South Africa: Trilogy of Rulings Against the Competition Commission Demonstrates the Importance of Following Proper Procedure

In three recent decisions, two by the Competition Tribunal and one by the Competition Appeal Court, a number of important procedural flaws were exposed in the manner in which certain complaints were initiated against various respondents. The Competition Appeal Court even made an adverse costs order against the Competition Commission in one of the cases. We discuss these important decisions below.

Misjoinder of Parent Company

The South African Competition Commission (“SACC”) had recently alleged that Power Construction (West Cape) Pty Ltd (“West Cape”) and Haw and Inglis (Pty) Ltd (“H&I”) colluded in respect of a tender submitted to South African National Roads Agency (SANRAL). The tender was in respect of maintenance services. The SACC alleges both parties had contravened section 4(1)(b)(ii) and (iii) of the South African Competition Act (the “Act”).  The parent company of West Cape, Power Construction (Pty) Ltd (“Power Construction”) was cited as a respondent on the basis that it would be liable to pay the administrative penalty. Power Construction, had engaged in “with prejudice” settlement negotiations.

The SACC refused the proffer and informed Power Construction that after having  considered the settlement proceed that it was clear that Power Construction and West Cape (being the subsidiary of Power Construction) shared a majority of their respective directors which, according to the SACC, was sufficient to implicate Power Construction in the alleged collusive conduct. Accordingly, the SACC alleged that any Administrative Should be calculated using the higher annual turnover figures of Power Construction.

Power Construction disputed this, arguing that it was never alleged by the SACC that Power Construction had contravened the Act. The SACC then opted to amend its referral to include Power Construction. On application to the South African Competition Tribunal (“Tribunal”), the Tribunal dismissed the proposed amendment on the basis that the SACC had failed to provide any material evidence to establish a prime facia case in favour the relevant amendment, stating that the burden remains on the applicant to prove that it is deserving of the amendment by putting sufficient factual allegations before the Tribunal.

In conclusion, the Tribunal also confirmed that the amendment could regardless have been rendered excipiable based on prescription. In this matter, the alleged conduct ceased more than three years prior to the Commission becoming aware of the conduct.

Prescription

In a further case, namely the Competition Commission and Pickfords Removals SA, regarding the interpretation of section 67(1) of the Act (namely that dealing with prescription), the Competition Appeal Court (“CAC”) was very recently called to decide on the correct date for the running of prescription in terms of section 67(1) of the Act.

The SACC (being the appellant in the matter), brought an appeal to the CAC after the Tribunal held that the complaint initiated by the SACC was time barred in terms of section 67 of the Act.

The SACC disputed this and submitted that prescription in terms of section 67 of the Act should only commence from the date on which the Commissioner or Complainant acquired knowledge of the prohibited practice and, alternatively, that the Tribunal has a discretion to condone non-compliance with this 3-year time period. The latter issue was central to the dispute.

The question was further complicated by the fact that the SACC filed two compliant initiations against the respondents. The SACC submitted that the so called ‘second initiation’ was merely an amendment to the first initiation. So the SACC argued, even if the time period had begun running when the practice had stopped, the time period in question would still not have expired.

In this regard, the CAC held that the SACC has the power to amend a compliant initiation and that it must be taken at its word on whether a second initiation is an amendment to the first or a separate and distinct complaint initiation. This is so, particularly where both complaint initiations concern the same conduct, in the same market and where the first complaint initiation states that the conduct is ongoing.

In relation to the issue of prescription, the CAC held that section 67 cannot be equated with section 12 of the South African Prescription Act which provides for prescription to commence  from the moment on which the “creditor acquires knowledge of the identity of the debtor and the relevant fact from which the debt arises”. Section 49B(1) of the Prescription Act provides for a much lower threshold, being the ‘reasonable suspicion of the existence of a prohibited practice’.

Accordingly, it must be accepted that the time bar in section 67 is intended to be a limitation of the Commissioner’s wide ranging powers (to prevent investigation into historic matters which are no longer in the public interest) and that the knowledge requirement contained in the Prescription Act cannot be read into this limitation as argued by the SACC. It follows then, based on this reasoning that there can similarly be no condonation by the Tribunal or the CAC on these matters.

For completeness sake, the CAC confirmed the general understanding that, for purposes of section 67, the alleged prohibited conduct will be deemed to have ceased on the date on which the respondent last benefited from the prohibited conduct (e.g. the date on which it last received payment under the agreement). In this regard, the Tribunal initially ordered the parties to produce evidence of the date on which the last payment was received. The CAC deemed this appropriate and opted not to interfere with this order.

