united republic of tanzania fair competition … · at dar-es-salaam in the matter of the fair...

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UNITED REPUBLIC OF TANZANIA FAIR COMPETITION COMMISSION

AT DAR-ES-SALAAM

IN THE MATTER OF THE FAIR COMPETITION ACT, 2003 (CAP 285) (FCC Comp/Tobacco Docket No. II of 2016)

BETWEEN

FAIR COMPETITION COMMISSION ------------------------------------COMPLAINANT

AND

ALLIANCE ONE TOBACCO TANZANIA LTD-----------------------1ST RESPONDENT

ALLIANCE ONE INTERNATIONAL, INC. -----------------------------2nd RESPONDENT

JTI -LEAF SERVICES LIMITED-------------------------------------------3rd RESPONDENT

JT INTERNATIONAL HOLDING BV ------------------------------------4th RESPONDENT

ASSOCIATION OF TANZANIA TOBACCO TRADERS------------- 5th RESPONDENT

FINAL FINDINGS (DECISION)

1.0 Introduction

These Final Findings are being issued as against the 3rd and 4th Respondents only. The reason for this is the fact that on the 25th day of October, 2018, Bowmans Advocates, who are appearing for the 1st, 2nd and 5th Respondents, applied for the settlement of the their clients’ case with the Commission. The application was made pursuant Rules 19 (6) read together with Rule 21 of the FCC Rules. The case against these three Respondents named herein is therefore hived out from these Final Findings given that they Respondents have opted for a different route which is yet to be finalised. However, since the case against the 1st, 2nd and 5th Respondents has been

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stayed to give way for settlement discussions, in order to capture the chronology of events and give context to the case against the 3rd and 4th Respondents, reference to the 1st, 2nd and 5th Respondents will continue to be made in these Final Findings, but for that purpose only.

The Background

1.1 On 25th September, 2017 the Fair Competition Commission (“FCC” or the Complainant) issued its Provisional Findings ("PFs") to the Respondents alleging that the Respondents were jointly and severally liable for 'making and giving effect to an Anti-Competitive Tobacco Supply Agreement; the object and effect of which was to prevent competition in the field green leaf tobacco buying market in Urambo and Tabora tobacco growing regions contrary to Sections 8 (1) and Section 8 (7) as read together with Section 12 and Section 60 (1) of the FCA, 2003.'

1.2 The "PFs", which form part of this 'Final Findings' or 'Decision', was issued following an investigation carried out by the FCC ("Complainant") in the field green leaf tobacco sub-sector, this being one of the few agricultural sectors which generate substantial revenues to the Government and boost the economic status of tobacco growers.

1.3 The investigation was carried out from February 2016. It involved visiting and interviewing/interrogating officers of the 1st, 2nd, 3rd, 4th and 5th Respondents and other third parties and obtaining relevant information forming part of the evidential materials establishing the alleged infringement of the FCA.

1.4 This investigation was prompted by complaints from tobacco growers in Tanzania regarding the general conduct of tobacco buyers in this market, a fact which made the Ministry of Agriculture, Food Security and Cooperatives and the Tanzania Tobacco Board (to be referred hereinafter as the TTB) to seek the intervention of the Fair Competition Commission (referred hereafter as the “FCC” or “the Commission”).

1.5 In the course of investigating these complaints the Commission found that on 31st August, 2012, the 1st Respondent (Alliance One Tobacco Tanzania Limited (AOTTL)) and the 3rd Respondent (JTI Leaf Services) concluded a Flue Cured Tobacco Sourcing Agreement (referred to hereafter as FCC-1). It is alleged that FCC-1 is anti-competitive.

2.0 Nature of the Field Green Leaf Tobacco (GLT) Market

2.1 The field green leaf tobacco market in Tanzania is in the nature of an oligopsonistic market. Such a market is characterised by a small number of large buyers, a fact which generates a possibility of substantial market

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control on the part of the buyers. Moreover, growers face few alternative market options for their products and the market is characterised by high barriers to entry. Furthermore, the nature of green leaf tobacco as a product has a limited use, and hence, placing the growers in an inferior position as compared with the buyers. From an economic perspective, such a concentrated market is highly susceptible to anti-competitive conduct which contravenes competition laws.1

2.2 In Tanzania, due to the nature and sensitivity of green leaf tobacco production, the tobacco sub-sector is highly regulated. Both growers and buyers of field green leaf tobacco are required to be registered by the Tanzania Tobacco Board (TTB). Moreover, buyers intending to buy green leaf tobacco from the field are required to obtain a green leaf tobacco buying licence.2 Furthermore, growers are obliged to sign tobacco farming agreements with licensed companies (buyers) in each particular crop season to the effect that all contracted volumes will be purchased.3

3.0 Brief Facts Constituting the Complaint

3.1 The Facts constituting this complaint (as against the 3rd Respondent (and which, in terms of Section 4 (1) and (2) of the FCA also implicate the 4th Respondent)) are as set out hereunder:

3.1.1 That, the 3rd Respondent is private companies, incorporated and registered under the Companies Act, Cap 212 RE 2002.

3.1.2 That, since crop year 2014/2015 to date, the 3rd Respondent has been independently carrying out the business of buying green leaf tobacco from primary societies located in Urambo and Tabora tobacco growing areas.

3.1.3 That, during the crop years 2011/2012, 2012/2013, the 3rd Respondent, signed a tobacco supply agreement (FCC-1) with Alliance One Tobacco Tanzania Limited (AOTTL) (the 1st Respondent). The signing and execution of the FCC-1 secured the supply of Tanzania green Flue Cured Virginia Tobacco (FCVT) from selected primary societies contracted to the 1st Respondent.

3.1.4 That, the 3rd Respondent operated as ‘a potential competitor’ of Alliance One Tobacco Tanzania Ltd (AOTTL), the 1st Respondent, in the field

1 See Competition Assessment Framework: An Operational Guide for Identifying Barriers to Competition in Developing Countries, DFID (2008). 2 See, particularly, section 16 (1) of the Tobacco Act 2001 ( as amended). 3 See Section 42 of the Tobacco Act, 2001 (as amended) and Regulation 21(3) of the Tobacco Regulations, 2011.

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green leaf tobacco buying markets in Urambo and Tabora tobacco growing areas in the crop years 2011/2012, 2012/2013.

3.1.5 That, the tobacco supply agreement (FCC-1) had an appreciable adverse effect on competition as it created barriers against the vigorous entry of a new entrant in the market and foreclosed competition.

3.1.6 That, after conducting an in-depth investigation of the matter; and having collected relevant information and interviewed the 1st, 3rd and 5th Respondents, the facts established that the Respondents, negligently contravened the provisions of the FCA, to wit; they engaged in the act of “making and giving effect to an anti- competitive agreement the effects of which was to prevent competition in the field green leaf tobacco buying market in Urambo and Tabora tobacco growing areas contrary to sections 8 (1) and section 8 (7) as read together with Section 12 and section 60 (1) of the FCA, 2003”.

4.0 Parties Submissions and Oral Hearing of the Parties

4.1 On the 31st day of January 2018, Ako Law (acting together with Weber Wentzel Attorneys from South Africa) filed a written reply to the “PFs” for and on behalf the 3rd and 4th Respondents and, on the 26th day of February, 2019, appeared before the Commission for an oral hearing.

4.2 Similarly, on the 28th day of February 2018, Bowmans Advocates, acting for and on behalf of the 1st, 2nd and 5th Respondents, filed a written response to the PFs.

4.3 However, as we stated earlier in the introductory part to these Final Findings, when the Counsel for the 1st, 2nd and 5th Respondents appeared before the Commission on the 25th day of October, 2018, he applied for the settlement of his clients’ case, a request which the Commission granted. It follows, therefore, that, due to this application for settlement of the 1st, 2nd and 5th Respondents’ case, the case against these three Respondents stands adjourned sine die to give way to the parties' settlement negotiations.

4.4 The current analysis, thus, is made in respect of the case against the for 3rd and 4th Respondents. For ease of discussion, the analysis of submissions and arguments made by the learned counsels for 3rd and 4th Respondents appears in sections: 'Section "A" (which considers submissions and arguments made by AKO LAW, for and on behalf of. Section "B" deals with further arguments raised by the 3th Respondent and "C" provide the Final Verdicts of the Commission.

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SECTION A

Analysis of the 3rd and 4th Respondents’ Submissions

4.5 This section considers submissions and arguments made by AKO LAW, for and on behalf of the 3rd and 4th Respondents. In response to the PFs the 3rd Respondent, through the services of AKO Law, raised a number of issues which, in our view, can be clustered as follows: The Issue Regarding Applicability of Section 4 and 60 of the FCA

4.5.1 The 3rd Respondent denies that, by virtue of the provisions of section 4 (1) and (2) of the FCA, “the 2nd and 1st

Respondents are regarded as a single person” (See para 211.1 of the Joint Submission in respect of the 3rd Respondent).

4.5.2 That, the FCC’s reliance on the provisions of section 4 (1) of

the FCA for purposes of including the 4th Respondent in its findings and proposed penalties is based on a fundamentally incorrect interpretation and application of that section. (See para 25 of the Submission in respect of the 3rd Respondents).

4.5.3 That, Section 4 (1) of the FCA applies only for purposes of

sections 8, 9 and 10 of the FCA and not for purposes of the penalty provisions contained in section 60 (1) thereof. The purpose of section 4 (1) is not to hold all body corporate in a control relationship liable for an offence under the FCA by any one of those corporate bodies but rather to ensure that any agreement or otherwise abusive conduct between two firms in the same economic entity is not regarded as a contravention of sections 8, 9 and 10 of the FCA. (See Paras 56 and 57 of the Submission in respect of the 3rd Respondent).

