Competition Commission v Betamax
Qs & As
* ‘Which concern holds the monopoly position? Betamax or STC?’
The unilateral cancellation of the contract for affreightment between the STC and Betamax in 2015, without sufficient consideration for international legal and contractual obligations, was finally resolved in the latter’s favour by the Law Lords, who reversed the judgment of the Supreme Court. The judicial matter however unpalatable should have rested there, were it not for the attempts to make parallel judgments through a recently appointed Commission of Inquiry and the actions of the Competition Commission. Lex shares his legal views below.
* What are the circumstances under the Competition Act 2007 that would trigger an investigation by the Commission?
The Competition Act of 2007 provides for a number of situations that are restrictive of free competition. Collusive agreements between enterprises that consist in fixing the selling or purchase prices of the goods or services; sharing markets or sources of the supply of the goods or services; or restricting the supply of the goods or services to, or the acquisition of them from, any person with a view to significantly prevent, restrict or distort competition.
Bid rigging will occur when one party to the agreement agrees not to submit a bid or tender in response to an invitation for bids or tenders; or agrees upon the price, terms or conditions of a bid or tender to be submitted in response to such a call or request. When bid rigging is collusive, it is prohibited.
A vertical agreement between enterprises shall, to the extent that it involves resale price maintenance is illegal. However, a supplier or producer may recommend a minimum resale price to a reseller of goods or services provided that the recommendation is not binding.
A monopoly situation also exists in relation to the supply of goods or services of any description where 30% or more of those goods or services are supplied, or acquired on the market, by one enterprise; or 70% or more of those goods or services are supplied, or acquired on the market, by three or fewer enterprises.
* Is the Commission empowered to take appropriate remedial actions under the law in the event that a business concern or practice is found to be contrary to the monopoly provision of the Competition Act? What remedies can it impose and their ceiling, if any, in case of a financial penalty?
After an investigation, the Commission may give directions to the person or enterprise concerned to put a stop to any practice that consists in restricting competition. During an investigation or prior to an investigation, a person or enterprise may give an undertaking to put a stop to any situation or practice that restricts competition. The law provides that an enterprise may offer a written undertaking to the Commission to address any concern that has arisen, or is likely to arise, during an investigation in respect of a restrictive agreement subject to investigation, a monopoly situation or a merger situation.
As regards financial penalties, the law provides in Section 5(3): ‘Where the Commission imposes a financial penalty on an enterprise, the financial penalty shall not exceed 10 per cent of the turnover of the enterprise in Mauritius during the period of the breach of the prohibition up to a maximum period of 5 years.’
* The Competition Commission has on 7 Sept 2021 launched an investigation into “a suspected abuse of a monopoly situation by the Bhunjun Group of Companies and Betamax Ltd in the supply of petroleum products” to the STC. Does the law allow the Commission to open an investigation on its own, or can it only do so following a complaint by the public or an aggrieved party?
The Competition Commission can start an investigation of its own volition or on a complaint.
* The Competition Commission’s press release mentions that if its Executive Director, Mr Deshmuk Kowlessur, finds at the end of its investigation that “the conduct of the Bhunjun Group and/or Betamax Ltd amounts to a reviewable monopoly situation…, he may recommend the Commissioners to impose appropriate directions on the concerned enterprise(s). What is the nature of the remedies it can impose in this particular case?
The Commission may give directions that measures should be taken to cease the restriction of competition. Or undertakings may be given by the offending person or enterprise. The Commission will monitor whether the directions are being complied with or whether the undertaking given is being complied with.
Where the Commission determines that an enterprise has failed, without reasonable excuse, to comply with a direction or undertaking, the Commission may apply to the Judge in Chambers for a mandatory order requiring the enterprise to make good the default within a time specified in the order. However, the Commission shall consider any representations the enterprise wishes to make before an application is made before a Judge in Chambers.
* Does the law provide for any appeal against any order of the Commission?
Any party who is dissatisfied with an order or direction of the Commission may appeal to the Supreme Court against that order or direction, within 21 days of the date of the order or direction of the Commission.
* We learn from the Competition Commission’s website that it has Me Mahmad Aleem Bocus as its Chairperson, Mr Alberto Mariette, Vice Chairperson, Me Candhayalallsing Seebaluck CSK & Mrs Vedwantee Bikhoo as Commissioners. It is a “parastatal, under the aegis of the Ministry of Commerce and Consumer Protection”, but “however independent of Government in its decision-making”. Where does the Competition draw its independence from? The Constitution?
Section 32 of the Competition Act states that “where the Executive Director exercises his power to investigate in a case involving a restrictive business practice, he shall not be subject to the direction, or control of, any other person or authority”. The Executive Director is appointed by the President of the Republic on the advice of the Prime Minister given after consultation with the Leader of the Opposition.
