Catch Up With Competition Law Now - Webber Wentzel June 2018

New Decision Of Interest

Dawn Raid set aside

The High Court has set aside a search warrant which authorised dawn raids to be conducted at the premises of five edible oils companies. In December 2016, the Competition Commission (Commission) made an urgent ex parte application for a search warrant on the basis that the companies had breached the anti-cartel provisions of the Competition Act 89 of 1998 (the Competition Act). Following the raids, the companies launched an application to challenge the lawfulness of the search warrant. The court held that the Commission had failed to make out a case for the issuing of a search warrant in terms of the Competition Act, and ordered that the search warrant be set aside. The Commission was also ordered to return all materials seized from the premises of Willowton Oil and Cake Mills and F R Waring Holdings (Pty) Ltd, and all copies or recording of those materials. The court also held that the Commission was guilty of serious breach of its duty of good faith to the court to disclose material facts in its ex parte application.

The judgement indicates that there must be evidence on oath to conclude that the parties had engaged in a prohibited practice and that the information connected with the Commission's investigation was on the premises being raided. This is only the second time a dawn raid by the Commission has been set aside. A copy of the judgment is available here.

 

Local News

Agribusiness, Food & Beverage: Updates & developments

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

  • The Commission recently held workshops with the National African Farmers Union of South Africa (NAFU). The Commission provided an overview of its interventions in the agricultural and agro-processing sector and NAFU presented on key challenges facing emerging farmers in South Africa. The Commission and NAFU also discussed the need for interventions in the sector to address barriers to entry and expansion.
  • The Competition Tribunal (Tribunal) approved the merger between Robertsons (Pty) Ltd (Robertsons) and Silver 2017 (Pty) Ltd (Newco). Newco has been established for the purpose of housing the business currently conducted by Unilever South Africa (Pty) Ltd (ULSA), pertaining to the manufacture, sale and distribution of its spreads products. The ULSA spreads business is a respondent in a complaint relating to the edible fats and oils market, which has already been referred to the Tribunal. Accordingly, the merger was conditionally approved subject to an undertaking by ULSA to pay any administrative penalty that might arise from the pending cartel matter.

[Source] and [Source]

Engineering & Construction: Wire supplier fined for collusive conduct

The Tribunal has confirmed a consent agreement between Cape Gate (Pty) Ltd (Cape Gate) and the Commission. Cape Gate agreed to pay an administrative penalty of ZAR 40 million for engaging in collusive conduct in respect of nails and various wire products. Cape Gate admitted to its involvement in the alleged conduct in 2009, but has since disputed the amount of the penalty. When determining the penalty amount, the Commission indicated that it had taken into account Cape Gate's assistance through the litigation process involving other companies implicated in the same cartel. A copy of the settlement agreement is available here.

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Healthcare: Updates & developments

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

  • Following a number of delays relating to confidentiality issues, the Health Market Inquiry (HMI) has confirmed that the HMI Provisional Report (the Report) will be released on 5 July 2018 for public comment. Details on the period allowed for public comment and engagement on the Report will be announced by the Panel Chair.
  • The Tribunal has overturned the Commission’s prohibition of a small merger between Netcare Hospitals (Pty) Ltd (Netcare) and Lakeview Hospital. The merger was classified as a small merger and was initially not notifiable. However, the Commission requested a merger notification when it became aware of the transaction during its investigation of the large merger between Netcare and The Akeso Group. The Tribunal ordered that the merger be approved subject to conditions relating to the regulation of tariffs.

[Source] and [Source]

Industrial: Hudaco acquires the Boltworld Business

The Commission has conditionally approved the merger between Hudaco Trading (Pty) Ltd (Hudaco) and The Boltworld Business (Boltworld). Hudaco imports and distributes branded industrial, automotive and electronic consumable products, while Boltworld is an importer and wholesale distributor of industrial fasteners and ancillary products. The Commission approved the merger subject to a condition placing a moratorium on merger specific retrenchments for a period of two years.

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Regulatory: SA and Eswatini competition authorities sign MOU

The Commission and the Swaziland Competition Commission have entered into a memorandum of understanding (MOU) to solidify relations and cooperation on competition enforcement policy. At the signing ceremony, the South African Competition Commissioner remarked that the MOU provides the regulators with the opportunity to strengthen bilateral cooperation on cross-border mergers and cartel enforcement.