4.5.4 That, even if the FCC were to find that the 3rd Respondent’s

conclusion and implementation of the Tobacco Sourcing Agreement constituted a contravention of section 8 (1) of the FCA, (which is denied), any conviction and penalty

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imposed by the FCC for such conduct in terms of section 60 (1) of the FCA would have been limited to the 3rd Respondent (and its turnover). (See Paras 61 and 67 of the Joint Submission in respect of the 3rd and 4th Respondents).

4.5.5 That, there is no basis for the FCC’s allegation that for the

purposes of section 7 (b) and (c) of the FCA, it has jurisdiction over the 4th Respondent through the 3rd Respondent. (See Paras 68 and 241.4 of the Joint Submission in respect of the 3rd and 4th Respondents).

4.5.6 That, there is no basis for a compliance order against the 3rd

or the 4th Respondent, given that neither party contravened section 8 (1) read together with section 8 (7) of the FCA. (See para 243 of the Submission in respect of the 4th Respondents).

4.5.7 That, the 4th Respondent was not a party to the conclusion or implementation of the Tobacco Sourcing Agreement but refers in that regard to the written reply of the 3rd Respondent. In particular, as explained by the 3rd Respondent; there is no factual basis for the FCC’s assumption that absent the Tobacco Sourcing Agreement, the 3rd Respondent would have entered the relevant market during the 2011/12 and 2012/13 crop seasons and not only when it in fact entered the market in the 2014/15 crop season. (See paras 11.1 and 11.1.1 of the Submission in respect of the 4th Respondents).

4.5.8 That, had the 3rd Respondent been able to enter the relevant

market (which is denied), its entry would not have had any appreciable effect on competition in the market. There is no factual or legal basis for the FCC’s proposal to impute any liability of the 3rd Respondent in respect of the alleged contravention to the 4th Respondent. The 4th Respondent was not a party to the conclusion or implementation of the Tobacco Sourcing Agreement nor could it be said that the 4th Respondent acted intentionally or negligently within the

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meaning of section 8 (7) of the FCA in relation thereto. (See para 11.2 of the Submission in respect of the 4th Respondents).

4.5.9 That, the FCC’s contention in relying on the 4th

Respondent’s majority shareholding in the 3rd Respondent in order to impute the alleged liability of the 3rd Respondent in respect of the Tobacco Sourcing Agreement to the 4th Respondent in terms of section 4 (1) of the FCA is based on a misinterpretation of the meaning and effect of section 4 (1) of the FCA. (See para 11.3 of the Submission in respect of the 4th Respondents)

4.5.10 That, the FCC has not made out any case that the 4th

Respondent falls within the jurisdiction of the FCC under section 7 of the FCA. (See paras 11.4 and 36 of the Submission in respect of the 4th Respondents)

4.5.11 That, there is no basis for the FCC’s proposal to impose

a penalty on the 4th Respondent equal to 8% of its annual turnover. The Penalties of this magnitude should only be imposed for egregious, deliberate and long-lasting competition law contraventions, none of which characteristics are evident in this case. The proposed penalty is unwarranted and disproportionate having regard to the nature and characteristics of the alleged contravention in this case. Therefore, no warrant for a substantial fine in this case. (See paras 11.5, 38 and 59.2 of the Submission in respect of the 4th Respondents).

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4.6 We have carefully considered the above submissions by the Counsel for the 3rd and 4th Respondent. We shall begin, therefore, by analysing the issues raised in relation to the applicability of Section 4 (1) of the FCA, Section 7 (b) and (c) as well as Section 60 of the FCA.

4.6.1 According to the FCA, Section 4 (1) and (2) (a) -(c) of this Act, the Act provides as follows:

4-(1) For the purposes of sections 8, 9 and 10, if a body corporate controls another body corporate, the bodies corporate shall be regarded as a single person.

(2) A body corporate shall control another body corporate within the meaning of sub-section (1) if the first-mentioned body corporate:

(a) owns or controls a majority of the shares carrying the right to vote at a general meeting of the other body corporate;

(b) has the power to control the composition of a majority of the board of directors or other governing organ of the other body corporate; or

(c) has the power to make decisions in respect of the conduct of the affairs of the other body corporate.

(Underline added).

4.6.2 In the Provisional Findings it was incontrovertibly established that the 4th Respondent is a majority shareholder of the 3rd Respondent, holding a total of 70% of all issued shares. This is evident from the Memorandum and Articles of Association (MEMARTS) of the 3rd Respondent dated on 22nd December 2011.

4.6.3 In terms of the voting rights or powers, Para 36 of the Articles of Association of the 3rd Respondent provides as follows:

“Subject to any rights or restrictions for the time being attached to any class or classes of shares, on a show of hands, every member present shall have one vote, and on a poll, every member shall have one vote for each share of which he is the holder. In case of an equality of votes the chairman shall be entitled to a second or casting vote.”

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4.6.4 Pursuant to the above, and in line with section 4 (2) (a), (b) and (c) of the FCA, since the 4th Respondent is a majority shareholder (…%) of the issued shares of the 3rd Respondent, it is evident that the 4th Respondent has control over the 3rd Respondent, has powers to control the composition of a majority of the board of directors of the 3rd Respondent and has powers to make decisions in respect of the conduct of the affairs of the 3rd Respondent. As such there is no doubt that the 4th Respondent controls the 3rd Respondent.

4.6.5 Having established that the 4th Respondent has ultimate control of the 3rd Respondent (as evidenced by the ‘MEMARTS’ availed to the FCC by the 3rd Respondent), and, given that the offence alleged is in respect of Section 8 (1) of the FCA (for which section 4 (1) of the FCA applies); then, it goes without saying that, the 3rd and the 4th Respondents, (in light of Section 4 (1) of the FCA), are regarded as a ' single person.'

4.6.6 However, it is clear that the 4th Respondent is not incorporated in Tanzania. Nevertheless, as noted herein, pursuant to section 4 (2) (a), (b) and (c), since the 4th Respondent controls the 3rd Respondent, as a controlled subsidiary, when section 7 (b) of the FCA is looked at, it is clear that the 4th Respondent is carrying on business within Tanzania through the 3rd Respondent which it controls as a majority shareholder.

4.6.7 Equally, and in the alternative, it is clear, without much ado, that, even if the 4th Respondent is incorporated outside Tanzania, by virtue of its control of the 3rd Respondent, and the fact that the current complaint is based on an alleged infringement of section 8 of the FCA, (see section 4 (1) and section 7 (b) of the FCA), qualifies the 4th Respondent to be a subject of the FCC’s jurisdiction.

4.6.8 Based on the foregoing analogy, we are of the settled view that there is an established factual and legal basis to join the 4th Respondent in this case. We shall expound on this issue later, in Para 4.43 of this Final Decision, when dealing with the issue of imposition of fines under section 60 of the

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FCA, and the applicability of the doctrine of Single Economic Entity (SEE).

The Issue of Imposition of Penalties Under Section 60 of the FCA

4.7 The Legal Counsel for the 3rd Respondent has raised two issues, questioning the FCC’legal basis for proposing (in the PFs) an imposition of penalties equal to 8% of the Respondents’ annual turnover. In particular, it is argued:

4.7.1 That, there is no factual or legal basis either for the FCC’s proposed findings or for the penalties that it proposes to impose in this matter. (See Para 14 of the Submission in respect of the 3rd Respondent).

4.7.2 That, there is no factual or legal basis for the FCC’s proposal to include 3rd Respondent’s holding company, i.e. the 4th Respondent, in its findings or to impose a penalty on the 3rd and 4th Respondents in an amount equal to 8% of the turnover of JTI Holding BV. (See para 22 of the Submission in respect of the 3rd Respondent).

4.7.3 That, having regard to the provisions of FCC Rules 28 and 30, there is no basis for imposing a penalty on the 3rd and 4th Respondents in an amount equal to 8% of JTI Holding BV’s annual turnover since penalties of that magnitude should only be imposed for egregious, deliberate, long-lasting competition law contraventions and, where no mitigating factors exist, none of which characteristics are evident in this case. Therefore, the proposed penalty is unwarranted and disproportionate having regard to the nature and characteristics of the alleged contravention in this case.

4.7.4 That, in this case, there are a number of mitigating factors as follows: (i) It is not alleged that the 3rd or 4th Respondents

intentionally contravened section 8 (1) of the FCA (if

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indeed they contravened section 8 (1) of the FCA at all);

(ii) The FCC has accepted in its Provisional Findings that the conclusion and implementation of the Tobacco Sourcing Agreement had the pro-competitive object of assisting the 3rd Respondent to enter the market;

(iii) The Tobacco Sourcing Agreement was only in place for a short time period;

(iv) There is no evidence of any advantage that accrued to 3rd or 4th Respondent as a result of the alleged contravention;

(v) There is no evidence of harassment caused to any person as a result of the alleged contravention;

(vi) Neither the 3rd Respondent nor the 4th Respondent had previously been found to have contravened the FCA in relation to similar conduct, or indeed to any conduct at all. (See paras 26, 198, 201, 203 and 242 of the Submission in respect of the 3rd Respondent).

4.8 We have considered the above submissions and, in response, we find that the FCC Rules and the FCA, (Section 4 (1) and Section 60) provide for the relevant legal basis for the penalties proposed by the FCC in the PFs. Once an infringement is established, the Rules permit the FCC to issue a Provisional Finding and propose for the remedial actions.