However, let me add that R. Laxman wrote in this very paper on 4 February 2019:
‘If a proper referendum were to be held today on the independence of our institutions, the result might astound us. We have in this country many institutions that should be independent. The perception is that many are not, although they may be in actual fact. Maintaining institutional autonomy vis-à-vis the government of the day and political parties is very important as it reflects on the kind of democracy that we practise. The process of recruiting people to serve in institutions is as important for an institution’s independence as those who are selected to do so.’
We must not kid ourselves. Most of our institutions are not independent; they toe, or have to toe, the line of the government of the day, especially those chosen by the political masters to head certain institutions. On the other hand, what is the point of having a clause in the law providing for consultations with the Leader of the Opposition when we know that the latter’s views would just be brushed aside? Look at the appointments in an important institution like the Electoral Commission…
* It’s almost after 12 years since the STC/Betamax contract of affreightment was entered (27 November 2009),that the Competition Commission has on 7 Sept 2021 launched an investigation. The public interest would have been best served if the Commission had started an investigation when the contract was in operation, not five and a half years after its termination in January 2015. That has been a long time in the making, isn’t it?
The matter must be viewed differently. Once the Lepep government assumed political power in 2014, they became a law unto themselves. They believed they could do anything from arresting political opponents without evidence to putting an end to contracts or agreements entered into by the preceding government.
So, when they put an end to the Betamax contract, they believed that was the end of the matter especially after the erroneous judgment of the Supreme Court. Little did they realize that they would be condemned not only by international arbitrators but more significantly, would be rebuked by the Privy Council.
It would seem that this legal humiliation has been difficult for the current government to digest. This might explain why they have appointed a commission of inquiry to examine the circumstances in which the contract was awarded to Betamax, a decision that is being challenged before the Supreme Court and which may ultimately find its way to the Privy Council.
Not content with setting up a commission of inquiry, the Competition Commission has started an investigation into the alleged monopoly that Betamax practised on the award of the contract.
* The Commission does not inform us on its website whether there has been any precedent like the one at hand wherein it had started an investigation after such a long time-lag. Does the law allow it to do that unlike the MRA which is barred from making an assessment for a period beyond three years preceding the current tax year?
There have been a few decisions with regard to dominant position, mergers, collusive behaviour, competition issues regarding the cement market. It does not appear the Competition Commission is time barred to start an investigation – the Betamax investigation is a case in point.
* The Commission’s investigation will assess whether the Bhunjun Group of Companies and Betamax Ltd, have engaged in relation to the supply of freight services for petroleum products to the STC, in conducts which are contrary to the Competition Act. It’s not looking into the sale and distribution of petroleum products by the STC, so the question of the STC being the direct beneficiary of the Betamax-STC contract cannot arise, isn’t it?
The irony of the situation is that it is the STC that is the sole importer of petroleum products. Betamax became the agent of the STC and not the importer by virtue of a contract.
Unlike the cement market where the STC can import cement along with other enterprises, petroleum products are imported by STC only. Which concern holds the monopoly position? Betamax or STC?
* We understand that “being in a monopoly position is not a breach in itself. It is the abuse of the monopoly situation that constitutes to be a breach of the Act”. Is there however a case for an investigation into the operation and conduct of the STC in this particular transaction in relation to the importation, supply and distribution of petroleum products?
This what the law says:
In reviewing a monopoly situation, the Commission shall take into account –
(a) the extent to which an enterprise enjoys or a group of enterprises enjoy, such a position of dominance in the market as to make it possible for that enterprise or those enterprises to operate in that market, and to adjust prices or output, without effective constraint from competitors or potential competitors;
(b) the availability or non-availability of substitutable goods or services to consumers in the short term;
(c) the availability or non-availability of nearby competitors to whom consumers could turn in the short term; and
(d) evidence of actions or behaviour by an enterprise that is, or a group of enterprises that are, a party to the monopoly situation where such actions or behaviour that have or are likely to have an adverse effect on the efficiency, adaptability and competitiveness of the economy of Mauritius, or are or are likely to be detrimental to the interests of consumers.
* It appears that the principle of the Betamax-STC contract of affreightment was approved by the Cabinet in 2009. Does that make of the then Cabinet culpable of any breach of the Competition Act?
No. Cabinet approved a deal, and STC imported through Betamax.
* The Commission’s press release informs us that its monopoly investigation is being conducted “with due regards to the judgements of the Supreme Court and the Privy Council on the case involving Betamax and State Trading Corporation”. What’s your take on that?
The issue of monopoly was never raised either before the Supreme Court or the Privy Council. The Supreme Court found that the contract was illegal whereas the Privy Council after a thorough analysis of the relevant statute and regulations found the contrary.
Had the issue of monopoly been raised, we would have been fixed. Since we have a final decision from the highest court, the Privy Council, that the contract was legal, is the Competition Commission now trying to give a parallel judgment that the contract may have been illegal on account of a monopoly situation? This is simply shocking. Political considerations are invading the judicial province, and that is very dangerous.
* Published in print edition on 28 September 2021
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