While better communications with affected parties and less vacillation in mandates are improving the perceptions of national and regional competition and regulatory authorities, businesses must still be vigilant regarding compliance issues, as penalties can be severe, says global law firm Baker & McKenzie South Africa Antitrust and Competition Practice Group partner Vani Chetty.

“Even with regard to the national mandates of regulatory authorities, transparency and visibility reduce risks for businesses and improve compliance. “National mandates can become a risk and a challenge if businesses are unaware of the requirements and the application of the law is unpredictable,” she emphasises.

A key risk arising from overly aggressive enforcement is the adverse impact on investments in a country and multinational mergers. Unpredictable, punitive or unnecessarily demanding interference or conditions have the potential to reduce the likelihood of foreign investments and mergers.

“Multinationals, in our experience, prefer to conduct business in countries where the application of the law is transparent and the merger approval process is a smooth one without parties being unnecessarily burdened with conditions unrelated to competition and which result in longer regulatory approval periods and an increased burden on costs and are out of line with other international competition authorities,” she notes.

The clout of competition authorities has increased significantly in the past few years, with cartel activities now often punishable by fines of up to 10% of yearly revenue and potential criminal charges against management.

“These penalties represent significant risks for the business and the individuals leading them, and increase the risks facing businesses in Africa, especially with regard to unintentional noncompliance.”

Unintentional noncompliance – where businesses fail to meet specific regulatory requirements, owing to an oversight or a lack of knowledge of regulatory changes – is a real risk to businesses on the continent, but can be mitigated through expert advice and proactive competition compliance training, advises Chetty.

“A company needs to proactively assess its own compliance requirements and engage in active compliance efforts to ensure unnecessary contraventions of competition legislation,” she advises.

An additional problem facing companies operating in several African countries is overlapping regulatory regimes and blocs, such as the East African Community and Common Market for Eastern and Southern Africa blocs that share member countries. Mechanisms should be developed to reduce duplication where possible, strengthening the role of the regulators and reducing any adverse impact on business.

“An issue which is hotly debated is whether countries should be regulating national objectives or sectoral issues using competition laws. It is often argued that these topics should be regulated within the appropriate laws, such as labour laws or industry laws. Competition regulators risk becoming unnecessarily burdened with regulations not within their direct ambit, thus reducing their ability to effectively enforce competition regulations.”