As another eventful year draws to a close, we would like to thank our valued clients for their continued support throughout 2017. Best wishes for the festive season and a healthy and prosperous new year ahead!
New Judgement of Interest
Competition appeal court rules in favor of HCI
The Competition Appeal Court (CAC) has held that the proposed transaction involving Hosken Consolidated Investment Ltd (HCI), Tsogo Sun Holdings Ltd (Tsogo Sun) and Niveus Investment Ltd (Niveus) does not require approval by the competition authorities in terms of the merger control provisions of the Competition Act 89 of 1998 (Competition Act). This important decision clarified competition law issues relating to the jurisdiction of the Competition Tribunal (Tribunal) and the concept of sole control.
In terms of the proposed transaction, HCI sought to:
- increase its shareholding in Tsogo Sun, an entity over which it exerts sole control pursuant to a decision of the Tribunal in 2014, to more than 50%; and
- consolidate all of its gaming interests (other than its sports and betting interests) by transferring such gaming interests (owned indirectly by HCI's subsidiary Niveus) to Tsogo Sun.
Two primary issues were raised before the CAC: (i) the first was whether the Tribunal has jurisdiction to entertain a matter in circumstances where a party has not notified a transaction in terms of the merger control provisions of the Competition Act; and (ii) the second was whether an acquiring company, having obtained unconditional prior approval from the Commission to acquire sole control of an entity over which it exerts control, must still obtain merger approval before entering into a subsequent transaction with that entity.
With regard to the first issue the CAC held that, having carefully considered the particular facts of this case, the Tribunal has the jurisdiction to grant declaratory relief and that the requirements for the exercise of that jurisdiction are met. The CAC did however caution that the grant of a declaratory order in this kind of case must be considered very carefully and that the power should be exercised sparingly, but that this case was one of those rare exceptions.
In relation to the second issue, the Commission contended that the proposed transaction constitutes a notifiable merger because it would result in the crossing of the bright line as HCI would increase its shareholding in Tsogo to more than 50%, and that the structure of the market had changed since the first merger was notified in 2014. The merger parties argued that HCI already has sole control of Tsogo Sun pursuant to approval by the Tribunal in 2014.
The CAC held that once sole control has been approved and acquired in one of the ways contemplated by section 12(2) of the Competition Act, it does not require separate approval if it is subsequently implemented in one of the other ways contemplated in section 12(2), and that merger approval is a ''once off'' affair.
The CAC went on to conclude that the Commission cannot require the notification of a transaction based on the reason that it wishes to assess the implications of such transaction. The CAC noted that "it is important to emphasise that the effects of an acquisition of control are considered and determined when the approval of the merger is sought and obtained on a forward looking assessment of the likelihood of competition harm and the public interest and cannot be revisited once it has been determined."
Agribusiness, Food & Beverage: Updates and Developments
In the agribusiness, food and beverage sector, there are two developments of interest:
- The Tribunal has ordered the Commission to file a supplementary affidavit to clarify a number of points contained in its original complaint against Unilever South Africa (Pty) Ltd (Unilever). The Commission has alleged that from 2005 to 2013, Unilever and Sime Darby Hudson & Knight (Pty) Ltd had a ‘general agreement’ not to compete with one another in the manufacture and supply of edible fats and oils. The Tribunal has ordered that the supplementary affidavit should set out whether the Commission is restricting its case to just the written contracts alleged in the referral, or whether the Commission is relying on more than the mere agreements.
- The CAC has dismissed an appeal by Pistorius, HWC N.O and six others (the appellants) against two distinct decisions of the Tribunal. The appellants, who are trustees of a trust, produce agricultural lime which is sold to fertilizer companies. The appeal against the first decision related to a joinder application to join two more appellants to the pending complaint referral which sets out a collusion case against the trust. The appeal against the second decision related to an amendment of the complaint referral on the basis of prescription. The CAC dismissed the appeals pertaining to both the joinder application and complaint referral amendment. In relation to the former, the CAC held that it is not sound trust law to assert that the institution of proceedings is a nullity merely because all the trustees were not joined as respondents from the outset.
