Competition economics

As the leading provider of competition economics services in Africa, Genesis Analytics has an unmatched breadth and depth of skills and experience. Blue-chip companies across Africa routinely rely on us for expert advice and support when they interact with competition authorities. We also work extensively with regulators and competition authorities, giving us a position of trust based on a strong reputation for providing robust and independent expert economic views.

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Expertise Areas

Abuse of dominance and prohibited practices

We offer expert economic analysis, advice and testimony in cases related to anti-competitive conduct. This includes investigations into cartel conduct, vertical agreements and abuse of dominance allegations such as excessive pricing, refusal to supply, exclusive supply and distribution arrangements, predatory pricing, bundling and tying, and price discrimination. We also provide advice in designing and responding to market inquiries in sectors such as banking, supermarkets and healthcare. Our regulatory accounting expertise is key for assessment of excessive pricing, predatory pricing and margin-squeeze cases, among others.

Merger analysis and public interest

We provide expert economic analysis, advice and testimony relating to mergers at the various stages of approval by competition authorities. This can be offered within the context of assisting with merger filings or in opposition to mergers. This economic analysis includes market definition as well as the assessment of the competitive effects, efficiencies and public interest effects associated with the transaction.  We routinely work with private companies (merging parties and interveners), the competition authorities as well as other parties such as government departments, statutory organisations and trade unions.

Expert testimony

The Genesis team has extensive experience in providing testimony as independent expert witnesses in hearings at the competition courts and tribunals that routinely stands up to scrutiny. Expert testimony is also provided in arbitration and High Court proceedings and regulation.

Compliance advice

We conduct confidential assessments of the compliance of business practices with competition legislation and the risks faced as a consequence of possible anti-competitive conduct. We also advise on the redesign of business practices that satisfies client business objectives while complying with competition law. Business practices typically examined here include pricing and rebate structures, exclusivity arrangements and information sharing between competitors (for example through industry associations).  We also routinely conduct market definition assessments for firms to assist in determining whether they would be likely to be subject to provisions of competition legislation applicable to dominant firms.

Projects

Commission levels playing field on school uniforms

Project name:
Assistance to the Competition Commission with a financial assessment of potential excessive pricing in the provision of school uniforms

Service:
Competition economics

Sector:
Education
Public and Social

Area of Expertise:
Abuse of dominance and prohibited practices

Client:
Competition Commission of South Africa

Date:
2017

Country:
South Africa


The Competition Commission of South Africa initiated a complaint in January 2017 against direct suppliers of school uniforms following allegations of possible abuse of dominance and restrictive practices in the supply of school uniforms across the country. The allegations were that certain schools or other suppliers had concluded exclusive supply agreements and were charging excessive prices for school uniforms to the detriment of parents and guardians.

Genesis was appointed by the commission to undertake a detailed assessment of the allegations against school-uniform retailers for excessive pricing. Genesis's assessment involved developing a financial model that calculated economic costs for over 10 000 school-uniform stock, keeping units from eight of the largest school-uniform retailers in South Africa.

The model also calculated the mark-up on economic cost, gross margin and ROCE (return on capital employed) for each school-uniform retailer. Our results showed that prices were significantly above economic costs for two retailers and materially above economic costs for two others.

Genesis also found that the returns on capital employed were significantly higher that the weighted average cost of capital for five of the eight school-uniform retailers, which supported a finding that the market for school uniforms was not competitive.

This finding motivated the commission to engage proactively with the industry to phase out exclusive supply arrangement and promote a more competitive market in the sale of school uniforms.

This engagement prompted the Independent Schools Association of Southern Africa (Isasa) to pledge that:

• uniforms would be made as generic as possible;

• schools would have multiple suppliers; and

• supplier contracts would not operate in perpetuity.

Schools urged to stick to uniform guidelines

Expert testimony in seminal media predatory pricing case

Project name:
Expert economic testimony in South Africa's seminal predatory pricing case

Service:
Competition economics

Sector:
Communications and Media

Area of Expertise:
Abuse of dominance and prohibited practices

Client:
Media24

Date:
2011 - 2018

Country:
South Africa


Genesis was retained by Media24, a large newspaper and magazine publisher, to defend predatory pricing allegations made against the group by the Competition Commission in what has proven to be South Africa’s seminal predation case.

