New Judgment Of Interest
Predatory pricing case dismissed
The Competition Appeal Court (CAC) has dismissed the predatory pricing case against Media24 (Pty) Ltd (Media24). In October 2016, the Competition Tribunal (Tribunal) found that Media24 had committed an exclusionary act in terms of section 8(c) of the Competition Act 89 of 1998 (the Competition Act) by engaging in a predatory pricing strategy to drive a rival community newspaper publication out of the market in the Welkom area. In its decision, the CAC noted that there is a fine line between effective competition on pricing and predation, and after carefully considering expert economists' evidence and submissions on the appropriate tests to be adopted in predatory pricing cases, the CAC ultimately found insufficient evidence of predation by Media24. Importantly, the CAC also found that the test for predatory pricing under the Competition Act is purely objective in nature, and that the subjective intention of a firm is not a relevant consideration. The CAC held that the decision of the Tribunal is set aside and dismissed the Competition Commission's (Commission) complaint referral. This case once again shows the difficulty in proving abuse of dominance offences, particularly predatory pricing conduct, and ultimately means that we have yet to see a successful predatory pricing case prosecuted in South Africa. A copy of the CAC's decision is available here.
Agribusiness, Food and Beverage: Coffee capsule manufacturer admits to price-fixing
The Tribunal has confirmed a settlement agreement between the Commission and Secret River Trading CC (trading as Caffeluxe) (Caffeluxe). The coffee capsule manufacturer admitted to fixing the prices of coffee capsules to retail customers. Caffeluxe admitted that it entered into an agreement with Global Coffee Exports Ltd (Global Coffee), in terms of which Global Coffee was precluded from undercutting Caffeluxe when selling coffee capsules to grocery retail outlets. The Tribunal imposed an administrative penalty of ZAR 750,000.00. A copy of the settlement agreement is available here.
Healthcare: Updates and developments
In the healthcare sector, there are two developments of interest:
- The Tribunal has conditionally approved the merger whereby Netcare Hospital Group (Pty) Ltd and Netcare Property Holdings (Pty) Ltd (collectively, Netcare), will acquire Akeso Group (Akeso) and certain immovable properties. The Commission initially prohibited the merger on grounds that the merger would provide Netcare with a combined market share for the provision of mental healthcare services in the local market in Gauteng. Following negotiations, the merger parties and Commission submitted a joint proposal to the Tribunal, where the proposal was made a condition to the approval of the merger. In terms of the conditions, Netcare agreed to dispose of Rand Hospital and Bell Street Hospital, maintain the base tariff agreed to by Akeso and honour Akeso's alternative reimbursement contracts.
- The National Health Network (NHN) has been granted an extension of its current conditional exemption by the Commission for four months (up to and including 30 April 2018). The conduct for which the extension of the exemption was sought relates to collective bargaining between the shareholders of the NHN and individual medical schemes and administrations, as well as agreements that result from the collective bargaining.
Industrials: Updates and developments
- The Western Cape High Court (the Court) has dismissed an application by Whip Fire (Pty) Ltd (Whip Fire) to set aside the Commission’s search warrant and return all electronic data and documents seized during a dawn raid carried out by the Commission in August 2016. Whip Fire challenged the search warrant on the basis that, among other things, no initiation document was filed, and the allegations were vague and baseless. The Court held that Whip Fire failed to establish its entitlement to the relief sought. A copy of the judgment is available here.
- The Tribunal has confirmed a consent agreement between Blurock Quarries (Pty) Ltd (Blurock), Procon Precast CC and the Commission. The Commission found that Blurock engaged in conduct amounting to margin squeeze and price discrimination with regard to the supply of crusher dust sold to manufacturers and suppliers of bricks and blocks in the geographic areas of Estcourt and surrounding areas. The companies have not made an admission of guilt but have agreed to pricing remedies.
Property: Commission to monitor conditions in self storage market
The Tribunal has conditionally approved the merger between Royal Bafokeng Platinum Ltd (Royal Bafokeng) and Maseve Investments 11 (Pty) Ltd (Maseve). In terms of the proposed merger, Royal Bafokeng will acquire the concentrator plant and certain surface assets of the Maseve Mine and the total issued capital in Maseve. The merger was approved subject to the conditions, among others, that Royal Bafokeng employs 115 staff members at its concentrator plant and 20 permanent employees from Maseve, giving preference to retrenched employees for job opportunities likely to occur in the future.
Retail: Updates and developments
In the retail sector, there are two developments of interest:
- The Commission has postponed the completion date for the Grocery Retail Sector Market Inquiry from 31 March 2018 to 28 September 2018. The Commission has stated that it has decided to amend the completion date to allow for sufficient time for further consultations with key stakeholders and to finalise its report.
- Although the Tribunal has approved a merger between the Industrial Development Corporation (IDC) and Le-Sel Research (RF) (Pty) Ltd (Le-Sel), the Commission has indicated that it will be engaging further with the parties in respect of the prior implementation of the merger. The merger parties could face a possible administrative penalty for prior implementation. The IDC provides funding to various sectors, and Le-Sel is a manufacturer of personal and homecare products. The merger parties submitted that one of the main reasons for the implementation of the transaction in 2015 was to save 569 jobs and create further jobs.
