New Decision of Interest
Massmart'a complaint referral against large retailers dismissed
The Competition Tribunal (Tribunal) has dismissed a complaint referral lodged by Massmart Holdings Ltd (Massmart) against Shoprite Checkers (Pty) Ltd, Pick ‘n Pay Retailers (Pty) Ltd and Spar Group Ltd (the Respondent Retailers). Massmart alleged that it has been prevented from entering the fresh grocery product market through its Game stores due to exclusive leases in place between the Respondent Retailers and landlords of shopping malls nationwide. These lease agreements prevent or restrict the landlord from allowing any other tenant in the mall from selling fresh grocery products. Massmart alleged that the conduct of the Respondent Retailers amounted to a restrictive vertical practice in contravention of section 5(1) of the Competition Act, 89 of 1998 (the Act). The Respondent Retailers contended that Massmart's complaint referral was excipiable on several grounds and should be dismissed.
The Tribunal held, amongst others things, that Massmart did not plead a clear market definition and that a complainant needs to allege more than the mere existence of a contractual restraint. Importantly, the Tribunal also noted that a case under section 5(1) requires a showing of an existing substantial lessening of competition, and that competition law is premised on the exclusion of competition as an objective fact, not the exclusion of a particular competitor.
Although Massmart was given an opportunity to address the exceptions raised against its referral by the Respondent Retailers, the Tribunal found that Massmart's complaint referral did not make out a cause of action in terms of section 5(1) of the Act. The referral was dismissed with costs. A copy of the decision is available
here.
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Local News
Healthcare: Issuing of hospital licenses take centre stage at inquiry
Further to our November 2017 update (available here), the Healthcare Market Inquiry (HMI) has warned that the regulatory failures relating to the licensing regime for healthcare facilities impacts on competition, entry and innovation. The HMI noted that this may contribute to rising expenditure in the private healthcare sector, thus reducing affordability and limiting access to private healthcare services. The HMI has proposed that, amongst other things, a standardised, national licencing regime must be implemented by provincial departments. In this regard, the HMI proposes that the role of the provincial departments should be limited to the implementation of the prescribed standardised licensing model. The HMI has also suggested that licensing criteria encompass intrinsic incentives to encourage novel and innovative healthcare delivery models.
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Industrials: Updates and Developments
In the industrials sector, there are four developments of interest:
- The Tribunal has approved a variation agreement allowing ArcelorMittal South Africa Ltd (AMSA) to pay the first instalment of its administrative penalty of ZAR 1.5 billion, in three tranches. In terms of the variation agreement, AMSA can pay off its first instalment of ZAR 300 million in tranches of ZAR 100 million on three specified dates. The Tribunal confirmed the settlement agreement between the Competition Commission (Commission) and AMSA in November 2016, in terms of which AMSA admitted that it had engaged in collusion. AMSA’s penalty is the largest single settlement amount imposed by the Tribunal to date.
- The Tribunal has conditionally approved the acquisition of the Mining Bag Division of Tufbag (Pty) Ltd (Mining Bag Division) by Timrite (Pty) Ltd (Timrite). Timrite is active in the provision of timber based and non-timber based mining support products. The Mining Bag Division design and manufactures polypropylene-based mining support bags. The merger was initially prohibited by the Commission due to concerns that the transaction would facilitate and enhance potential market allocative arrangements, as well as facilitate the potential loss of competition. The conditions imposed by the Tribunal protect employees from merger specific retrenchments for a period of two years and prevent future manufacturing agreements that contain exclusivity supply provisions (other than a provision aimed at protecting Timrite’s intellectual property and know-how).
- Further to our January update (available here), the Tribunal has conditionally approved the acquisition of Scaw South Africa (Pty) Ltd (Scaw) from the Industrial Development Corporation SOC Ltd (IDC) by Barnes Southern Palace (Pty) Ltd (Barnes). Conditions were imposed to address information-sharing concerns between Barnes and Consolidated Wire Industries (Pty) Ltd (CWI). CWI is owned by the IDC and the IDC will retain a minority shareholding in Scaw post-merger. In terms of the conditions imposed, for as long as the IDC is able to appoint directors to the respective boards of CWI and Scaw, the IDC shall ensure that its representatives on the board of Scaw are not the same persons serving, nominated and/or appointed on any board or management committees or sub-committees of CWI. Conditions relating to employment were also imposed to ensure that the merged entity will supply small steel mills with direct reduced iron which will enable these mills to produce better quality steel.