4.9 In Particular, Rule 19 (3) and (4) of the FCC Rules 2013 provides as follows:

(3) The Commission shall, where it takes the view that an infringement has been committed or is likely to be committed, make provisional findings and issue such findings with reasons thereof to the respondent requiring the respondent to make written representation within a specified period.

(4) The provisional findings specified under sub-rule (3) shall set out-

(a) the facts, legal and economic assessment that constitutes a finding of an infringement;

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(b) any action and reasons which the Commission proposes to take, including imposition of a financial penalty or issuance of directives to refrain from the continuity of an infringement.

4.10 In view of the above, the argument that there is no legal basis to propose for the imposition of financial penalties Respondents once an infringement is provisionally established, is an erroneous view.

4.11 We have taken note, as well, of the applicability of Rule 28 and 30 of the FCC Rules and the Respondents’ list of mitigating factors, and find that, the Commission was justified to propose a penalty equal to 8% of the turnover of JTI Holding BV in the PFs. We hold so because of two basic reasons:

Firstly, the penalties proposed by the FCC in the PFs were provisional in nature and not conclusive (final). It could be further reduced depending on the counterfactual evidence submitted by the Respondents as well as mitigating factors if any. Secondly, Section 60 (1) gives the Commission a discretion to impose a fine of not less than five percent of a Respondent’s annual turnover and not exceeding ten percent of his annual turnover.

In view of the two reasons above, we find that the provisional penalty (equal to 8% of the turnover of the 4th Respondent), proposed in the PFs was reasonable and could still be reduced in the Final Findings depending on the mitigation facts or counterfactuals submitted by the Respondents in reply to the Final Findings.

4.12 On the other hand, while we agree that stiff penalties should only be reserved for egregious conduct, such as price fixing or other collusive conducts, we do not agree, based on the two reasons in Para 4.11 above, that, the FCC’s proposed penalty could not have been imposed on the Respondents.

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The Issue Regarding Whether absent the Agreement (FCC-1) 3rd Respondent Would have Entered the Relevant Market

4.13 The Legal Counsel for the 3rd Respondents has also argued:

4.13.1 That, there is no factual basis for the FCC’s assumption that absent the Tobacco Sourcing Agreement, the 3rd

Respondent would have entered the relevant market during the 2011/12 and 2012/13 crop seasons. (See para 15 of the Submission in respect of the 3rd Respondent).

4.13.2 That, the constraints on greenfield entry into the Tanzanian

green leaf purchasing market led the 3rd Respondent to seek the Tobacco Sourcing Agreement as a means of accelerating the necessary learning process to achieve scale entry. The Tobacco Sourcing Agreement enabled the 3rd Respondent to develop knowledge regarding complex contracting arrangements, the crop throw and to put in place the necessary organisational and physical infrastructure to conduct operations as a field green leaf purchaser in Tanzania; at lower commercial risk than would otherwise be. (See para 122 of the Submission in respect of the 3rd Respondent).

4.13.3 That, even if the 3rd Respondent had hypothetically entered

the market for the 2011/12 crop year, such entry would definitely have been slower and on a smaller scale than was subsequently the case because a slower entry would have been the only way in which the 3rd Respondent could possibly have built the necessary knowledge whilst keeping the commercial risks at a manageable level. (See para 160 of the Submission in respect of the 3rd Respondent).

4.14 We have considered the above submissions made by the 3rd Respondent

and the oral submissions of the 3rd Respondent (which were made on 26th February 2019 and the Respondents confirmed the oral transcripts on 3rd June 2019).

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4.15 As regards the argument that ‘there is no factual basis for the FCC’s assumption that absent the Tobacco Sourcing Agreement, the 3rd Respondent would have entered the relevant market during the 2011/12 and 2012/13 crop seasons’, (See para 15 of the Submission in respect of the 3rd Respondent and pages 12 to 14 of the transcript of the oral hearing), we do not think that there is merit to such submissions. We think so because:

Firstly, the law regards a potential competitor (like the 3rd Respondent) as a competitor. In particular, Section 5 (3) of the FCA provides that “A person is a competitor of another if they are in competition with each other or would, but for an agreement, to which the two persons are parties, be likely to be in competition with each other.” The second limb of this definition, which includes a potential competitor under the ‘but for’ considerations, is most relevant here. According to the 3rd Respondent’s submissions, the 3rd Respondent entered into FCC-1before being incorporated in Tanzania on 22nd February 2012. However, the 3rd Respondent concedes that the FCC-1 continued to be implemented even post incorporation of the 3rd Respondent, and the implementor was the 3rd Respondent and the 1st Respondent. Under such a factual position, what more should be needed as a basis for the FCC’s assumption that, absent the Tobacco Sourcing Agreement, the 3rd Respondent would have entered the relevant market during the 2011/12 and 2012/13 crop seasons’? In our view, whether such basis is established or not is immaterial. What we firmly confirm here, as in the PFs is that, the 3rd Respondent was a potential competitor, and, therefore, a potential entrant to the market, save for the agreement (FCC-1).

Secondly, it is obvious that the volumes of field green leaf tobacco which the 3rd Respondent had obtained from Alliance One Tobacco Tanzania Ltd (the 1st Respondent) under the Supply Agreement, ought to have been obtained from the growers by 3rd Respondent had the 3rd Respondent not concluded the FCC-1 with 1st Respondent.

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Thirdly, the arguments advanced in the oral submissions (see page 13 of the oral transcript) that, the 3rd Respondent had to get personnel, physical infrastructure and logistics, as well as developing knowledge of the crop throw of the primary societies appropriate to the tobacco requirements of the 3rd Respondent, are also irrelevant. We hold so because those are business decisions which should not have required a conclusion of FCC-1 with a would be competitor. Moreover, such issues could have been dealt with differently through independent actors such as the TTB or TORITA (as we shall discuss this point later on).

4.16 As far as this point is concerned, we are satisfied, therefore, that, in view

of the above, the Complainant has raised and sufficiently proved that the 3rd Respondent was a potential competitor of the 1st Respondent save for the FCC-1. For that reason, the 3rd Respondent’s submissions regarding whether absent the FCC-1, the 3rd Respondent would have entered the relevant market, is without merits. In our view, once the status of being a potential competitor is confirmed, analysis of the effect on competition flowing from any conduct of a potential competitor shall be as equally the same as that of an actual competitor.

4.17 As regards the submission that, ‘the constraints on greenfield entry into the Tanzanian green leaf purchasing market led the 3rd Respondent to seek the Tobacco Sourcing Agreement as a means of accelerating the necessary learning process to achieve scale entry’; we think that the same is without merits. We think so because the 3rd Respondent could have acquired the learning by other means or could have legalised the FCC-1 by way of applying for its exemption under section 12 of the FCA, if at all it was meeting the requisite criteria listed under that provision. We shall revert to this point shortly afterwards. It is therefore utterly pointless, to argue (as argued by the 3rd Respondent (See para 122 and para 160 of the 3rd Resppondent’s Submissions) that, the FCC-1 was necessary to enable the 3rd Respondent to develop knowledge regarding complex contracting arrangements, the crop throw and to put in place the necessary organisational and physical infrastructure to conduct operations as a field green leaf purchaser in Tanzania; at lower commercial risk than would otherwise be).

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Regarding Whether the 3rd and 4th Respondents Acted Negigently or Intentioanally

4.18 In its submissions, the 3rd Respondent has contested the FCC’s findings in the PFs arguing as hereunder:

4.18.1 That, there is no basis for the FCC’s Provisional Findings that the 3rd and 4th Respondents (or on the part of any of the other Respondents) acted negligently in contravening section 8 (1) of the FCA, and accordingly committed an offence under section 8 (7) of the FCA.

4.18.2 That, the mens rea element is a fundamental component of

any criminal offence such as that created by section 8 (7) of the FCA and in order for the mens rea requirement to be met, it must be shown that the Respondent should have known that its conduct constitute a contravention of that section. (See paras 21, 45, 235, 236, 237, 238 and 239 of the Submission in respect of the 3rd Respondent).

4.18.3 That, the FCC does not allege (nor could it) that the 4th

Respondent was a party to the Tobacco Sourcing Agreement or that the 4th Respondent acted intentionally or negligently in contravening section 8 (1) of the FCA for the purpose of committing an offence in terms of section 8 (7) of the FCA. (See Paras 23 and 45 of the Submission in respect of the 3rd Respondent).

4.19 We have considered the above arguments by the 3rd and 4th Respondents

and we find as hereunder:

4.19.1 That, it is a well established that competition law principles require individual competitors to make their own business decisions independently of each other. The decision to enter into the market, be it directly or otherwise, was a business decision. A business decision of such kind integrates or takes into account both legal and reputational risks.

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4.19.2 That, in line with what is stated in Para 4.19.1 above, the 3rd Respondent knew or ought to have known, through its own analysis, the effects of its decision to enter into an Agreement with the 1st Respondent. This is basically so given that, in terms of the requirements of good corporate citizen principles, the 3rd Respondent should have carried out its own regulatory due diligence exercise which should have included an assessment of competition-related effects of its decisions. Contrary or failure to do so exhibits a degree of negligence that cannot escape the provisions of section 8 (7) of the FCA.

Whether Section 12 of the FCA is Relevant to the Assessment of FCC-1

4.20 In their submissions, both written and during the oral hearing (see pages 16 and 17 of the transcript of the 3rd Respondent), the 3rd and 4th Respondents have challenged the relevance of Section 12 of the FCA in assessing FCC-1. In particular, it has been argued:

4.20.1 That the analysis contemplated by Section 12 (1) of the FCA is quite unrelated to the determination of whether or not an agreement has an appreciable anti-competitive object or effect within the meaning of section 8 (1).