Updates on the criminalisation of cartel conduct
The National Prosecuting Authority (NPA) has recently remarked that it has the "capacity" to deal with competition law cases. It has been reported that the NPA's Head of Communications has said that cartel activities fall under the realm of “private sector corruption” and that the NPA has a Specialised Commercial Crime Unit mandated to deal with cartel cases. Since the criminalisation of cartel conduct came into effect in May 2016, there has not been a prosecution in terms of the Competition Act. During a recent television interview, the Commission's spokesman, Sipho Ngwema, has remarked that the Commission is in discussions with the NPA and South African Police Service regarding criminal prosecutions. Mr Ngwema said that there is no doubt that there is an appetite for criminal prosecutions, and that the competition authorities could do with more resources.
Angola: The implementation of competition law makes progress
It has been reported that Angola’s National Assembly MPs will discuss and approve the draft law on competition at the next Parliamentary session. The proposal for competition law, which has been driven by the President of Angola, João Lourenço, was approved unanimously by the Commissions of Constitutional and Legal Affairs, and Economy and Finance of the National Assembly.
Botswana: Updates and developments
In Botswana, there have been two developments of interest:
- Further to our August 2017 update (available here), the Botswanan Parliament has approved the Competition Bill (the Botswana Bill) which seeks to amend current competition law legislation and provides for the establishment of the Competition and Consumer Authority. The Botswana Bill will bring the Consumer Protection Act under the ambit of the Botswana Competition Authority, and will also establish the Competition and Consumer Board as well as the Competition and Consumer Tribunal.
- The Ambassador and Permanent Representative of the Botswana Mission to the United Nations, Dr Molokomme, has reiterated the importance of competition law during her speech at the UNCTAD Trade and Development Commission in Geneva. Dr Molokomme said that the enforcement of competition law has enhanced transparency and complemented the anti-corruption efforts by government which has placed Botswana high on the list of least corrupt countries.
Gambia: Authority concerned about cement prices
At the end of February 2018, the Gambian Competition and Consumer Protection Commission (GCCP) called for a meeting with cement dealers and retailers in relation to cement price increases. The GCCP said that it has come to its attention that the retail price of cement has increased by approximately a hundred Gambian Dalasi from January to February 2018. It has been reported that the GCCP has already conducted a preliminary inquiry in this regard.
East Africa: East African Competition Authority commences operations
It has been reported that the East African Competition Authority (EACA) has begun operations and is currently undertaking sector and market studies to assess the competitiveness of the regional economy. While it remains to be seen when the EACA will begin to accept merger notifications, the news that the authority is now operational indicates that this is a development to closely monitor. The East African Community's Member States are Burundi, Kenya, Rwanda, South Sudan and Uganda.
Kenya: Updates and developments
n Kenya, there are two developments of interest:
- The Competition Authority of Kenya (CAK) has published rules and guidelines for stakeholder comment. These include: Merger Thresholds Rules, Competition Buyer Power Rules, Subsidiary Rules to the Competition Act No. 12 of 2010 (the Kenyan Competition Act), Consolidated Guidelines on the Substantive Assessment of Mergers, Block Exemption Guidelines, Search and Seizure Guidelines and Consumer Protection Guidelines. Copies of the proposed rules and guidelines can be accessed here.
- The Kenya Ships Contractors Association (KSCA) has approached the CAK to seek an exemption to set minimum prices. The KSCA is seeking the exemption from sections of the Kenyan Competition Act which prohibit professional associations from engaging in anti-competitive conduct. A number of professional and trade associations have recently unsuccessfully tried to seek similar exemptions from the CAK.
Australia: ACC to conduct inquiry on the impact of digital platforms
Australia's Competition and Consumer Commission (ACCC) has been instructed to conduct an inquiry on the impact of digital platforms on supply of news and journalistic content and the implications of this for media content creators, advertisers and consumers. The ACCC has been given a year to produce a draft report with the view to publish a final report by early June 2019. It has been reported that Facebook and Google are said to be among the firms who will be investigated as part of this inquiry.
European Union: Updates and developments
In the EU, there are two developments of interest:
- The European Commission (EC) has approved the multi-billion dollar acquisition of Monsanto Corporation by Bayer AG. The merger is conditional on the divestiture of an extensive remedy package which addresses the parties' overlaps in seeds, pesticides and digital agriculture. EU Competition Commissioner, Margrethe Vestager, has said that the parties' remedies, worth well over EUR 6 billion (approximately ZAR 87 billion), meet the EC's competition concerns in full.
- Margrethe Vestager has also recently expressed concerns regarding Google's dominance and has said that ordering its break up into smaller companies on anti-trust grounds may be the only way to ensure fair trading conditions. Last year, the EC fined Google EUR 2.1 billion (approximately ZAR 28 billion) for abusing its dominant position
Japan: Competition authority raids Amazon Japan
Japan's Fair Trade Commission (JTFC) has raided the offices of Amazon Japan. It has been reported that the company is suspected of asking suppliers to shoulder the costs incurred for selling their products at a discount. This is a second raid by JTFC of Amazon's office. The first raid took place in 2016 when Amazon was suspected of forcing retailers to set low or lower prices than those listed on other e-commerce sites. The previous investigation ended when Amazon agreed to stop the practice.
