Month: January 2015

Government-mandated sharing of trade secrets: anticompetitive interference

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Ms. Zulu proposes foreign competitors share trade secrets with SA counterparts

Perhaps it is time for increased advocacy initiatives within the South African government, or at a minimum a basic educational program in competition law for all its sitting ministers.
In what can only be described as startling (and likely positively anticompetitive), Lindiwe Zulu, the S.A. Minister of Small Business, has demanded foreign business owners to reveal their trade secrets to their smaller rivals.
The South African Competition Commission, and perhaps one of the Minister’s own fellow Cabinet members, minister Ebrahim Patel, who is de facto in charge of the competition authorities, can see fit to remind Ms. Zulu that fundamental antitrust law principles (and in particular section 4 of the South African Competition Act), preclude firms in a horizontal relationship from sharing trade secrets that are competitively sensitive – i.e., precisely those types of information Ms. Zulu now proposes to be shared mandatorily amongst competitors.
While SACC has utilized this provision with much success against big business in South Africa, it would be remiss not enforce the provisions of the Act without fear or favor should the traders act out on the instruction of the Minister.  It is also time that the Cabinet seeks to enforce business practices which comply with South African legislation.
BDLive‘s Khulekani Magubane reports in today’s edition (“Reveal trade secrets, minister tells foreigners“) that “foreign business owners in SA’s townships cannot expect to co-exist peacefully with local business owners unless they share their trade secrets, says Small Business Development Minister Lindiwe Zulu.”

Lindiwe Zulu. Picture: PUXLEY MAKGATHO

Lindiwe Zulu. Picture: PUXLEY MAKGATHO

“In an interview on Monday she said foreign business owners had an advantage over South African business owners in townships. This was because local business owners had been marginalised and been offered poor education and a lack of opportunities under apartheid.

“Foreigners need to understand that they are here as a courtesy and our priority is to the people of this country first and foremost. A platform is needed for business owners to communicate and share ideas. They cannot barricade themselves in and not share their practices with local business owners,” Ms Zulu said.”

Research fellow at the SA Institute for International Affairs Peter Draper said Ms Zulu’s remarks, underscored government’s mistrust of foreign investors which was also reflected in business regulations. “If you connect this to the broader picture, essentially this is part of a thrust to single out foreign business, which is contrary to the political message President Jacob Zuma went to portray in Davos. We are at a tipping point and we are going beyond it. You can only push foreign business so far before they disengage,” he said.Mr Draper agreed with Ms Zulu’s remarks on the effect of apartheid on local business owners in townships but said foreign business owners had to confront their own challenges with little state support.

“Apartheid did disadvantage black people and over generations it inhibited social capital. Many foreigners have trading entrenched in their blood. Wherever they go they bring social capital, networks and extended family. Is that unfair? I don’t think so. That’s life,” he said.

Ms Zulu’s comments show the about-turn in the African National Congress’ (ANC’s) ideology of Pan Africanism and in line with remarks by party leaders.

After a week of looting in Soweto last week, ANC secretary-general Gwede Mantashe told residents in Doornkop that immigration laws needed to be strengthened to protect the country from terror.

South Africa: Competition Commission makes available draft guidelines for the assessment of the public interest criteria in merger control matters

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In what is certainly a most welcome development, the South African Competition Commission (SACC) has made available for comment draft guidelines for the Assessment of Public Interest Provisions in Merger control.

The Draft Guidelines seek to provide guidance on the Commission’s approach to analysing mergers by indicating the approach that the Commission is likely to follow and the types of information that the Commission may require when evaluating public interest grounds in terms of section 12A(3) of the Act.

The Guidelines come after recent Competition Tribunal and Competition Appeal Court decisions and the ongoing debate among stakeholders on how public interest issues should be assessed in merger investigations. Contributors and editors of AAT have also called for clarity from the SACC.  In this regard see 140822-What-is-competition-good-for-FINAL

Written comments on the guidelines, and not the accompanying background information document, can be e-mailed to Ms. Seema Nunkoo at SeemaN@compcom.co.za. Alternatively, stakeholders can call (012) 394 3203, for further enquires.

The closing date for comments is Monday, 23 February 2015.

AAT welcomes the SACC’s initiative particularly in light of the fact that public interest conditions imposed in the past have been a cause for concern.  In many instances merging parties were faced with public interest conditions with little or no nexus to the transaction which caused delays and unnecessary and significant costs to the parties in having to fulfill the conditions.  Clear guidelines are invaluable to the broader competition law community and particularly to the business community.

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Pistorius family embroiled in Ag price-fixing cartel

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The Pistoriuses refuse to stay out of the media (Ag-)limelight

Starting in late 2009, the South African Competition Commission had suspected cartel activity in the Agricultural Lime (“AgLime”) industry.  Notably, one of the participants in the alleged price-fixing scheme was the Hendrik Pistorius Trust and its Pistorius-family trustee members, all of whom are respondents (defendants) in the action now referred by the CompComm to the S.A. Competition Tribunal (official referral document here).

The connection of this antitrust case with now-infamous Olympic runner Oscar Pistorius is obviously only a family link (based on some quick research, it seems as though one of Oscar’s cousins is involved, namely Arnoldus Pistorius, the son of yet another respondent, Leo Pistorius who is apparently known as an elephant hunter).

It is interesting to note that the Commission requests a 10% penalty, however, they do not explicitly state that it is for the period of the contravention (page 10).

On 16 January 2015, the South African Competition Commission filed a complaint against Hendrik Wilhelm Carl Pistorius N.O., Leo Constantin Pistorius N.O., Hermine Pistorius N.O., Arnoldus Kurt Pistorius,  Kalkor (Pty) Ltd, CHL Taljaard & Son (Pty) Ltd, PBD Boerdedienste (Pty) Ltd, Grasland Ondernemings (Pty) Ltd and Fertiliser Society of South Africa.

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The Commission alleges that the respondents were engaged in a prohibited practice from 1995 until 2008, by agreeing or entering into a concerted practice to fix the commissions payable by each of them to fertiliser companies who employ agents to market, sell and distribute agricultural lime, which is crushed / pulverised limestone or dolomite used for soil treatment in order to reduce the acidity of the soil.  This alleged practice is in contravention of section 4(1)(b)(i) of the South African Competition Act, which provides the following:

“An agreement between, or concerted practice by, firms, or a decision by an association of firms, is prohibited if it is between parties in a horizontal relationship and if –

(a) it has the effect of substantially preventing, or lessening, competition in a market, unless a party to the agreement, concerted practice, or decision can prove that any technological, efficiency or other pro-competitive gain resulting from it outweighs that effect; or

(b) it involves any of the following restrictive horizontal practices:

(i) directly or indirectly fixing a purchase or selling price or any other trading condition;

(ii) dividing markets by allocating customers, suppliers, territories, or specific types of goods or services; or

(iii) collusive tendering.”