- The Tribunal has found that Eye Way Trading (Pty) Ltd and Seardel Group Trading (Pty) Ltd t/a Berg River Textiles engaged in collusive tendering when bidding for two tenders issued by the National Treasury for the supply of fabric used to manufacture uniforms for the then Department of Correctional Services, the South African Air Force and the South African Military Health Services. Remedies in this matter are still to be heard and the reasons for the Tribunal’s decision are yet to be issued.
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Regulatory: Importance of competition highlighted in Sona and budget speech
During the annual budget speech on 21 February 2018, the then Minister of Finance, Malusi Gigaba (Finance Minister), acknowledged the work done by the competition authorities. The Finance Minister noted that one of the main obstacles facing small businesses is a lack of access to the market, and commended the competition authorities' efforts in addressing barriers to entry and rooting out anti-competitive behaviour. During the State of the Nation Address earlier in February, President Ramaphosa also indicated that competition policy will be used to open markets up to new black entrants.
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Retail: Update on school uniforms investigation
In early February 2018, the Commission held a public discussion on school uniforms as part of efforts to finalise its investigation into the sector. During the Commission's dialogue session, the Competition Commissioner, Tembinkosi Bonakele, stressed the need to clamp down on suppliers who have monopolised the sector. The dialogue included discussions on the advantages and disadvantages of school uniforms. Minister of Basic Education, Angie Motshekga, was also in attendance and argued that it was important to consider the needs of pupils who came from poor families.
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Telecoms, Media & Technology: Updates and Developments
In the telecoms, media and technology sector, there are two interests of development:
- Further to our November 2017 update (available here), the Minister of Economic Development, Ebrahim Patel, has stated in a speech before parliament that government intervention is a key tool in ensuring the fall of data prices. In this regard, the Minister stated that, “we will bring down the cost of data through the competition market inquiry into data services". During the 2018 annual budget speech, the then of Finance Minister also made mention of the market inquiry into data services, and confirmed that the inquiry will be completed by the end of August 2018.
- The Tribunal has dismissed a complaint by the Commission against Avusa Ltd t/a Nu-Metro Cinemas and Primedia (Pty) Ltd t/a Ster-Kinekor Theatres. The Commission alleged that Nu Metro and Ster-Kinekor agreed to divide markets by limiting the genre of film that each theatre could exhibit at the V&A Waterfront shopping complex. A settlement agreement containing the terms of this arrangement was made an order of the High Court in 1998. The Commission argued that although the settlement agreement was made an order of court prior to the Act coming into effect, there had been continuous implementation of the agreement after the Act came into force. The Tribunal dismissed the complaint on the basis that Ster-Kinekor had never implemented the settlement agreement. Furthermore, the Tribunal found that it was not borne out by the facts that there was continuing conduct regarding the implementation of the settlement agreement after the Act came into operation. A copy of the Tribunal's decision is available
here.
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Transport: Updates and Developments
In the transport sector, there are three developments of interest:
- The Commission has referred SA Airlink (Pty) Ltd (SA Airlink) to the Tribunal for prosecution on charges of excessive pricing and predatory pricing. The referral was preceded by complaints lodged by businessman Khwezi Tiya, Fly Blue Crane and the OR Tambo District Chamber of Business in relation to the Johannesburg-Mthatha route. The complainants alleged that: SA Airlink’s prices were excessive before Fly Blue Crane entered this route; SA Airlink then lowered its prices below its costs when Fly Blue Crane entered the route; and SA Airlink went back to their exorbitant prices after Fly Blue Crane exited the route. The Commission seeks to impose an administrative penalty of up to 10% of SA Airlink's annual turnover for both the conduct of excessive pricing and predatory pricing.