Predatory pricing generally refers to a strategy where a company prices its products at a low level in the short term to exclude rivals from the market, and then raises its prices in the medium to long term to recoup profits.

In South Africa, section 8(d)(iv) of the Competition Act (No. 89 of 1998) explicitly outlaws predatory pricing. The act also allows for claims of such conduct to be assessed using the general exclusionary clause outlined in section 8(c).

The commission was acting on a complaint by Gold-Net News, a former community newspaper published in the Free State Goldfields region. Gold-Net News alleged that Forum, one of Media24’s publications in that region, had been used as a “fighting brand” and its adverts priced below the production cost of the newspaper from 2004 to 2009 in order to exclude Gold-Net News from the market.

On behalf of the complainant, the commission further alleged that upon Gold-Net News’s exit from the market in 2009, the Forum title was withdrawn and a sister publication, Vista, was left to profit from its resulting market position.

Our work encompassed detailed financial analysis of Media24’s management accounts in conjunction with careful analysis of the economic evidence. As the case unfolded, the expert analysis by the Genesis team traversed a number of important economic issues before the tribunal. These are likely to assist in bringing greater legal certainty in future cases.

Genesis’s involvement in the case spanned the course of the entire matter – the investigation phase; the complaint hearing before the Competition Tribunal, at which it was found that there was no evidence of Media24 pricing below marginal or average variable cost; the hearing on remedies following the tribunal’s decision that Media24 had contravened section 8(c) of the act; and, most recently, Media24’s appeal to the Competition Appeal Court regarding the tribunal’s section 8(c) finding.

In March 2018, following Media24’s appeal of the tribunal's section 8(c) ruling, the Competition Appeal Court – in a unanimous decision – ruled that the test put forward by the tribunal of pricing below ATC with predatory intent had no application under the act. The court set aside the decision of the tribunal, dismissed the commission’s original complaint dating back to 2011, and gave a cost order against the commission for the appeal proceedings.

Full judgment

Business Day: Media predatory pricing ruling brings clarity to competition law

Full article

Media24 welcomes ConCourt dismissal of predatory pricing appeal

Expert economic testimony paves the way to tile merger

Project name:
Expert economic testimony in Italtile’s acquisition of CIL and Ezee Tile

Service:
Competition economics

Sector:
Manufacturing
Retail

Area of Expertise:
Merger analysis and public interest
Expert testimony

Client:
Italtile

Date:
2016 - 2017

Country:
South Africa


Genesis was appointed by Italtile to provide expert economic opinion and testimony in Italtile’s acquisition of Ceramic Industries Limited (CIL) and Ezee Tile. 

Italtile consists of major retail stores such as Italtile, CTM and Top T; upstream supplier CIL is a producer of tiles, baths and sanitaryware products; and Ezee Tile produces grouts and adhesives. 

The merger was initially prohibited by the Competition Commission, and Genesis was appointed to provide testimony before the Competition Tribunal on behalf of the merging parties. 

The key issue raised by the commission was that the acquisition would result in CIL’s tiles being channelled solely through Italtile’s retail stores, to the detriment of its rivals. This transaction was unique in that the merging parties were already owned by a common majority shareholder.

We provided an expert economic report focusing on the commission’s concerns. In particular, we considered the competitive dynamics in the production and retailing of tiles. 

Genesis indicated to the tribunal that the merging parties were unlikely to either have the ability or incentive to stop supplying other retailers, given that alternative sources of supply existed for these retailers. Furthermore, the nature of the markets meant that a foreclosure strategy would be immensely costly to the merged entity, to the extent that there would be limited prospects to recoup at the retail level the upstream cost that would have to be incurred.

Genesis’s analysis ultimately assisted the tribunal in reaching its decision to overturn the commission’s prohibition. The tribunal approved the merger with the sole condition that Italtile not be granted access to information about CIL’s other customers. 

