Update On The Competition Amendment Bill
In September 2018, the Portfolio Committee on Economic Development held a series of meetings to deliberate over the Competition Amendment Bill, 2018 (Bill). The Minister of Economic Development was also given an opportunity to respond to matters raised during the public hearings on the Bill. It has been indicated that the Committee will consider the Bill further in early October. We will keep you updated on all further developments.
Please also note that that there has been a slight amendment to our e-alert setting out the key amendments proposed by the Bill under the section on mergers. Access the amended e-alert
here.
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New Judgments Of Interest
Constitutional Court clarifies Commission's powers
The Constitutional Court has confirmed the Competition Commission's extensive powers in relation to mergers. The Court confirmed that the Commission not only has the power to investigate notifiable mergers, but may also
investigate transactions to determine whether they constitute or give rise to a notifiable merger and determine whether proceedings should be initiated in the Competition Tribunal to impose appropriate penalties.
The Constitutional Court (Court) has confirmed the Competition Commission's extensive powers in relation to mergers. The Court confirmed that the Commission (under the Act) not only has the power to investigate notifiable mergers, but may also
investigate transactions to determine whether they constitute or give rise to a notifiable merger and determine whether proceedings should be initiated in the Competition Tribunal to impose appropriate penalties.
By way of background, in the matter involving
S.O.S Support Public Broadcasting Coalition and Others v South African Broadcasting Corporation (SOC) Ltd and Others (CCT 121/17), the Court was asked to examine the powers of the Commission to investigate whether the channel licensing agreement entered into between the South African Broadcasting Corporation and MultiChoice gave rise to a notifiable merger as defined in the Act. The parties contended that the Commission was limited to a "desktop study" of the case and could not investigate any further or interview witnesses.
The Court found, however, that the Commission's investigative powers are sourced from the Act and that "were the Commission found to be without powers to investigate merger transactions to enforce these provisions, this would emasculate the entire edifice of compliance that characterises the merger regime of self-notification under the Act."
A copy of the decision is available
here
CAC considers lawfulness of complaint referral
The Competition Appeal Court (CAC) has dismissed an appeal by Continental Tyres South Africa (Pty) Ltd and Goodyear South Africa (Pty) Ltd against a Tribunal decision in favour of the Competition Commission. The appeal concerned the question of whether the Commission lawfully referred a third-party complaint to the Tribunal in terms of the Competition Act. The appellants contended that the Tribunal had no jurisdiction to adjudicate the third-party complaint as the Commission failed to refer it to the Tribunal within the timeframes prescribed. Furthermore, the appellants contended that the Commission failed to note a case number on the electronic version of the complaint referral. After considering a number of factors, the CAC held that the complaint referral was filed timeously. The CAC also concluded that the Commission's omission to note the case number did not warrant a finding that there was no valid referral in terms of the Act. A copy of the CAC's decision is available
here
Local News
Agribusiness, food & beverage: Updates & developments
In the agribusiness, food & beverage sector, there are two developments of interest:
- The Tribunal has confirmed a consent agreement between the Commission and Omnia Fertilizer Ltd (Omnia). In terms of the settlement agreement, Omnia admitted that Nitrochem (Pty) Ltd (a business acquired by Omnia as a going concern in 1995) engaged in price-fixing and market allocation with two competitors. Omnia agreed to pay an administrative penalty of ZAR 30 million. A copy of the consent agreement is available
here
- The Tribunal has confirmed a consent agreement between the Commission and Karan Beef (Pty) Ltd (Karan Beef). The settlement followed an investigation by the Commission which found that Karan Beef and Irvin & Johnson Ltd agreed not compete with each other in certain markets. Karan Beef agreed to pay an administrative penalty of ZAR 2.7 million. A copy of the consent agreement is available
here
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Industrials: Water transportation firm fined for price-fixing
The Tribunal has imposed an administrative penalty of ZAR 10.2 million on Enviroserv Waste Management (Pty) Ltd (Enviroserv) for colluding with Wasteman Holdings (Pty) Ltd to set the downstream price in the market for waste transportation services in which both firms compete. The Tribunal found that the two firms used their upstream joint venture as a forum to reach agreement. Although Enviroserv attempted to provide many justifications for the existence of the downstream price, the Tribunal was of the view that the decision to fix the downstream price was not the behaviour of firms in a vertical relationship but was rather the conduct of two firms competing directly with each other.
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Healthcare: Inquiry to be completed by November 2018
The Terms of Reference for the Health Market Inquiry (HMI) have been amended. In terms of the amendment, the final HMI report and recommendations will be completed by 30 November 2018. It is noted that the amendment was necessary due to the data access process and extensive engagements required in respect of the provisional report. The HMI commenced in January 2014 and was initially set to be completed on 30 November 2015.