4.20.2 That, the Tobacco Sourcing Agreement did contribute to “greater efficiency in production or distribution” within the meaning of section 12 (1) (b) (i) of the FCA when JIT LS ultimately entered into the relevant market as a direct purchaser of field green leaf tobacco. (See paras 229.1 to 229.4 of the Submission in respect of the 3rd Respondent). That, the benefits generated by the Tobacco Sourcing Agreement reflect the promotion of “technical or economic progress” within the meaning of section 12 (1) (b) (ii) of the FCA.

4.20.3 That, it is inappropriate, irrelevant and impermissible for the FCC to employ the analysis contemplated by Section 12 of the FCA in order to find that the object (or effect) of the Tobacco Sourcing Agreement was anti-competitive for purposes of section 8 (1) of the FCA. The analysis is only relevant if it is already established that an agreement contravenes section 8 (1) of the FCA and even then only upon application by one of the

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parties for exemption in terms of section 12. (See paras 48, 219.5 and 228.2 of the Submission in respect of the 3rd Respondent).

4.21 The Commission has considered the above noted submissions by the

legal counsel for the 3rd and 4th Respondents regarding the relevance of section 12 of the FCA in this matter and finds that, the key issue is whether the Complainant (FCC) was wrong when it subjected the analysis of section 8 (1) of the FCA to section 12 (1) (b) of the FCA.

4.22 While the Commission agrees that the analysis under Section 12 of the FCA is relevant once it is established that an agreement contravenes Section 8 (1) of the FCA or when there is an application by one of the parties for exemption of an agreement in terms of Section 12, the Commission is in disagreement with the rest of the submissions by the legal counsel for the 3rd Respondent regarding the applicability of Section 12 in the analysis of Section 8 (1) of the FCA.

4.23 In the first place, we note that there was no application for exemption of FCC-1.

4.24 We note, however, that, when addressing the issue regarding whether the Complainant (FCC) was wrong when it subjected the analysis of section 8 (1) of the FCA to section 12 (1) (b) of the FCA, one should bear in mind the following:

4.24.1 That, the complaint facing the Respondents is that they

infringed the provisions of section 8 (1) and (7), read together with section 12 and section 60 (1) of the FCA. The link between section 8 (1) and section 12 (1) of the FCA is on the second limb of section 12 (1) (a), which is in pari materia with section 8 (1) of the FCA. As such, based on this link, for an agreement to qualify under section 12 should have contravened section 8 of the FCA, as provided for in the second limb of section 12 (1) (a) of the FCA.

4.24.2 That, as regards the benefits enumerated in Section 12 (1)

(b) (i) to (iv) of the FCA, the benefits are an import of

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section 3 (a) through (d) of the FCA. In terms of linkage between Section 8 on one side and either Section 12 or section 3 of the FCA; it goes without saying that the statutorily provided links between Sections 8 and 12 of the FCA is the only prima facie and direct link in the FCA..

4.24.3 Furthermore, Rule 24 (3) of the Fair Competition Procedure

Rules, 2018 (just as Rule 24 (3) of the FCC Rule 2013 now repealed and replaced) requires the Commission, in the event it is to make a decision that the proposed agreement has either breached or is likely to breach the provision of section 8 (as was the case for the FCC – 1), to consider the benefits provided for under section 12 of the FCA.

4.24.4 That, since the Complainant had provisionally established that the FCC-1 was anti-competitive, and, there being no evidence that the Respondents has applied for exemption of FCC-1 under Section 12 (1), (a fact which ought to have been done if the Respondents believed that FCC – 1 was pro-competition and welfare enhancing), it follows that the Complainant was justified and, it was appropriate, relevant and permissible for the Complainant to employ the analysis contemplated by Section 12 of the FCA in order to find that the object (or effect) of the Tobacco Sourcing Agreement was anti-competitive for purposes of section 8 (1) of the FCA.

In view of the above, it is clear that the submissions made by the counsels for the 3rd and 4th Respondents in this regard are without merits.

The Issue Regarding FCC’s Jurisdiction to Prosecute and Punish Respondents for Criminal

Offences

4.25 The legal counsel for 3rd Respondent has an issue which is akin to a preliminary objection, namely: That, the FCC enjoys no lawful power or jurisdiction to prosecute, convict or punish Respondents for criminal offences in Tanzanian law and that the FCA is unconstitutional insofar as it purports to vest

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the FCC with any such power. (See para 70 of the Submission in respect of the 3rd Respondent).

4.26 The Commission has considered the above legal arguments (objection) raised by the legal counsel for the 3rd Respondent and makes the following findings:

4.26.1 That, as regards the issue of unconstitutionality of the FCA,

it is not within the powers of the Commission to determine it. This is within the exclusive powers of the High Court of Tanzania.

4.26.2 That, notwithstanding the above disclaimer on our part, the

Commission is not debarred from responding to issues raised in response to its PFs.

4.26.3 The FCC is established by an Act of the Parliament, Act

No. 8 of 2003 (section 62 (1) thereof) to discharge powers vested in it by the provision of the FCA. It is therefore a gross misdirection on the side of the Respondents to construe that when the Commission is discharging its lawful functions it is acting unconstitutionally.

4.26.4 That, the Commission has taken judicial notice of the fact

that there exist various statutes which requires that the consent of the Director of Public Prosecutions (DPP) be obtained prior to filing of a particular criminal case, the FCA is not among the list of statutes listed under Sections 31 to 52 of the National Prosecution Service Act, 2008 (Cap.430) which requires for the consent of the (DPP) to be obtained whenever a criminal case is to be filed against an offender.

4.26.5 That, the FCA is not a per se criminal statute and, hence,

offences under the FCA are considered to be 'administrative offences’ punishable, administratively, through the imposition of 'administrative monetary fines'. For that reason, even the burden of proving cases under the FCA is not beyond reasonable

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doubts, but rather on the preponderances of probability as in civil cases.

4.26.6 For the reasons articulated herein above, the arguments put

forward by the legal counsel for the 3rd Respondent are hereby dismissed in their entirety.

The Issue Regarding Involvement of at TORITA

4.27 In their submissions (both written and oral) the legal counsel for the 3rd

Respondent has also attacked the PFs findings regarding the Respondents’ inability to engage TORITA instead of concluding FCC-1 with the 1st Respondent and argue:

4.27.1 That, contrary to the FCC’s allegation, the crop throws of

individual Primary Societies is not within the knowledge to TORITA which neither monitors nor gathers information on the crop throw of individual Primary Societies is not within the knowledge to TORITA which neither monitors nor gathers information on the crop throw of individual Primary Societies. Such knowledge instead resides with existing leaf merchants who purchase on a “run of crop” basis.

4.27.2 That, as for TORITA, the necessary knowledge of crop

throw of the Primary Societies was neither available to TTB nor to the JTI-owned TCC. (See paras 147, 148, 172, 174, 175, 176 and 177 of the Submission in respect of the 3rd Respondent.))

4.28 We have considered the above arguments and we hereby reaffirms the

Findings in the PFs regarding TORITA’s importance. In particular, we find and emphasize:

4.28.1 That, TORITA, being a research institute, was a perfect

entity from which the learning experiences sought after by

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the 3rd Respondent should have been obtained. TORITA has demonstration farms, laboratory testing facilities for soil testing and provide growing techniques which gives high tobacco yields. TORITA, therefore, was an alternative source from which the 3rd Respondent could have obtained prior information necessary to enable it to make its own independent business decision.

4.28.2 That, TORITA is a neutral arbiter in that particular relevant

market. Since it is not a market participant, its findings with regard to the relevant market would not have compromised the welfare of the competitive process in that relevant market. Indeed, as a matter of fact, since the 3rd Respondent was, in line with Section 5 (3) of the FCA, a potential competitor, it would have been wiser had it obtained what it needed before formal entry through TORITA rather than through the 1st Respondent (a competitor).

Issue Regarding the Time Frame of FCC-1 and Its Effects In the

Relevant Market

4.29 The Legal Counsel for the 3rd Respondent has also argued that:

4.29.1 That, there is no basis for the FCC’s allegation that the Tobacco Sourcing Agreement has had a harmful effect in the relevant market subsequent to its termination, and after 3rd Respondent’s entry into the market, by preventing the emergence of “significantly differentiated buying prices” in the latter period. The reason why purchasers have not paid more than the TTC-imposed minimum price levels for field green leaf tobacco in the latter period is because there has been weak global demand and global excess supply of FCV tobacco since the 3rd Respondent entered in the market in the 2014/15 crop season. (See paras 182 and 183 of the Submission in respect of the 3rd Respondent).

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4.29.2 That, the FCC’s Provisional Findings incorrectly state that the 2012 crop year in terms of the Tobacco Sourcing Agreement ran from June 2012 to September 2013 and that the 2013 crop year ran from June 2013 to September 2014. On a proper interpretation of the Tobacco Sourcing Agreement, the crop years in the Tobacco Sourcing Agreement referenced the calendar year in which the crop was harvested (not planted). Therefore, the 2012 and 2013 crop years referred to the 2011/12 and 2012/13 crop seasons, running from June 2011 to September 2012, and from June 2012 to September 2013 respectively. (See paras 150 and 151 of the Submission in respect of the 3rd Respondent).