Probe on restrictive warranties on car parts

Project name:
Assessment of the impact that prescriptive warranty provisions by original equipment motor vehicle manufacturers have on South African consumers

Service:
Competition economics

Sector:
Manufacturing
Transport and Logistics

Area of Expertise:
Abuse of dominance and prohibited practices

Client:
Confidential

Date:
2015

Country:
South Africa


Genesis was asked by a player in the automotive industry to conduct an independent economic assessment of the impact of prescriptive warranty provisions used by original equipment motor vehicle manufacturers (OEMs) on South African consumers.  

Similar conduct by OEMs has not been treated favourably by competition authorities in other jurisdictions. In South Africa no remedial measures have been taken to address the possible restriction of competition in the aftermarkets for automotive spares and repair of motor vehicles. 

The purpose of the report was to highlight to the Competition Commission the significant positive impact that remedial intervention in motor vehicle aftermarkets could have in terms of competition and, hence, the cost of motor vehicle repairs in South Africa. 

Genesis outlined in its analysis why the imposition of restrictive warranty conditions by OEMs was likely to raise competition concerns.  These restrictive practices included the use of OEM branded parts and OEM approved service centres or panel beaters for vehicles under warranty. 

In particular, Genesis showed that due to the firm-specific nature of motor vehicle aftermarkets, OEMs are likely to possess market power in the aftermarket for their parts and repairs.  Genesis' analysis demonstrated that the benefits to consumers from enacting remedial measures to prohibit the use of such restrictions in motor vehicle warranties would likely run into the billions of rands.  

Subsequent to Genesis’ engagement with the commission, the commission announced in February 2017 that it would hold an industry workshop to discuss recommendations to remedy conduct that it had identified as creating competitive distortions in automotive aftermarkets. 

Following consultations with the industry the commission published the draft code of conduct for competition in the South African automotive industry in September 2017. 

The code of conduct is focused on removing restrictions in the agreements between OEMs and dealers, insurers, and repair and maintenance providers which it believes have increased barriers to entry and negatively impacted on competition and prices. In particular, the code of conduct proposes the removal of restrictive warranty provisions requiring the use of OEM branded parts or approved service centres. 

Commission probe might unlock savings for consumers

Expert analysis in Africa's largest bottling merger

Project name:
Project Savannah

Service:
Competition economics

Sector:
Manufacturing

Area of Expertise:
Merger analysis and public interest
Expert testimony

Client:
The Coca-Cola Company, SABMiller and Coca-Cola Sabco

Date:
2014 - 2016

Country:
Botswana
Kenya
Namibia
South Africa
Tanzania


Genesis Analytics was appointed jointly by The Coca-Cola Company, SABMiller and Coca-Cola Sabco to provide expert economic advice regarding the creation of Coca-Cola Beverages Africa, the largest Coca-Cola bottler on the African continent.

The transaction was investigated and approved by the competition authorities of Botswana, Kenya, Namibia, Tanzania, the Common Market for East and Southern Africa (COMESA) and, lastly, South Africa. 

Genesis met the many and varied challenges thrown up by this transaction, such as the fact that it involved some of the largest beverage and bottling firms across multiple jurisdictions and, more significantly, that it became a landmark public interest case in South Africa. Genesis is fast-becoming a leading provider of economic assessments of public interest concerns in merger control, with this transaction following its key contributions to the assessment of employment issues in the Walmart-Massmart merger, amongst others.

In this case, our work was a focal point in negotiations between the merging parties, the Minister of Economic Development and the Competition Commission over two conditions. 

The first related to employment, where Genesis provided analysis relating to the headcount condition and its appropriate duration. The employment condition approved by the Competition Tribunal is limited to three years. 

The second related to a requirement that the merged firm allow its competitors to access Coca-Cola-branded coolers. Our use of robust survey analysis provided a factual basis to determine the appropriate limits to this access conditions.  

This condition was also approved by the Competition Tribunal.

