New Competition Law in Angola brings much needed reforms

Africa/ Portugal

On 10 May 2018, the first Competition Law of Angola, Law no. 5/18 was enacted with the goal of creating a "market economy based on fair competition, morality, and ethics."

The new law creates a Competition Regulatory Authority (ARC), which will be autonomous and will have supervisory power over competition and price regulation. The specific structure of the ARC is still to be decided.

The new law regulates private enterprises, cooperatives, and state-owned companies, and reflects the main tenets of international commercial law.

The law also defines illegal practices that may hinder free competition in markets, and potentially damage the economy and society.

In terms of illegal practices, the law prohibits agreements, concerted practices, and decisions by competing firms (i.e. cartels), particularly in those cases where firms are able to prevent, distort or restrict competition with tactics such as price-fixing, and limiting production or distribution to markets. (According to the law, not all concerted practices are to be sanctioned, and they may be considered justified if they result in promoting competition, productivity, and technical and economic development in a particular market.)

The law also prohibits abuses by firms in dominant or monopolistic positions, and lists the actions it considers abusive.

When drafting the law, Angolan lawmakers included protections for small businesses competing against much larger enterprises.

The new law also enacts concentration controls, based on a mechanism of compulsory prior notification to the ARC in the case of mergers and acquisitions that exceed a certain market share, volume of business, or annual billing limits to be defined by the President of the Republic.

The ARC will issue rulings within 120 days, at the end of which, if no answer is given, the merger or acquisition will be authorised by tacit acceptance. During this 120-day period, the activities of the companies in question will be suspended, which may be waived in exceptional cases that are still to be determined. The ARC will deny mergers in those cases where it rules that the action will create barriers to competition.

In terms of sanctions, all proceedings will be initiated by an investigation stage that is triggered either through the initiative of the ARC or from a complaint filed by an interested or third party.

At the end of the investigation stage, an accusation will be issued, and the procedural phase will begin during which suspect entities may respond to charges and submit evidence. Interim injunctions may be ordered if the ARC deems it necessary.

At the end of the procedural phase, the ARC can archive or dismiss the case, if it finds no evidence of anti-competitive actions. The ARC may also issue a warning, or impose a fine and sanctions if it deems that there has been an infringement.

As in European Union law, fines range from 1% to 10% of a company’s turnover for the prior year. Other penalties include exclusion from participation in public procurement procedures for a period up to three years.

To defend competition in regulated markets, the ARC may consult with regulatory bodies overseeing these sectors. In turn, regulators that develop investigations of anti-competitive activity in their sphere of influence should consult with the ARC and consider its recommendations as binding.

Angola's new competition law is considered a straightforward mechanism that promotes global market principles, and has been designed to make Angola's economy more competitive and dynamic.

The new law, however, falls short in some essential areas, such as its almost total silence regarding deadlines for sanctions and administrative proceedings (with the exception of the five year limit for implementing sanctions). According to critics, this shortcoming could result in proceedings becoming unnecessarily long.

Although legal analysts are hopeful about the law's passage, they say only time will tell whether this act will bring change to the Angolan commercial sector and economy. But if successful in enhancing Angola's economic performance, analysts state that Angola's attractiveness in international markets could increase, and lead to more foreign investment.

For more information on Angola's new commercial law and the legal environment in this developing market, please contact the author.

In collaboration with Filipa Tavares de Lima, FTL Advogados, CMS Portugal's correspondent office in Angola.