Healthcare: Timetable for the health market inquiry revised
The Health Market Inquiry (HMI) has published a notice advising all stakeholders of amendments to the Revised Administrative Timetable and of delays in the publication of the Provisional Report which was due to be published on 30 November 2017. The HMI Panel announced that it will aim to publish: (i) eight analytical reports by 8 December 2017 (for public comment by 31 January 2018); (ii) the Provisional Report by 30 April 2018; and (iii) the Final Report by 31 August 2018.
Regulatory: Updates & Developments
In the regulatory sector, there are four developments of interest:
- Further to our May update (available
here.), the Chairperson of the Ministerial Advisory Panel (Panel) established to develop draft amendments to the Competition Act, Advocate Michelle Le Roux, recently confirmed that the Panel has submitted its proposals to the Minister of Economic Development, Ebrahim Patel (Minister). The Minister will publish the draft amendments for public comment once consultations with other stakeholders have been completed. Advocate Le Roux has said that,
"our panel’s approach has been to ensure explicit and separate consideration of the issues of concentration and ownership whenever these could possibly be encountered by the authorities - whether in mergers or abuse of dominance cases most commonly, or more proactively in the market inquiry process." We will keep you updated on all further developments in this regard.
- The Commission has released its Annual Report for the period 2016-17. The report provides a useful summary of an eventful year marked by increased enforcement activities. It is worth noting that during the 2016-17 financial year, 418 mergers were notified and 86 cartel cases were handled by the Commission. A copy of the Annual Report can be accessed
- Further to our September update (available
here), in relation to the calculation of merger thresholds, on 10 November 2017 amendments to the method of calculation as set out in General Notice 216 of 2009, were published in Government Gazette No. 41245. Some of the key amendments include the change from G.A.A.P to IFRS, and the addition of wording in certain sections to provide clarity regarding which financial year should be assessed when determining the asset value and turnover of a firm.
- In December 2015, the Speakers’ Forum established an independent high-level panel of eminent South Africans to undertake the task of assessing the content and implementation of legislation passed since 1994 in relation to its effectiveness and possible unintended consequences. The High Level Panel on the Assessment of Key Legislation and the Acceleration of Fundamental Change (Panel) was appointed in January 2016 and has released a report. The Panel has made the following recommendation in relation to existing competition law legislation:
"Parliament should enact amendments to competition legislation that enrich the powers of economic regulators to promote competition, based on fact-based inquiries and investigations, and also to discourage government policy and action that stifles competition."
- The Commission has signed the Brasilia Joint Declaration at the 5th International BRICS Competition Conference. By signing the declaration, the five BRICS members - Brazil, Russia, India, China and South Africa - have pledged continued efforts to implement policies and practices that encourage competitiveness.
Retail: Updates and Developments
In the retail sector, there are two developments of interest:
- Further to our June update (available here), public hearings continued in Pretoria in November as part of the Commission's Retail Market Inquiry.
- The Tribunal has dismissed a complaint against health and safety training firm, Real Tree Trading 1 (Pty) Ltd (RTT). In 2014, the Commission initiated an investigation against Global Sustainable Risk Control Management (Pty) Ltd and RTT, in which it alleged that the two companies entered into an agreement to fix prices for induction training services. This complaint referral revolves around the provision of General Safety Induction training required by ArcelorMittal South Africa Ltd. The Tribunal held that there was insufficient evidence to prove that there was an agreement, by the two firms involved, to fix prices.
Telecoms, Media & Technology: Data inquiry report expected to be published in 2018
Further to our August update (available here), in a written reply to a parliamentary question, the Minister has said that the Commission is expected to publish a report with interim findings and potential recommendations in 2018, in respect of its market inquiry into data services. The Minister has also indicated that the Commission will invite comments on the interim report before the recommendations are finalised.
