Competition Commission appoints new Spokesperson and Cartels Executive

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south_africa

Personnel changes at SACC

The Competition Commission (“the Commission”) has announced that it has appointed Mr Mava Scott (“Mr Scott”) as Spokesperson of the Commission from 1 August 2014 and Mr Makgale Mohlala (“Mr Mohala”) as Divisional Manager of the Cartels division, with effect from 18 August 2014

Mr Scott has more than 12 years’ experience in communications and media relations, and was formerly employed, since 2008, at the Department of Water Affairs as the Chief Director of Communication Services. Mr Scott holds a Baccaleureus Procurationis (BProc) degree from the University of the Western Cape, and is currently studying towards a Master of Laws (LLM) degree in Constitutional and Administrative Law at the University of Pretoria.

Mr Mohlala has been with the Commission for over 14 years, having joined as part of the Graduate Trainee programme in 2000 as part of Mergers and Acquisitions. More recently, Mr Mohala was the Principal Investigator of the Cartels division. In this position, Mr Mohlala led investigations into the cement cartel and the collusion in the construction industry, which included some of the 2010 FIFA World Cup Stadia. Mr Mohlala holds a BProc degree from Vista University, an LLM in Corporate Law from the University of Pretoria and is currently enrolled for a Master of Business Leadership (MBL) with the University of South Africa.

Massmart reinstate retrenched employees

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south_africa

Employee action taken after competition ruling

Following the March 2012 merger between Wal-Mart and Massmart, the Competition Appeal Court (“CAC”) ordered, as one of the merger conditions, that Massmart re-employ 503 former staff members who were retrenched in 2009 and 2010 as a result of the then proposed merger.

However, it would now appear as though Massmart has failed to comply with the condition. Reportedly, former employees of Massmart have lodged a complaint with Competition Commission (“the Commission”) relating to concerns over Massmart’s non-compliance of this condition.

Following the complaint, the Commission conducted a series of meetings with the South African Commercial Catering and Allied Workers Union (“SACCAWU”) and Massmart. The Commission concluded that Massmart had not complied with the condition imposed by the CAC and found that approximately 217 of the former employees had not been reinstated.

Following negotiations between the Commission, SACCAWU and Massmart, it was found that although Massmart had allegedly sent initial reinstatement offer letters out to former employees, many former employees, allegedly, did not receive the letter.

It was agreed that Massmart would re-employ 61 former employees, who had not received the letter, with 6 months back pay. In addition, Massmart would also re-employ at least 94 former employees, who had received the letter and had not responded to the letter, with 3 months back pay, if such employees accepted the offer by 30 September 2014.

Massmart is required to provide feedback relating to the progress of the implementation of the plan to the Commission over the coming months.

South Africa: Competition Tribunal permits competitor intervention in merger involving Media24 and Paarl Media

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Following an intervention application which was heard by the Competition Tribunal (“Tribunal”) last week, the Tribunal has granted Caxton and CTP Publishers and Printers (“Caxton”) intervention status in the merger involving Media24 (Pty) Ltd (“Media24”), Paarl Media Group (Pty) Ltd, Paarl Media Holdings (Pty) Ltd and Paarl Coldset (Pty) Ltd (collectively referred to the “merger parties”).

The Tribunal has ordered that the intervention will include the control structure of Naspers Limited (”Naspers”), the interests (both direct and indirect) of the Naspers’ shareholders in printing and publishing and the competition effects of such interests in relation to the proposed merger.  In addition, the scope of Caxton’s intervention also includes whether the proposed merger will enhance coordination in the media industry and the effect of the proposed merger on the public interest.  Caxton is also entitled to submit proposed conditions, if any, to the Tribunal.

In addition, the Tribunal, in terms of a directive, ordered the merger parties to disclose all interests of Naspers Beleggings Limited, Keeromstraat 30 Beleggings Limited, Wheatfields 221 (Pty) Ltd, Sholto Investments BVI, De Goedgedacht.

The matter is of significant importance in ensuring South African merger control remains sacrosanct.  Merger control in South Africa  is, as in other jurisdictions,  an important mechanism to assess the impact of transactions on competition, however, it can only be effective if adequate and accurate information is provided by the merging parties to the SACC.  The content of a merger filing is usually vetted by the merging parties’ respective competition lawyers.

