Doris Tshepe to lead Africa’s major antitrust enforcer as of September 2022

On 9th June 2022, the Minister of Trade, Industry and Competition, Mr Ebrahim Patel, announced his decision to appoint Ms. Doris Tshepe as the new Commissioner of the South African Competition Commission (“SACC”). Ms Tshepe will succeed outgoing Commissioner Tembinkosi Bonakele.

Minister Patel’s announcement comes as somewhat of a surprise to observers, given Commissioner Bonakele’s nine-year tenure and instrumentality in increasing merger and cartel enforcement within South Africa, whilst also advocating and advancing the role of the ‘public interest’ in both of these aspects. Under the leadership of Commissioner Bonakele, the SACC has been considered widely as an agency of international importance.

Andreas Stargard and Outgoing Commissioner Tembinkosi Bonakele (South Africa)

Commissioner Bonakele’s successor, Ms Doris Tshepe, is a well-regarded attorney with extensive experience. Her legal practice spans over 20 years, during which she specialised in constitutional and administrative law, legislative drafting, media and communication law, commercial law, competition law and employment law.  Additionally, Ms Tshepe has significant investigatory experience, having been involved in the SACC’s previous market inquiries into the Liquid Petroleum Gas and Grocery Retail sectors as well as being a panel member for the recent Online Markets Inquiry. In addition to her investigative experience, Ms Tshepe also has legislative chops, having sat on a 2019 panel considering the recent amendments to the South African Competition Act.  Says John Oxenham, a South African antitrust attorney: “Future Commissioner Tshepe’s long history of working with the SACC and others to shape the current enforcement approach of the agency (as well as its trajectory for the future) indicates that the Commission’s focus will remain steady and sharp. I do not foresee any wavering in the course of the SACC’s currently robust operations, due to the transition in its leadership.”

Bearing Ms Tshepe’s investigative history in mind, we can generally expect her to continue Commissioner Bonakele’s strong enforcement initiatives. Having been appointed to the panel on the amendment of the Competition Act, there is also a reasonable likelihood that we will see the SACC continue implementing, if not increasing, its long-standing public-interest agenda – particularly given the transformative socio-economic objects of South African legislation, say the competition practitioners at Primerio Ltd.

Lastly, we note that not all is over at the SACC for “Tembi” — Minister Patel has stated that there are discussions with outgoing Commissioner Bonakele regarding the delegation of an appropriate set of responsibilities that would allow him to utilize his skills and experience in competition and public policy after his departure. Again, although the details of these responsibilities are unknown, Minister Patel’s statement emphasizes the increased shift towards a public-policy centric competition regime. 

Ms Tshepe is expected to assume her position as Commissioner of the Competition Commission during the course of September 2022.

Incoming Commissioner Doris Tshepe

African antitrust authority edges closer to becoming price regulator

The South African Competition Commission warns against unjustifiable price increases of basic foods, particularly edible oil

By Gina Lodolo and Nicola Taljaard

Recent increases in the prices of edible oils have been the focus of news reports. Some retailers have been garnering particular attention for limiting the amount of oil that can be purchased per consumer.

The Chief Economist of the South African Competition Commission (“SACC”), James Hodge, highlighted the price of oil increasing by 42% over a year. This is significant as it reflects 3%-5% of poorer households’ food budget. It has been reported that, although there were already market factors last year affecting the price of oil, the Russia-Ukraine war has certainly exacerbated the situation. Hodge warns, however, that retailers and edible oil companies alike should not unreasonably use the Russia-Ukraine war to raise prices to unjust levels by inflating their price increases more than necessary, thereby seeking to earn ‘excessive profits’.

The SACC will look into the issue more closely. If and when the SACC comes to the conclusion that companies profiteer from their customers, they will act accordingly.

Where costs go up, there may be justifiable increases in prices, however, its recent warning against unjustifiable increases indicates that it will act where prices increase beyond justifiable cost-increase levels. Accordingly, the SACC is considering items that indicate unusual increases, even when taking into consideration the prevailing inflationary environment.

To this effect, Hodge emphasised that the SACC makes use of its ‘monitoring unit’ which tracks price increases by comparing increases in wholesale prices to increases in retail prices.

