Catch Up With Competition Law Now - October 2019

New decision of interest: Competition Appeal Court dismisses Computicket appeal

The Competition Appeal Court (CAC) dismissed an appeal by Computicket (Pty) Ltd (Computicket) against a decision by the Competition Tribunal (Tribunal). Earlier this year, the Tribunal imposed an administrative penalty of ZAR 20 million on Computicket for abusing its dominance. The Tribunal found that Computicket’s exclusive agreements with inventory providers had resulted in anticompetitive effects during the period 2005 to 2010. The CAC agreed with the Tribunal and concluded that Computicket's exclusionary act was substantial in terms of foreclosing the market to rivals. The CAC also held that there is evidence pointing to actual harm to consumers and that no pro-competitive efficiencies were established. A copy of the decision is available here.

Local News

Agribusiness, food & beverages: Updates & developments

In the agribusiness, food & beverages sector, there are two developments of interest:

• The Tribunal dismissed an application by the Competition Commission (Commission) to reinstate a cartel case against Beefcor (Pty) Ltd and Cape Fruit Processors (Pty) Ltd. In September 2017, the Commission initiated a market division complaint against the companies but decided to withdraw its case in a bid to negotiate a settlement in June 2018. Following a withdrawal notice filed by the Commission, the matter was removed from the Tribunal’s roll. In September 2018, the Commission attempted to reinstate the same withdrawn complaint under a new case number. The Tribunal found that the Commission’s withdrawal notice had the effect of withdrawing the complaint referral and did not serve to merely remove the matter from the roll.
• The Minister of Trade, Industry and Competition has commended Massmart Holdings Ltd's (Massmart) programme to procure products from small, local suppliers, following the announcement that the programme had reached the ZAR 1 billion mark. The Massmart supplier development programme was established in 2012 as a condition to the merger between Walmart Inc and Massmart. The programme currently has a portfolio of 23 small businesses manufacturing various products.
  

Engineering & construction: Updates & developments

In the engineering & construction sector, there are two developments of interest:

• It has been reported that the Commission has received complaints regarding the Council for the Built Environment (CBE). The Commission's Divisional Manager, Khanyisa Qobo, recently spoke at a CBE Transformation Indaba, where she indicated that the Commission had investigated and continued to receive complaints from the public about exclusionary practices in the built environment sector.
• The Tribunal dismissed an application by Eston Brick and Tile (Pty) Ltd (Eston) to have the Commission’s decision to institute proceedings against it reviewed and set aside. In 2008, the Commission decided to non-refer a market division complaint involving Eston to the Tribunal, but subsequently initiated a complaint against the company in 2017. Eston contended that the Commission's change of mind in 2017 was irrational, but the Commission argued that the prior decision to non-refer was based on the hardship being faced by Eston at the time, and not because the agreement did not constitute an anticompetitive arrangement. The Tribunal concluded that the Commission did not act irrationally and that the doctrine of legitimate expectation does not apply.

Energy& infrastructure: Power cable company admits to collusion

The Tribunal confirmed a settlement agreement between the Commission and Kewberg Cables and Braids (Pty) Ltd (Kewberg). Kewberg admitted that it was involved in fixing the prices of communication and power cables. In terms of the settlement agreement, Kewberg has agreed to pay an administrative penalty of ZAR 30,000.00.

Financial Services: Asset management services merger approved

The Tribunal conditionally approved Brookfield Asset Management Inc.'s (Brookfield) proposed acquisition of Oaktree Capital Group LLC (OCG), an American global asset manager. The merger has been approved subject to conditions relating to the fulfilment of the second of two phases of the transaction within a stipulated time period. In terms of the condition imposed, Brookfield is required to inform the Commission should it acquire sole control over OCG within the specified time frame. If sole control is acquired after the specified period, Brookfield is required to notify the transaction as a merger if the thresholds are met.

Telecommunications, media and technology: Tribunal approves Business Day sale

The Tribunal unconditionally approved Lebashe Investment Group (Pty) Ltd’s proposed acquisition of Tiso Blackstar Group (Pty) Ltd (TBG), Rise Broadcast (Pty) Ltd and Vuma 103 FM (Pty) Ltd. TBG owns, among others, Sunday Times, Business Day, Rise FM and Vuma FM. Although two trade unions and the Department of Trade, Industry and Competition had raised employment concerns relating to the merger, a legal representative for the companies submitted that the anticipated retrenchments were not merger related and will be carried out irrespective of the proposed transaction.