Condonation and Costs

The Tribunal was also called recently upon to decide two interlocutory applications, the first being a condonation application brought by the SACC in terms of section 54 of the Act for the late filing of its revised trial bundle (containing an additional 1221 pages), which was opposed by the respondents (Much Asphalt and Roadmac Surfing) and finally a counter application for costs against the SACC.

In terms of the condonation application, the SACC sought to revise the trial bundle on the basis that the revised trial bundle contained documents which were essential to its case (which were inadvertently omitted from its initial bundle) and had been re-organized in a manner that was less burdensome for all the parties involved. In support, the SACC argued, that the respondents wouldn’t be prejudiced by the late filing as the extra documents had already been discovered.

The Tribunal confirmed that the test for condonation must be ‘good cause shown’ by the SACC which should be assessed on case by case basis. The Tribunal held that the SACC had not shown good cause in this matter as it had ample time to furnish the respondents with the revised bundle and further found that filing the revised bundle at the 11th hour was unnecessarily prejudicial to the respondents.

south_africaIn terms of applications for costs, the respondents sought an order for wasted costs in relation to the postponement due to the late furnishing of the bundle as well as the cost of defending the application for condonation. Importantly it should be borne in mind that the Tribunal does not as a matter of course make cost orders against the SACC.  In this regard, the Constitutional Court has previously held that the Tribunal does not have the powers to make adverse cost orders against the SACC, even where the SACC has abused its powers. The general rule is that the parties pay their own costs. The Tribunal may only make cost orders against third parties and, accordingly, dismissed the respondent’s application for costs.

John Oxenham, director of Primerio says that these cases demonstrate the objectivity and impartiality of the adjudicative bodies which is an encouraging sign for respondents who do not believe that the case brought against them is procedural or substantively fair.

Fellow competition lawyer, Michael-James Currie says it is unfortunate that only the Competition Appeal Court makes adverse costs rulings and that the Competition Tribunal is precluded from doing so. Adverse costs ruling against the SACC should be reserved for matters in which there was clear negligence in the manner in which a case was investigated, pleaded or prosecuted. Such costs orders would, however, go a long way in ensuring that parties and in particular the prosecution agency, does not refer cases  to the adjudicative bodies (which have limited prospects of success) with no downside risk in losing the case.

Oxenham shares Currie‘s sentiment and suggests that adverse costs orders against the Commission will likely result in a more efficient enforcement regime as cases will be settled more expeditiously and respondents will be more reluctant to oppose the Competition Commission’s complaints with the knowledge that the SACC is confident in its case and prepared to accept the risk of an adverse costs order.

[The Editor wishes to thank Charl van der Merwe for his contribution to this article]

 

 

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Antitrust Overhaul: South Africa to amend Competition Act today

South African President Cyril Ramaphosa is expected to sign the Competition Amendment Bill into law today, February 13, 2019, continuing a busy seven-day streak for major legislative antitrust developments on the continent (see here). The new law will be amending the venerable Competition Act, one of the preëminent antitrust statutes of the continent.  The amendment has been pushed for by Minister for Economic Development, Ebrahim Patel.  The official Presidential commentary on today’s signing notes the novel fights against “concentration and economic exclusion as core challenges” to the country’s growth, as well as the perceived dangers of economic exclusion from major markets of small and black-owned businesses.

As a trio of competition attorneys write in a recent article in the Journal of European Competition Law & Practice, the Amendment Bill alters key provisions of the South African Competition Act focusing specifically on the redistribution of wealth and transformation of ownership in lieu of pursuing traditional antitrust goals.

The Bill provides for greater ministerial intervention at the initial stage of a merger (based on national security), during the merger investigation (based on public-interest grounds) and broadens the right of appeals to parties outside the merger control review.

The Bill lowers the standard that the South African Competition Commission must meet to prosecute cases and foreshadows a risk of increased third-party interventionism more generally.

The departure from a traditional substantial lessening of competition (SLC) test to an adverse effects-based test, which takes public interests considerations into account, is likely to result in the injection of greater subjectivity into the decision-making process and parties’ increased difficulty in self-assessment of conduct particularly in relation to dominant firms.

AAT has published further articles on the topic here, here, and here.