The work of the monitoring unit is particularly timely in light of its recent Report on Essential Food Pricing Monitoring, which was released on 1 March 2022. The Report clearly communicated the SACC’s intention to start tracking price increases and monitoring dynamics prevalent in the South African food value chain, which made it apparent that the SACC is cognizant of the impact of the significant disruptions and events which have characterized the pandemic years. The SACC has identified this impact to reflect particularly through supply chain disruptions, trade restrictions, border closures and the like.  

Should the SACC suspect that retail price increases have surpassed wholesale price increases, complaints may be initiated by the SACC in terms of Section 49B of the Competition Act 89 of 1998. Thereafter, the complaint will be investigated in terms of Section 49B(3) of the Act to determine whether it will be referred to the Competition Tribunal for adjudication.   

Concentration and Participation in the South African Economy: Levels and Trends – SACC Publishes Report

By Michael-James Currie & Gina Lodolo

On 7 December 2021, the Minister of Trade, Industry and Competition, Ebrahim Patel released a report titled “Measuring concentration and participation in the South African Economy: Levels and Trends”, accessible here (“Concentration Report”). This Concentration Report is the first of many as the Minster undertook to update the report bi-annually from hereon out.

The theme of the Concentration Report is centered on identifying and remedying:

  • Economic levels and trends that are skewed and don’t reflect South Africa’s population demographic; and
  • Entrenched leaders in certain sectors, which creates “inefficient concentration” by setting high barriers to entry thereby reducing competition, which, according to the Concentration Report, can lead to higher prices and lower investment in South Africa.

The Concentration Report highlights that concentrated markets are of a rising concern internationally, however, specifically in the South African context, the apartheid era created dominant firms that persist and prevent historically excluded persons from participating and gaining market share.

The Competition Commission (“SACC”) does however note that concentration does not automatically mean there is a lack of competition and there may be many instances where concentration will be for the benefit of the consumer and pro-competitive. In this regard pro-competitive concentration can be seen when innovation creates increased market size and economies of scale reduce prices for consumers. Further, the SACC notes that there are still gaps in the data, which will be addressed in the subsequent reports.

The Concentration Report highlights that the SACC will hereinafter be concentrating its efforts on markets that have been identified to contain a role player that is presumed dominant. In this regard, the sectors that have been identified as requiring increased scrutiny are:

  • Farming inputs;
  • Agro-processing;
  • Sin (alcohol and tobacco) industries;
  • Healthcare;
  • Communications;
  • Upstream steel value; and
  • Financial services

This increased scrutiny will be seen particularly in industries that require licenses to operate. This is of concern to the SACC because licensing can be used as a mechanism to spread out ownership, which may be curtailed by a merger, and the SACC has seen increased merger activity particularly in industries characterized by licensing requirements.

To conclude, it is vital to take cognizance of this Concentration Report because the SACC has highlighted that it will form the basis of strategic enforcement of the Competition Act 18 of 2018 (“Act”) and will lay the path for policy centered on a concentrated economy.  In this regard, we foresee closer scrutiny of role players with large market shares in the years to come, especially those players that are presumed to be dominant or expressly mentioned in the Concentration Report.

A further challenge that the Commission faces in tackling perceived high-levels of concentration, is balancing the clear socio-economic objectives with competition law goals and consumer welfare enhancing conduct. Although the Report acknowledges that high concentration does not mean the market is anti-competitive, the general policy of the Report is clearly aimed as protecting or promoting a designated group of competitors as opposed to the competitive process itself. This creates an inherent policy tension and requires very clear, transparent and quantifiable trade-offs.

As the Constitutional Court recently affirmed in the Mediclinic case, higher prices to consumers is not in the public interest. The converse is of course also true. Intervention in markets which may lead to adverse effects on consumer welfare would need to be weighed against the objective of “opening up” the market. Where healthy and efficient entry is permissible, that may well be consumer welfare enhancing but if remedial actions are deigned to simply protect inefficient market participants then interventionist measures are likely to amount to nothing more than a tax on large players which either ultimately gets passed on to consumers or discourages investment. It is absolutely critical to South Africa’s economy and to the integrity of the competition law regime that the latter consequences do not materialize.

You can access the summary report here: https://www.compcom.co.za/wp-content/uploads/2021/12/Concentration-Tracker-Summary-Report.pdf

China tells Africa: ‘Monopolies bad!’

In an interesting twist, a representative of the last properly remaining centralised economy (the People’s Republic of China) has admonished African nations (specifically South Africa, where he acts as Ambassador) to enhance competition-law enforcement against dominant firms, including Western tech giants.