In addition to addressing the various competition concerns raised by the authorities that investigated this transaction, our analysis of these public interest issues assisted in finalising a lengthy process with a positive outcome for all parties involved.

Expert analysis on impact of Walmart-Massmart merger

Project name:
Expert advice and testimony on public interest issues in the landmark Walmart merger before the competition authorities

Service:
Competition economics

Sector:
Retail
Manufacturing
Public and Social

Area of Expertise:
Merger analysis and public interest
Expert testimony

Client:
South African Commercial, Catering and Allied Workers Union

Date:
2011-2012

Country:
South Africa


Genesis was appointed to provide expert analysis on Walmart’s proposed acquisition of Massmart by affected trade unions, which were later joined by the Department of Economic Development. This was considered a seminal case regarding public interest issues related to mergers and acquisitions in South Africa.

The central issues at stake were whether the acquisition would result in a loss of employment, or reduction in the conditions of employment, and an increase in global sourcing at the expense of domestic industry. Genesis was brought in to provide expert analysis of these issues by the trade unions, later joined by the Department of Economic Development. 

The particular challenge in this case was not only to determine if such effects were likely on the economic and documentary evidence, but also if likely, what the quantum of effect would be. Genesis was able to meet this challenge through the careful extraction of key information from the vast discovery and the application of a variety of economic tools drawn from international trade theory, labour economics and input-output analysis. 

This evidence was central to the Competition Tribunal adopting a condition that Walmart put in place a supplier development fund, and the Competition Appeal Court singling out Genesis as fulfilling the expert role in these kinds of proceedings in an exemplary fashion.       

When the Competition Appeal Court later decided to refer the matter of the size and structure of the supplier development fund to a group of experts, Genesis was once more involved in developing submissions, which were co-authored by Nobel laureate, Joseph Stiglitz. This process ultimately resulted in the total funds dedicated to a supplier development fund being raised from R100 million to R200 million. At the conclusion of the proceedings, the Appeal Court singled out the Genesis team for fulfilling its expert role in the proceedings in an exemplary fashion

The Walmart case not only shaped the legal view of public interest in merger control, but the contribution made by Genesis  demonstrated that economists are able to bring useful tools to bear in matters such as these. Using these tools, they are able to accurately quantify and measure the effects on public interest variables and, in doing so, to greatly improve legal decision-making on otherwise vague concepts.   

Impact of Walmart merger on Namibia

Telkom series of abuse of dominance cases

Project name:
Telkom series of abuse of dominance cases

Service:
Competition economics

Sector:
Communications and Media

Area of Expertise:
Abuse of dominance and prohibited practices

Client:
Competition Commission

Date:
2011 – 2013

Country:
South Africa


Genesis was specifically selected by the Competition Commission of South Africa to provide expert reports and testimony in the prosecution of a series of abuse of dominance cases brought against the fixed-line incumbent, Telkom. The multi-faceted complaints focused on exclusionary and exploitative practices designed to inhibit downstream competition in internet access and corporate virtual private networks, including margin squeeze, inducement and excessive pricing.

Combining our deep understanding of telecommunications markets with a meticulous evaluation of the strategy and pricing documents, Genesis was able to determine that Telkom priced its own downstream services below the cost of the necessary wholesale inputs it provided to its competitors and, in so doing, was engaged in a deliberate margin-squeeze strategy. This evidence, and the effective rebuttal of the Telkom defence, was instrumental in the Competition Tribunal finding against Telkom on margin squeeze in the first case, and ultimately imposing a fine of over R400-million.  

In the second case, Genesis used a sophisticated financial model to demonstrate that if Telkom’s own downstream services paid wholesale inputs charged to competitors, then it would be loss-making. A thorough analysis of market data also revealed that this had an exclusionary effect on competitors. Genesis also demonstrated that pricing for certain transmission products was excessive relative to the costs.

The Genesis report was material in moving Telkom to settle the second complaint. Genesis was asked to take a lead role in the settlement negotiations, which fundamentally reshaped the market by bringing about a functional separation between wholesale and retail services, cash fines of R200-million and price reductions of almost R900-million. In approving the settlement, the Competition Tribunal described it as the most sophisticated and far-reaching settlement it had ever seen. 