India: Airlines fined for anti-competitive behaviour
The Competition Commission of India has imposed a penalty on three domestic airlines for fixing the price of air cargo operations. The domestic airlines, InterGlobe Airlines, Jet Airways and SpiceJet Ltd, were alleged to have acted in a concerted manner in fixing and revising the fuel surcharge rates, which are a component of freight charges. This is the second time the airlines have been penalized for the same issue.
United Kingdom: CMA prioritises consumers
As part of the Competition and Markets Authority's (CMA) 2018/19 Annual Plan, it intends to protect vulnerable people and make sure that markets can be trusted. The plan aims to build on existing work in areas such as online hotel booking, secondary ticketing and care homes, as well as in markets such as online gambling and the supply of essential medicines to the National Health Service. The CMA will also expand its digital analysis capabilities by establishing a new Digital, Data and Technology team, which will ensure that it can respond rapidly to developments including the use of algorithms and artificial intelligence to illegally fix prices or distort how markets work.
Our Recent Work
AECI and Much Asphalt merger approved
The Tribunal has unconditionally approved the merger between AECI Ltd (AECI) and Much Asphalt (Pty) Ltd (Much Asphalt). This follows the unconditional approval of the merger by the Namibian and Zimbabwean authorities.
Daryl Dingley, Cara du Plessis and Clare-Alice Vertue represented the merger parties.
AECI is a South African chemicals group and focuses on supplying products and services to customers in the mining, water treatment, process, plant and animal health, food and beverage, and general industrial sectors. Much Asphalt manufactures and supplies hot and cold mix asphalt products to the road construction sector.
The Tribunal found that the merger is unlikely to substantially lessen or prevent competition and does not raise any public interest concerns.
Main Street 1518 and Phembani Group merger approved
The Tribunal has unconditionally approved the merger in relation to the restructuring of the Phembani Group (Pty) Ltd (Phembani) for the purposes of facilitating a listing of Pembani on the stock exchange operated by JSE Ltd. The restructuring will result in the establishment of a private equity fund which will own all of the shares of Phembani and which will be managed by a black fund manager company, namely Main Street 1518 (Pty) Ltd (BFM).
Mmadika Moloi, Betty Mkatshwa and Makati Seekane represented the merger parties
BFM is a newly established private company and currently does not have any business activities. Phembani is a locally based industrial holding company with a focus on the making of investments in, and the operating of businesses and interests which fall within, the oil, gas, minerals, mineral resources, metals and infrastructure related sectors in Africa.
The Tribunal found that the merger is unlikely to substantially lessen or prevent competition and did not raise any public interest concerns
SEMA Holdings and CWT-Aquarius Shipping International merger approved
The Commission has conditionally approved the merger whereby SEMA Holdings Ltd (SEMA) intends to acquire CWT-Aquarius Shipping International (Pty) Ltd (CWT).
Mmadika Moloi and Betty Mkatshwa represented the merger parties.
SEMA is a South African holding company and does not have any business activities. The acquiring group’s only local activities are conducted through M B SEC which provides long distance and cross border road transport services in respect of equipment, chemicals, consumables and minerals. CWT provides logistics services including shipping, warehousing, customs clearance and freight forwarding.
The Commission approved the merger subject to conditions relating to cross-directorships. The Commission found that the merger did not raise any public interest concerns.
Renewable energy merger approved
The Tribunal has approved the merger whereby Thebe Renewable Energy Holdings (RF) Ltd (TREH) intends to acquire control Phembani Solar Energy 1 (Pty) Ltd, Phembani Renewables (Pty) Ltd and Shanduka Black Umbrellas Energy (Pty) Ltd, as well as Pulida Energy (RF) (Pty) Ltd (collectively, the Target Firms).
Mmadika Moloi and Betty Mkatshwa represented the merger parties.
TREH is a renewable energy holding company and a wholly owned subsidiary of Thebe Investment Corporation (Pty) Ltd. The Target Firms are special purpose companies created by the sellers to hold shareholding interest in two renewable energy projects.
The Tribunal found that the merger is unlikely to substantially lessen or prevent competition and did not raise any public interest concerns.
United Technologies Corporation and Rockwell Collins merger approved
The COMESA Competition Commission (CCC) and Competition Authority of Kenya have unconditionally approved the merger whereby United Technologies Corporation (UTC) intends to acquire the entire issued share capital of Rockwell Collins, Inc (Rockwell Collins).
Robert Wilson, Werner Rysbergen and Cara du Plessis represented the merger parties.
UTC develops and manufactures products in various areas, including aircraft engines, aerospace systems and building systems worldwide. Rockwell Collins provides avionics and information technology systems and services to governmental agencies and aircraft manufacturers.
The CCC found that the merger is not likely to substantially lessen competition in the Common Market and is compatible with the COMESA Treaty objective of full market integration.