Minister Patel speaks

Minister Patel speaks

“Emerging Antitrust”: One size doesn’t fit all?

Pro rem publicam

At the Concurrences “Antitrust & Developing and Emerging Economies” conference held at NYU Law last Friday — and aptly sub-titled “Coping with nationalism, building inclusive growth” — the audience was treated to a (rather iconoclastic, yet fascinating) keynote speech by Nobel laureate economics professor Joe Stiglitz, which highlighted what would become a theme woven throughout the four panels of the day: One size does not fit all when it comes to competition-law regimes, according to a majority of the speakers; imposing a pure U.S. or EU-derived methodology without regard to local economic and/or political differences is doomed to fail.  However, as we outline further below, there were also countervailing voices…

Nobel Laureate Joseph Stiglitz: “Revisit all of antitrust!”

In the words of Professor Stiglitz, his advice to developing nations was (perhaps to the chagrin of U.S. government representatives, such as the FTC’s international director, Randy Tritell): “don’t copy the US antitrust laws and presumptions!”  Smaller markets in developing countries are even more susceptible to market power by few large firms.  Competition law can be used in developing countries to advance the public interest, as there are fewer “tools in the toolkit” in those nations, and in his view, all available tools should thus be used.  He referred to the WalMart/Massmart transaction in South Africa in this regard, noting the public-interest conditions imposed there.

On the day’s Mega Mergers panel, SACC Commissioner Tembinkosi Bonakele noted how the outcomes of truly global “mega mergers” all having been positive, “there has been no outright prohibition, there really is no problem that’s too big which could not be remedied by the authorities and the parties.”

Andreas Stargard and Commissioner Tembinkosi Bonakele (South Africa)

Observes Andreas Stargard: “Commissioner Bonakele also pointed to the importance of international merger enforcers cooperating on remedies, in order to allow these positive outcomes to be maintained.  Taking up Professor Harry First’s hypothetical of a joint or ‘merged’ antitrust enforcement agency, Mr. Bonakele considered a combined merger authority for the African continent a possibility, especially in light of the many small jurisdictions which individually lack resources to police cross-border M&A activity.”  Mr. Bonakele expressed the concern that “the smaller, national enforcers certainly feel as if they cannot block a mega deal on their own, so they largely defer” to the established agencies, such as the EC and DOJ / FTC.

In response to Frederic Jenny’s critical introduction of the South African Competition Amendment Act, Commissioner Bonakele commented that the current legal regime lacked the ability to tackle concentration as a market feature in itself, whilst the SACC had a comparatively positive track record on unilateral enforcement issues.  Overall, he disagreed with the moderator that most of the Bill’s changes were drastic, stating simply that it would in fact bring South Africa more in line with other international regimes.

As to the ministerial intervention powers, he identified two concerns, namely the use of the agency’s resources as well as the possible risk of abuse by a minister who could employ the new law to pursue ulterior motives against a firm or a sector.

Counterpoint: public interest or politicization?

Prof. Ioannis Lianos characterized the “slightly fuzzy public interest test” as largely a scheme to enhance the bargaining power of the competition agencies that do apply such a test.

Canadian attorney and former enforcer Lawson Hunter pointed out that the trend of growing political interference in the merger approval process has spread globally, not only in developing nations but also in well-established regimes — often under the guise of national security reviews, which are “obscure, opaque in process, fundamentally political, and without any ‘there there’.”  Merger review has “simply become very broad and less doctrinal.”  “I found it interesting that Mr. Hunter recommended that other antitrust agencies should give more frank input into their sister agencies, if and when those stray from the right path,” said Stargard, who focuses his practice on competition matters across the continent.  “Hunter also pointed to the tendency in emerging antitrust jurisdictions to abuse the remedy process in merger control to address economic issues that lie well outside the actual competition concerns that may have been found — an issue we have also come across, sadly.”

Commissioner Bonakele closed the final panel of the day by addressing the recently ratified South African Competition Amendment Bill: he admitted that there were some “radical” provisions in the law, such as the power to break up companies, as well as the existence of a risk of government using the law’s new national security provision in a protectionist manner. He concluded by stating his personal worry that the law had possibly too much ambition, which could be difficult to implement in reality by the SACC.