We observe that his statement is an “interesting” twist, because the Editor was taught over the years in several (perhaps faulty?) history lessons that the PRC itself had been inarguably heavily reliant on government-run monopoly companies for decades.

But let’s cut to the chase of what Mr. Xiaodong is actually saying: his thesis, not exactly ground-breaking in antitrust circles, can be summarised succinctly as “excessive power and influence of technology giants hinder innovation and competition and increases economic inequality.” There!

With regards to the applicability of his thesis to South Africa, the ambassador notes that “Antimonopoly practices also exist in SA. The control over data fees and food prices imposed by big corporations here has safeguarded consumers’ rights and interests. Monopolistic actions in the platform economy is also a matter of grave concern for SA’s Competition Commission. No country can turn a blind eye to the negative externality of the emerging digital economy.”

Image credit: Shutterstock

“Negative externalities…” sound very much like proper Western antitrust-economics-speak. Interesting. However, there is of course an ulterior motive behind this little lesson in competition economics from his excellency, the honorable ambassador. It comes at the end of his “opinion” piece: China would like to do more business in Africa, strengthen its ties, and deepen its influence (including in the area of education – beware!)… In the diplomat’s own words: “China’s high quality economic development brings greater opportunities for Africa’s development. … And China’s current cumulative investment in SA has exceeded $25bn, creating more than 400,000 jobs directly and indirectly in the region and making big contributions to SA’s economic and social development.”

Curious news, perhaps not so much any more after digging deeper. Especially when the interested reader googles (oh yes, coincidentally using that same FAANG company’s services that Mr. Xiadong’s diatribe indirectly disparages here) the simple search term “China – Africa“, the latest news from today’s South China Morning Post is that “China seeks to expand influence in Africa with more digital projects…” — nice coincidence.

Well, now readers of AAT know.

China wants to “share the achievements of digital technology with Africa to promote interconnectivity”

Revisiting the Burger King prohibition: [Unintended] Consequences & [Possible] Reconsideration

By Joshua Eveleigh

On the 1 June 2021, the South African Competition Commission (SACC) released its media statement announcing the prohibition of ECP Africa’s proposed acquisition of Burger King (South Africa) and Grand Foods Meat Plant Pty (Ltd) from Grand Parade Investments.   AAT published a note on this precedent-setting decision here.

Despite finding that the acquisition would not have any likely effect of substantially lessening or preventing competition, the transaction was prohibited as it would result in the merged entity having no ownership by historically disadvantaged persons (HDPs) and workers. In its media statement, the SACC states that both Burger King SA and Grand Foods Meat Plant form part of an empowering entity in which HDP’s have 68% ownership. This ownership stake would decrease to 0% if the transaction were to be approved. In this regard, Tembinkosi Bonakele, chairperson of the SACC, states:

“You had an entity that had quite an impressive transformation profile, and all of that was going to disappear at the stroke of a pen with this transaction.”

Unsurprisingly, Grand Parade Investments, as well as the general public, have responded to the SACC’s decision with discontent.

The topical concerns regarding the prohibition of the acquisition include:

  1. The unintended, prejudicial impact upon black shareholders of sellers / target companies; and
  2. The equally detrimental deterrence of foreign direct investment (FDI) into the Republic of South Africa.

i. Harm to HDP shareholders

Grand Parade Investments had supposedly been attempting to sell Burger King and Grand Foods Meat Plant for a period of 18 months in order to settle debts and pay dividends to its black shareholders, whom had reportedly not received dividends for a number of years. Furthermore, the shareholders would incur even greater harm upon the SACC’s media statement as Grand Parade Investments share price would plummet by 10%, making future dividend payouts ever less likely.

Bonakele argues that the Competition Act cannot waiver in its goal of transformation purely because of the prejudicial impact that a decision may have on individuals.

“This is about the system, it is not about individual shareholders. We are not really concerned about the immediate impact on Joe Soap today, that’s not the criteria.

ii. Deterring FDI

The decision of the SACC raises varying concerns for foreign investors, and understandably so. The key concerns can be encapsulated into the following: certainty, timing and costs.

Firstly, merger review is subject to ever-evolving standards. In this regard, foreign investors cannot approach a merger with full certainty as to whether it will be approved or not. Moreover, continually changing standards presents increased opportunities of opposition from competition authorities which furthers investor uncertainty. Secondly, subsequent to changing standards and increased opposition, the timing of proposed mergers is significantly lengthened. Lastly, the imposition of non-competition conditions on transactions incurs significant costs on the burden of investors.

