Following the March 2012 merger between Wal-Mart and Massmart, the Competition Appeal Court (“CAC”) ordered, as one of the merger conditions, that Massmart re-employ 503 former staff members who were retrenched in 2009 and 2010 as a result of the then proposed merger.
However, it would now appear as though Massmart has failed to comply with the condition. Reportedly, former employees of Massmart have lodged a complaint with Competition Commission (“the Commission”) relating to concerns over Massmart’s non-compliance of this condition.
Following the complaint, the Commission conducted a series of meetings with the South African Commercial Catering and Allied Workers Union (“SACCAWU”) and Massmart. The Commission concluded that Massmart had not complied with the condition imposed by the CAC and found that approximately 217 of the former employees had not been reinstated.
Following negotiations between the Commission, SACCAWU and Massmart, it was found that although Massmart had allegedly sent initial reinstatement offer letters out to former employees, many former employees, allegedly, did not receive the letter.
It was agreed that Massmart would re-employ 61 former employees, who had not received the letter, with 6 months back pay. In addition, Massmart would also re-employ at least 94 former employees, who had received the letter and had not responded to the letter, with 3 months back pay, if such employees accepted the offer by 30 September 2014.
Massmart is required to provide feedback relating to the progress of the implementation of the plan to the Commission over the coming months.
Tribunal decides against Commission’s recommendation of prohibition of resin merger
The Competition Commission (“Commission”) recommended to the Competition Tribunal (“Tribunal”) to prohibit the proposed acquisition of resin manufacturer Arkema Resins SA (Pty) Ltd (“Arkema”) by specialised coatings company Ferro Industrial Products (Pty) Ltd (“Ferro”).
The acquiring firm, Ferro, operates in the industrial chemicals sector and its activities comprise powder coatings, plastics, enamels and ceramics, glass colours, spectrum ceramics and resin.
Arkema, the target firm, is a wholly-owned subsidiary of Arkema Afrique SAS, which in turn is wholly-owned by Paris-listed company Arkema. Arkema is also involved in the manufacture of unsaturated polyester resin which is used in the manufacture of swimming pools, truck bodies, baths, etc.
The merging parties argued that the Commission’s recommendation to the Tribunal was fundamentally flawed as it failed to take into account certain key considerations, such as the constraint of imports on domestic suppliers, the fact that post-transaction, there were two alternative domestic suppliers to the merging parties and that the merging parties argued that Arkema was not in fact a competitive constraint to Ferro in certain key market segments.
Following a two-week long hearing, the Tribunal approved the merger subject to conditions which involve a pricing formula to customers in the mining segment, a toll-manufacturing agreement and a two-year moratorium on retrenchments.
The President of the Republic of South Africa has made his decision to re-appoint Competition Tribunal Chairperson Norman Manoim for a second term now that his term has come to an end. Along with Mr Manoim, the President has also re-appointed full-time panel members Yasmin Carrim and Andreas Wessels for a further five years at the Tribunal.
For the past decade, the Tribunal has comprised three full-time panel members and up to eight part-time panel members can be appointed. For the first time, a fourth full-time panel member has been appointed, namely Ms Mondo Mazwai.
Two panel members who were not re-appointed are part-time panel members Professor Merle Holden and Dr Takalani Madima. The President has not announced whether two additional part-time panel members will be appointed to the Tribunal panel.
South Africa takes on more price regulation in planned amendment to Competition Act
BDLive’s Carol Patonreports that Economic Development Minister Ebrahim Patel – with whose involvement in competition policy AAT readers are well aware from reading our site – has further strengthened his grip on the country’s competition authorities. He is said to be drafting amendments to the Competition Act in relation to dominant firms’ “excessive pricing” practices. The amendments are to be introduced to Parliament in 2015.
The article quotes Mr. Patel’s Sunday interview, in which he said:
“The past five years indicated that we are serious about dealing with cartels. But the challenge that we have had is that the economy still has many formal monopolies or upstream producers who are able to impose high prices on downstream manufacturers. We have got to move with greater urgency to tackle the structural challenges. Giving a dominant player the right to set its own price results is an unfairness. In the Sasol example, part of the remedy is for the firm to work with the competition authorities to develop a soft version of price regulation.”