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Mining: Sibanye / Lonmin merger conditionally approved
The Commission has recommended to the Tribunal that the large merger whereby Sibanye Gold Ltd t/a Sibanye-Stillwater (Sibanye) intends to acquire sole control of Lonmin Plc (Lonmin) be conditionally approved. The Commission found that the proposed transaction raises significant public interest concerns and imposed a number of conditions. In terms of the conditions, among other things, Sibanye must: embark on three short term mining projects to avoid retrenchments; implement an Agri-Industrial Community Development Programme in the Rustenburg area; continue to honour the contracts of Lonmin’s existing HDP suppliers; and also endeavour to continue to procure from non-contracted HDI suppliers.
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Regulatory: Commission publishes Annual Report
The Commission has published its 2017/18 Annual Report (a copy is available here). The report provides a useful summary of an eventful year. It is worth noting that during the 2017/18 financial year:
- 377 mergers were notified and 52 were approved with conditions;
- 146 total cartel cases were handled, with 52 referrals to the Tribunal;
- only 2 leniency applications were received;
- and 16 cartels cases, 10 abuse of dominance cases and 16 merger reconsiderations are at the litigation stage.
Importantly, the report also notes that one of the Commission's priorities is the successful implementation of the criminal provisions of the Act. The report indicates that the Commission has engaged various stakeholders in the criminal justice system with a view to understanding the implications of individual criminal liability in competition law and to reach agreement on the roles of each institution going forward in the new dispensation.
Retail: Updates & developments
In the retail sector, there are two developments of interest:
- The Commission has conditionally approved the proposed transaction whereby Procter & Gamble Company (P&G) intends to acquire the Consumer Healthcare Business of Merck KGaA (Merck). The Commission found that the proposed transaction is unlikely to substantially prevent or lessen competition but that the proposed transaction may negatively affect some of Merck’s contracted manufacturers in South Africa. The Commission approved the proposed transaction subject to conditions which will ensure that the production of the Merck products concerned remains in South Africa.
- The Terms of Reference for the Grocery Retail Sector Market Inquiry (Retail Inquiry) have been amended to allow for further consultations with key stakeholders and to finalise and publish a provisional report. In terms of the amendment, the Retail Inquiry will be completed by 30 September 2019.
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Telecoms, media & technology: Update on the Data Service Market Inquiry
The Commission has announced that it will hold public hearings for the Data Services Market Inquiry (Data Inquiry) on 17 and 18 October 2018 in Gauteng. The terms of reference for the Data Inquiry have also been amended. In terms of the amendment, the Data Inquiry will be completed by 31 March 2019.
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Transport: Collusive tendering hearing continues
The Tribunal has continued its hearing into allegations that the furniture removal company, Elliott Mobility (Pty) Ltd, participated in 23 instances of collusive tendering with its competitors JH Retief Transport CC (JH) and Cape Express Removals (Pty) Ltd (Cape Express). JH has since paid an administrative penalty of ZAR 4.3 million for 3 487 instances of cover pricing and Cape Express was fined ZAR 645,710 for 1 744 incidents. The hearing ran from 17 September to 20 September 2018.
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Rest Of Africa News
Botswana: Insurance merger approved with conditions
The Botswana Competition Authority (BCA) has conditionally approved the proposed acquisition of the entire issued share capital in Saham S.A. by Sanlam Emerging Markets (Ireland) Ltd (SEM). The merger was approved subject to the condition that there would be no retrenchments, in perpetuity, of any employee associated with this merger in Botswana. Furthermore, SEM will continue to supply the same short-terms insurers that were previously engaged by Continental Reinsurance Company Botswana and will, for three years, submit to the BCA a report indicating a list of its new and old customers and the related trading terms between the parties and these customers.
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Egypt: Updates & developments
In Egypt, there are two developments of interest:
- The Cairo Economic Appeals Court has confirmed the decision of the Cairo Economic Court ordering beIN Sports TV Network (beIN) to pay a fine of EGP 400 million (approximately ZAR 320 million) for contravening competition laws by monopolising the streaming of football matches. The Egyptian Competition Authority (ECA) previously declared beIN's deal with the Egyptian Cable Network Egypt to be invalid.
- The ECA has issued instructions prohibiting schools from enforcing requirements which oblige parents to purchase school uniforms, supplies or equipment from specific stores or solely from the school itself. The ECA stated that it viewed such requirements as contrary to fair competition practices. The authority has demanded that all schools set objective specifications for school uniforms and that there should not be coercion on parents to purchase school tools of specific brands.
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Kenya: Kenya Airways and Precision Air granted exemption
Further to our May update (available
here), the Competition Authority of Kenya (CAK) has granted a four year exemption for the joint venture agreement between Kenya Airways PLC and Precision Air PLC. The CAK's approval of the exemption from competition regulations means that the two commercial airline carriers may now set prices, share revenues and collaborate on sales and marketing activities.
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Namibia: Alleged price-fixing in pharmaceutical industry
The Namibian Competition Commission has announced that it is currently investigating the Pharmaceutical Society of Namibia (PSN) and more than 200 pharmacies for alleged price-fixing activity. The investigation follows allegations of strict enforcement of a PSN rule which requires pharmacies to implement a 50% mark-up on the dispensing of medicines.