These principles of certainty, timing and costs can be considered as the essential elements of a sound merger regime. Ultimately, the SACC’s decision of prohibition strikes at the balance of South Africa’s merger regime by introducing great uncertainty, prolonged timing and greater costs  – all of which present themselves as significant areas of concern for foreign investors.

In response to these FDI concerns, Bonakele states that South Africa’s democratic sustainability is of paramount importance and that foreign investors must consider the long-term effects that exclusionary investments would have on the Republic, particularly in regard to transformation and empowerment:

“But it’s not like empowerment imperatives are less important than FDI.”

A potential for reconsideration?

A window for reconsideration of the proposed acquisition presents itself where the merging parties present a better offering of HDP ownership. Bonakele suggests that this is potentially on the table as the parties to the agreement have continued engagement despite the SACC’s decision.

Therefore, the proposed acquisition may eventually find approval where ECP Africa and Grand Parade Investments agree on an improved HDP empowerment plan, of which the SACC is satisfied.

Image

Conclusion

In essence, the SACC’s decision to prohibit the proposed acquisition of Burger King (South Africa) and Grand Foods Meat Plant by ECP Africa has had prejudicial effects upon the seller’s black shareholders.

Further, the decision presents concern for foreign direct investment by striking at the essential elements of a sound merger regime, namely: certainty, timing and costs.

However, the chairperson of the SACC has now noted that the SACC may change its initial decision upon the improvement of empowerment considerations between the parties to the transaction.

Competition Law Africa conference 2021 / this Tuesday

The Informa Competition Law Africa conference is back with a vengeance this year, albeit still held virtually due to the pandemic.

The overview can be found here, and the more detailed agenda here.

Speakers include South African enforcer Hardin Ratshisusu, COMESA chief Willard Mwemba, the OECD’s competition expert Frederic Jenny, Mahmoud Momtaz, head of the Egyptian competition authority, Lufuno Shinwana, senior legal counsel on competition issues for Anheuser-Busch Inbev, Ntokozo Mabhena, Anglo American’s Legal Advisor, and Maureen Mwanza, head of legal for the Zambian CCPC.

Primerio partner, Andreas Stargard, will host the afternoon panel on Vertical Restraints, interviewing Okikiola Litan, Senior Counsel, Commercial and Competition Law, with Coca-Cola Hellenic Bottling Company.

Precedent-Setting Decision: Burger King Acquisition Prohibited Purely on Public Interest Grounds

By Charl van der Merwe

The South African Competition Commission (SACC) made headlines with its first prohibition of an intermediate merger that was based solely on public-interest grounds.

Emerging Capital Partners (ECP), a private equity firm founded in the US, was to acquire all Burger King assets from South African Grand Parade Investments, a South African majority black owned entity. 

The SACC, while finding that the proposed transaction will have no actual impact on competition, prohibited the transaction on the basis that the transaction will have a substantial negative effect on “the promotion of greater spread of ownership, in particular to increase the levels of ownership by historically disadvantaged persons” (HDPs).

The SACC found that the merger would lead to a 68% reduction in the shareholding of HDPs in the target entity.

As John Oxenham, director at Primerio points out, “public interest” considerations have long been a feature of competition law in South Africa, particularly in relation to merger control. In this regard, mergers, which may otherwise be deemed problematic, could be ‘justified’ on public interest grounds. Public interest, while initially limited to employment, was first informally expanded through notable mergers such as Walmart/Massmart (2011) and AB Inbev/SAB (2016) where public interest conditions were imposed related to empowerment and ownership, through agreement by the merging parties.

The Competition Amendment Act, which largely became effective in 2019, formally expanded the recognised public-interest factors contain in Section 12A(3) of the Competition Act to include the “promotion of a greater spread of ownership, in particular to increase the levels of ownership by historically disadvantaged persons and workers in firms in the market”. Further, the public-interest element was elevated to a separate and self-standing assessment, which must be assessed as an integral part of the merger assessment.

While the Competition Act, as amended, has made provision for mergers to be assessed and prohibited on pure public interest grounds since July 2019, the Burger King merger is the first merger to be prohibited on this basis.