SA Competition Act officially amended – serious consequences for businesses

South Africa has amended its antitrust laws, first introduced to the country in 1998 via its Competition Act.  Parliament ratified the amendments (which still have to be rubber-stamped by the National Council of Provinces, a mere formality) yesterday over the serious objections of the opposition parties.  The new law will give significant interventionist powers to the Minister for Economic Development, Ebrahim Patel, as well as introduce lower (or even reversed) burdens of proof for the Competition Commission (SACC) to make its case, after a long-running string of court losses and appellate defeats has seen the SACC’s track record weakened, observers say.

As reported on AAT Monday, a panel of Africa-focussed competition specialists had just recently convened in Johannesburg, warning the South African business community about the high probability of the Bill’s passage, as well as addressing the adverse effects the Bill will have on doing business in South Africa as a medium to large size market player (measured in market share, not merely revenue) or simply as a foreign-owned corporate.

Minister Patel speaks

Minister Patel

Interviewed yesterday in Cape Town, where the Amendment Act was ratified by South Africa’s Parliament, Primerio competition practitioner Andreas Stargard commented: “As we foreshadowed at our conference less than a week ago, the likelihood of the Bill passing was high.  Political, populist pressure was simply too strong for this amendment — which had been introduced as a so-called ‘prioritised bill’ that could be fast-tracked — not to pass.  We view the likely effects of it as a serious departure from commonly accepted best practices in the international world of antitrust law, as we outlined to our clients at the Johannesburg conference.  I will be curious to hear what Commissioner Bonakele’s comments on these critiques will be at Friday’s conference at New York University“, referring to an event sponsored by NYU and Concurrences, at which the SACC Commissioner is expected to deliver a panel speech later this week.

Commenting on the purported social transformational goals, South African competition partner John Oxenham adds: “There is a relentless push from government (not only Mr. Patel) to use the Competition Act as a tool to speed up its broader social and transformation goals.  The underlying reasons for this Amendment are rather straightforwardly conceded by the current, and arguably presently fluctuating, administration: the Bill was ostensibly designed not to enhance competitiveness in the traditional antitrust sense, but rather to address so-called market concentration and perceived unequal ownership patterns in the SA economy.”

October Antitrust Conference Shines Spotlight on Africa

New York Concurrences conference: Focus on emerging economies, “coping with nationalism and building inclusive growth”

AAT invites its readers to sign up for what promises to be a timely and topical conference in NYC this October 26, 2018, at NYU Law School.  Program below, sign-up with Eventbrite here.  The event features the SACC’s Commissioner Tembinkosi Bonakele as well as professor Simon Roberts from the Univ. of Johannesburg.


08.15 am

Registration & Breakfast

 8:45am

Opening Keynote Speech

Joseph STIGLITZ  

Nobel Prize-Winning Economist | Professor, Columbia University, New York  

9:30am

Competition, Industrial Policy and Developing Countries

Noah BRUMFIELD | Partner, White & Case, Washington DC

Dennis DAVIS | President, Competition Appeal Court of South Africa, Cape Town

Kirti GUPTA | Senior Director, Economic Strategy Qualcomm, San Diego

Frédéric JENNY | Chairman, OECD Competition Committee, Paris

Simon ROBERTS | Professor, University of Johannesburg, Johannesburg

Moderator: Eleanor FOX | Professor, NYU School of Law, New York

 11:00am

Coffee Break

11:15am

Mega Mergers and Developing Countries

Tembinkosi BONAKELE | Commissioner, South Africa Competition Commission, Pretoria

Marcio DE OLIVEIRA JR | Senior Consultant, Charles River Associates, São Paulo

Gönenç GÜRKAYNAK | Partner, ELIG Gürkaynak Attorneys-at-Law, Istanbul

Nicholas LEVY | Partner, Cleary Gottlieb Steen & Hamilton, London

Ioannis LIANOS | Professor, University College London

Moderator: Harry FIRST | Professor, NYU School of Law, New York

 12:45pm

Lunch

1:45pm

BRICS: A Competition Agenda? 

Alexey IVANOV | Director, HSE-Skolkovo Institute for Law and Development, Moscow

Ruchit PATEL | Partner, Ropes & Gray, London

Cristiane SCHMIDT| Commissioner, CADE, Brasília

Xianlin WANG | Professor, Shanghai Jiao Tong University, Shanghai

Moderator: Daniel RUBINFELD | Professor, NYU School of Law

 3:15pm

Coffee Break

3:30pm

Enforcer’s Roundtable: What’s Under the Radar?