4.29.3 That, because the crop throws of a particular Primary

Society is affected by seasonal weather conditions, it is typical to assess it over a two- to three- year period in order to determine the performance of the Primary Society on average. Hence, the two-year term of the Tobacco Sourcing Agreement was the minimum that could feasibly be agreed in order to provide the 3rd Respondent with a reasonable basis for understanding the “run of crop” and crop throw of the relevant Primary Societies over time. (See paras 162 and 163 of the Submission in respect of the 3rd Respondent).

4.29.4 That, the Tobacco Sourcing Agreement gave 3rd Respondent

flexibility to shift and or adjust the sourcing of tobacco from the Primary Society if their crop throw and or “run of crop” volume was not suitable for the 4th Respondent’s specific needs even though that Primary Society was contracted to the 1st Respondent for a multi-year period. Such flexibility was only possible because the 1st Respondent had other customers for those grades and volumes in contrast to the 3rd Respondent which purchases for the 4th Respondent alone. (See paras 164 and 165 of the Submission in respect of the 3rd Respondent).

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4.30 We have given careful considerations to the above submissions and we find as follows:

4.30.1 That, as regards the issue of the effects of FCC-1, we wish

to reiterate our clear and undisputed position, that the 3rd and 4th Respondents concluded and gave effect to the FCC-1. Section 8 (1) of the FCA states that: “[a] person shall not make or give effect to an agreement if the object, effect or likely effect of the agreement is to appreciably prevent, restrict or distort competition.” As such, the part regarding the making or giving effect part is conceded by the Respondents. The only issue to deal with is whether the FCC-1 was anti-competitive, a fact which the 3rd and 4th Respondents dispute, while the Complainant maintains its position.

4.30.2 That, in order to determine whether FCC- 1 was anticompetitive or not, the same should be analysed by way of rule of reason. In particular, its object, effects or likely effects of competition in the relevant market need to be ascertained and analysed.

4.30.3 That, as regards ascertaining the object of FCC-1, it is clear,

and as well conceded by the legal counsel for the 3rd and 4th Respondents that, its object can be ascertained from its purposes, contents (the terms of the agreement) and/ or the commercial context under which it was entered into, (given its role in that context).4

4.30.4 That, in our view, the word ‘object’, as it appears in Section

8 (1) of the FCA, goes to the purpose(s) for which the agreement was made. It refers to the subjective intention of the parties at the time when they ventured to enter into the alleged anti-competitive agreement. Section 8 (6) of the

4 See also Case C-68/12 Protimonopolný úrad v Slovenskej republiky, OJ C 165, 9.6.2012, Para 14- Case 56/64 and 58/64 Consten and Grundig v Commission [1966] ECR 299, 342.See also the Case of Groupement des Cartes Bancaires (GCB), Case C 67/13P, 2014.

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FCA, further qualifies an object, to be the object of an agreement, even if it is only one of a number of objects of that agreement.

4.30.5 That, in our assessment, we find that, the PFs (see Para 7.0,

8.0 and 9.0 of the PFs) proved on high preponderances of probability that FCC – 1 had anti-competitive object. In particular, the PFs provided legal and economic analysis to prove that the Agreement prevented, restricted, distorted and, hence, harmed competition in contravention of section 8 (1) of the FCA. Essentially, Paras 7.4.1 to 7.4.5 of the PFs have addressed these issues sufficiently, hence a finding that the FCC-1 was, by its object anticompetitive.

4.30.6 That, it must be noted and emphasised that, one of the

fundamental principles of competition laws is that, markets function best when individual competitors make business decisions independently of each other. As soon as that independence is restricted, for instance by an agreement such as FCC-1, competition is restricted.

4.30.7 The rest of the arguments regarding why the prices were not paid above the TTB Minimum indicative Prices in the post—FCC-I does not counteract the position already pointed out in the PFs. In fact, it was an indication that the agreement had already paralysed or compromised any innovation, which the 3rd Respondent could have been expected to bring about but for the FCC-1. Otherwise, why in other similar markets like Chunya, competitors were able to offer a price higher than the TTB MIP? It must be noted, and we wish to emphasise here, that reference to Chunya is reference made from an analogous point of view, Chunya being a similar market for green leaf tobacco, showing the effects on competition, which can flow from a new entrant into a market.

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4.30.8 That, as regards the timing when the crop years covered under the FCC- 1 ran, and whether or not FCC-1 had given the 3rd Respondent flexibility to adjust its sourcing of tobacco from the Primary Society if their crop throw and or “run of crop” volume was not suitable for the 4th Respondent’s specific needs, we think that these are irrelevant issues. The gist of the matter is the agreement itself and its anticompetitive nature and not otherwise.

Whether Reference to PATL’s Entry into the Tobacco Market in 2008/2009 Season is a

Poor Benchmark

4.31 The legal counsel for the 3rd Respondent has questioned the reference to PATL’s entry for comparative view, an approach adopted by the Complainant in the PFs, and argued:

4.31.1 That, PATL’s entry in 2008/09 is a poor benchmark for

assessing the benefits of the Tobacco Sourcing Agreement or the likely effects of the 4th Respondent’s entry into the market absent the Tobacco Sourcing Agreement because PATL entered when global market conditions for FCV tobacco were particularly strong and Tanzanian tobacco was well priced relative to global competitors whereas global market conditions have been weak since 2011. In addition, in 2008/09 crop season, the shareholders of PATL were already established in Tanzania with legal operating entities, business licenses, business infrastructure, personnel and had detailed contracting knowledge through their prior business experience in the Tanzanian tobacco industry. (See paras 187, 188, 189, 190 and 191 of the Submission in respect of the 3rd Respondent).

4.31.2 That, unlike 3rd Respondent, which is a vertically integrated buyer which faces commercial risk from buying on a run of crop basis where a large part of the crop may be unsuitable to its needs and therefore wasted, PATL entered the market as an independent green leaf merchant selling to all cigarette

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manufacturers globally. As a result, PATL, unlike 3rd Respondent, could proceed to contract from any Primary Society on a run of crop basis without first gaining knowledge of that Primary Society’s specific crop throw. (See para 192 of the Submission in respect of the 3rd Respondent).

4.31.3 That, the premium paid by PATL was initially not for tobacco itself, but effectively represented a payment for the Primary Societies to undertake agronomy extension services on behalf of PATL rather than PATL providing such services itself or through the 5th Respondent. (See para 193 of the Submission in respect of the 3rd Respondent).

4.31.4 That, most of the non-price benefits relied upon in the Provisional Findings are standard components of Primary Society contracts and therefore do not represent any difference to 3rd Respondent’s own contracting with Primary Societies. (See para 194 of the Submission in respect of the Respondent).

4.32 We have considered the above arguments by legal counsel for the 3rd

Respondent and we are in disagreement with him. This is specifically so because:

4.32.1 Firstly, the purpose of using the comparative approach in

this complaint was to reveal the effects of an un-compromised entry in a similar market context and how the market would have behaved if the FCC-1 was not concluded. It is an approach prompted by perceptions of success elsewhere. In our view, and, in the circumstance of this complaint, we find that such approach was certainly indispensable and appropriate for the sake of arriving at an intelligible and fair treatment of the entire scenario resulting from the conclusion of FCC-1. Consequently, reference to PATL as a benchmark was appropriate, since PATL entrance into Chunya, showed the effects on competition,

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which can flow from a new entrant into a market. Basically, market entry of a new competitor in any market may expand the total market volume, because it is usually accompanied by increases in product variety, promotional activity, and distribution, as well as changes in prices. These changes may attract new buyers and lead to accelerated market growth and expansion.5

4.32.2 Secondly, even if the 3rd Respondent was a vertically

integrated buyer facing commercial risks of buying tobacco on a run of crop basis where a large part of the crop could have been unsuitable to its needs and therefore wasted, that would have been its own business decision. As stated earlier, each competitor ought to make independent decision and that goes with its associated risks.

4.32.3 Thirdly, whether the premium paid by PATL was initially

not for tobacco itself, but effectively represented a payment for the Primary Societies is not an issue of contention. In fact, it demonstrates the kind of supposed similar benefits of competition which could also have been realized in the relevant market save for the FCC-1. This is equally appreciated by the Respondents in their own submissions (See para 194 of the Submission in respect of the 3rd Respondent).

Whether the Complaint was Properly Initiated and Whether the 3rd Respondent was made

Aware of It.

4.33 In his submissions, the legal counsel for the 3rd Respondent has raised an issue regarding the initiation of this complaint. In particular, it is argued:

4.33.1 That, the FCC does not allege that letters from the Ministry

of Agriculture, Food Security and Cooperatives, the TTB and growers constitute a “complaint against an alleged prohibited practice to the Commission in the prescribed

5 (See, for more information, Vijay Mahajan, Subhash Sharma and Robert D. Buzzell , ‘Impact of Competitive Entry on Market Expansion’ (1993) 57(3) Journal of Marketing , pp. 39-52 at p.39-40.

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form” as contemplated by section 69 (2) (b) of the FCA. The letters do not contain any “complaint against an alleged prohibited practice” nor are they “in the prescribed form”. (See paras 207.2 and 215 of the Submission in respect of the 3rd Respondent).

4.33.2 That, the 3rd Respondent is unaware of whether and, if so, when the FCC initiated a complaint against the 3rd and 4th Respondents in respect of the Tobacco Sourcing Agreement and accordingly denies the lawfulness of the investigation and all steps taken by the FCC pursuant thereto. (See para 207.3 of the Submission in respect of the 3rd Respondent).