Disclosure of all shareholders’ interests (both direct and indirect) is of particular importance in respect of the control structures involved in the proposed transaction, in order to ensure that the Commission is able to conduct a proper assessment of the proposed transaction, taking into account the competitive landscape and the dynamic concomitant impact of the proposed transaction, by properly taking into account the relevant shareholders.  It is important that the merging parties are transparent in all of their dealings with the competition authorities and that the Commission is apprised of all the information during the merger investigation in order to conduct a proper investigation to avoid having the Tribunal send the merger back for further investigation and analysis to the Commission, as was ordered by the Tribunal in the Aspen/ Pfizer matter and more recently, in this decision of the Tribunal.

In addition, the merging parties are obliged to sign the respective Statements of Information (also referred to as the Form CC4(1) and Form CC4(2)) in respect of every merger which is filed with the Commission.  The Form CC4(2) explicitly states that the person authorised to submit the information confirms the accuracy, truthfulness and completeness of the information submitted to the Commission and that such person understands that it is an offence in terms of the Competition Act to provide any manner of false information.

The Tribunal’s directive clearly casts doubt as to whether the content of the original merger filing met the above criteria .

The matter does, however, demonstrate the importance of valid intervention by competitors, despite the intervention regime becoming somewhat tainted due to interventions by government and unions on the basis of alleged “public interest”  concerns.

 

 

Tribunal overrides Commission’s lean toward merger veto

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south_africa

Tribunal decides against Commission’s recommendation of prohibition of resin merger

The Competition Commission (“Commission”) recommended to the Competition Tribunal (“Tribunal”) to prohibit the proposed acquisition of resin manufacturer Arkema Resins SA (Pty) Ltd (“Arkema”) by specialised coatings company Ferro Industrial Products (Pty) Ltd (“Ferro”).

The acquiring firm, Ferro, operates in the industrial chemicals sector and its activities comprise powder coatings, plastics, enamels and ceramics, glass colours, spectrum ceramics and resin.

Arkema, the target firm, is a wholly-owned subsidiary of Arkema Afrique SAS, which in turn is wholly-owned by Paris-listed company Arkema. Arkema is also involved in the manufacture of unsaturated polyester resin which is used in the manufacture of swimming pools, truck bodies, baths, etc.

The merging parties argued that the Commission’s recommendation to the Tribunal was fundamentally flawed as it failed to take into account certain key considerations, such as the constraint of imports on domestic suppliers, the fact that post-transaction, there were two alternative domestic suppliers to the merging parties and that the merging parties argued that Arkema was not in fact a competitive constraint to Ferro in certain key market segments.

Following a two-week long hearing, the Tribunal approved the merger subject to conditions which involve a pricing formula to customers in the mining segment, a toll-manufacturing agreement and a two-year moratorium on retrenchments.

Nortons Inc. acted for Ferro in this matter.

Competition Tribunal members re-appointed by President

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south_africa 

President Zuma re-appoints three Tribunal members

The President of the Republic of South Africa has made his decision to re-appoint Competition Tribunal Chairperson Norman Manoim for a second term now that his term has come to an end. Along with Mr Manoim, the President has also re-appointed full-time panel members Yasmin Carrim and Andreas Wessels for a further five years at the Tribunal.

For the past decade, the Tribunal has comprised three full-time panel members and up to eight part-time panel members can be appointed. For the first time, a fourth full-time panel member has been appointed, namely Ms Mondo Mazwai.

Two panel members who were not re-appointed are part-time panel members Professor Merle Holden and Dr Takalani Madima. The President has not announced whether two additional part-time panel members will be appointed to the Tribunal panel.