Roger ALFORD|Deputy Assistant Attorney General, US DOJ, Washington DC

Tembinkosi BONAKELE | Commissioner, South Africa Competition Commission, Pretoria

Randolph TRITELL | Director, Office of International Affairs, US FTC, Washington DC

Joseph WILSON | Adjunct Professor, McGill University, Montreal | Former Chairman, Competition Commission of Pakistan

Moderator: Frédéric JENNY| Chairman, OECD Competition Committee, Paris

5:00pm

Closing Wrap-up: New York Minute

Eleanor M. FOX | Professor, New York University School of Law

Harry FIRST | Professor, New York University School of Law

5:15pm

Cocktail Reception 

 

South Africa Competition Tribunal: Merging Parties Penalised for Failure to Comply with Public Interest Conditions

By Michael-James Currie

On 29 June 2018, the South African Competition Tribunal (Tribunal) penalised the RTO Group R75 000 for failing to comply with the Tribunal’s conditional merger approval in respect of two companies now within the RTI stable, Warehouseit and Courierit. The Tribunal approved the large merger in August 2015.

In terms of the Tribunal’s merger approval, a moratorium on merger specific retrenchments for a two year period was imposed – now a frequently imposed public interest related condition by the competition agencies in South Africa.

RTI, however, was penalised not for retrenching any employees during this window but for failure to adhere to the monitoring obligations as set out in the Tribunal’s conditional approval certificate.

In this regard, the merging parties were obliged to notify their employees (and Courierit’s subcontractors) of the conditions to the merger approval within five days of the merger approval date. The merging parties were also obliged to provide the Competition Commission with an affidavit confirming that the obligations in terms of the conditions had been complied with.

By way of a consent order, RTI admitted that it failed to comply with its monitoring obligations and agreed to pay an administrative penalty for breaching the Tribunal’s conditional merger approval.

Although there have been a limited number of cases in respect of which an administrative penalty has been imposed for a breach of the merger conditions, this case demonstrates the importance of fully complying with the terms set out by way of a conditional merger approval.

Furthermore, although notifying the employees of the relevant conditions may not have been a particularly onus obligation, merging parties should take particular cognisance of monitoring and reporting obligations when negotiating conditions with the Competition Commission. Merging parties understandably place greater emphasis on the substantive aspects of the conditions and may underestimate the reporting obligations related thereto – particularly if conditions are being negotiated at the eleventh hour (which is not uncommon).

While there are mechanism’s available to merging parties to remedy any patently unworkable aspects contained in merger approval conditions, it is advisable to ensure that the conditions are practical and capable of being adhered to in full prior to being finalised – assuming the merging parties have that luxury.

[Michael-James Currie is a South African based competition lawyer and practices across Sub-Saharan Africa]

Competition Appeal Court’s Ruling in Standard Bank Case: A Changing of the Tides?

Threat of Referral no Longer an Arrow in the Commission’s Quiver?

By AAT Senior Contributor Michael-James Currie

In the first week of June 2018, the South African Competition Appeal Court (CAC) upheld Standard Bank’s appeal and ordered that the Competition Commission (Commission) make available its investigation record to Standard Bank. Standard Bank is a respondent in the Commission’s ForEx investigation.

Standard Bank had requested that the Commission make available its record in terms of Rule 15 of the Competition Commission Rules. Rule 15 permits any member of the public to request access to the Commission’s non-confidential record. Standard Bank therefore brought its application in terms of Rule 15 not on the basis of it being a respondent to the Commission’s investigation but as an ordinary member of the public.

Although the CAC had in an earlier case, Group 5, set out the correct interpretation and application of Rule 15 and stated that:

  1. the Commission is obliged in terms of Rule 15 to make available its record of investigation;
  2. that the Commission must do so within a “reasonable time”; and
  3. that the Commission must disregard the applicants status as a litigant when determining what a reasonable time is.

The Tribunal in the Standard Bank case, however, deviated from the CAC’s binding decision in Group 5 and held that the Commission would only need to make its record available to Standard Bank at the time of discovery.

Accordingly, the CAC in the Standard Bank case found that the Tribunal took Standard Bank’s status as a litigant into account when assessing what a reasonable time would be by which the Commission was obliged to make available its record to Standard Bank. The CAC in Standard Bank confirmed that although the Tribunal is not bound by the stare decisis principle in relation to its own decisions, the Tribunal is bound by the CAC’s decisions. The Tribunal’s decision in Standard Bank was inconsistent with the CAC’s earlier decision in the Group 5 case – where the CAC expressly stated that there is no rational basis for linking the production of the Commission’s record with discovery proceedings. The Tribunal’s departure from the CAC’s earlier precedent was noted with concern by the CAC in Standard Bank.