SACC Commissioner, Tembinkosi Bonakele noted that the SACC had no choice but to recommend that the merger be prohibited as, clearly, the merger would result in a reduction of HDP ownership from 68% to 0%, which the SACC believes is substantial. This concern was raised with the merging parties, who were unable to address the concern in a suitable manner.

Regarding the broader impacts of the decision on investment and merger control in South Africa, Bonakele noted that the SACC is merely a statutory agency obliged to impose the law as it currently stands and, according to the Bonakele, there is no uncertainty regarding the transformation objectives which had been introduced to the Competition Act. The SACC is clear on its mandate in terms of the Competition Act, as amended, and will continue to implement such mandate.

The legal basis for the decision is clear, however, as is the case with any new legislation, implementation thereof less so. At the time of the enactment of the amendments to the Competition Act, it was well recognised that the practical implementation of these provisions will be critical and that it may lead to significant unintended consequences – including adverse effects on consumer welfare and even broader public interest. Primerio director, Michael-James Currie points out that, ironically, HDP-owned target firms might be negatively prejudiced by this criterion, as the pool of potential buyers is limited (and hence the value) if non-black owned firms are not able to successful acquire the target’s business.

It is not clear, at this stage, what the assessment in the Burger King merger entailed, what evidence was put forward by the parties and what the relevant counterfactual may have been. It is also not clear whether the transaction presented pro-competitive elements which outweigh the adverse effect on public interest – similar to what is required in terms of public interest where a merger may have an adverse impact on competition. The SACC confirmed, however, that the transaction was ultimately prohibited after ECP failed to adhere to requests to proffer conditions relating to shareholding and empowerment.

The SACC has the power to assess and prohibit intermediate mergers. Accordingly, the SACC’s prohibition can only be challenged by way of a request for consideration, to be filed by the merging parties, to the South African Competition Tribunal. The SACC opined, however, that unless the acquiring firm is prepared to make concession to remedy the public interest concerns, the decision is unlikely to be overturned.

Grand Parade has been vocal in its dissatisfaction of the prohibition. The matter will be highly contested, and it is not uncommon for transactions to be approved on a request for consideration to the Tribunal.  Furthermore, any decision by the Tribunal is likely to be taken on appeal to the Competition Appeal Court and likely also the Constitutional Court.

The Burger King decision, regardless of its eventual outcome, will leave a lasting precedent and shape merger control proceedings in South Africa going forward.

Competition Commission releases impact report of the results from enforcement initiatives during the COVID-19 pandemic

By Gina Lodolo

On the 25th of April 2021 the Competition Commission (“Commission”) released a media statement pertaining to its now final report titled “the impact of the COVID-19 block exemptions and commissions enforcement during the pandemic” (“Report”).

At the onset of the pandemic, the Minister of the Department of Trade, Industry and Competition  (“DTIC”) established block exemptions, which would exempt practices usually falling foul of section 4 and 5 of the Competition Act 89 of 1998 (“Act”). The block exemptions were granted to the Healthcare Sector, the Retail Property Sector, and the Banking Sector. Further, the Commission noted that the pandemic required a particular focus on potential price-gouging by enhancing the advocacy, investigation and prosecution thereof.

The DTIC was empowered to create the block exemptions by Section 78 read with section 10(10) of the Competition Amendment Act 18 of 2018 (“Amendment Act”) which states that “The Minister may, after consultation with the Competition Commission, and in order to give effect to the purposes of this Act as set out in section 2, issue regulations in terms of section 78 exempting a category of agreements or practices from the application of this Chapter”. Further the Commission had a chance to test Section 8 of the Amendment Act which provides a broader discretion to the Commission in testing whether there has been a violation of the Act through excessive pricing.

The Report highlights that due to the uncertainty of the pandemic and the need to act quickly, the block exemptions created the possibility for unpredictable results. As such, to limit the scope of the block exemptions, collaboration needed to be at the request of the Ministers and only granted, upon motivations to respond to the pandemic.

These block exemptions showed their benefits in the Health Care Sector, which allowed cooperation and discussions regarding, inter alia, medical supplies, capacity for testing, sharing of resources, testing cost reduction and coordination of pharmaceuticals and other PPE resources.