Price regulation is an absolute taboo in U.S. antitrust law, and even under more interventionist and public-policy influenced EU standards, explicit price regulation is not practiced in the bloc’s 28 member states. Sasol, the giant South African oil company, is said to be aware of the government’s plans, saying: “setting prices, in particular of traded goods, invariably leads to unsatisfactory outcomes. South Africa’s joining the World Trade Organisation in 1995 took us forward to opening the economy to compete internationally, with prices being brought in line with international prices. Regulating prices to below gate price, is unlikely to lead to building long-term competitive industries.”
Economic Development Minister of South Africa, Ebrahim Patel, recently stated that the Competition Commission (“Commission”), South Africa’s key competition authority, will be asked to focus on jobs, industrialisation and small business development in lieu of ‘pure’ antitrust-law issues.
Patel stated that government would require the Industrial Development Corporation to focus on supporting black industrialists, and on the competition authorities to promote economic transformation “not as a by-product of but an explicit objective of competition policy.” According to Patel, competition bodies are in a position to contribute directly to the state’s objective of creating a more equal economy, where workers shared in the benefits of growth. His department is allegedly already in talks with the construction industry on a restitution package to redress collusion and price fixing. The end result, he stated, would be that larger companies will provide funds to support small producers and local suppliers.
Patel’s controversial views have already influenced Commission merger decisions and can clearly be seen in the recent Afgri/AgriGoupe case, where the authority entered into an agreement with the foreign buyer of the local grain and poultry company Afgri, requiring the new owners to contribute R90 million ($9m) to a fund to support small-hold farmers with training and loans.
Based on Mr. Patel’s latest pronouncements, South Africa is on a path to politicizing antitrust law and making pure competition considerations a secondary objective to public-interest considerations.
Earlier this morning, the South African Competition Commission (“Commission”) has conducted dawn raids at the offices of Precision and Sons (“Precision”), Eldan Auto Body (“Eldan”) in Pretoria West, as well as the Vehicle Accident Assessment Centre (“VAAC”) in Centurion.
Precision and Eldan’s business activities include panel beating, spray painting and towing of vehicles. Precision is an approved auto body repairer to Original Equipment Manufacturers (“OEMs”) such as Cadillac, Dodge, Chrysler, Fiat, Kia, Chevrolet, Toyota and Honda, while Eldan is an approved auto body repairer to OEMs such as Jeep, Fiat, Mitsubishi, Toyota, Honda and Nissan.
The VAAC is an assessment centre which renders vehicle assessment services to customers of both Precision and Eldan.
The Commission has indicated that the dawn raid operation forms part of its ongoing investigation into collusive conduct in the market for auto body repairs. The Commission has also indicated that it has reasonable grounds to believe that information relevant to this investigation is located on the premises of the two companies.
Sections 46 to 49A of the South African Competition Act of 1998 (“Competition Act”) empowers the Commission to conduct surprise search and seizure visits and to carry out so-called “dawn raids” to a firm’s business premises in order to inspect documents and interview staff where an infringement of competition law is suspected.
The Commission is empowered to enter any such premises when a judge or a magistrate has issued a warrant. Although a warrant is usually an essential requirement to ensure that a dawn raid is conducted in accordance with the law, the Competition Commission does have the power to enter and search a premises without a warrant, in exceptional circumstances. The Commission has confirmed that it has duly obtained the warrants which authorise it to search the offices of Precision, Eldan and VAAC from the North Gauteng High Court.
If the Commission has reason to believe that a firm is in contravention of provisions of the Competition Act, or is in possession of information relating to a matter that is under investigation, the Commission’s investigators have the authority to enter into the firm’s premises in order to inspect and request copies of documents, ask for information in relation to any documents, take notes and interrogate employees, search and examine computer data and remove evidence from the premises. In particular, officials may examine files, reports and emails. The Competition Commission is entitled to confiscate computer hard drives. They may also take copies of documents.
Following a four-year dawn raid “drought”, the immediately-previous dawn raid initiated by the Commission had been conducted in April 2014 at the offices of Unilever South Africa (Pty Ltd) and Sime Darby’s respective South African offices, in relation to the Commission’s investigation into alleged collusive conduct in the product markets for the manufacture and supply of edible oils and baking fats to both wholesale and retail customers.
Lots AAT news this Monday, from Sudan/COMESA to South Africa
Visa facilitator backed by one branch of government & investigated by another
In substantive antitrust news, the South African Competition Commission is reported to be investigating alleged abuses of market dominance by VFS Global in the visa support services market to foreign embassies.
VFS is a worldwide outsourcing and technology services specialist for diplomatic missions and governments.