Transport: Updates & developments

In the transport sector, there are two developments of interest:

• The Tribunal issued an order recognising Weelee (Pty) Ltd (Weelee) as a participant in the merger proceedings involving WeBuyCars and MIH Ecommerce. In May 2019, after the Commission recommended that the proposed transaction be prohibited, MIH eCommerce and WeBuyCars decided to oppose the Commission's prohibition recommendation. Weelee contended that it is a competitor to WeBuyCars and, while it has been called as a witness for the Commission, this status does not afford it sufficient protections over its own interests.
• The Commission granted an exemption to South African Airways and (SOC) Ltd and Air Mauritius Ltd to form a joint venture (JV) on the Johannesburg and Mauritius route and other related routes. In terms of the exemption, the JV may collaborate on the network, scheduling, revenue management and distribution across both carriers. The exemption has been primarily granted because cooperation between the two airlines will promote exports from South Africa.

Regulatory: Updates & developments

There are two developments of interest pertaining to regulatory issues:

• The Tribunal’s 2018/2019 Annual Integrated Report has been tabled in Parliament and is now available online.
• The Tribunal dismissed an application for a merger filing fee refund by Vresthena (Pty) Ltd and the Dimas Family Trust. The parties abandoned their proposed transaction three months after the Commission was notified and argued that they were entitled to a 75% refund of the merger filing fees. The Commission opposed the application due to the fact that before the notified transaction was abandoned, it had assessed the merger which required a substantial amount of work and resources.

Rest of Africa News

Angola: Sonangol and Total merger approved

The Angolan Regulatory Competition Authority (ARC) has approved the partnership, through a jointly owned company, between Angolan national oil and fuel company Sonangol and Total. According to the ARC, the joint company is set to operate in the logistics, distribution and marketing of oil products.

CEMAC: Updated merger thresholds

The turnover value of the merger notification thresholds of the Central African Economic and Monetary Community (CEMAC) has been amended in terms of Article 59 of the new 2019 CEMAC Regulations. In terms of the amendment, the previous monetary threshold of CFA 1 billion has been increased to CFA 10 billion. A copy of the new Regulations is available here.

COMESA: Updates & developments

• The COMESA Competition Commission (CCC) has approved the merger between Telkom Kenya Ltd and Airtel Networks Kenya Ltd. According to the committee responsible for initial determination, the merger would not result in the lessening of competition in the common market.
• George Lipimile (the CEO of the CCC), has recently emphasised the importance of competition law in the COMESA region. Mr Lipimile, while speaking at a workshop in Nairobi, said that a robust competition law and its constituent merger control regime are instrumental to attracting foreign direct investment. He also indicated that there is empirical evidence that transnational corporations are more likely to invest in a country where there is robust competition law and policy.

Egypt: IMF and World Bank recommend improvements to competition policy

The International Monetary Fund (IMF) and the World Bank (WB) have made recommendations urging Egypt to enhance its competition law and policy. The recommendations, which submit that Egypt will need to accommodate approximately 3.5 million new entrants into its labour market within the next 5 years, seek to promote private sector investments. The IMF and WB identified competition law in Egypt as an important element in ensuring market competitiveness, through the Egyptian Competition Authority (ECA). It has been reported that a new draft competition law, which aims to strengthen the ECA's powers, has been submitted to parliament and is likely to be approved during the current parliamentary round.

Namibia: Sale of Erindi Game Reserve approved

The Namibian Competition Commission (NaCC) has approved the sale of the Erindi Private Game Reserve to Alberto Baillères. The Commission approved the proposed transaction subject to the condition that workers should not be retrenched for a five year period. According the NaCC, Mr Baillères intends to challenge the employment condition.

International News

Australia: Inquiry launched into home loans market

The Australian Competition and Consumer Commission (ACC) has commenced an investigation into the home loans market. The ACCC will investigate a wide range of issues ranging from the rates paid by new vs existing customers, how the cost of financing for banks has affected bank decisions on interest rates and why the Reserve Bank of Australia cuts are not always passed on in full. The ACCC is expected to produce a preliminary report by the end of March 2020.