Through these collaborative efforts the price of testing became a standardised R850, as opposed to ranging from R1 000-R1 500. As the pandemic started, hospital capacity became a forefront of concern. To this end, the Report states that private hospitals and public hospitals shared data which related to capacity, enabling  hospital beds and staff in all the respective hospitals to be known. Accordingly, the Report states that “South Africa managed the pandemic effectively such that the health system was not overwhelmed in the first wave of the pandemic. As such, very few public sector patients were treated at private facilities”. This cooperation will be beneficial in aiding in a potential third wave of the pandemic, which may very well require more hospital beds, of which, availability between the various hospitals is now known.

However, stakeholders with less bargaining power were bound to those with bigger bargaining power and found that they had little choice on the agreed prices by the larger players. Further, according to the Report “certain provincial departments of health and public sector hospitals” refused to collaborate due to the voluntary nature of the exemptions and therefore, the Report notes suggestions for compulsory exemptions in future. Further, criticism has been levied in that block exemptions could have been granted to enable medical aid schemes to participate in the COVID-19 roll out discussions through agreements on prioritisation, access, sourcing and side-effect reporting. The Report notes that in the future advocacy work will be increased to ensure that smaller stakeholders who feared a violation of the Competition Act, are informed and encouraged to participated in these collaborative  efforts.

In the Retail Sector, collaborative rental arrangements were required due to Level 5 Lockdown, which necessitated the closing of non-essential retail outlets. Collaboration was allowed by limiting evictions, payments holidays and adjusted lease agreements. However, only payment holidays were utilised. These payment holidays were not uniformly agreed between landlords, but rather agreed individually between landlords and their tenants. Nonetheless, the Report notes that the block exemptions purpose of “relief” was met by creating the “platform for discussions” as opposed to landlords agreeing upon a coordinated relief. Further, all retailors were able to benefit from the payment holidays, regardless of their size.

Michael Currie, a partner with competition boutique firm Primerio Ltd., highlights that the Report notes criticism in that the lack of uniformity in the granting of payment holidays, created an opportunity for potential anti-competitive tactics and “cartel-like” behaviour from landlords who “collectively decided to require 100% rental payment in one instance and to require 70% rental payment in another instance”. Accordingly, the Report notes from the minority feedback received, that in the future, frameworks for negotiation “should have been coupled with tools for mediation between landlords and retailers, to ensure synergy”.  

Similarly to the Retail Sector, in the Banking Sector the Report notes that collaboration was only found in bilateral agreements between banks and debtors in the granting of debt relief or payment holidays, as opposed to blanket relief for all debtors. Stakeholders recommended that “future exemptions or industry solutions that target the sector must not be limited to banks only but include all lenders to ensure a level playing ground” and further that “some of the conditions set should be maintained post the pandemic” as debtors may need longer to recover from the adverse economic effects of the lockdown.

Importantly, the pandemic created opportunities for price-gouging of hygiene, food and medical products. To this end, the Consumer and Customer Protection and National Disaster Management Regulations and Directions (“Regulations”) were published by the DTIC. According to the Report, the Commissions initiatives included advocacy initiatives through “enforcement letters” and visible enforcement, which ensured that suppliers susceptible to price-gouging  were aware of the possible prosecution and penalties thereof. Further, price-gouging reporting initiatives were increased by the establishment of a consumer hotline, which created the opportunity for consumers to report via SMS/Whatsapp, which yielded a total of 1199 investigations.

Importantly, the Report highlights the precedent set by the decisions in Competition Commission v Babelegi Workwear and Industrial Supplies CC (“Babelegi”) and  Competition Commission of South Africa v Dis-Chem Pharmacies Limited (“Dis-Chem”) where it was held by the Competition Tribunal (“Tribunal”) that price-gouging in terms of section 8(1)(a) of the Amendment Act can be determined in cases where market power is not sustained over a longer period of time. The Tribunal found that firms who were seen to have temporary market power had engaged in price-gouging. The Report states that it “established precedent for a simplified test to determine whether price gouging occurred”.  Accordingly, The South African team at Primerio International is of the view that this application of Section 8(1)(a) of the Amendment Act is flawed in that the traditional economic tests in establishing excessive pricing were watered down to provide for the circumstances of the pandemic, without relying on the Regulations, but rather the legislation. Thus, as noted in the Report, creating precedent of a now simplified price-gouging test. [For an in depth discussion click here: https://academic.oup.com/jeclap/article/11/9/524/5917388 ]