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Zambia: Updates & developments
In Zambia, there are two developments of interest:
- The Bank of Zambia has announced the abolishment of unwarranted bank charges. Following the promulgation of the Bank of Zambia Prohibition Against Unwarranted Bank Charges and Fees Directives of 2018, banks may no longer charge for withdrawal fees, balance inquiries and account maintenance fees amongst other charges. The move has been commended by the Economics Association of Zambia while the Bankers Association of Zambia views the step as a threat to the financial services industry and jobs. A copy of the Directives can be accessed
here
- The Northern Western province provincial investigator of the Competition and Consumer Protection Commission, James Chalungumana, has warned school managements against forcing parents to buy uniforms from learning institutions. Mr Chalungumana indicated that such behaviour was anti-competitive given that there were various service providers in the market.
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Zimbabwe: Electricity company accused of anti-competitive tender behaviour
The Competition and Tariff Commission has made an order requiring Zimbabwe Electricity Transmission and Distribution Company (ZETDC) to open up its tenders for the procurement of aluminium conductor cables to all qualified bidders. The order follows allegations of a deal between ZEDTC and Cafca Ltd (Cafca), in terms of which, Cafca agreed to exclusively supply aluminium conductor cables in exchange for copper scrap. It was alleged that this arrangement amounted to a restrictive practice as it may restrict the entry of other aluminium conductor cable producers into the market.
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International News
European Union: Apple and Shazam merger approved
The European Commission (EC) has unconditionally approved the acquisition of Shazam Entertainment Ltd (Shazam) by Apple Inc (Apple). Apple operates "Apple Music", which is the second largest music streaming service in Europe, after Spotify. Shazam offers a leading music recognition application in the European Economic Area. The EC concluded that the acquisition by Apple would not reduce competition in the digital music streaming market.
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Hong Kong: Authority pursues enforcement against individuals
The Hong Kong Competition Commission (HKCC) has accused three construction companies and two directors of market sharing, price-fixing and distorting fair competition in a way that amounted to “serious anti-competitive conduct”. The conduct involves a subsidised housing estate. This is the first time the HKCC is suing individuals for anti-competitive conduct and the regulator has also requested the disqualification of one of the directors implicated.
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Turkey: Regulator imposes fine on Google
Turkey's Competition Authority has fined Google around USD 15 million (approximately ZAR 213 million). It has been reported that the fine is in relation to Google's mobile software sales and that the authority has said that Google LLC, Google International and Google Reklamcilik have six months to make the necessary changes in order to “reinstill effective competition in the market and end the violation”.
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United Kingdom: Updates & developments
In the United Kingdom, there are two developments of interest:
- The Competition Appeal Tribunal (CAT) has upheld the Competition and Markets Authority's (CMA) finding that Ping Europe Ltd contravened competition law by banning the online sale of its golf clubs. The CAT lowered the CMA’s original penalty to GBP 1.25 million (approximately ZAR 23 million). The decision indicates that attempts by manufacturers to impose absolute bans on selling their products online are not permitted by law.
- The CMA has imposed a fine of GBP 1.6 million (approximately ZAR 29 million) on Heathrow Airport Ltd for restricting competition on parking prices. During the CMA's investigation it was revealed that the airports agreement with the Arora Group for the lease of Arora’s Sofitel hotel at Terminal 5, included a clause restricting how parking prices should be set by Arora for non-hotel guests. Both parties accepted that this was a breach of competition law and have removed the pricing restriction. Notably, this is the first time the CMA has taken competition law enforcement action in a case involving a land agreement.
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Our Recent Work
Off The Shelf and Chevron merger approved
On 8 March 2018, the Tribunal conditionally approved the merger between Off The Shelf Investments 56 (RF) (Pty) Ltd (OTS) and Chevron South Africa (Pty) Ltd (CSA). The transaction relates to the acquisition of control by OTS of 75% of CSA. Accordingly, with its current 23% shareholding in CSA, the transaction will result in OTS increasing its shareholding in CSA to 98%.
Mmadika Moloi, Burton Phillips and
Betty Mkatshwa represented OTS, the acquiring firm.
OTS is a B-BBEE consortium with no other activities but its 23% shareholding in CSA. CSA is a refiner and producer of petroleum products from its facilities in Cape Town and Durban. CSA markets its products in South Africa under the Caltex brand and competes with other oil companies such as Engen, BP, Shell, Total and Sasol.
The Tribunal approved the transaction with conditions.
Altron TMT and IS Partners merger approved
The Commission has unconditionally approved the proposed transaction whereby Altron TMT (Pty) Ltd (Altron TMT) intends to acquire IS Partners (Pty) Ltd (IS Partners).
Daryl Dingley and
Betty Mkatshwa represented the merger parties.
Altron TMT is an information and communication technology services (ICT) provider in South Africa. The TMT Group offers a wide variety of ICT services which include telecommunication services, systems integration, information technology (IT) infrastructure support services and IT outsourcing services. IS Partners is a technology consulting firm, which provides a host of IT services which include IT outsourcing, systems integration services and infrastructure support services. In addition, IS Partners provides information management and data advisory consulting.
The Commission found that the merger is unlikely to substantially lessen or prevent competition and does not raise any public interest concerns.