Transport: Updates and Developments
In the transport sector, there are three developments of interest:
- It has been reported that the Commission will investigate a franchise agreement between South African Airways Ltd (SAA) and its partner SA Airlink Ltd (Airlink). The Commission confirmed that it had received a formal complaint from a potential new entrant in the market. The referral alleges exclusionary conduct on the basis that SAA refused to grant the potential new entrant access to the portal and booking system it shares with Airlink.
- Airlink and Safair (Pty) Ltd have announced in a joint statement that the two independent South African aviation groups will apply to the Commission for approval to unite under the common umbrella of the Airlink group of companies. The companies confirmed in the joint statement that the airlines will retain their respective products, aircraft fleets, management and leadership teams, and that employees will be secure as there will be no job losses as a result of the consolidation.
- The CAC has handed down its judgment in an appeal brought by the Commission against Stanley's Removals CC (Stanley's Removals). In November 2010, the Commission initiated an investigation into possible collusive tendering in the furniture removal industry by several firms, including Stanley's Removals. Following the referral of the complaint, the Tribunal imposed an administrative penalty of ZAR 450 000 without using the six step approach. The Commission appealed the Tribunal's decision and contended that the Tribunal's failure to apply the six-step approach was unexplained. The CAC concluded that the Tribunal's exercise of its discretion to impose an administrative penalty of ZAR 450 000 cannot be impugned and accordingly dismissed the appeal.
Comesa: Investigation against caf reaches advanced stage
The COMESA Competition Commission (CCC) has issued a press release providing an update on its investigations regarding anti-competitive agreements between the Confédération Africaine de Football (CAF) and its various stakeholders. The CCC indicated that it has reached an advanced stage in its assessment and has identified a number of concerns arising from clauses contained in the agreements, which could affect competition in the relevant markets for all 19 Member States of COMESA. Two of the key concerns relate to the duration of the agreements and the inclusion of 'first right of refusal' clauses. The CCC has stated that it shall soon submit its findings and proposed remedies to the Board of Commissioners (Board) for their determination, and wishes to invite stakeholders who may have submissions regarding the matter to do so before the findings and proposed remedies are submitted to the Board.
Kenya: Public secretaries seek exemption to fix fees
The Competition Authority of Kenya (CAK) has indicated that it has received a notice from the Institute of Certified Public Secretaries of Kenya (ICPSK) seeking an exemption from the existing law in order to be able to fix fees for governance audit services. Should an exemption be granted, all certified public secretaries providing these services would be required to stick to the fee guidelines specified by the ICPSK. A similar application from the Institute of Certified Public Accountants of Kenya was denied in November 2016.
Malawi: Competition authority hosts merger workshop
The Competition and Fair Trading Commission (CFTC) recently hosted a capacity building workshop on merger review and analysis. The workshop was organised by the African Competition Forum in conjunction with the CCC. Competition authorities from other African jurisdictions including Egypt, Gambia, Kenya, Mauritius, South Africa, Zambia and Zimbabwe, also attended the workshop. The main objective of the workshop was to develop practical and substantive skills for merger review and analysis in African jurisdictions.
Mauritius: Competition authority publishes outcomes of rpm amnesty programme
Further to our June update (available here), the Competition Commission of Mauritius (CCM) has issued a media release detailing the outcomes of its Resale Price Maintenance (RPM) Amnesty Programme (RPM Amnesty Programme). The objective of the RPM Amnesty Programme, which ran from June 2017 to October 2017, was to provide enterprises engaging in RPM a window of opportunity to report and discontinue their conduct in order to gain immunity from fines. The RPM Amnesty Programme resulted in 102 companies applying for RPM Amnesty. The companies operate in various sectors such as fast-moving consumer goods, construction, manufacturing, electronic goods, IT products, books, pharmaceutical and cosmetic products.