The Commission argued – as justification for not producing its record – that Standard Bank was abusing its position as a litigant. In this regard, the CAC expressly rejected this argument and held that simply because a plaintiff would be better placed to plead its case after receiving the Commission’s record that, in of itself, does not amount to an abuse of process. The CAC held that it would only amount to an abuse of process if an applicant sought to rely on Rule 15 in order to avoid or delay having to plead within the prescribed time periods.

Furthermore, the CAC reaffirmed that a member of the public’s right to access the Commission’s record should not be prejudiced by the fact that such a member is also a litigant.

The Court’s Standard Bank decision is important as respondents will invariably be inclined to seek access to the Commission’s record prior to pleading their case. This may have a material impact on the Commission’s settlement strategy as respondents in settlement negotiations with the Commission are likely to request the Commission’s record in order to assess the strength of the Commission’s case against it before deciding whether to settle the case or not – thereby compelling the Commission to ensure that a robust investigation is conducted prior to entering into settlement negotiations with respondents.

Says John Oxenham, ‘the “threat of a referral” is unlikely to present the Commission with the same negotiating leverage as it may otherwise have enjoyed when respondents were kept in the dark as to the evidence which the Commission may have against them.’

Whether this all plays out in practice remains to be seen although any decision which promotes transparency and legal certainty can only be positive. It is for this reason that the CAC’s express criticism of the Tribunal’s decision to depart from established case precedent is particularly noteworthy as it is a stark reminder to all adjudicative bodies of the importance of adhering to the rule of law.

Shipping cartels: BMW Pursues Civil Damages Claim against certain Carriers

By Stephany Torres

BMW plans to lodge a claim in South Africa for damages against international car-carriers and shipping companies which have been found guilty or have pleaded guilty to competition law contraventions, including Japanese-based Mitsui O.S.K. Lines (“MOL”) and K-Line Shipping South Africa, the local subsidiary of Kawasaki Kisen Kaisha (“K-Line”), Norway’s Wallenius Wilhelmsen Logistics AS (“WWL”) and Nippon Yusen Kabushiki Kaisha (“NYK”).  BMW is seeking compensation for the losses it alleges to have suffered as a result of the anti-competitive price-fixing arrangements between the car carriers.

BMWship.jpgBMW’s case stems from an amnesty application, by which MOL approached the South African Competition Commission (“the Commission”) in terms of its Corporate Leniency Policy (“CLP”), which outlines a process through which the Commission may grant a self-confessing cartel member, who approaches the Commission first, immunity for its participation in cartel activity upon the cartel member fulfilling specific requirements which includes providing information and cooperating fully with the Commission’s investigation.  Says John Oxenham, a South African competition lawyer, “if the Commission grants an applicant what is called ‘conditional immunity’, a possible outcome is the complete avoidance of a fine, which could otherwise be calculated at up   to 10% of domestic revenues, including exports.”  That said, conditional antitrust immunity, does not offer full exoneration from potential other liability in respect of the conduct for which the Competition Commission granted immunity.

It is notable that MOL, NYK and WWL subsequently agreed to cooperate with the Commission in prosecuting K-Line.

On further investigation by the Commission it found that K-Line, MOL, NYK and WWL fixed prices, divided markets and tendered collusively in contravention of section 4(1)(b)(i), (ii) and (iii) of the Competition Act no 89 of 1998 in respect of the roll-on/roll-off (Ro-Ro) ocean transportation of Toyota vehicles from South Africa to Europe, the Mediterranean Coast of North Africa and the Caribbean Islands via Europe, West Africa, East Africa and the Red Sea.

The Commission’s investigation found that from at least 2002 to 2013 K-Line, MOL, NYK and WWL colluded on a tender issued by Toyota SA Motors (“TSAM”) to transport Toyota vehicles from South Africa abroad by sea.  The Commission further found that K-Line, MOL, NYK and WWL agreed on the number of vessels that they were to operate on the South Africa to Europe routes at agreed intervals or frequencies.

In addition, the Commission found that K-Line, MOL, NYK and WWL agreed on the freight rates that they were to charge TSAM for the shipment of Toyota vehicles.

