Agribusiness, Food & Beverage: Updates And Developments
- The Competition Commission (Commission) has conducted dawn raids on the premises of seven meat suppliers in three provinces. The meat suppliers are alleged to have entered into an agreement and/or engaged in concerted practices to fix the prices and trading conditions when purchasing weaner calves from farmers. In addition, the meat suppliers are also alleged to have an agreement to fix the prices at which they sell meat to wholesale and retail customers.
- The Commission has referred a complaint against Rooibos Ltd (Rooibos) to the Competition Tribunal (Tribunal) for prosecution, on charges relating to abuse of dominance. The Commission has alleged that Rooibos is inducing rooibos tea farmers not to deal with rooibos tea processors who are competitors of Rooibos. The Commission’s investigation focused on Rooibos' alleged monopolisation of rooibos tea supply from rooibos tea commercial farmers, in order to foreclose its competitors or prevent the expansion of its rivals in the market.
Healthcare: Updates And Developments
In the healthcare sector, there are two developments of interest:
- The Commission has initiated separate investigations against three global pharmaceutical companies. The Commission has alleged that Roche Holdings AG is engaging in excessive pricing, price discrimination and/or exclusionary conduct in the provision of breast cancer medicine in South Africa. The Commission has also initiated investigations against Pfizer Inc. and Aspen Pharmacare Holdings Ltd (Aspen Pharma) for suspected excessive pricing of cancer medication in South Africa.
- The Tribunal has confirmed a settlement agreement between the Commission, Bidvest Group Ltd (Bidvest) and BB Investment Company Ltd (BB Investment), a wholly-owned subsidiary of Bidvest. The Commission alleged that Bidvest and BB Investment may have acquired control of Adcock Ingram Holdings Ltd prior to obtaining approval from the Tribunal. In terms of the settlement agreement, Bidvest has agreed to pay an administrative penalty of ZAR 2 million, without admitting guilt. A copy of the settlement agreement is available
Industrials: Updates And Developments
In the industrials sector, there are three developments of interest:
- The Commission has referred complaints against three companies for alleged price fixing and collusive tendering in relation to a tender issued by the City of Cape Town. In 2014, the City of Cape Town issued invitations to tender to various companies for the supply and delivery of padlocks. The City of Cape Town suspected that Cakaca AC 1892 (Pty) Ltd, Southern Ambition 1668 CC and Zamantlane Construction and Cleaning CC had engaged in collusive conduct and lodged a complaint with the Commission. The Commission found that the parties colluded by discussing and coordinating the preparation of their respective bids in relation to the tender.
- The Tribunal has dismissed an application brought by Ferro (Pty) Ltd (Ferro) to vary conditions imposed by the Tribunal in the merger between Ferro and Arkema Resins (Pty) Ltd (Arkema). The merger was approved subject to the condition that Ferro was to divest of the portion of Arkema’s business relating to the manufacture and sale of unsaturated polyester resins (the UPR business) as, amongst other things, the merger would have resulted in Ferro controlling a substantial share in that market. Ferro sought to change these divestiture conditions on grounds that a former employee allegedly stole certain confidential and competitively sensitive information which is being used to unfairly compete with Ferro. The Tribunal held that Ferro's recourse was with the High Court as the theft of information was not a competition issue.
- The Commission has prohibited the proposed intermediate merger between Greif International BV (Greif) and Rheem South Africa (Pty) Ltd (Rheem). In South Africa, Greif manufactures and sells steel drums, steel pails, blow moulded plastic drums and knock-down-drums. Rheem manufactures steel drums, cans and pails - mainly used for packaging industrial liquids and hazardous chemicals in South Africa. The Commission noted that Greif and Rheem were the only manufacturers of steel drums in KwaZulu-Natal and Gauteng and found that, given the high barriers to entry in the industry, it was likely that the merged entity would be in a position to unilaterally increase prices.
Regulatory: Proposed amendments to the merger notification thresholds and merger filing fees gazetted
The Minister of Economic Development, Ebrahim Patel, has begun the process of implementing changes to the Competition Act, 89 of 1998 (Competition Act). On 9 June 2017, the Minister gazetted proposed amendments to the lower merger notification thresholds for compulsorily notifiable mergers, as well as the relevant merger filing fees (published in Government Gazette No. 40902, available here). In terms of the first proposed amendment, the threshold for an intermediate merger will be met where: (i) the acquiring and target firms have combined turnover or assets (whichever combination is higher) of ZAR 600 million or more (currently the merger threshold amount is ZAR 560 million); and (ii) the target has turnover or assets (whichever is the higher) of at least ZAR 100 million (currently the merger threshold amount is ZAR 80 million). The higher thresholds for large mergers (combined threshold of ZAR 6.6 billion and target firm threshold of ZAR 190 million) remains unchanged (for the time being).