- The Commission has prohibited the proposed merger between SA Airlink and Safair Operations (Pty) Ltd on grounds that the transaction is likely to result in a substantial prevention of competition. The Commission found that the merger is likely to result in the removal of an effective competitor to SA Airlink on the routes it currently operates. Furthermore, the Commission found that the merger would likely result in the enhancement and facilitation of coordinated conduct and that no remedies could sufficiently address the competition concerns identified. SA Airlink has confirmed that it will appeal the Commission's decision before the Tribunal.
- On 12 February 2018, the Economic Regulation of Transport Bill, 2018 was published for public comments. The purpose of the Transport Bill is, amongst other things, to promote an efficient, competitive and viable transport sector. The Transport Bill also proposes to establish two parallel, independent, but integrated regulatory agencies. Amongst other provisions relating to competition, in terms of the Transport Bill, the Minister responsible for transport matters can make a decision on whether an entity, market, facility or service within the transport sector is not functioning competitively. A copy of the Transport Bill and further information on the period for comments is available
here.
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Africa News
Botswana: Acquisition of KFC franchises conditionally approved
The Botswana Competition Authority (BCA) has conditionally approved the acquisition of Kentucky Fried Chicken (KFC) franchises in Botswana by Bradleymore’s Holdings (Pty) Ltd (Bradleymore's). Bradleymore’s, a special purpose vehicle set up for purposes of the proposed transaction, is acquiring the assets and the business of a number of target enterprises as a going concern from the liquidator of the target enterprises. The target enterprises operate 12 KFC franchises in Botswana The conditions imposed relate to: Bradleymore's sourcing of a significant portion of their input requirements locally; Bradleymore's ensuring that local suppliers are assisted in penetrating or meeting YUM’s standards of accreditation; and the commitment that the merger parties shall not retrench any employees of the target enterprises as a result of the acquisition for a period of three years from the implementation date.
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Egypt: Significant fine imposed on beIN sports
The Cairo Economic Court (Court) has imposed a fine of USD 22 million (approximately ZAR 255 million) on sports broadcaster beIN Sports (beIN) and its chief executive. The Court held that beIN violated Egypt’s competition law by forcing subscribers to switch from Egyptian satellite Nilesat, to Qatar’s Sohail satellite to access its programming. The Court also found that beIN's subscription policy, which forced subscribers to subscribe to all sports bundles, was exploitative.
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Ethiopia: 21 steel bar producers charged with price-fixing
The Ethiopian Trade Competition and Consumer Protection Authority has charged 21 local steel bar producers for price-fixing. It is alleged that the producers and importers are guilty of fixing selling prices on the same day the 15% devaluation of the Birr by the National Bank of Ethiopia was announced. It is reported that the Ethiopian government are also investigating more businesses in the market for the production and importation of metal and metal related products for price-fixing.
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Mauritius: CCM enhances leniency programme
Further our March 2017 update (available here), the Competition Commission of Mauritius (CCM) has announced that initiators of cartels or coercers of cartels may now apply for leniency and benefit from a 50% reduction in fines. Whereas the previous amnesty programmes for cartel initiators were temporary offers and open only to initiators, the present amendment is a permanent change to the CCM’s leniency programme which is now open not only to initiators but to coercers as well. The purpose of this amendment is to advance the CCM's endeavours to combat cartels.
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Zambia: Updates and Developments
In Zambia, there are two developments of interest:
- The Competition and Consumer Protection Commission (CCPC) recently hosted a Stakeholder Workshop on Amendments to the Competition and Consumer Protection Act, 2010 (the Zambian Act). The purpose of the workshop was to provide a platform for stakeholders to make proposals to the CCPC on amendments to the Zambian Act. The workshop was attended by representatives from the legal fraternity, banking, insurance and the agricultural sector.