Further, the Competition Appeal Court (“CAC”) in Babelegi went to great lengths to emphasis the flaws in the Tribunals decision. The CAC emphasised the competition law principle of durability, which requires that for a determination of market power to be reasonable, the pricing must be sustained for a long period of time. Durability is an important factor, because it becomes inevitable that other firms will display opportunistic behaviour during a crisis such as COVID-19, which will then create a new equilibrium as competitors once again become constrained to have better prices than their competitors. Accordingly, the context of the pandemic does not warrant short cuts in decision making, such that a small firm, who sold a few masks at an excessive price, should be considered to be dominant. The CAC decided that the consumers were still capable of purchasing masks from other firms, therefore, although the pricing was excessive, consumer harm cannot be assumed simply because the excessive prices were in the context of a health crisis. Following the CAC’s criticism of the Tribunal’s decision, The CAC did not overturn the Tribunal’s decision. This bazar decision potentially finds reasoning in the Report which states that “A failure to uphold these judgements would have hindered the Commission’s ability to respond to the conduct in question, making price gouging more widespread”.  This statement is concerning as it alludes to decision making which was made to fit a desired outcome of low prices for consumers, potentially creating unnecessary intervention in competition, which would have naturally found an equilibrium. To this end, the Report states that “a total of R16 532 105 was paid in fines”, which, coupled with advocacy initiatives, deterred price increases.

To conclude, although the Tribunal may have erred in its utilisation of Section 8(1)(a) of the Amendment Act instead of utilising the Regulations, as a whole, and according to the Report the block exemptions granted served their purpose and had an overall positive effect in mitigating against the harsh effects of the pandemic.

Interdict Granted in Favour of GovChat, Preventing Removal from the Whatsapp Platform

By Gina Lodolo

The South African Competition Tribunal (the “Tribunal”) has been called to consider a complaint of abuse of dominance against Whatsapp, arising out of its notice to terminate its contract with “GovChat” and off-board GovChat from the Whatsapp platform. GovChat is a chatbot service that allows the government to engage with citizens and provide government services such as health and education.

GovChat approached the Tribunal, alleging that due to the high market shares of Whatsapp in South Africa, competing platforms do not have sufficient scale (consumer numbers and reach) to provide alternatives on their own separate platform (such as WeChat in China). Smaller platforms are forced to make use of the Whatsapp network where Whatsapp’s terms of service do not allow for the expansion of the GovChat business model to become a competitor to Whatsapp. GovChat stated that its “entire existence will be materially prejudiced” if removed from the platform. It was alleged that the decision to off-board GovChat would put GovChat out of business and affect millions of citizens who benefit from the platform. CEO of GovChat, Eldrid Jordaan stated that “GovChat’s case is that Whatsapp/Facebook have abused their dominance because off-boarding GovChat has an exclusionary effect, preventing GovChat from operating in the relevant market.”Exclusionary acts are prohibited by Section 8(1)(c) of the Competition Act 89 of 1998 (“Act”) which states that a firm is prohibited from engaging in an exclusionary act if the “anti-competitive effect of that act outweighs its technological, efficiency or other pro-competitive gain”.  In this matter, Whatsapp/Facebook would have to prove that the exclusionary act has a pro-competitive gain.  The respondent has to discharge the allegation that refusing consumers access to an essential facility or a scarce service is an abuse of dominance according to sections 8(1)(b) and/or 8(1)(d)(ii) of the Act.

The alleged breach of the terms of service lies in the use of GovChat as a de facto communications platform for the government, when it is in fact not a government owned entity and WhatsApp stated of concern that “GovChat seeks to intermediate itself between government and citizens as a profit-making entity. It seems to aspire to become the official communication channel for the South African Government and effectively be the gateway through which citizens access government through Whatsapp”, where GovChat monetises confidential information of citizens through the use of the Whatsapp platform. Accordingly, citizens share confidential information which is monetized by a private entity, of which practice Whatsapp believes to be prejudicial to its platform and its terms of use, and therefore in breach of its terms of service.

GovChat logo

The competitive harm towards GovChat lies in the manner in which Whatsapp made use of its dominance through the unilateral off-board of GovChat. Whatsapp argues that its conduct cannot be anti-competitive as Whatsapp and GovChat do not provide the same facilities and are therefore not direct competitors. To this end, representing GovChat, Advocate Paul Farlam stated that “Facebook founder and CEO Mark Zuckerberg intends to introduce a payment system, as such, locking GovChat out of Whatsapp would give Whatsapp an advantage as being locked out of the market for an indefinite period would stop GovChat from entering the market first, allowing Whatsapp to keep customers away from GovChat while Whatsapp enters that market”. If this is the case,  Facebook is hiding under the guise that the offboard is due to a breach in its terms of service, in order to remove the potential competition from GovChat in the same market.

