Worrying trends in South African merger control – Government’s abuse of process continues unabated

south_africa

Secret deals sideline competition authorities

In what can only be described as a significant step backwards in ensuring that the more established of the emerging economies enforce the application of sound and established (e.g., ICN) best practices in relation to merger remedies, AAT has discovered that the much publicised acquisition of South Africa’s AFGRI by international private investment group AgriGroupe has recently been subjected to a private side deal between the South African Government and the merging parties, sidestepping the Commission’s jurisdiction and decision-making competence.  According to its terms, Afgri is obligated to make available R90 million (US$9m, over four years) to certain South African farmers & enrol emerging farmers in development programmes and assist poultry farmers.

Minister’s side deal replaces Competition Act merger remedies

There is little doubt that these forced conditions constitute matters best handled by the relevant antitrust regulator as proper remedies in a merger-control proceeding. At the outer limit, relevant departments such as the Department of Water, Forestry and Fisheries might have input into them.  Yet, it appears that these conditions are purely negotiated by the Minister of Economic Development – the same office that sacked the prior chairman of the Competition Commission, Shan Ramburuth, and which has been subjected to criticism of meddling in the independent authority’s affairs.

Minister Patel

Following the questionable intervention of various South African Government departments in Walmart’s acquisition of Massmart (which is, as we have previously noted, the origin of the non-competition merger remedies), it appears that the same departments have in effect sought to force the merging parties into agreeing to perform services on behalf of the Government in exchange for the departments’ non-intervention before the Competition Tribunal proceedings.

Following a pattern…

Heather Irvine, counsel for the merging parties, confirmed that the “merger was approved (with the agreement as a condition) after the Tribunal hearing yesterday.”  She points out that “this agreement was voluntarily entered into by the merging parties in a spirit of goodwill and as a demonstration of Afgri’s commitment to growing the African food sector, not because of concerns about any public interest issues in terms of the Competition Act,” pointing to the transcript to be made available shortly.  We appreciate counsel’s confirmation that the side agreement was reached entirely outside the confines of the SA Competition Act between the ministry and the parties.

It is apparent that since Minister Patel has assumed his role as Minister of Economic Development (an “activist, interventionist and micromanaging minister,” according to the former Competition Tribunal chairman David Lewis), the competition authorities’ independence has been undermined (see some of our prior articles here and here).   In particular, the merger process is little more than a means by which the South African Government seeks to extract from merging parties a series of additional unwarranted (industrial policy) conditions. It is in our view a highly problematic development.  In sum, the S.A. merger review process remains a highly contentious issue and while the parties in this case sought to placate Government, others may not be as willing.
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