 

Minister’s grip over antitrust authorities further strengthened

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South Africa takes on more price regulation in planned amendment to Competition Act

BDLive’s Carol Paton reports that Economic Development Minister Ebrahim Patel – with whose involvement in competition policy AAT readers are well aware from reading our site – has further strengthened his grip on the country’s competition authorities.  He is said to be drafting amendments to the Competition Act in relation to dominant firms’ “excessive pricing” practices.  The amendments are to be introduced to Parliament in 2015.
The article quotes Mr. Patel’s Sunday interview, in which he said:

“The past five years indicated that we are serious about dealing with cartels. But the challenge that we have had is that the economy still has many formal monopolies or upstream producers who are able to impose high prices on downstream manufacturers. We have got to move with greater urgency to tackle the structural challenges.  Giving a dominant player the right to set its own price results is an unfairness. In the Sasol example, part of the remedy is for the firm to work with the competition authorities to develop a soft version of price regulation.”

Price regulation is an absolute taboo in U.S. antitrust law, and even under more interventionist and public-policy influenced EU standards, explicit price regulation is not practiced in the bloc’s 28 member states.
Sasol, the giant South African oil company, is said to be aware of the government’s plans, saying: “setting prices, in particular of traded goods, invariably leads to unsatisfactory outcomes.  South Africa’s joining the World Trade Organisation in 1995 took us forward to opening the economy to compete internationally, with prices being brought in line with international prices. Regulating prices to below gate price, is unlikely to lead to building long-term competitive industries.”

Patel not mincing words, diluting competition-law factors in mergers

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south_africa

Economic Development Minister of South Africa, Ebrahim Patel, recently stated that the Competition Commission (“Commission”), South Africa’s key competition authority, will be asked to focus on jobs, industrialisation and small business development in lieu of ‘pure’ antitrust-law issues.

Patel stated that government would require the Industrial Development Corporation to focus on supporting black industrialists, and on the competition authorities to promote economic transformation “not as a by-product of but an explicit objective of competition policy.” According to Patel, competition bodies are in a position to contribute directly to the state’s objective of creating a more equal economy, where workers shared in the benefits of growth. His department is allegedly already in talks with the construction industry on a restitution package to redress collusion and price fixing. The end result, he stated, would be that larger companies will provide funds to support small producers and local suppliers.

Patel’s controversial views have already influenced Commission merger decisions and can clearly be seen in the recent Afgri/AgriGoupe case, where the authority entered into an agreement with the foreign buyer of the local grain and poultry company Afgri, requiring the new owners to contribute R90 million ($9m) to a fund to support small-hold farmers with training and loans.

Based on Mr. Patel’s latest pronouncements, South Africa is on a path to politicizing antitrust law and making pure competition considerations a secondary objective to public-interest considerations.

Competition agencies to split up, abandon dual roles

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Dual role of Commission prompts constitutionality questions

As Portia Nkani reports in the Botswana Gazette, the country’s two competition-law authorities are slated to be separated in the near future.  Botswana – a COMESA member state – has both a Competition Commission and Competition Authority.  Concerns over the dual roles of the Competition Commission (it is, since January 2011, both the strategy-setting administrative entity supervising the Authority and a quasi-judicial agency) have reportedly led to the structural change in organization.

The Chairman of the Competition Commission, Dr Zein Kebonang purportedly has voiced support for the decision to separate the two functions and agencies, saying “that regular contact between Commission and CA officials could give raise to reasonable appreciation of bias. ‘The independence and impartiality of Commissioners cannot be guaranteed when it doubles up as a board and as a tribunal. Besides relational bias, the likelihood of informational bias is also far too great. Sitting as a Board, the Commission acquires prior knowledge of disputes that are to be adjudicated before it as a tribunal. Undoubtedly, prior knowledge of a dispute may operate in the minds of the Commissioners and thus deprive the parties that appear before them a proper hearing,'” he has written in a position paper.

Procedural fairness demands that investigative and adjudicative functions must be kept separate. This is desirable because competition law and policy must be implemented in an objective, impartial and transparent manner. Unless the Competition Commission and the Competition Authority are afforded independence from each other, they are unlikely to objectively decide matters presented before them and the risk of bias will forever be present,’” he said, adding that public confidence and trust can only be enhanced if the adjudicative and administrative function were separated.

The initial call for the split of the authorities was made by lawyers for panel-beating companies under investigation last year (see article here):

Sadique Kebonang, counsel for one of the parties, had argued that the relationship between the agencies was “too intimate”: “The main test here is what the ordinary man out there perceives the two entities to be.”