International competition authorities including authorities in the US, Canada, Japan, China and Australia investigated this case and, in recent years, imposed large fines on the respective cartelists for engaging in market division and price fixing.  In February 2018, Wallenius Wilhelmsen agreed to pay a large fine to the EU.  Höegh Autoliners has reportedly been summoned to a court meeting in South Africa in March 2018.

 

Concurrences: Interview with Commissioner Bonakele

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Antitrust in Developing Countries: Competition Policy in a Politicised World

Our friends at Concurrences Review are hosting the fourth edition of the joint conference co-organized by Concurrences & New York University School of Law, in New York City on October 27, 2017.

Tickets and more information can be obtained here.

Below is the interview of Tembinkosi Bonakele (Commissioner, South African Competition Commission) by Ioannis Lianos (Professor, University College London). The two will participate in the conference panel “Impact of the New Nationalism on Competition and Economic Development in Developing Countries.”

Interview between Prof. Lianos and Commissioner Bonakele

© Concurrences

Competition authorities are increasingly interested in assessing the effects of mergers or other conduct on innovation. How is this concern over the promotion of innovation affecting the substance of competition law enforcement, and in particular the extraterritorial application of competition law, as innovation is often taking place in the context of global value chains? How should one resolve conflicts over competing visions over the impact of competition on innovation, as it seems to be, for instance, the case between the EU and the US, and possibly BRICS countries?

One of the aims of competition law is to encourage innovation. Firms and individuals are incentivised to innovate due to the protection conferred on their innovations by intellectual property laws (IP). Therefore, at least theoretically, competition and IP laws ought to be complementary. However, the conflicts between competition law and innovation/IP laws are increasingly coming into sharp focus within the context of global value chains. One such example is the recent global mega-mergers in the seeds and agro-chemicals sectors. These mergers illustrate how multinationals can leverage their significant innovation and research resources by extending their IP protections through ‘ever-greening’ of patents, reciprocal IP cross licensing arrangements with close rivals, joint ventures and collaborative research and development. This level of collaboration suggests that the seed/agro-processing markets are likely more concentrated than is currently understood. From a policy perspective, competition authorities in both the EU and US seem supportive of this level of concentration based on the theory that such concentration increases innovation, notwithstanding their (unintended) global unilateral effects to which developing countries are especially vulnerable, given the centrality of agriculture for the sustenance of communities in their economies. The vulnerability of developing countries is further exacerbated by the fact that they are trying to regulate multinationals which have access to resources that dwarf the GDPs of many developing countries, and are able to lobby hard politically, against any interventions aimed at their activities.

Against this backdrop, the way forward for BRICS and other developing countries is to continue efforts to establish their own research platforms to enable the true impacts of the trade-off between innovation and competition law to be better understood from a developing country perspective. Furthermore, there is scope for greater global co-ordination amongst competition law agencies to ensure that global transactions are investigated and remedied in a co-ordinated manner.

Broader public policy concerns, than consumer welfare narrowly defined, are increasingly taken into account by various competition law systems around the world, in both developing and developed countries when assessing mergers and, in some instances, anticompetitive conduct. There is also increasing demand for a broader canvas of principles and values in order to assess business conduct, as this is demonstrated by the development of the concepts of “social” and “green” capitalism. Should competition law authorities explore more systematically this trend and eventually move to a public interest standard in assessing anticompetitive conduct, at least in some economic sectors (for instance involving primary goods, such as food, shelter, or with considerable environmental impact etc.)? What would be the implications for the global governance of antitrust?

Many countries already apply tests beyond the typical competition law tests in merger assessments, but they do not declare those tests in an open and transparent way. In contrast, South Africa’s merger regulation explicitly includes a public interest test and guidelines have been issued setting out how the test will be applied during merger assessment.

Should public interest cover some old and emerging social issues such as green issues or the environmental impact on food security, shelter and so on? I think there is scope for these to be part of an assessment of merger transactions, but their location need not necessarily be with a competition agency and they can be properly assessed through a different regulatory agency in a transparent manner. Countries should be allowed to structure their agencies the way they deem fit.

Within South Africa’s context, in order to address historical inequalities and economic and political imbalances, competition legislation specifically provides for both competition law and public interest standards in the merger assessment process. It bears specific mention that the courts have recently confirmed that both the competition law and public interest tests are of equal prominence in any merger determination process. In a developmental context, economic exclusion exacerbates inequality, poverty and unemployment and competition policy in conjunction with industrial policy (introduced through public interest) can break down barriers to entry and unleash innovation and new entry, which are pivotal to the unleashing of economic growth and development.