4.33.3 That, the 3rd Respondent was not incorporated on 22nd

December 2011 rather on 22nd February 2012 in terms of the Certificate of Incorporation No. 89443 issued by the Assistant Registrar of Companies. It is thus evident that the 3rd Respondent was not licensed to buy field green leaf tobacco from registered Primary Societies any time prior to 2014/15 crop season, and it did not do so. (See paras 212.1 and 212.2 of the Submission in respect of the 3rd Respondent).

4.34 We have given thought to the above submissions by the 3rd and 4th

Respondents and we find:

4.34.1 That, according to the FCA the Commission has a mandate to initiate complaints suo moto. However, any other person may file a complaint before the Commission. In view of this, the complaint at hand was brought under section 69 (1) and (2) (a) of the FCA, read together with Rule 10 (1) (a) and (c), and 10 (2) and (3) of the FCC Procedure Rules, 2013. It was commenced after the FCC received letters of complaint, Ref. No CAC 65/616/01 dated 4th September, 2014 and Ref. No CAC 65/616/01 from the Ministry of Agriculture, Food Security and Cooperatives; and Tanzania Tobacco Board.

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4.34.2 That, according to Rule 12 (3) of the FCC Rules once an internal decision by the Commission is reached that a particular matter warrants an investigation, the persons to be investigated should be issued with a Statement of the Case (SoC). A Statement of the Case under Rule 12 (3) is only informative to the Respondent, informing him/her the nature of the allegations that are being investigated.6 The Respondent is not obliged to file any response. If he/she elects to respond to it, his/her response will only form part of information obtained during an investigation and will be considered at the time when the Commission issues its Provisional Findings (PFs). If the Respondent opts to remain quiet, the Complainant will be entitled to proceed with its investigation to the point of moving the Commission to issue PFs, in line with Rule 19 of the FCC Rules 2013. It is at this stage that the Respondent will be required, as a matter of natural justice, to respond having been availed with all evidential materials which form the basis of the PFs.

4.34.3 That, the 3rd Respondent’s submission that it was not aware of the complaint is grossly erroneous. This is because, according to the records of Tanzania Posts Corporation (TPC), on 26th August, 2017, the 3rd Respondent was supplied with a Statement of the Case (SoC) pursuant to Rule 12 (3) of the FCC Rules 2013 and that, on 26th September, 2017, the same was served with the Commission’s PFs and filed written submissions in response to the PFs.

4.34.4 That, the argument that the 3rd Respondent was not licenced

to buy field green leaf tobacco from registered Primary Societies any time prior to 2014/15 crop season, and it did not do so is, in our view, immaterial. The gist of the matter is that the 3rd Respondent concluded an agreement (FCC-1) which has been found to be anticompetitive. It is even

6 See FCT decision in Tribunal Application No.2 of 2013 (unreported) ( see page 17, 25, 26 and 7 on Case Statement.

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worth noting that the Tobacco Act and its regulations prohibits unlicensed persons from buying green leaf from growers. Such prohibition in our view applies whether the purchase is made directly or indirectly being made. What the 3rd Respondent is stating or wants us to believe is that it was indulging in an illegality. Be that as it may, our concern is on competition and we will not venture into such an uncalled for debate.

4.34.5 In view of what is stated in Para4.31.1 to 4.34.5 above, the

3rd Respondent’s submissions and arguments captured in Para 4.33.1 to 4.33.3 above are devoid of merits and are hereby dismissed.

The Issue Regarding Exercise of Decisive Influence

4.35 The legal counsel for the 3rd Respondent has raised the following arguments in his submissions:

4.35.1 That, the 4th Respondent does not operate as a

manufacturer of tobacco products in the Netherlands. (See para 213.1 of the Submission in respect of the 3rd Respondent).

4.35.2 That, the FCC has not alleged or put up any evidence to demonstrate that the 4th Respondent exercised decisive influence over the 3rd Respondent or indeed any influence at all in respect of the 3rd Respondent’s conclusion and implementation of the Tobacco Sourcing Agreement. The 4th Respondent does not have any active involvement in the commercial policy, strategic direction or operational activities of the 3rd Respondent, whether in respect of the Tobacco Sourcing Agreement or otherwise. (See para 213.3 of the Submission in respect of the 3rd Respondens).

4.36 In response to the two issues, we note the following persuasive ruling from the EU cases:

4.36.1 That, it is an undisputed fact that the 4th Respondent has a controlling stake in the 3rd Respondent of ….%. This is a

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majority shareholding which, as noted earlier in these Final Findings, gives it sufficient voting rights to tilt any decision or policy within the 3rd Respondent. From case laws in jurisdictions such as the EU, it has once been noted that even where a company does not own 100% of shares in the subsidiary but has a majority shareholding, in the event that the subsidiary infringes the competition law, such company may be held liable.7

4.36.2 In the case of Akzo Nobel v. Commission, 8 the EU Court of Justice was of the view, there is a rebuttable presumption regarding the exercise a decisive influence over the conduct of a subsidiary company (see, to that effect, AEG-Telefunken v. Commission, paragraph 50, and Case C 286/98 P Stora Kopparbergs Bergslags v. Commission [2000] ECR I 9925, Paragraph 29).

4.36.3 That, in those circumstances, the company with a controlling stake and influence, has the burden of rebutting that presumption, and should adduces sufficient evidence to show that its subsidiary acts independently on the market (see, to that effect, Case C 286/98 P Stora Kopparbergs Bergslags v. Commission [2000] ECR I 9925, Paragraph 29)'.

4.36.4 In view of the above cases, which we find to be persuasive and relevant to the issues raised by the 4th Respondent, we find that the 4th Respondent’s submissions are wanting and are hereby dismissed. The fact is that, the 4th Respondent should have availed to this Commission sufficient evidence to rebut the presumption that the 4th Respondent, being a majority shareholder of the 3rd Respondent, exercises decisive influence over the latter. As noted herein above, the burden of rebutting that presumption, and of adducing sufficient evidence to show that its subsidiary acts

7 See, for instance, Elf Aquitaine v. Commission, Case T-174/05, Para 49-56, Arkema v. Commission, Case C-521/09 P paragraph 63, 167 and Avebe v Commission, Case T-314/01). 8 Case T-112/05 , paragraph 45, paragraph 58 and the case-law cited, see also Paras 60-61.

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independently on the market was on the part of the 4th Respondent. Unfortunately, this burden was not discharged.

The Issue whether the 3rd and 1st Respondents were Actual or Potential Competitors

4.37 The legal counsel for the 3rd and 4th Respondent has challenged the findings in the PFs arguing that, the 3rd and 1st Respondents were not actual (or potential) competitors in the relevant market neither at the time that the Tobacco Sourcing Agreement was concluded, in force nor prior to its conclusion. (See paras 216.9 and 216.10 of the Submission in respect of the 3rd Respondent). This was also reiterated in their oral submissions.

4.38 In response to the above submission by the legal counsel for the 3rd Respondent, we find that the issue of whether the 3rd and 1st Respondents were Actual or Potential Competitors was sufficiently discussed in the PFs (see page 19 thereof). We reiterate that position and therefore respond to the above issue affirmatively.

Whether there are two Relevant Markets: Purchasing and Selling Markets

4.39 The legal counsel for the 3rd Respondent has argued that in considering whether a purchase agreement, such as the Tobacco Sourcing Agreement, has anti-competitive effects, there are two markets that are relevant to the competition law assessment, namely the purchasing market and the selling market. This argument has further been strengthened by an Economic Analysis Report by Genesis Analytics (Pty) Ltd (hereinafter, the Genesis Report.9) In his submission, and with the support of the Genesis Report, the legal counsel argues:

4.39.1 As regards the relevant purchasing market, that, the product market is limited to field green leaf tobacco. As regards the geographic component of the purchasing market, the geographic market is, at least, as wide as the Tabora-growing region of mainland Tanzania because buyers operational in growing areas that are adjacent to those identified in the Tobacco Sourcing Agreement would be in a position

9 This is a confidential report commissioned by JTILS , titled: 'An economic Assessment of the Provisional Findings by the FCC into JTI Leaf Services' Purchasing Arrangement with TLTC' . Its authors are James Hodges, Viresh Ranchod and Dumakude Nxumalo of Genesis Analytics (Pty) Ltd.

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to contract with Primary Societies in such regions given their infrastructure within Tabora.

4.39.2 That, as regards the relevant selling market, it is the global market for dry-packed FCV tobacco and the downstream geographic market is a global one since more than 90% of Tanzania FCV packed tobacco is exported globally. (See paras 217.3, 217.5, 217.6, 217.7, 217.8 and 217.9 of the Submission in respect of the 3rd Respondent and Paras 55 to 82 of the Genesis Report).

4.39.3 The Commission has considered the above submissions and finds that:

4.39.4 That, as regards the argument are relevant to the competition law assessment, namely the purchasing market and the 'selling market', the legal counsel for the 3rd Respondens (as well as their economic advisors (Genesis)), grossly erred in failing to appreciate the distinctions that exist between the buying market and the selling market.

4.39.5 That, the only market for our concern in this complaint is the buying market given that, the FCC-1, which is the central focus in this matter, was in relation to unprocessed field green tobacco from growers and not processed field green tobacco.

Whether it was Proper to Respond to the Averments in Affidavits of Mr. Wilfred Mushi; Mr. Glenn; Ms. Easter Romole; Mr. Msafiri Ngassa; and Mr. Matola

without Filing Counter Affidavits

4.40 The Legal Counsel for the 3rd Respondent has made general and unsubstantiated denials to several affidavits which were attached to the PFs. Such Affidavits were:

4.40.1 The Affidavit of Mr. Wilfred Mushi; (paras 221.5 and 221.7 of the Joint Submission in respect of the 3rd and 4th Respondents).