The firm has now drawn the potential ire of the Commission, as it is now apparently the only outlet for foreigners to apply for South African visas and work permits, as well as for South African citizens to obtain entry visas for multiple countries abroad.
The irony here that we at AAT perceive is that the monopoly position of VFS appears to be based on the new immigration regulations imposed by the ZA government itself (notably the Department of Home Affairs) earlier in 2014: According to a report, the company had recently opened the doors of its multiple offices across the country — “The Pretoria (Gauteng), Rustenburg (North West) and Kimberley (Northern Cape) centres were the first to open on Monday, 2 June. It is envisaged that the last office will be opened on 23 June.”
The investigation – to be confirmed by the Commission this week, as it potentially launches a full-on formal inquest – was purportedly initiated by a competitor complaint from company Visa Request, claiming damage to its competing business flowing from the governmentally-imposed dominant position of VFS’s (allegedly pricier) services…
Commission stays course on Sasol
In more ZA news, Competition Commissioner Tembinkosi Bonakele is staying the agency’s strong course on the excessive-pricing fine imposed on Sasol, which is said to be appealing its R543 fine that had been upheld by the country’s Competition Tribunal, and which Commissioner Bonakele thinks “should be bigger”…
The S.A. Competition Tribunal is hearing the excessive-pricing portion (which was not settled) of the Commission‘s claims against the refining & steel giant this month. The relevant legal underpinning of the case is the provision against excessive pricing by a dominant firm. Precedent has declared prices excessive that “bear no reasonable relation to the economic value of the good or service” at issue. Pheeew. Facts. Economics. Nice. Looks like a coming battle of the experts to me…
By comparison, in the U.S., antitrust law of course does not forbid “excessive pricing.” While setting and reaping apparently high prices may be indicative of monopoly power, such acts are not in themselves anti-competitive or illegal in the States. In Verizon v. Trinko, the U.S. Supreme Court held famously that:
The mere possession of monopoly power, and the concomitant charging of monopoly prices, is not only not unlawful; it is an important element of the free-market system. The opportunity to charge monopoly prices—at least for a short period—is what attracts “business acumen” in the first place; it induces risk taking that produces innovation and economic growth.
Interestingly, there is a notable history of failures in the area of ‘excessive pricing’ complaints in South Africa, as well, despite the statutory legitimisation of the cause of action. In the prior ArcelorMittal and Telkom cases, the Commission and/or Tribunal lost in the end, either at trial or on appeal to the Competition Appeal Court. That Court had found, in the ArcelorMittal case, that the antitrust watchdogs could not use the ‘excessive pricing’ provision of the statute to combat perceived anti-competitiveness in the “market structure rather than price level.”
Today, Bonakele is quoted as follows:
“These are different times. I can promise you this matter is not going to disappear. Sasol is out of touch if it believes it can win the matter on the basis of technical legal arguments. This issue has to be resolved either through competition law or through government policy.
The issue in this case is fundamental to the development of our economy. We are dealing with resources that should be available to promote that development. The government plays an important role in the country’s industrialisation, and I believe it will be very interested in the progress of this case.”
COMESA’s costly courthouse
While the COMESA organisation has had trouble in the virtual world this year, its real-world endavours appear to be prospering: Its shiny new courthouse, built to the tune of over $4 million (equivalent to only 8 merger filing fees), has opened its doors. The country’s Minister of Justice, Mohamed Bushara Dosa, last week handed over to the COMESA Secretariat-general the Khartoum-based court premises.
The court will notably hear antitrust and merger cases that are appealed from the organisation’s Competition Commission.
The glimmering COMESA court house in Sudan, built to the tune of $4.1 million
Law firm of AAT editor John Oxenham has been awarded two prestigious recognitions
Finance Monthly – Law Awards 2014
Following a nomination and voting process, Nortons Inc. has won the award for “Antitrust & Competition Law Firm of the Year – South Africa” in this year’s Finance Monthly Law Awards. The awards are divided into firm and individual categories and have been chosen to reflect the range of practice areas and skills that lie at the heart of the successful law firm or legal department.
Lawyers World Global Awards 2014
Nortons Inc. also won the South African award in the Lawyers World Global Awards 2014, which recognises a select number of leading professional firms, organisations & advisers worldwide for their individual areas of specialisation within their respective geographical locations.
“Highly regulated” liquefied petroleum gas at center of second sectoral Commission inquiry
According to the South African Competition Commission, the agency has issued “Terms of Reference for the market inquiry into the Liquefied Petroleum Gas sector”:
The Commission has today issued the Terms of Reference (ToR) for the LPG market inquiry. The ToR formally launches and outlines the scope of the inquiry.
