Impact of Malawi's new competition law on mergers - Part 2

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The Act marks a significant shift from the previous regime. Amongst other things, it includes measures to address the abuse of buyer power as an anti-competitive practice and empowers the Commission to conduct market inquiries and studies.

The Act also strengthens the Commission’s enforcement mandate. The latter is an important development, given that in July 2023, in Airtel Malawi plc vs Competition and Fair-Trading Commission (Airtel judgment), the High Court of Malawi held that the Commission did not have the mandate to impose penal or administrative sanctions under the Repealed Act.

The Airtel judgment was perceived to have significantly weakened the enforcement mandate of the Commission. The Act now specifically empowers the Commission to issue ‘administrative orders’, including financial penalties for competition law and consumer protection contraventions.

Impact of Malawi's new competition law on mergers - Part 1

Tamara Dini and Nazeera Mia  7 Aug 2024

Anti-competitive practices

Similar to the position under the Repealed Act, the Act prohibits certain conduct as per se unlawful.

Provision is made for the imposition of penalties of up to 10% of annual turnover in the case of enterprises and up to 5% of annual income in the case of individuals.

The Act prohibits a range of practices articulated as instances of abuse of dominance. An enterprise is deemed to be dominant if, either by itself or acting with others, inter alia, it has a market share of 40% or more, or the actual capacity to eliminate or restrain competition in the market, or the actual capacity to control prices or other commercial conditions.

The Act introduces a prohibition against ‘an abuse of buyer power’ and defines ‘buyer power’ as ‘the influence exerted by an undertaking or group of undertakings in the position of a purchaser of a product or services to (a) obtain from a supplier more favourable terms; or (b) impose a long-term opportunity cost including harm or withheld benefit, which, if carried out, would be significantly disproportionate to any resulting long term cost to the undertaking or group of undertakings’.

The buyer power provisions do not appear to be limited in their application to undertakings with a dominant position, either alone or with other undertakings and, as such, it appears that these provisions may apply to undertakings that do not command market power. The Act provides a non-exhaustive list of conduct that may constitute an abuse of buyer power, including delays in payments to suppliers without justification, demands for preferential terms unfavourable to the supplier, and refusal to receive or return goods (including digital products) without justifiable reason in breach of contractual terms.

How will the new competition laws impact business?

Mark Garden, Clare-Alice Vertue & Annerita Maritz  5 Jul 2024

Market studies and inquiries

The Commission is empowered to conduct a market study or market inquiry where it has reasonable grounds to suspect that an unfair trading practice, or a prevention, restriction, or distortion of competition, is occurring within a particular sector of the economy or within a particular type of agreement occurring across various sectors.

The Commission may invite, and may require, market players to participate in the inquiry or study.

The Commission will make its findings publicly available at the end of the market inquiry or study.

The Act envisages that regulations may be issued in relation to the manner and form in which the Commission shall institute an inquiry under the Act. As such, further details regarding market inquiries may be published.

Regional and continental cooperation

Malawi is a Member State of the Common Market for Eastern and Southern Africa (Comesa) at a regional level and is a Member State of the African Continental Free Trade Area (AfCFTA) at a continental level.

In respect of the former, competition law is regulated by the Comesa Competition Commission and, in respect of the latter, it is envisaged that competition law will be regulated by the AfCFTA Competition Authority.

The Act contains specific provisions for the Commission to cooperate with fellow Member States as well as the regional and continental competition regulators in all matters of competition and consumer protection.