The second proposed amendment relates to raising fees for merger notifications. In terms of the proposed amendment, the notification fee will be increased to (i) ZAR 150,000 for filing an intermediate merger (the current filing fee for intermediate mergers is ZAR 100,000); and (ii) ZAR 500,000 for filing a large merger (the current filing fee for large mergers is ZAR 350,000).
Retail: Updates & Developments
In the retail sector, there are three developments of interest:
- Further to our January update (available here), public hearings continued in Pretoria and Johannesburg in early June as part of the Commission's Grocery Retail Sector Market Inquiry. Further hearings are scheduled to take place in KwaZulu-Natal in early July.
- The Tribunal has confirmed a settlement agreement between Core Relocations (Pty) Ltd (Core) and the Commission. In terms of the settlement agreement, Core will pay and administrative penalty of ZAR 211,750 for collusive tendering in the market for furniture removal services. A copy of the settlement agreement is available here.
- The Commission has referred complaints against seven companies to the Tribunal for prosecution on charges of price fixing and collusive tendering in relation to a Free State Provincial Treasury tender for the supply and delivery of office stationery to provincial government departments. The companies that have been charged are Catha Silkscreen Printers CC, Molemo Trading CC, Lounge 848 CC, Nakanyane Business Solutions CC, Litabe & Seema Trading CC, Mo Mollo Records (Pty) Ltd t/a Mo-Faya Inc and Kgomo Ya Maphura General Trading CC.
Telecoms, Media & Technology: Tribunal rejects Caxton's intervention application in Media24 / Novus merger
The Tribunal has rejected Caxton and CTP Publishers and Printers Ltd's (Caxton) intervention application in the Media24 Ltd (Media24) / Novus Holdings Ltd (Novus) merger. Caxton's ground for intervention was that Media24 had failed to provide accurate details of its controlling shareholders to the Tribunal. The Tribunal rejected this argument on the basis that the issue regarding Media24's control structure was not relevant to the proposed transaction, because the merging parties had agreed on a de-merger condition, whereby Media24 would sell down its existing shareholding in Novus to a level at which Media24 will no longer exercise control over Novus.
Transport: Updates And Developments
In the transport sector, there are two developments of interest:
- The Tribunal has dismissed the application made by Goodyear South Africa (Pty) Ltd (Goodyear) and Continental Tyre South Africa (Pty) Ltd (Continental) to order a portion of the Commission's price fixing complaint referral to be set aside. Continental argued that some of the extensions that Parsons Transport (the complainant) provided to the Commission during its investigations were not validly authorised. The Tribunal held that the Competition Act does not provide that an agreement to extend an investigation should be reduced to writing and that it has become a practice that the Commission requests extensions from a complainant by first obtaining these verbally, and then submitting them in writing. Goodyear and Continental had also alleged that the referral against them was lodged out of time, having been filed after the 15h30 time period at 16h50, and should be rejected. The Tribunal held that a reading of the Tribunal Rules shows, amongst other things, that the registrar can accept documents within or outside office hours of the Tribunal, in his or her discretion as well as at the direction of the Tribunal or member of the Tribunal assigned by its chairperson.
- The Commission has referred complaints against five vessel owners to the Tribunal for prosecution on charges of price fixing and collusive tendering. The vessel owners ferry passengers between the Robben Island Museum and the V&A Waterfront in Cape Town. The referral follows an investigation by the Commission, after it received a complaint from the Robben Island Museum against the five respondents.
Central Africa: Unctad receives funds to strengthen competition law
The United Nations Conference on Trade and Development (UNCTAD) has received EUR 1 million (approximately ZAR 14.5 million) from the European Union to strengthen competition laws in Central African countries. The donation is made pursuant to UNCTAD's two-year project aimed at strengthening competition for the Economic and Monetary Community of Africa. The project will focus on the following countries: Cameroon, the Central African Republic, Chad, the Democratic Republic of the Congo, Gabon, the Republic of the Congo, Equatorial Guinea and São Tome and Principe.
Kenya: Updates And Developments
In Kenya, there are two developments of interest:
- The Competition Authority of Kenya (CAK) has issued Leniency Programme Guidelines (Guidelines). The Guidelines contain the collection of principles adopted by the CAK which govern the processing and granting of leniency and have been prepared to inform parties how the CAK will handle applications for leniency.
- The High Court of Kenya has made a ruling that restores the Communications Authority of Kenya's (Communications Authority) powers to regulate competition in the communications sector in Kenya. The judgement effectively struck down amendments that were introduced in December 2015 which would have required the Communications Authority to consult the CAK and Communications Minister before punishing anyone for abuse of dominance.
Malawi: Updates And Developments
In Malawi, there are two developments of interest:
- The Competition and Fair Trading Commission of Malawi (CFTC) dismissed a case involving the 2014 merger between two insurance companies, Real Insurance and Britam of Kenya, where it was alleged that the parties had implemented a merger without authorisation from the CFTC. The CFTC found that the transaction had no effect on any factors affecting competition in the market.