Unlocking competition in digital finance in Africa & Asia

Project name:
Unlocking competition in digital finance

Service:
Financial inclusion
Competition economics
Digital

Sector:
Financial services

Area of Expertise:
Digital transformation
Fintech market enablement

Client:
Confidential

Date:
2015 - 2016

Country:
Bangladesh
India
Kenya
Nigeria


Genesis was commissioned to study impediments to more effective competition in mobile money markets in four markets – India, Bangladesh, Kenya and Nigeria. The explosive growth in mobile money in a number of countries has made a key contribution to providing the poor with access to financial services.

At the same time, in some of these markets, the presence of dominant providers, inappropriate regulations, and other problems may prevent effective competition, to the detriment of consumers and to innovation.

The purpose of the study was to provide the client with insights into (i) potential regulatory or market-based solutions to identified problems; and (ii) how these might be promoted to improve competitive outcomes for consumers of digital financial services (“DFS”).

The team conducted the study by utilising four main tools i.e.:

  • A competition policy framework based on economic theory
  • An extensive literature review on DFS, payment systems, competition and regulation issues in network industries, and also in multi-sided platform industries
  • Stakeholder engagements in the four countries, i.e., DFS/MFS providers, regulators, banks and mobile network operators (MNOs)
  • Internal financial sector expertise and knowledge provided by the project leader, Richard Ketley.

In addition to various country-specific recommendations, Genesis identified the following cross-cutting priorities:

  • That appropriate regulation is required for USSD pricing. Cost-based pricing of USSD is a critical enabler of competition.
  • Regulators should drive full interoperability between competing MFS platforms
  • Regulatory capacity building is required at the interface between competition law and payment systems regulation to develop the pro-competitive regulatory approaches in future.

The findings of the report are that environments in which mobile network operators are able to offer mobile financial services, and there is a dominant player in the data and voice market, the potential for network effects to give the dominant provider market power is high.

This market power can be offset by appropriate regulatory interventions. It is less clear that these interventions will drive down the price of the services given demand elasticities for different product types.

Expert evidence on SA National Payments System

Project name:
Expert economic evidence regarding the competition risks of a structural change in the South African National Payments System

Service:
Competition economics

Sector:
Financial services

Area of Expertise:
Merger analysis and public interest

Client:
Association of System Operators

Date:
2014

Country:
South Africa


The South African National Payments System is the backbone of the South African economy. Genesis was asked by the Association of System Operators (ASO) to address a number of key competition issues in terms of the reconsideration of conditions imposed by the Competition Commission in two mergers in the South African National Payment System. 

The case involved the merger of Bankserv, the payment system operator, with two downstream system operators, Emid and Nomad. The merger was initially approved with conditions, but subsequently a dispute arose regarding whether the conditions were appropriate.  In particular, ASO was concerned that Bankserv’s unique position, as an effective utility provider of interbank clearing and settlement, would provide it with the ability and incentive to engage in anti-competitive behaviour in the downstream markets.  In light of their concerns ASO asked Genesis to assess the merger conditions.

 In this matter Genesis produced an expert report which highlighted potential concerns relating to the merger based on convincing theories of harm.  In this regard, the ultimate concern related to cross-subsidisation and predatory pricing – a relatively uncommon theory of harm, particularly in the case of mergers. The Genesis report also assessed the appropriateness of the conditions proposed by the Competition Commission in light of such risks and suggested enhanced remedies.

 The Genesis report was instrumental in securing a settlement between the parties in the form of conditions that were significantly enhanced and provided sufficient safeguards for the theories of harm identified in the Genesis report.  These conditions were also accepted by the Tribunal.