European Union: Updates & developments

• The European Commission (EC) has ordered Broadcom Inc. (Broadcom) to stop applying certain provisions contained in six agreements with its main customers. The EC is currently investigating Broadcom to assess whether it restricted competition in various markets for chipsets and components for so-called central office/head end equipment. This is the first time in 18 years that the EC has decided to implement interim measures in an ongoing investigation.
• Margrethe Vestager, the EC Competition Commissioner, has recently emphasised that the need for independence in law enforcement is non-negotiable. Ms Vestager was responding to questions from the European Parliament regarding conflicts of interest in relation to her new roles. Ms Vestager was chosen as an executive vice-president to oversee a new portfolio called the "Europe fit for the digital age", while simultaneously holding her position as EU Competition Commissioner. During the Q&A session, Ms Vestager also indicated that the EC will look into stronger, far-reaching competition remedies, particularly in relation to large tech companies.

Malaysia: Competition authority proposes fine against e-hailing company

The Malaysian Competition Commission (MyCC) issued a proposed decision against Grab Inc., GrabCar Sdn. Bhd. and MyTeksi Sdn. Bhd. (collectively, Grab) for breaching competition law. The MyCC has provisionally found that Grab abused its dominant position by imposing a number of restrictive clauses on its drivers which prevented the drivers from promoting and providing advertising services for Grab's competitors in the e-hailing and transit media advertising market. MyCC has proposed to impose a financial penalty of RM 86 million (approximately ZAR 350 million) against Grab as well as a daily penalty of RM 15,000 (approximately ZAR 53,000) per day from the date of service of the proposed decision should the company fail to take remedial actions.

United Kingdom: Updates & developments

• The Competition and Markets Authority (CMA) is investigating the acquisition by Amazon.com NV Investment Holdings LLC of certain rights and a minority shareholding in Roofoods Ltd (trading as Deliveroo). The CMA is considering whether it is, or may be the case, that this transaction constitutes a merger and, if so, whether the merger may result in a substantial lessening of competition within any market or markets in the UK.
• The CMA has fined three construction firms a total of GBP 36 million (approximately ZAR 690 million) for engaging in cartel conduct from 2006 to 2013. The companies agreed to coordinate their prices, shared the market by allocating customers and regularly exchanged competitively sensitive information.

United States of America: FTC Commissioner highlights big data threat to competition

Rohit Chopra, a Commissioner at the Federal Trade Commission, has recently pointed out the potential harm to competition as a result of large-scale data gathering by companies. Mr Chopra said that "vast troves of data collected by big technology companies allow them to gain a competitive edge and pose a threat to competition". Mr Chopra encouraged regulators to take a closer look at remedies, as small fines and financial penalties will not be enough to address concerns about the power of large technology companies.

Our Recent Work

Dynamic Brands / Elvin Group

The Commission unconditionally approved Dynamic Brands Manufacturing (Pty) Ltd's (Dynamic Brands) proposed acquisition of certain assets and liabilities of Elvin Group (Target Business), an operating division of Libstar Operations (Pty) Ltd.

Shawn van der Meulen and Makati Seekane acted for Libstar.

Dynamic Brands manufactures and supplies certain concentrates and ready to drink beverage products in South Africa under its own brands, and manufactures and packages certain private label beverage products for retailers. The Target Business includes Elvin Group's non-alcoholic beverages production lines and equipment, as well as the intellectual property and stock relating to Elvin's concentrates and ready to drink beverage brands.

The Commission found that the merger is unlikely to substantially lessen or prevent competition or raise any public interest concerns.

Special Purpose Acquisition Partnership III / Rosond Holdings

The Tribunal unconditionally approved Special Purpose Acquisition Partnership III’s (SPAP III) acquisition of Rosond Holdings (Pty) Ltd (Rosond).

Daryl Dingley and Busisiwe Masango acted for the merger parties.

SPAP III is a special purpose vehicle entity, incorporated for the purposes of the transaction, ultimately controlled by Capitalworks Private Equity Advisor (Pty) Ltd, an alternative asset management and private equity investment firm. Rosond is a private company which provides surface exploration, underground drilling and geotechnical engineering services to mining and exploration industries.

The Tribunal found that the merger is unlikely to substantially lessen or prevent competition or raise any public interest concerns.