Robust debate needed on AfCFTA’s Competition Protocol
Posted in Blog post
The possible impact of the African Continental Free Trade Agreement (AfCFTA) on African competition regimes has not received much attention to date despite the fact that AfCFTA’s Competition Protocol could create another layer of supra-national competition regulation across Africa. The recent publication of the Assessing Regional Integration in Africa (ARIA) report by the United Nations Economic Commission for Africa (UNECA), the African Union, the African Development Bank and the UNCTAD has raised important questions as to not only what the Competition Protocol could mean in practice but also the need for it in the first place. With no known plans for consultation, there is a concern that the final version of the Competition Protocol will be presented as a fait accompli. Due to the significance of the Competition Protocol, the voice of business must be heard as part of meaningful consultation throughout the drafting process.
The AfCFTA came into force on 30 May 2019 following its ratification by 22 countries, the threshold for implementation. The next steps involve the operationalisation of the existing AfCFTA protocols relating to the free movement of goods, free provision of services and the dispute resolution procedures. This phase will involve technical discussions giving effect to these protocols including the finalisation of schedules of concessions for trade in goods, rules of origin and schedules of specific commitments for trade in services. In addition, AfCFTA’s entry into force kicks off the negotiations on the Phase II protocols, including the Competition Protocol. These negotiations are scheduled to commence later in 2019 and must be concluded by June 2021.
Although the provisions of AfCFTA are not prescriptive as to the contents of the Competition Protocol, the publication of the ARIA report in July 2019 sheds some light on its intended purpose as well as the various forms that it may take in practice. The contents of the report are particularly enlightening as the African Competition Forum (ACF), the network of African competition authorities, participated in expert groups on the Competition Protocol and provided input on and contributions to the relevant chapter of the ARIA report. Due to the ACF’s involvement, the ARIA report is indicative, at the very least, of the likely direction of the negotiations on the Competition Protocol.
It is questionable whether the ARIA report sufficiently justifies the need for the Competition Protocol in the first place. As a point of departure, the report claims that the protocol is required as competition law enforcement remains patchy across Africa with only 23 countries (at the time of writing) having competition regimes and that, from these, only a handful have fully operational competition authorities.
This statement does not, however, portray an accurate representation of the application of competition law across the continent. Aside from the fact that the number is now out of date (e.g. Angolan and Nigerian regimes have since become operational), it does not take into account the application of regional competition law frameworks across Africa. For example, COMESA effectively provides a competition law framework for nine COMESA Member States that do not have national competition laws. Moreover, it does not take into account the effective economic coverage of competition law over the African economy as countries with competition law regimes account for almost 90% of Africa’s GDP.
In a further attempt to substantiate the need for the Competition Protocol, the ARIA report categorically states that African countries face cross-border anti-competitive practices. This allegation is reminiscent of the claims, at the time of its introduction, that the COMESA competition regime was needed to unearth rampant cartels in COMESA despite no such cases being brought in the six years since becoming operational.
Moreover, the ARIA report makes the bold statement that there have been cartels in southern Africa that have affected regional competition. However, in citing the ‘probable’ geographic reach of a number of a SA cartel cases, the report does not acknowledge that the SA competition authorities have made no such extra-territorial rulings or are not even empowered to do so.
Without consensus on the need for the Competition Protocol in the first place, it is premature to start sketching out what the protocol should look like in practice. The ARIA report does set out two possible structures, either a continental competition authority or a cooperation framework. While the former would be akin to a regional competition authority but on a much wider scale, the latter would correlate to the cooperation within the Southern African Development Community where competition authorities may exchange non-confidential case information, collaborate with capacity building activities but have no mandate to deal directly with cross-border cases.
While no firm position is taken on the structure of the regime, the report recommends that the Competition Protocol should provide for a mandatory merger control regime for those transactions with an appreciable effect on trade within the AfCFTA. The only additional comment on this recommendation in the report is that the AfCFTA regime should not duplicate either national or regional notifications.
Although the ARIA report is only indicative of the Phase II negotiations, it nonetheless highlights the profound and long-term implications of the Competition Protocol in introducing another regulatory layer above existing regional and national competition regimes. Such an introduction would materially increase the level of complexity for investors despite the fact that the rationale, as set out in the ARIA report, for the Competition Protocol is highly questionable. The possible impact of the AfCFTA has somewhat gone under the radar and there is a concern that the Competition Protocol will be presented as a fait accompli as no consultation is anticipated as part of inter-government negotiations. A higher profile of the Competition Protocol is needed and the voice of business must be heard as part of meaningful consultation throughout the drafting process.