Namibia: Competition authority receives a high number of merger notifications in 2017
It has been reported that the Namibia Competition Commission (NaCC) received 24 merger notifications in the first quarter of the 2017/2018 financial year. The NaCC determined 17 mergers, all of which were unconditionally approved. During the second quarter of the 2017/2018 financial year, the NaCC received 19 merger notifications and determined 32 mergers, three of which were approved with conditions. According to the NaCC spokesperson, the conditions were all behavioural in nature and were aimed at addressing possible public interest considerations.
Nigeria: Update on the nigerian competition bill
Further to our March update (available here), it has been reported that the National Assembly has passed the harmonised version of the Federal Competition and Consumer Protection Bill (the Bill). The Bill still requires Presidential assent before it becomes law.
Swaziland: Energy regulator partners with competition authority
The Swaziland Competition Commission (SCC) and the Swaziland Energy Regulatory Authority (SERA) have entered into a memorandum of understanding (MOU). The objectives of the MOU are to promote and maintain competition and eliminate the duplication of responsibilities between the SCC and SERA.
European Union: EC probes arcelormittal merger
The European Commission (EC) has initiated an investigation into the proposed acquisition by ArcelorMittal S.A. (ArcelorMittal) of Ilva SpA (Ilva). ArcelorMittal is a producer of flat carbon steel, both worldwide and in Europe, with a wide production network within the European Economic Area. Ilva is a significant producer of flat carbon steel with major production assets in Italy. The EC has raised concerns that the merger may reduce competition for a number of flat carbon steel products and that, following the transaction, customers would face higher prices. The EC will also investigate whether the transaction could have an effect on the supply and prices of certain other products, such as metallic coated steel for packaging.
Switzerland: BMW loses appeal against competition authority
The Federal Supreme Court of Switzerland (Court) has rejected an appeal by Bayerische Motoren Werke AG (BMW) against a fine of EUR 135 million (approximately ZAR 2 billion) imposed by the Swiss Competition Commission (SCC) in 2012 for market division. The SCC alleged that BMW prevented Swiss nationals from buying BMW and Mini cars abroad. BMW denied any wrongdoing and first appealed the fine to the Swiss Federal Administrative Court, which rejected the appeal in 2015.
United Kingdom: Updates and Developments
In the United Kingdom, there are two developments of interest:
- The Competition and Markets Authority (CMA) plans to establish a dedicated data-tech team to handle the use of algorithms, artificial intelligence and big data. The purpose of establishing the data-tech team is to improve the CMA's capability to collect and analyse the use of data by companies and the effect on competition. The CMA’s new Chief Executive said that the team would be made up of data scientists, computer experts and economists and would be headed by a chief data and technology insights officer.
- The CMA has provisionally found that Concordia abused its dominant position to overcharge the National Health Service (NHS) for an essential thyroid drug. The CMA found that last year, the NHS spent more than GBP 34 million (approximately ZAR 612 million) on the drug, an increase from around GBP 600,000 (approximately ZAR 10 million) in 2006. The CMA is pursuing another seven investigations relating to drug pricing and competition issues.
United States of America: AT&T and time warner merger faces hurdles
The United States Justice Department has sued to block AT&T Inc.’s (AT&T) proposed acquisition of Time Warner Inc. (Time Warner). The proposed acquisition is valued at USD 85.4 billion (approximately ZAR 1.2 trillion). Currently, AT&T is among the largest US internet and telephone providers, and is also the largest television distributor in the US. Time Warner would contribute (among other assets) HBO and Turner Broadcasting, which includes the news channel CNN. The Assistant Attorney General for Antitrust has said that a union of the two companies would harm consumers and weaken competition. AT&T has indicated that it intends to defend the proposed deal.
Our Recent Work
Deere & Company and wirtgen group holding GMBH
The transaction involving Deere & Company (Deere) and Wirtgen Group Holding GmbH (Wirtgen Holding) has been approved in a number of jurisdictions. In terms of the transaction, Deere (through one or several wholly-owned and solely-controlled entities of the Deere group) acquired from Wirtgen Holdings all of the shares and sole control in certain companies of the Wirtgen group, as well as certain specified assets which are currently held by Wirtgen Holding.
