigations.
Upon the violations or business conduct in an anti-competitive manner, businesses may be subject to financial penalties, remedies or exemptions. Repeated behaviours are subject to aggravated sanctions.
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Dispute Settlement
Disputes arising among Member States in relation to their rights and obligations under the Protocol shall be resolved in accordance with the Protocol on Rules and Procedures on the Settlement of Disputes under the AfCFTA Agreement.
Moreover, the AfCFTA Protocol on Competition Policy also provides for a Tribunal as an independent and autonomous legal body that is responsible for decisions on appeals taken against the Board of the Authority while implementing this Protocol. The Tribunal’s decision is binding on all Parties in the dispute.
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Other Provisions
The Protocol also includes a provision aiming to design a roadmap for establishing a unified African continental competition regime. In this respect, the Assembly of Heads of State and Government will collaborate to develop the roadmap considering national and regional competition authorities' roles as per the Abuja Treaty. The Authority's operationalisation will follow the roadmap, which will become a part of this Protocol once approved by the Heads of State and Government.
It should also be noted that the Competition Authorities of the Regional Economic Communities (RECs) shall retain their jurisdiction and the Council of Ministers will establish regulations and procedures to manage concurrent jurisdiction.
The AfCFTA Secretariat or the AfCFTA Competition Authority, along with regional bodies and development partners, will offer technical aid and capacity-building activities to Member States, facilitating the adoption and implementation of competition laws and the setting up of enforcement bodies. In addition, a network of competition authorities will be formed to enhance coordination, guided by a Regulation developed by the Council of Ministers. The Authority will also identify ways in which cooperation can be improved among Member States.