4.40.2 The Affidavit of Mr. Glenn; (See para 221.11 of the Submission in respect of the 3rd Respondent).

4.40.3 The Affidavit of Ms. Easter Romole; (See paras 221.12 and 221.13 of the Submission in respect of the 3rd Respondent).

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4.40.4 The Affidavit of Mr. Msafiri Ngassa (See para 222.2 and its sub-paragraphs thereto of the Submission in respect of the 3rd Respondent), and

4.40.5 The Affidavit of Mr. Matola (See para 227.12 of the Submission in respect of the 3rd Respondent).

4.41 We have taken note of the ‘confirmatory affidavit’ of Robert Glenn sworn on 24th January 2018 in which, he asserts, in para 4 that he: ‘ … read the responses of JTI Leaf Services Limited as well as the economic report prepared by Genesis Analytics submitted therewith and confirm the facts contained therein insofar as they relates to JTI Leaf Services Limited’.

4.42 According to decided case law in Tanzania, the proper way to challenge evidence submitted by way of an affidavit is by way of filing a counter affidavit. In this regard, we are guided by the words of the Court of Appeal of Tanzania in the case of Inspec tor Sadiki and Others v . Gerald Nkya (1997) TLR 290, where the Court stated that, “The proper way to contradict the contents of the counter- affidavit of the respondent was not by making statements from the bar but was by filing a reply to the counter affidavit.”

4.43 Taking the cue from the above case, we have asked ourselves whether Mr. Glenn’s ‘confirmatory Affidavit’ amounts to a counter affidavit to contradict the facts contained in the affidavits of Mr. Mushi, Ms Romole, Mr. Ngassa and Mr. Matola. In our considered view we find:

4.43.1 That Mr. Glenn’s affidavit does not amount to a counter affidavit. It is only a confirmatory affidavit, confirming the what is in the written submissions of the 3rd Respondent.

4.43.2 That, even if it were to be referred to as a counter affidavit, the confirmatory affidavit of Mr. Glenn is defective and cannot be relied upon since it lacks a verification clause. As a matter of principle, affidavits must be verified and verification must be on all paragraphs. The purpose of such verification was set out by the Court of Appeal of Tanzania in the Case of Juma Said and Another vs The Republ i c , Crim.Appl.No.4 of 2010. In this Case Massati, JA (as he then was) stated as follows (and we quote in extenso):

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‘The purpose of an affidavit therefore, is to convey to the court and the other party some facts material to the case from the best sources. It is evidence in written form. According to DODOLI KAPUFl's case (supra) \, the purpose o f the ver i f i cat ion c lause i s to show whether the fac ts asser ted by the deponent are o f his own knowledge or based on information or be l i e f s . With respec t , s ince an af f idavi t i s a subst i tute for oral ev idence the requirement o f a ver i f i cat ion thereon goes to the root o f substant ial just i c e , and not just a matter o f form and not a mere technical i ty . ’

4.44 On the basis of what is stated in Paras 4.43, 4.43.1 and 4.43.2 above, it is clear to us that since the confirmatory affidavit of Mr. Glenn is does not constitute a counter affidavit and, even if it was to be held to be a counter affidavit, it is unreliable for being defective, the written evidence of Mr. Mushi, Ms Romole, Mr. Ngassa and Mr. Matola has not been contradicted. If the 3rd Respondent was to properly contradict it, there should have been filed, together with the Respondent’s written submissions, counter affidavits to contradict the evidence contained in the aforementioned affidavits Mushi, Romole, Ngassa and Matola. This should have been so, given that, all the evidential materials, including the affidavits which the legal counsel sought to challenge, were availed to the Respondents to enable them file their defence. Failure to file counter affidavits means, therefore, that, no evidence was tendered to counter the complainant’s averments in the respective affidavits.

Whether the Alleged Conduct was repetitive in Character

4.45 The legal counsel for the 3rd Respondent has argued:

4.45.1 That, it is incorrect for the FCC to state that the alleged violation in this case is a repetitive one on the grounds that it covered two crop years.

4.45.2 That, what is contemplated by Rule 28 (d) of the FCC Rules is a repetition of conduct that has previously been found to constitute a prohibited practice under the FCA.

4.45.3 That, in this case, there was a single course of conduct which has not previously been found to be a contravention

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under the FCA. (See para 244.4 of the Submission in respect of the 3rd Respondent).

4.46 A brief response to the above is warranted. We are in disagreement with the submissions by the legal counsel for the 3rd Respondent. In our view, since the FCC-1 was for two seasons, the conduct was perpetrated in those two seasons and thus, the market had suffered twice. We find, therefore, that, the complainant’s view to be a sound assessment and a reasonable judgement of the state of affairs in respect of the relevant market affected by the FCC-1.

Additional Submissions Made by the 4th Respondent

4.47 The 4th Respondent has also raised arguments against the findings contained in the PFs as well. In summary, the following are the issues raised by this Respondent in response to the PFs arguing:

4.47.1 That, the FCC purports to convict and/or penalise the 4th Respondent for a criminal offence under section 8 (1) read together with section 8 (7) of the FCA, the 4th Respondent reserves the right to raise a constitutional objection in respect of the FCA and the conduct of the FCC in this matter. (See paras 11.6, 41.1 and 41.2 of the 4th Respondent’s submissions.)

4.47.2 That, the 3rd and 4th Respondents are completely separate and independent companies. The 4th Respondent is a holding company which holds …% of the shares in 3rd Respondent. The 4th Respondent does not have any direct involvement in the commercial policy, strategic direction or operational activities of the 3rd Respondent, whether in respect of the Tobacco Sourcing Agreement or otherwise. (See Paras 17, 32 and 33 of the 4th Respondent’s submissions.)

4.47.3 In terms of section 8 (7) of the FCA, the intention or negligence must relate not merely to the facts giving rise to a contravention of section 8 (1) of the FCA, but to the contravention itself. The FCC does not allege that any of the Respondents acted intentionally in relation to the alleged contravention in this case, only that they acted negligently. It must therefore be demonstrated, on a balance of probabilities on the evidence, that each of the Respondents should have been aware that their alleged conduct constituted a

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contravention of section 8 (1) of the FCA. (See para 21 of the 4th Respondent’s submissions.)

4.47.4 There is no basis upon which to conclude that the 4th Respondent should have been aware that such conduct constituted a contravention of section 8 (1) of the FCA, and the FCC does not attempt to make out any case in that regard. (See para 23 of the 4th Respondent’s submissions.)

4.47.5 The FCC’s interpretation and application of section 4 (1) of the FCA is contrary to the express wording and clear purpose of section 4 (1) of the FCA. The wording of section 4 (1) clearly states that the provision applies only “for the purpose of section 8, 9 and 10 of the FCA” and not for purposes of sections 58 and 60 thereof. Section 4 (1) of the FCA has a clear purpose in the Tanzanian competition regime, namely to ensure that, agreements or conducts which may otherwise be considered anti-competitive between firms in the same economic entity, are not subject to scrutiny under section 8, 9 and 10 of the FCA. In this way, section 4 (1) recognises that, firms within the same economic entity, should be able to regulate their affairs between each other as they see fit. (See paras 28, 29, 30 and 31 of the 4th Respondent’s submissions.)

4.47.6 Even if the FCC were to find that the 3rd Respondent’s conclusion and implementation of the Tobacco Sourcing Agreement constituted a contravention of section 8 (1) of the FCA (which is denied), any conviction and penalty imposed by the FCC for such conduct in terms of section 60 (1) of the FCA, would have to be limited to the 3rd Respondent (and its turnover). Section 4 (1) does not provide any basis to include the 4th Respondent (and its turnover) in any conviction or penalty imposed by the FCC in respect of the 3rd Respondent ’s conduct. In addition, the FCC does not make out any case that the 4th Respondent should be rendered liable for any offence committed by the 3rd Respondent on any other basis in law. (See para 35 of the 4th Respondent’s submissions.))

4.47.7 There is no basis for imposing any penalty on the 4th Respondent on this matter, let alone a penalty of 8% of its annual turnover. (See para 40 of the 4th Respondent’s submissions.))

4.47.8 It is incorrect that the Tobacco Sourcing Agreement covered the 2012/13 and 2013/14 crop years. As set out in the 3rd

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Respondent ’s written submissions, the Tobacco Sourcing Agreement covered the 2011/12 and 2012/13 crop years. (See para 43.2 of the 4th Respondent’s submissions.)

4.47.9 That, the 4th Respondent is unaware of whether and, if so, when the FCC initiated a complaint against the 3rd and 4th Respondent in respect of the Tobacco Sourcing Agreement and accordingly denies the lawfulness of the investigation and all steps taken by the FCC pursuant thereto. (See para 44.2 of the 4th Respondent’s submissions.)

4.47.10 That, the 4th Respondent denies that, by virtue of the provisions of section 4 (1) and (2) of the FCA, “the 2nd and 1st Respondents are regarded as a single person” (See para 48.1 of the 4th Respondent’s submissions.)

4.47.11 That, the 3rd Respondent was not incorporated on 22nd December 2011.The 3rd Respondent was incorporated on 22nd February 2012. (See para 49.1 of the 4th Respondent’s submissions.)

4.47.12 That, the 4th Respondent does not operate as a manufacturer of tobacco products in the Netherlands. (See para 50.1 of the 4th Respondent’s submissions.)