Although public interest considerations in merger assessment would appear, largely, the preserve of developing countries, developed countries and most notably, the European Union, seem to be re-considering their stance towards public interest considerations in merger assessment. Moreover, the impact of globalisation appears to be giving rise to a new wave of ‘new nationalism’ in developed countries (and the United States is no exception). This has ushered in more inward looking perspectives to international trade and ironically, may give rise to the use of public interest considerations in ‘tit for tat’ exchanges in transactions taking place within an increasingly geopolitical context. Thus, the implications for the global governance of anti-trust may be convergence.

In recent years the competition authorities of BRICS countries and other large emergent economies have been increasingly active in competition law enforcement, adjudicating high profile cases of global importance. The experience gained may be a source of inspiration for competition authorities in other emergent and developing countries, and could also be an important source of learning and wisdom for the competition authorities in developed countries. Do you consider that BRICS and other larger emergent competition authorities should strive to ensure global convergence with the EU and/or US models of competition law, as this is put forward by some, or should they opt for different models, experimentation being an important source of collective learning for both developing and developed countries? Should convergence, or experimentation, be the main/driving principle for the global governance of competition law? 

In the developed world, competition law is applied within a context in which it is presumed that markets are naturally competitive, self-correcting and don’t require policy interventions to address failures. However, that presumption cannot hold true in a developing country context where markets are undeveloped, highly concentrated, non-inclusive and unemployment and inequality are high. In this ‘developmental context’ competition law is applied within a context in which it is presumed that firms with market power exploit it. Therefore, in developmental context, competition law more than just efficiency, but human and socio-economic development as well.

Rather than seeking convergence with developed country perspectives on competition law, developing countries need to play a more prominent role in understanding how competition law policy can be used to address poverty, inequality and unemployment. This will require developing countries through the auspices of representative regional platforms such as BRICS, to enhance co-operation, share experiences and develop legal and competition law expertise from a developmental perspective.

Thus, it is important to appreciate that approaches to competition law in the developed and developing worlds are diverse and that divergence should be tolerated and informed by context. This does not take away the need for global co-operation and sharing best practices. There are also instances where harmonisation may be desirable, like in regions with or striving for common markets.

South Africa: Merger Thresholds and Filing Fees Increased

As of 1 October 2017, the recently revised merger thresholds which were published by way of Government Gazette will become effective.

The large merger thresholds have remained unchanged, however, the thresholds for an intermediate merger (which requires mandatory merger notification if met) have been amended as follows:

The combined threshold has been increased to R600 million (approx.US$46 million) R560 million).  The combined threshold for an intermediate merger relates to either the combined turnover of the merging parties’ South African specific turnover or the merging parties combined asset value in South Africa.

The lower merger threshold (i.e. the target’s thresholds) for an intermediate merger has also been increased from R80 million to R100 million (approx. US$7.6 million) For purposes of the lower merger threshold, however, either the turnover or the asset value of the target entity is utilised.

The large merger thresholds remain unchanged with a combined threshold of R6.6 billion (approx. US$500 million) and the target’s threshold at R190 million (approx.US$14.6 million)

For purpose of both the intermediate and large merger thresholds, any combination of the South African specific turnover or asset value of the merging parties which exceed the thresholds will require a mandatory merger notification. In other words, the combined large merger threshold will be met if the acquiring firm’s asset value combined with the target firm’s turnover exceeds R6.6 billion.

In addition to the merger thresholds, the merger filing fees have also been increased and the new filing fees are:

  • Intermediate merger: R150 000
  • Large merger: R500 000

The merger thresholds were previously revised in 2009 and as John Oxenham, Director of Primerio Ltd., comments “increasing the target’s thresholds for purposes of an intermediate merger will assist in ensuring that transactions which are highly unlikely to result in any anti-competitive effects are subject to the merger control process“. Oxenham also points out that it is noteworthy that the filing fees have increased by 50% in respect of intermediate mergers and more than 40% for large mergers.

In addition to the mandatorily notifiable thresholds, Michael-James Currie notes that “the South African Competition Commission may call for the notification of any transaction which does not meet the intermediate merger thresholds (i.e. a small merger) within 6 months after the transaction has been implemented should the Commission be of the view that the small merger raises competition or public interest concerns“.

[For legal advice, please contact a Primerio representative]