Desmond Rudman,Werner Rysbergen,Andriza Liebenberg and
Cara du Plessis represented the merger parties.
Deere, a public company incorporated in the United States, is listed on the New York Stock Exchange. Deere manufactures agricultural, construction, and forestry machinery; industrial diesel engines, drivetrains and certain other components; and lawn care equipment. Wirtgen manufactures and supplies equipment used for compaction to rehabilitation as well as mining and quarries equipment. Wirtgen supplies equipment used in road building, maintenance and rehabilitation of roads and in mining.
The merger was approved in COMESA, Kenya (by means of an exclusion application), South Africa and Tanzania.
Murray & Roberts LTD and Bombela civils joint venture (PTY) LTD merger unconditionally approved
The Tribunal has unconditionally approved the merger between Murray & Roberts Ltd (M&R) and Bombela Civils Joint Venture (Pty) Ltd (BCJV) whereby M&R intends to acquire an additional 40% shareholding in BCJV.
Robert Wilson and
Burton Phillips represented the merger parties.
M&R’s current business operations are focused on natural re[Source]s market sectors, specifically within metals and minerals, oil and gas, and power and water. BCJV is a special purpose vehicle, established to perform the design and construction of the civil works for the Gautrain Rapid Rail Link. BCJV’s only remaining activities relate to its obligation to repair any latent defects within the civil works of the Gautrain.
The Commission found that proposed merger is unlikely to substantially prevent or lessen competition and does not raise any public interest concerns
Strategic partners group concessions (PTY) LTD and Bombela concessions company (RF) LTD merger unconditionally approved
The Commission unconditionally approved the merger in terms of which Strategic Partners Group Concessions (Pty) Ltd (SPG) will increase its shareholding in Bombela Concessions Company (RF) (Pty) Ltd (BCC) to 38%.
Robert Wilson and
Burton Phillips represented the merger parties.
SPG is a black economic empowerment company, primarily formed to participate in the Gautrain Rapid Rail Link (Gautrain) project. SPG represents the interests of a wide range of previously disadvantaged groups and is involved in the provision of various services relevant to the operation of the Gautrain, including facilities management and security services. BCC was formed by a consortium of companies, including Murray & Roberts Limited, Bombardier Transportation UK Limited, Bouygues Travaux Publics SAS and SPG, in order to bid for the Gautrain project. BCC was selected by the Gauteng Provincial Government as the preferred bidder to design, build, partly finance, operate and maintain the Gautrain system. The proposed transaction forms part of a broader restructuring of the shareholding in the various Gautrain companies and facilitates the disposal by Bombardier and Bouygues of their shares in BCC.
The Commission found that proposed merger is unlikely to substantially prevent or lessen competition and does not raise any public interest concerns.
Transaction involving Opel automobile GMBH and the opel distribution network and Chevrolet aftersales distribution network conditionally approved
The Commission has conditionally approved the proposed transaction whereby General Motors South Africa (Pty) Ltd (GMSA) intends to transfer the responsibility for the Opel Distribution Network and the Chevrolet Aftersales Distribution Network to Opel Automobile GmbH (Opel).
Robert Wilson,Werner Rysbergen and
Cara du Plessis represented Opel.
Opel is an international company with its principal place of business in Germany and was previously controlled by General Motors (GM). Peugeot S.A. (PSA) acquired control over Opel on 31 July 2017, following the implementation of the recent global transaction that was notified in multiple jurisdictions and approved by the Commission on 25 July 2017. In South Africa, the PSA Group imports and supplies passenger vehicles and commercial vehicles. The Opel Distribution Network entails the importation and distribution of Opel branded vehicles, spare parts and accessories. The Chevrolet Aftersales Distribution Network entails the provision of service parts and aftersales services for Chevrolet, Saab, Cadillac and Hummer branded vehicles.
The Commission found that the transaction is unlikely to raise competition concerns in any market and imposed conditions relating to public interest.