4.47.13 That, the FCC has not established either factual or legal basis to join the 4th Respondent as a Respondent in the present proceedings for liability or penalty purposes. (See Para 50.3 of the 4th Respondent’s submissions.))

4.47.14 That, having regard to the provisions of FCC Rules 28 and 30, there is no basis for the FCC’s proposal, that, the 4th Respondent, together with the 3rd Respondent, pay an administrative penalty equal to 8% of the 4th Respondent’s turnover for 2016. (See Para 57.2 of the 4th Respondent’s submissions.))

4.47.15 That, there is no basis for a compliance order against the 3rd or the 4th Respondent given that neither party contravened section 8 (1) of the FCA. (See Para 58.2 of the 4th Respondent’s submissions.))

4.48 From our assessment of the above submissions by the 4th Respondent, we find as follows:

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4.48.1 That, most of the issues raised in herein above, have been dealt with in other paragraphs in this Final Findings. In view of that, we see no reason to repeat what we earlier discussed in this PFs regarding the penalties, the applicability of the SEE doctrine or the constitutionality issues. We therefore reiterate what we have stated earlier in herein above, noting:

4.48.1.1 That, while it is partly conceded that Section 4 (1) of the FCA codifies the concept of "Single person or Economic Entity" (SEE), we find it erroneous to argue, as the legal counsel for the Respondents does, that the doctrine of SEE has nothing to do with the calculation of a fine under Section 60 (1) of the FCA.

4.48.1.2 That, in our view, and as we shall further expound herein below, we find that, Section 4 (1) of the FCA, which espouses the doctrine of SEE, and which is "for the purposes of Sections 8, 9 and 10" and, accordingly, "rooted in sections 8, 9 and 10 of the FCA, has a statutory link with Section 60 (1) of the FCA (the fining provision). These provisions (sections 8, 9 and 10 of the FCA) prescribed anticompetitive conduct punishable as offences under section 60 (1) of the FCA. For that matter, , when sections 4 (1) and (2) and 7 are taken into account, the FCC can, and should, have the ability to exercise its jurisdiction over those involved, and impute liability on the 3rd and 4th Respondents. It is therefore a misconception on the part of the legal counsel for the 3rd and 4th Respondents to separate the application of section 4 (1) from section 8 (1) and section 60 (1) of the FCA. This fact will further be expounded below in relation to the single economic entity (SEE) doctrine.

4.48.1.3 In essence, the doctrine of a single economic entity is not only well established, but also well recognized by the Courts. In DHN Food Distributors Ltd. and Others v. London Borough of Tower Hamlets [1976] 3 ALL ER 462, for instance, at Page 467, the Court held as under:-

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'We all know that in many respects, a group of companies [is] treated together for the purpose of general accounts, balance sheet and profit and loss account. They are treated as one concern. Professor Gower in his book on company law says: there is evidence of a general tendency to ignore the separate legal entities of various companies within a group, and to look instead at the economic entity of the whole group'.

4.48.1.4 Applied in competition cases, the SEE Doctrine operates in the same manner 'allowing legally separate entities pursuing the same commercial goals and under common ownership and control to be treated as integrated economic units.'10 However, apart from operating as a shield it can as well operate as a sword and impute liability on a company that has a decisive control over another company.

4.48.1.5 That, the 4th Respondent’s assertion that it is a separate entity with no decisive influence over the affairs of the 3rd Respondent (see Para 4.47.2 above) is not supported by any evidence. Ordinarily, one would have expected the 4th Respondent to file supporting evidential information in any form, say, for instance, an affidavit to that effect, and not a mere denial which is unsupported by evidence. As stated earlier in Para 4.36.2 to Para 4.36.4 above, the onus was on the 4th Respondent to establish, with evidence, that it had no influence over the affairs of the 3rd Respondent in which it holds majority shares. This was not discharged.

4.49 In view of the above, we find that the submissions by the 4th Respondent do not tilt the balances and the Commission’s findings in the PFs remain intact.

10 See Mr. Ravisekhar Nair & Mr. Aakarsh Narula 'Bathtub Conspiracies – An Indian Competition Law Perspective' (2016) (available from https://www.competitionpolicyinternational.com/wp-content/uploads/2016/12/CPI-Nair-Narula-final.pdf (as accessed on 16/3/2017). See also ase C- 97/08 P Akzo Nobel NV, Akzo Nobel Neder land BV, et al. v Commission of the European Communities OJ C 128

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SECTION- B

Arguments Raised by the 3rd Respondent in defence of the 5th Respondent

5.0 The 3rd Respondent has challenged, in defence of the 5th Respondent, the PFs findings arguing:

5.1 That, the 5th Respondent did not provide any services to 3rd Respondent or make any payments for and on behalf of the 3rd Respondent during the term of the Tobacco Sourcing Agreement as alleged by the FCC. The Tobacco Sourcing Agreement contemplated that the 5th Respondent would provide certain services to the 1st Respondent in respect of the tobacco to be sourced by 1st Respondent for the 3rd Respondent. (See para 216.8 of the Submissions by the 3rd Respondent).

5.2 That, the 5th Respondent was not a party to the Tobacco Sourcing Agreement and did not aid or abet the 3rd Respondent in concluding or giving effect thereto. (See para 216.13 of the Submission by the 3rd Respondent).

5.3 That, 3rd Respondent denies that it was required to be registered as a purchaser of green leaf tobacco for purposes of its purchases under the Tobacco Sourcing Agreement, and that understanding was confirmed by the TTC. (See para 218.1 of the Submission by the 3rd Respondent).

5.4 That, the allegation that the fact that the 1st Respondent was a shareholder in the 5th Respondent “strongly influenced 3rd Respondent to make and give effect to the Tobacco Sourcing Agreement is in any event incorrect and irrelevant to the presumption contained in section 8 (3) of the FCA since the 1st Respondent’s shareholding in the 5th Respondent did not influence the 3rd Respondent at all in its decision to conclude and implement the Tobacco Sourcing Agreement. (See para 221.3 of the Submission by the 3rd Respondent).

6.0 In responding to the above submissions made by the 3rd Respondent in favour of the 5th Respondent the Commission finds that, while it is obvious that the 5th Respondent was not registered as a player in the market, it had a facilitative role which was well recognized in the FCC-1. This fact is well acknowledged by the 3rd Respondent in its submission (see Para 4.3 of FCC-1 and Para 4.4 of the 5th Respondent’s submission (the last sentence therein)). In our view, this

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fact suffices to establish that the 5th Respondent was an abettor and aided the smooth implementation of FCC-1.

SECTION- C

FINAL FINDINGS AND VERDICTS OF THE COMMISSION

7.0 Commission's Final Findings

7.1 The Commission, having considered the 3rd and 4th Respondents’ written and oral submissions as discussed in these final findings, and further, having examined all the available evidence and materials contained in the Provisional Findings (PFs) served upon the 3rd and 4th Respondents, (and which we see no reasons to reproduce again in these Final Findings) make a finding that:

7.1.1 From the analysis of the 3rd and 4th Respondents' oral and written submissions, the facts and the available evidence, as analysed herein and in the PFs, the Commission finds that the 3rd and 4th Respondents' responses to the PFs have not been able to exonerate them from liability. The Commission thus confirms its allegations for reasons stated herein and as contained in the PFs, which, forms part and parcel of these Final Findings;

7.1.2 Pursuant to Rule 24 (1) and (3) and (4)(a) and (c) of the FCC Rules 2018, the 3rd and 4th Respondents (as a single entity) are jointly and severally liable for the following count: Making and giving effect to an Anti-Competitive Tobacco Supply Agreement (FCC-3); the effect of which was to prevent competition in the field green leaf tobacco buying market in Urambo, Ulyankulu and Sikonge tobacco growing areas contrary to sections 8 (1) and Section 8 (7) as read together with section 12 and section 60 (1) of the FCA, 2003.

8.0 Orders of the Commission

8.1 Having held that the 3rd and 4th Respondents (as a single entity) have infringed the FCA, and having considered their Oral and Written Replies to the PFs, the Commission hereby issue a Compliance Order that requires the 3rd and 4th Respondents (as a single entity) to jointly and severally, execute the following actions:

8.1.1 THAT, pursuant to sections 60 (1) of the FCA, Rules 24(a) and (c), 28 and 32 of the FCC Rules, 2018; and on the basis

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of Section 4 (1) and (2) (a), (b) and (c) and 7 (b) of the FCA, the 3rd and 4th Respondents (as a single entity) is hereby ordered to pay a monetary administrative fine equal to 5 percent of the 4th Respondent’s annual turnover, and which, according to its audited accounts of the year 2013, the last year of the infringement, amounts to Japanese Yen 106,010,000,000. The said amount should be payable to the Commission.

8.1.2 THAT, pursuant to section 58 (1) and (3) of the FCA, the 3rd and 4th Respondents are hereby required to refrain from all future conduct that are against the FCA; and

8.1.3 The 3rd and 4th Respondents to publish an undertaking in at least 3 widely circulating newspapers that the two will refrain from infringing the FCA provisions.

Signed, dated, sealed and issued on this ………day of ……JUNE…..2019.

QUORUM SIGNATURE

1. Prof. Humphrey P. B. Moshi …. Chairman …………………………

2. Mr. Fadhili Manongi……. …….Member …………………………

3. Dr. John K. Mduma ……. …….Member …………………………

______________________________

SEAL OF THE COMMISSION

united republic of tanzania fair competition … · at dar-es-salaam in the matter of the fair...

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