Dawn raids, early in the morning

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south_africa

Auto-body repair centres raided by SACC

Earlier this morning, the South African Competition Commission (“Commission”) has conducted dawn raids at the offices of Precision and Sons (“Precision”), Eldan Auto Body (“Eldan”) in Pretoria West, as well as the Vehicle Accident Assessment Centre (“VAAC”) in Centurion.

Precision and Eldan’s business activities include panel beating, spray painting and towing of vehicles. Precision is an approved auto body repairer to Original Equipment Manufacturers (“OEMs”) such as Cadillac, Dodge, Chrysler, Fiat, Kia, Chevrolet, Toyota and Honda, while Eldan is an approved auto body repairer to OEMs such as Jeep, Fiat, Mitsubishi, Toyota, Honda and Nissan.

The VAAC is an assessment centre which renders vehicle assessment services to customers of both Precision and Eldan.

The Commission has indicated that the dawn raid operation forms part of its ongoing investigation into collusive conduct in the market for auto body repairs. The Commission has also indicated that it has reasonable grounds to believe that information relevant to this investigation is located on the premises of the two companies.

Sections 46 to 49A of the South African Competition Act of 1998 (“Competition Act”) empowers the Commission to conduct surprise search and seizure visits and to carry out so-called “dawn raids” to a firm’s business premises in order to inspect documents and interview staff where an infringement of competition law is suspected.

The Commission is empowered to enter any such premises when a judge or a magistrate has issued a warrant. Although a warrant is usually an essential requirement to ensure that a dawn raid is conducted in accordance with the law, the Competition Commission does have the power to enter and search a premises without a warrant, in exceptional circumstances. The Commission has confirmed that it has duly obtained the warrants which authorise it to search the offices of Precision, Eldan and VAAC from the North Gauteng High Court.

If the Commission has reason to believe that a firm is in contravention of provisions of the Competition Act, or is in possession of information relating to a matter that is under investigation, the Commission’s investigators have the authority to enter into the firm’s premises in order to inspect and request copies of documents, ask for information in relation to any documents, take notes and interrogate employees, search and examine computer data and remove evidence from the premises. In particular, officials may examine files, reports and emails. The Competition Commission is entitled to confiscate computer hard drives. They may also take copies of documents.

Following a four-year dawn raid “drought”, the immediately-previous dawn raid initiated by the Commission had been conducted in April 2014 at the offices of Unilever South Africa (Pty Ltd) and Sime Darby’s respective South African offices, in relation to the Commission’s investigation into alleged collusive conduct in the product markets for the manufacture and supply of edible oils and baking fats to both wholesale and retail customers.

Has national antitrust enforcer abdicated to COMESA?

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swaziland

Swaziland Competition Commission all but shuttering its doors

Since the creation of its competition-law authority in 2007, COMESA member state Swaziland has seen only 2 (two) enforcement matters, according to a report by the Observer.  Even by COMESA’s statistical standards, 2 matters in 7 years amounts to a record low.

Over in the virtual world, the SCC’s web site reflects the agency’s real-life inactivity: The last update appears to have been made in March 2012, a full two years ago; many, if not most, hyperlinks to “news” are broken or lead the viewer to blank pages; PDF document downloads often fail for no obvious reason.

As to the two discernible cases undertaken by the agency, the Observer article quotes Swaziland Competition Commission (SCC) Advocacy and Communications Officer Mancoba Mabuza as follows:

[T]he first enforcement matter the commission dealt with was The Gables (Pty) Ltd versus Pick n Pay Retailers (Pty) Ltd where the secretariat conducted an investigation into allegations made by The Gables against Pick n Pay.

[T]he second enforcement case involved Eagles Nest (Pty) Ltd and Usuthu Poultry (Pty) Ltd which was investigated by the secretariat and at the conclusion of the investigation; the report was shared with the parties to the matter as the finding was adverse to the parties.

“The matter was then taken to court where the commission successfully defended the case in the court of first instance and the parties then appealed the matter. In a judgement delivered on May 30, the parties’ appeal was dismissed and that the commission will be adjudicating on this matter soon,” he said.