On the 25th of March 2021, the Tribunal issued an interim interdict to restrain Whatsapp from removing GovChat from its platform, pending the outcome of the complaint that GovChat has lodged against Facebook with the Competition Commission. The interim interdict has been granted in favour of GovChat as it established a prima facie case demonstrating the alleged exclusionary conduct and anticompetitive effects that the off-board would have on GovChat. Facebook failed to rebut the prima facie case by providing pro-competitive gains that outweigh the alleged anti-competitive effects of the off-board. Due to the nature of the GovChat platform being in the public interest during the COVID-19 pandemic, the Tribunal held that “the balance of convenience favours the granting of interim relief to the applicants who provide an invaluable service.”

Importantly, the relief is only interim in nature. Accordingly, the Competition Commission has not yet made a finding that Facebook has indeed contravened the Competition Act 89 of 1998  through an abuse of dominance.

The price might be right, but simmer down: a “Yup” is still required from competition authorities in Mr. Price’s strategic Yuppiechef acquisition

By Gina Lodolo and Estelle Naude


South Africans have been left with dropped jaws at the news that Mr Price Group has entered into an agreement to acquire the local Yuppiechef, known for their quirky, luxury kitchenware.


The owners of Yuppiechef are certainly pleased with their agreement with Mr Price Group to have 100% of their issued share capital acquired in cash for around R470 million and stated that “the timing is right for Yuppiechef to move forward with its growth ambitions with a partner who has a shared vision and the resources to help achieve this. I am excited about our future as a part of the Mr Price Group. They are a business which prides themselves on innovation and growth and we are strategically aligned in our plans. We share similar cultures and values which will make this an easy fit for both parties.”

According to Mr Price Group, the acquisition will provide the opportunity for Mr Price Group to expand their market share by reaching a high-end customer base in the kitchen appliance department, as well as expand their product variety from that which is already part of the Mr Price Group offering. Yuppiechef has a larger online presence than Mr Price Group, as such, Mr Price Group will reap competitive benefits from the online presence of Yuppiechef, which will enable them to become a more effective competitor with the likes of inter alia, Takealot.


According to the voluntary announcement from Mr Price Group regarding the acquisition of Yuppiechef, “the targeted effective date is subject to the fulfilment of both regulatory and commercial suspensive conditions which includes competition authority approval.” As such, it is important to note that section 13(3) of the Competition Act 89 of 1998 (“Act”) states that “the parties to an intermediate or large merger may not implement that merger until it has been approved, with or without conditions, by the Competition Commission.” Thereafter, according to section 12A(2) of the Competition Amendment Act 18 of 2018 (“Amendment Act”), a proposed merger must be evaluated on both competition and public interest grounds.


Accordingly, although South Africans are excited about the success story of the local Yuppiechef start-up, it is important to note that the proposed acquisition is still subject to scrutiny from the competition authorities before implementation of the merger can take effect.


Further, Yuppiechef is not the only home-grown retail store that Mr Price Group has sunk it’s teeth into as they seem untouched by the COVID-19 pandemic in their acquisition of Power Fashion, which was approved by the Competition Tribunal in March 2021. The acquisition of Power Fashion, with 170 retail stores, places Mr Price Group in an even stronger competitive position against the likes of Pep and JAM Clothing. According to the South African Primerio team, this acquisition places Mr Price Group in a strategic position to compete more vehemently with the lower end market, while Mr Price Group’s proposed acquisition of Yuppiechef places Mr Price Group in a position to access the higher end market. It seems that Mr Price Group intends to diversify its market share to such an extent that they are able to access the entire market, being both the lower end and the higher end consumer through the acquisition of Power Fashion and proposed acquisition of Yuppiechef respectively. The large scope of retail outlets provided by Power Fashion allows Mr Price Group to expand their physical store offering, while the online retail side will soon be catered for by the acquisition of YuppieChef.


According to Moneyweb the Mr Price Group’s JSE listing is “around 64% up on a year ago when South Africa went into its first Covid-19 lockdown”. Accordingly, Mr Price Group’s diversification and broader acquisition of market share may be one of the reasons that Mr Price Group finds itself at a stock high, unfettered by effects of the COVID-19 pandemic.