The Commission is initiating the inquiry because it has reason to believe that there may be features of the sector that prevent, distort or restrict competition. The Commission hopes that the inquiry will assist in understanding the state of competition in the LPG sector.
It comes on the heels of the first market inquiry into private healthcare, on which AAT has reported extensively.
According to the Terms of Reference, the objectives of the market inquiry include:
Analyzing the current regulatory pricing framework with the aim of determining whether regulation could be improved in order to limit the exercise of substantial market power by market participants;
Examining whether the supply bottlenecks in the liquefied petroleum gas industry may serve to create circumstances or incentives that serve to distort, prevent or lessen competition;
Determining whether features currently prevalent in the market increase costs of switching to a prohibitive level when customers seek to switch between resellers of liquefied petroleum gas;
Assessing the extent of the barriers to entry and general competition dynamics at various levels of the supply chain within the industry; and
Making recommendations that may serve to improve the state of competition.
The Commission has identified the participants in the market inquiry process as including business enterprises within the liquefied petroleum gas chain, such as manufacturers, wholesalers, distributors and retailers, other related enterprises, end-users, government departments, public entities, regulatory authorities, industry associations and any other stakeholders that may be able to provide information relevant to the market inquiry.
BDLive reports that approximately “300,000 tons of LPG is manufactured in SA annually, generating turnover of about R1.5bn. Six refineries, Sapref, Sasol Synfuels, PetroSA Synfuels, Enref, Chevref and Natref produce and supply LPG.
Major resellers such as Afrox, Easigas, BPSA and Total Gas distribute it bulk or in a repackaged form. Afrox, Easigas and Sapref also imported at least 6,100 tons of LPG through facilities in Richards Bay, Port Elizabeth and Durban.”
South African justice ministry’s highest-ranking member calls for strengthened competition enforcement against “monopoly pricing” and creation of “black bourgeoisie”
In an apparently rambling discourse, covering a vast swathe of subject-matter, South Africa‘s Justice Minister Jeff Radebe has been quoted as calling not only for the dismantling of the “over-concentrated” economy “in the hands of a few large companies,” but also for the creation of a “black bourgeoisie,” purportedly to counter-act the remaining racial imbalance in the country’s economic structure, according to an article in the South African Times Live:
On promoting competition in the economy, Radebe said the Competition Act would be strengthened to prevent monopoly pricing of goods such as steel and heavy chemicals.
This would make local manufacturing more competitive, and support infrastructure investment.
“The competition authorities will be further developed to act against cartels and ensure public interests are adequately protected in mergers and acquisitions.”
… Radebe was heckled from opposition benches when he said the emphasis would be on “creating black industrialists in productive sectors of the economy, and developing a patriotic black bourgeoisie”.
He broke from his prepared speech and asked, to laughter: “Why should it only be white bourgeoisie?“
Is a “bourgeoisie” reconcilable with populist politics (and competition law)?
One cannot help but wonder what the connection between the elimination of the so-called “white bourgeoisie” and the reduction of “over-concentration” in the economy may be, if any.
Moreover, AAT respectfully expresses its doubt whether creating a “bourgeoisie” — any bourgeoisie (wholly regardless of its race) — is in the general population’s interests, as the Minister seems to think (“It is a people’s plan which has been adopted by the majority of our people and stakeholders. We are therefore calling on all South Africans to rally behind the implementation of the plan, including labour, business and civil society”). As another article on the topic points out,
In Marxist philosophy, the termbourgeoisiedenotes the social class who owns the means of production and whose societal concerns are the value of property and the preservation of capital, in order to ensure the perpetuation of their economic supremacy in society.
The prototypical bourgeois: Molière’s Monsieur Jourdain, the protagonist of the play Le Bourgeois gentilhomme (1670)Radebe’s vision of a better & more competitive society? Replace Monsieur Jourdain with a new version of Sandton’s bourgeoisie?
Antitrust plan unclear
How the SA antitrust watchdogs (the Competition Commission and the Competition Tribunal) were going to be “further developed” – structurally, scope/jurisdictionally, personnel-based or otherwise – was not immediately clear.
The remarks were part of the minister’s statement in the parliamentary opening debate on the president’s state-of-the-nation address.
Justice Minister Jeff Radebe (Image via Times Live, by: SYDNEY SESHIBEDI)
African Antitrust & Competition Law 