The Moroccan economy has been opening up for several years now, illustrated by the development of new sectors such as aerospace and automotive construction. Distribution methods and consumption have also evolved, with the emergence of supermarkets with their own business and marketing practices. In addition, multinational companies’ subsidiaries are showing heightened awareness on anti-trust issues.
As such, Moroccan legislation was amended. Following the enactment of a first law on June 5, 2000 (Law No. 06-99), Article 166 of the 2011 Constitution made free and fair competition a constitutional principle, and established the Competition Council as an independent institution in charge of regulation. Finally, two new laws were enacted in 2014 and 2015: Law No. 104-12, providing a legal framework on the freedom of pricing and competition, and Law No. 20-13 on the Competition Council.
Referral
The new legislation provides for the Competition Council acting on its own motion. As such, it can fully play its role as controller of economic public order. It can also be referred to by administrations; the private sector; regional and local authorities; chambers of commerce, industry, crafts, agriculture and fisheries; professional unions; and registered public associations. End users are excluded and only registered public associations can refer to the council. As such, a consumers’ association that does not fulfil the conditions to be granted this status cannot defend the interests of its members.
Powers Of The Competition Council
The council has decision-making authority in terms of anti-competitive practices and controlling economic merger transactions. It is not merely a consultative body, and has means of investigation. The council adheres to its consultative mission on any matter of principle pertaining to market competition. It can be consulted by standing committees of Parliament; the government; regional and local authorities; chambers of commerce; trade unions; registered public associations; and the courts in a pending case. The Competition Council publishes studies on the general climate of sectoral and national plans on an annual basis.
Advisory Missions Of The Competition Council
These include the control of horizontal practices such as agreements, concerted actions, and express or implied coalitions and conventions. An unjustifiable agreement can occur on the basis of several elements such as prices and payment terms, markets and client typology, production capacity limitations or even group boycotts. Regarding price criteria, not only the final price but also its inherent elements (margin, discount, production costs) are relevant. Terms such as liability, warranty, payment or delivery terms can also influence the economic value of a business relationship and are therefore analysed.
The concerted actions can take on different forms, such as bid rigging, and exist in different frameworks: formal, in the case of a participation in a professional association, or informal, in the case of exchanging information. This exchange is considered anti-competitive if it allows companies to coordinate their market behaviour and if it partly leads to the possibility of making it easier to anticipate competitor behaviour on the relevant market.
Controls are not easy to perform when it comes to widespread practices such as benchmarking, which requires an overall analysis of information on a case-by-case basis. The fact that data is public does not mean that its communication is not problematic, particularly if, in practice, competitors cannot obtain this data in the same detail or in the same timeframe. The legally sanctioned consequences are to limit access to the market; prevent price formation through competition by artificially encouraging their increase or decrease; limit or control production, business opportunities, investments or technical progress; and share markets, sources of supply or public procurement.
Controlling Vertical Practices
Any abuse by one or several companies of their dominant position in the domestic market or of a position of economic dependence in which a client or supplier may find themselves, not having any equivalent alternative, is prohibited when it has the purpose or effect of preventing, restricting or distorting competition. In these cases the definition of the market is decisive and account must be taken of the council’s case law. It should be remembered that it is the abuse that is sanctioned. Dominance does not automatically lead to the characterisation of anti-competitive practices.
Sanctioned abuses are the application of discriminatory conditions of sale, tied and conditional sales practices, severing established business relationships solely on the grounds that the partner refuses to adhere to unjustified business conditions, or directly or indirectly imposing a minimum nature to the resale price of a product or to a sales margin.
In the event of a merger or a takeover of separate legal entities, the law provides for the requirement to notify such transaction to the Council if one of the three following conditions is fulfilled:
- The total global turnover, excluding taxes, of all the parties is in excess of or equal to Dh750m (€68.8m);
- The turnover excluding taxes generated in Morocco by at least two relevant companies is greater than or equal to Dh250m (€22.9m);
- If during the previous financial year, the companies party to or economically tied to the transaction have together carried out over 40% of the purchases, sales or property transactions in a domestic market of the same nature or a substitutable, or in a substantial share of the said market.
The council has 60 days to make a decision on the transaction by establishing that it does not fall under the scope defined by law, authorising the transaction, potentially by subjecting it to commitments by the parties, or to undertake a comprehensive review if it considers there are serious competition concerns.
Exemptions To Anti-Competitive Practices
Practices arising from enforcing the law or having the effect of contributing to economic and/or technical progress and which allow consumers a fair share of the resulting benefits are not prohibited. These restrictions on competition must be essential in order to attain the objective of progress.
Sanctions For Violations Of Legal & Regulatory Provisions
The Competition Council may impose financial penalties, the maximum amount being 10% of the highest global or national turnover, excluding taxes, and the possible publication of the decisions, in particular in the management report of the board of directors. Since the entry into force of the new law on limited liability companies, this report must be published on the website of listed companies. There are also criminal penalties for managers of up to one year’s imprisonment and a fine of Dh500,000 (€45,800), in addition to impacts such as damage to the company’s reputation and stock price. The nullity of contracts establishing anti-competitive practices can be duly declared. The Council also has the authority to impose injunctions and fines.
Current Challenges
This is a matter that needs to be based on case law and the doctrine of practitioners. However, to date there is little existing judicial case law and doctrine on this topic on essential notions such as the relevant market, the abuse, or related concepts such as tied and conditional sales practices.
In addition, there is no scheme of sanctions emanating from the Competition Council. The latter, although it is an independent authority and guardian of economic public order, has not yet fully seized the scope of its powers. Important decisions have been published in which the council concluded competition concerns and requested, rather than ordered, the administration to conduct a comprehensive study on several sectors. From this one can detect some apprehension from the council regarding freeing itself from government tutelage. According to the principle of continuity of public service, the head of the government is therefore the authority to which future merger transactions should be notified.
Despite the fact that Law No. 104-12 has entered into force and its implementation texts have been published, the implementation texts of Law No. 20-13 regarding the Competition Council have not been published, preventing its entry into force and de facto the proper functioning of this institution.
Managers should prepare for possible raids by the competition authority in the coming years. It could be useful to offer training programmes to raise employee awareness about the sanctions provided for by the law and possible consequences for the company. These programmes should also aim to guarantee that employees meet the standards and processes which need to be applied in written correspondence with their suppliers and distributors, as well as during their possible participation in trade associations.
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