[Source]

Retail: Spree and Superbalist merge

Media24 Ltd (Media24) and Takealot Online (Pty) Ltd have announced the merger between their online fashion brands, Spree and Superbalist. Media24, the owners of Spree, will hold 51% of the new venture, while the Takealot Group will hold 49%. The merger will be effective on 1 July 2018 and is not subject to the Commission's approval.

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Transport: Market Inquiry public hearings continue

As part of the Commission's Public Passenger Transport Market Inquiry, public hearings have been held in both Gauteng and the Western Cape. Public hearings are currently taking place in KwaZulu-Natal and are scheduled to continue across the country until the end of August.

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Rest Of Africa News

COMESA: Investigation launched against FIFA

Following the submission of a complaint by the Egyptian Competition Authority (ECA), the COMESA Competition Commission (CCC) has launched an investigation against the Federation International de Football Association (FIFA) for refusing to allow Egypt's state TV from broadcasting the 2018 FIFA World Cup matches. It has been alleged that FIFA had awarded beIN Sports all media rights pertaining to the tournament. On 10 June 2018, the ECA released a statement indicating that it had ordered FIFA to make available to the Egyptian National Media Authority the rights to broadcast selected matches of the tournament.

[Source] and [Source]

Ethiopia: Moves to bolster competition in the telecoms market

As part of efforts to encourage competition in the telecoms sector, the Ethiopian Prime Minister has confirmed plans to sell a 30% - 40% stake in Ethiopia's state-run Ethio Telecom. The intention is to split the company into two telecom corporations and to sell shares in both companies. Currently, Ethio Telecom is the only telecommunication company in the country.

[Source]

Kenya: Updates & developments

In Kenya, there are two developments of interest:

  • The Competition Authority of Kenya (CAK) has recently rejected two exemption applications. The CAK rejected an application by WOW Beverages Ltd in terms of which the firm was seeking to enter into exclusive distributorship agreements with seven international suppliers. The CAK also rejected an application by the Institute of Certified Public Secretaries to set a fee guideline for their services.
  • The CAK and the Public Procurement Regulatory Authority (PPRA) have signed an MOU to promote a fair and competitive public procurement environment in Kenya. The MOU provides for collaboration between the two regulators when handling anti-competitive behaviour in the public procurement sector. The CAK's Director General said that committee’s first assignment will be will be poring through all major tender documents stored with government entities to seek out any red flags that may point to collusive tendering.

[Source], [Source] and [Source]

SADC: More collaborative efforts in the future

The SADC Competition and Consumer Law and Policy Committee recently held its 9th meeting in Botswana. The Deputy Competition Commissioner of the South African Commission, Hardin Ratshisusu, stressed that urgent work is required to develop and implement a regional competition policy framework by the year 2020. Mr Ratshisusu also indicated that research studies focusing on airlines and roaming charges are part of the current work plan of the SADC Committee.

[Source]

 

International News

European Union: Updates & developments

In the EU, there are two developments of interest:

  • The European Court of Justice (ECJ) has provided guidance on the type of conduct that could constitute the implementation of a merger prior to approval. In this instance, the case involved the termination of a cooperation agreement between KPMG DK and KPMG International, before the merger between KPMG DK and Ernst and Young was approved. The ECJ held that a concentration arises as soon as the merger parties implement operations contributing to a lasting change in the control of the target undertaking and that, in these circumstances, the termination of a cooperation agreement did not bring about the implementation of a concentration.
  • Google could face the possibility of another fine being imposed on it by the European Commission (EC). The EC alleges that Google breached EU antitrust rules by requiring manufacturers to pre-install Google Search and Google's Chrome browser and by requiring them to set Google Search as default search service on their devices. It has been reported that the EC's decision will be announced in July and that Google could face a fine of up to EUR 11 billion (approximately ZAR 176 billion).

