Big Picture, BRICS, economics, event, full article, South Africa

“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.

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BRICS, Extra-judicial Factors, legislation, public-interest, South Africa

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.”

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AAT, AAT exclusive, predatory pricing, Price fixing, public-interest, South Africa, Uncategorized, Unfair Competition

Breaking: South African Competition Amendment Bill passed by Parliament

AAT has closely monitored the progress of the Competition Amendment Bill and provided commentary to the Bill from leading local and international competition practitioners.

This is to update our readers that the Amendment Bill was passed in the National Assembly on 23 October 2018. The Bill still requires the National Council of Provinces to approve the Bill, following that the President’s consent – both of these procedural steps are likely to be mere formalities in light of the National Assembly’s decision to approve the Bill.

AAT expects that the Bill will be brought into effect imminently and likely without any material grace period for parties to assure compliance with its onerous provisions.

The Bill passed by the National Assembly has been amend mended from the draft Bill which was placed before Parliament’s Portfolio Committee.  The key contentious provisions of the Bill, however, remain largely unchanged.

To access a copy of the Bill passed by Parliament, click here.

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AAT exclusive, collusion, Patel, politics, predatory pricing, Protectionism, public-interest, South Africa, Uncategorized

Panel highlights SA Competition Amendment Bill’s pitfalls

As AAT has reported on extensively, the South African Competition Amendment Bill, currently pending in Parliament, is likely to be adopted in short order in its current draft form.

It carries with it significant, and in our view, adverse, effects that will burden companies trying to conduct business or invest in South Africa. These burdens will be particularly onerous on foreign entities wishing to enter the market by acquisitions, as well as any firm having a market share approaching the presumptive threshold of dominance, namely 35%

On Wednesday, 17 October 2018, the law firms of Primerio and Norton Incorporated held an in-depth seminar and round-table discussion on the ramifications of the Competition Amendment Bill. The setting was an intimate “fireside chat“ with business and in-house legal representatives from leading companies, active across a variety of sectors in the South African economy.

Moderated and given an international pan-African perspective by Primerio partner Andreas Stargard, the panel included colleagues John Oxenham and Michael-James Currie, who delved into the details of the proposed amendments to the existing Competition Act, covered extensively by AAT here.

As of today, 18 October 2018, the Bill appears set to be promulgated.  The SA Parliament’s committee on economic development has rubber-stamped the proposed amendments after a prior committee walk-out staged by the opposition Democratic Alliance (DA), in opposition to the Bill. DA MP and economic development spokesperson Michael Cardo states:

The ANC rammed the Competition Amendment Bill through the committee on economic development, and adopted a report agreeing to various amendments. To make sure they had the numbers for a quorum, the ANC bussed in two never-seen-before members to act as pliant yes men and women. Questions from the DA to the minister… This bill is going to have far-reaching consequences for the economy. It gives both the minister and the competition authorities a great deal of power to try and reshape the economy. It is unfortunate that the ANC, and the committee chair in particular, have suspended their critical faculties to force through this controversial bill and behaved like puppets on a string pulled by the minister of economic development.”

The Amendment Bill introduces significant powers for ministerial intervention and bestows greater powers on the Competition Commission, the investigatory body of the competition authorities in South Africa.

The panel discussion provided invaluable insights into the driving forces behind the Bill and ultimately what this means for companies in South Africa as it certainly won’t be business as usual if the Amendment Bill is brought into effect – particularly not for dominant entities.

[If you attended the panel discussion and would like to provide feedback to the panelists or would generally like to get in touch with the panelists, please send an email to editor@africanantitrust.com and we will put you in touch with the relevant individuals]

 

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BRICS, event, Meet the Enforcers, mergers, new regime, South Africa

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 

 

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AAT exclusive, BRICS, Extra-judicial Factors, fines, mergers, public-interest, South Africa

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]

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BRICS, South 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.

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