- The CFTC has dismissed allegations of predatory pricing against Vision International Tobacco Ltd (VIT). The CFTC conducted an investigation to establish whether VIT was engaging in predatory pricing which negatively impacted on the competitiveness of other cigarettes manufacturing companies. The CFTC found that VIT did not have the substantial market power which would enable it to engage in predatory pricing since the company had a small market share.
Mauritius: Amnesty offered to minimum resale price maintenance offenders
The Competition Commission of Mauritius (CCM) is offering a resale price maintenance (RPM) amnesty programme to companies. In essence, the CCM is giving offenders an opportunity to report and amend their RPM conduct and become compliant with the Competition Act, 2007. The amnesty programme will grant applicants immunity from penalties for RPM and is available from 5 June to 5 October 2017. This is the second amnesty programme offered by the CCM - earlier this year a similar programme was put in place offering amnesty to cartel initiators.
European Union: Developments And Updates:
In the EU, there are three developments of interest:
- The European Commission (EC) has fined Google EUR 2.42 billion (approximately ZAR 35.3 billion) for breaching EU antitrust rules. The penalty is the biggest ever competition fine from the EC and is double the previous highest fine imposed on Intel Corporation in 2009. The EC found that Google has abused its dominance as a search engine by giving an illegal advantage to another Google product, its comparison shopping service. If Google fails to comply with the EC's decision, it would be liable for non-compliance payments of up to 5% of the average daily worldwide turnover of Alphabet, Google's parent company. Google is also liable to face civil actions for damages that can be brought before the courts of the Member States by any person or business affected by its anti-competitive behaviour.
- The EC has opened a formal investigation into allegations that Aspen Pharma has engaged in excessive pricing with regards to several cancer drugs. This follows the EU's 2008 inquiry into the pharmaceutical sector. The investigation covers all of the European Economic Area except Italy, where the Italian competition authority has already fined Aspen Pharma.
- The EU has made submissions to the Organisation for Economic Co-operation and Development (OECD) regarding algorithms which are used by online competitors to record and adjust prices. The submission identifies three potential implications for algorithms in vertical competition, all relating to the imposition of minimum resale price maintenance.
Germany: Competition authority revokes fines
Germany's competition authority recently revoked EUR 238 million (approximately ZAR 3.5 billion) in fines imposed on sausage manufacturers for price collusion. The companies used a now-closed "loophole" in German competition law which allowed a company to escape fines when taken over by another firm. The law has been revised and parent companies can now also be held liable for anti-competitive conduct.
United Kingdom: Authority imposes fine for online rpm
The Competition and Markets Authority (CMA) has fined the National Lighting Company (NLC), a supplier of light fittings in the UK, GBP 2.7 million (approximately ZAR 44.3 million) for imposing minimum resale prices through online sales. NLC prohibited its retail distributors from on-selling certain brands below a certain minimum price to consumers. Although the agreement to on-sell was not reduced to writing, the retail distributors had understood the resale price to be an implicit condition of the Internet License Agreement. As a result of this case and other recent matters, the CMA has also re-issued advice to remind all suppliers and resellers what RPM practices look like, and what to do if they are or may have been involved in such practices.
Our Recent Work
Actis impact LTD and MCO and impact holdings (Mauritius SA) Ltd merger unconditionally approved
The Tribunal has unconditionally approved the proposed large merger whereby Actis Impact Ltd (Actis) and Mco are set to acquire Impact Holdings (Mauritius SA) Ltd (Impact).
Mmadika Moloi and Burton Phillips represented the merger parties.
Actis is controlled by Actis Africa Real Estate Fund 3, a private equity real estate fund investing in primarily prime retail, office and industrial property developments in Sub-Saharan Africa. Mco will be controlled by the existing shareholders of Improvon Group which is active in the property development sector, construction management sector and property management sector in South Africa. Impact, a newly established special vehicle for the purposes of the proposed transaction, is a wholly-owned subsidiary of Actis. The existing shareholders of Impact control certain industrial and logistics property investment assets.
The Tribunal found that the proposed merger is unlikely to substantially lessen or prevent competition and did not raise any public interest concerns.
Sygnia Ltd and DB X-Trackers (RF) (PTY) Ltd merger unconditionally approved
The Commission has unconditionally approved the proposed intermediate merger whereby Sygnia Ltd (Sygnia) intends to acquire Db X-trackers (RF) (Pty) Ltd (DBX).
Robert Wilson,Werner Rysbergen and Cara du Plessis represented the merger parties.
Sygnia and all its subsidiaries are referred to as the Sygnia Group. The Sygnia Group is a financial services group offering a range of savings, investment and product management solutions and administration services to institutional and retail clients locally and abroad. DBX is a wholly-owned subsidiary of Deutsche Group Holdings SA (Pty) Ltd. DBX is a collective investment scheme manager incorporated in South Africa. It offers a portfolio of offshore DB X-tracker Exchange Traded Funds to South African investors that are approved by South African regulators and are listed on the JSE.
The Commission found that the proposed merger is unlikely to substantially lessen or prevent competition and did not raise any public interest concerns.