Competition Commission vs Netstar and others

Project name:
Competition Commission vs Netstar and others

Service:
Competition economics

Sector:
Manufacturing

Area of Expertise:
Abuse of dominance and prohibited practices

Client:
Netstar, Tracker

Date:
2009

Country:
South Africa


In what has become a landmark case, Genesis was retained by a number of vehicle-tracking companies to provide an independent economic analysis of the allegation that a standard set for the vehicle-tracking industry and its adoption by insurers had the effect of raising barriers to new entrants. This was the first product standard case in South Africa and raised a host of complex legal and economic issues. 

On the back of extensive research into USA and EU case law, Genesis tackled the issue from three major angles. The first was an analysis of whether the standard was developed in conjunction with, and on the instruction of, the insurance firms themselves. This is because, in economic theory, customers are unlikely to agree to a standard which would harm themselves. Second, Genesis sought to understand how widely the standard was adopted by insurance companies at the time, and therefore whether new entrants could gain traction with some insurers, even if not all. Finally, Genesis spent considerable effort in building evidence as to whether any potential entrant was ready for entry during the period the standard was in place and therefore whether it had the actual effect of preventing entry. 

This analysis contributed to the eventual finding by the Competition Appeal Court that the case against the vehicle-tracking companies lacked merit. Genesis’s work also helped the court establish an important legal principle in assessing these types of cases, namely that the effect cannot be hypothetical where a specific allegation is made by a litigant. Rather, in those cases the court found there was a need to demonstrate an actual effect.

Expert testimony in alleged case of excessive pricing

Project name:
Expert advice and testimony in an alleged case of excessive pricing in the polymer production industry

Service:
Competition economics

Sector:
Manufacturing

Area of Expertise:
Expert testimony
Abuse of dominance and prohibited practices

Client:
Sasol Chemicals

Date:
2015

Country:
South Africa


The concept of excessive pricing and how competition authorities should treat this prohibition has been the subject of much debate worldwide. The seminal Sasol Polymers excessive-pricing case has since set precedent as to how future claims of excessive pricing will be assessed in South Africa, and is likely to also shape the approach of other competition authorities across Africa. In this matter, Genesis was commissioned to provide an in-depth economic assessment of whether Sasol’s polypropylene export prices were likely to represent a valid comparator to the domestic prices that were alleged to be excessive. 

Central to this analysis was the question as to whether an investment in an export facility could be taken as a reliable indication that export prices were a reflection of economic value (and therefore a reasonable benchmark against which excessive prices could be evaluated).  Combining our deep understanding of Sasol’s business, with a meticulous evaluation of Sasol’s investment decisions and financial position, Genesis was able to offer an assessment which showed that export prices in this matter did not necessarily represent a reasonable benchmark to evaluate excessive prices.

Neither the Tribunal nor the Competition Appeal Court disputed the independent economic analysis offered by Genesis Analytics.  The Competition Appeal Court ultimately overturned an initial finding of excessive pricing against Sasol made by the Competition Tribunal.

Meet the Team

Areas of Service Expertise

  • Abuse of dominance and prohibited practices
  • Merger analysis and public interest
  • Expert testimony
  • Compliance advice

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Projects

Project

Commission levels playing field on school uniforms

Genesis was appointed by the Competition Commission of South Africa to undertake a detailed assessment of the allegations against school-uniform retailers for excessive pricing across the country.

View Project
Project

Expert testimony in seminal media predatory pricing case

Genesis was retained by Media24, a large newspaper and magazine publisher, to defend predatory pricing allegations made against the group by the Competition Commission in what has proven to be South Africa’s seminal predation case.

View Project

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Leading the team

Stephan Malherbe

Chair and Managing Partner (Competition and Regulatory Economics)

Stephan Malherbe
Chair and Managing Partner (Competition and Regulatory Economics)
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Fatima Maria Fiandeiro

Partner (Competition and Regulatory Economics)

Fatima Maria Fiandeiro
Partner (Competition and Regulatory Economics)
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Anthony Felet

Partner (Competition and Regulatory Economics)

Anthony Felet
Partner (Competition and Regulatory Economics)
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Paul Anderson

Partner (Competition and Regulatory Economics)

Paul Anderson
Partner (Competition and Regulatory Economics)
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