[Source], [Source] and [Source]

United Kingdom: Updates and developments

In the UK, there are two developments of interest:

  • New merger and takeover rules have been introduced in the UK. The new rules apply to businesses developing military and dual-use technology, computing hardware and quantum technology. The government made these changes to recognise the growing importance of small British businesses in developing technology products with national security applications. In terms of the new thresholds, ministers may now intervene on certain grounds when the target businesses' UK turnover is more than GBP 1 million (approximately ZAR 18 million), a substantial decrease from previous threshold of GBP 70 million (approximately ZAR 1.2 billion).
  • The Competition Appeal Tribunal (CAT) has overturned a fine imposed by the Competition and Markets Authority (CMA) on Pfizer Ltd and Pfizer Inc. and Flynn Pharma Ltd and Flynn Pharma (Holdings) Ltd. In 2016, the CMA found that that the companies were charging unfairly high prices for phenytoin sodium capsules, and imposed a penalty totalling GBP 90 million (approximately ZAR 1.6 billion). The CAT has however, ruled against the CMA's finding of abuse and has sent the case back to the CMA for further consideration.

[Source] and [Source]

The United States of America: Multi-billion dollar media merger approved

U.S. District Judge Richard Leon has cleared the merger between AT&T Inc. and Time Warner Inc. The merger is valued at USD 85.4 billion (approximately ZAR 1 trillion). Last year, the Department of Justice sued to block the merger due to competition concerns. However, Judge Leon unconditionally approved the merger and found that the government had failed to establish that the deal was likely to lessen competition substantially.

[Source]

 

Our Recent Work

Philafrica Foods and Pakworks merger approved

The Commission has unconditionally approved the merger whereby Philafrica Foods (Pty) Ltd (Philafrica Foods) intends to acquire Zutco (Pty) Ltd – Heibron – Free State and Pakworks (Pty) Ltd – Heibron – Free State (the Target Group).

Philafrica Foods is part of the AFGRI Group of companies. The AFGRI Group is an agricultural commodity trading company. The Target Group is involved in the contract manufacturing of savoury snacks on behalf of a third party.

The Commission found that the merger is unlikely to substantially lessen or prevent competition and does not raise any public interest concerns.

Desmond Rudman and Werne​r Rysbergen acted for the merger parties.

Sea Harvest and Viking Fishing Merger Approved

The Tribunal has conditionally approved the merger whereby Sea Harvest Corporation (Pty) Ltd (Sea Harvest) intends to acquire certain fishing rights and assets used in operating the fishing business of Viking Fishing Holdings (Pty) Ltd (Viking Holdings). As part of the transaction, Sea Harvest will also acquire a controlling interest in Viking Aquaculture (Pty) Ltd (Viking Aquaculture).

Sea Harvest is a vertically integrated firm in the South African fishing industry whose business activities include fishing and/ or harvesting of Cape Hake and Shark Bay prawns as well as processing and marketing of value-added frozen and chilled seafood products. Viking Holding is vertically integrated in the South African fishing industry and its activities consist of fishing rights and fishing vessels, seafood processing facilities and cold storage. Viking Aquaculture is involved in the breeding, rearing and harvesting of abalone, oysters, mussels, trout and co at aquaculture farms located throughout South Africa.

The Tribunal found that the transaction is unlikely to raise public interest concerns and imposed conditions relating to information sharing. Robert WilsonWerner Rysbergen and Andriza Liebenberg represented the merger parties.

Sereli, Freestate Petroleum Distributors and Metabis merger approved

The Commission has conditionally approved the merger whereby SerEli Holdings (Pty) Ltd (SerEli) intends to acquire Freestate Petroleum Distributors (Pty) Ltd (FPD) and Metabis Properties (Pty) Ltd (Metabis).

SerEli is a newly incorporated private company and does not conduct any business activity. FPD is a Caltex branded marketer who supplies fuel products to 33 Caltex service stations across the Free State province and Metabis is a property holding company.

The Commission found that the transaction is unlikely to result in any negative impact on the public interest, but imposed conditions relating to vertical integration concerns. Mmadika Moloi and Makati Seekane acted for the merger parties.

VKB merger approved

The Tribunal has unconditionally approved the merger between VKB Agri Processors (Pty) Ltd (VKB Agri) and VKB Flour Mills (Pty) Ltd (VKB Flour).

VKB Flour is a manufacturer and supplier of wheat flour, bread and other bakery products and VKB Agri is a holding company in the VKB Group.

The Commission found that the merger is unlikely to substantially lessen or prevent competition and does not raise any public interest concerns.

Daryl Dingley, Cara du Plessis and Samantha Robb acted for the merger parties.​​​​