- The Executive Director of the CCPC, Mr Chilfya Sampa, recently addressed an end of year media briefing to highlight the CCPC's activities in 2017. Mr Sampa confirmed that 82 merger notifications were received and that the CCPC fined eight enterprises for implementing mergers without authorisation. The approximate value in pledged merger investments handled in 2017 was USD 6 million (approximately ZAR 69 million). The CCPC received six abuse of dominance cases and handled 37 restrictive business practices cases. The CCPC also handled seven cartel cases in the services, agriculture and livestock sectors.
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International News
Australia: First criminal prosecution of Australian company and individuals
The Australian Competition & Consumer Commission (ACCC) has laid criminal charges against The Country Care Group (Pty) Ltd, its Managing Director and a former employee. The charges relate to alleged cartel conduct involving assistive technology products used in rehabilitation and aged care. The ACCC Chairman, Rod Sims, said that this is the first criminal prosecution of an Australian corporation under the criminal cartel provisions of the Competition and Consumer Act, 2010. Mr Sims confirmed that it was also the first time that individuals had been prosecuted under the criminal cartel provisions in Australia.
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European Union: Apple and Shazam merger to be scrutinised
The European Commission (EC) has announced that it has accepted a request from Austria, France, Iceland, Italy, Norway, Spain and Sweden to assess the proposed acquisition of Shazam Entertainment Ltd by Apple Inc. (Apple). Apple announced the acquisition, reportedly valued at USD 400 million (approximately ZAR 46 billion), in December 2017. The EC noted that although the merger did not meet the thresholds set by the EU Merger Regulation, it considers that the transaction may have a significant adverse effect on competition in the European Economic Area and has asked Apple to notify the transaction.
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INDIA: COMPETITION AUTHORITY FINES GOOGLE India: Competition authority fines Google
The Competition Commission of India (CCI) has fined Google USD 21 million (approximately ZAR 244 million) for abusing its dominance. A report from the CCI states that Google had favoured its own services when customers ran searches, and that this search bias practice causes harm to the competitors of Google as well as to its users. The penalty was calculated at the rate of 5 % of Google's average total revenue generated from India operations from different business segments for the financial years 2013, 2014 and 2015.
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United Kingdom: Updates and Developments
In the United Kingdom, there are two developments of interest:
- 21st Century Fox Inc. (Fox) has proposed a new set of remedies to the Competition and Markets Authority (CMA) in relation to its acquisition of the 61% share of Sky plc (Sky) that it does not already own. Last month, the CMA's provisional finding was that Fox’s GPB 11.7 billion (approximately ZAR 190 billion) takeover of Sky would not be in the public interest. Some of Fox's proposed remedies include a commitment to maintain Sky-branded news services for at least five years and the creation of an independent Sky News editorial board.
- The CMA has introduced a new campaign to encourage more people to come forward with information that will help it target cartels. The new campaign encourages people to be “Safe, not Sorry” if they think they may have involved in cartel activity and to make sure they are the first to report it to the CMA. As part of the new campaign, witnesses are also being asked to “Do the Right Thing” by reporting cartel activity to the CMA. In 2017, the CMA saw a 30% increase in tip offs, following the launch its first digital campaign aimed at targeting cartels.
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United States: DOJ warns against "No-Poaching Agreements"
At a recent conference held earlier this year, the Assistant Attorney General for the Department of Justice Antitrust Division (DOJ) has said that the DOJ would be announcing prosecutions relating to "no-poach" agreements and “naked wage-fixing” agreements. In terms of no-poach agreements, companies agree not to recruit or hire each other's employees, and in terms of wage-fixing agreements, companies agree amongst themselves to restrict wages and benefits. The Antitrust Guidance for Human Resource Professionals issued by the DOJ and Federal Trade Commission earlier this year indicates that such conduct may be considered per se illegal.
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Our Recent Work
Classic FM interview on proposed amendments to the competition Act
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here to listen to insights from Daryl Dingley who was recently interviewed by Michael Avery on Classic FM.
Ethos Healthcare Investments (PTY) LTD and Main Street 1574 (PTY) LTD Merger approved
The Tribunal has unconditionally approved the merger whereby Ethos Healthcare Investments (Pty) Ltd (EHI) intends to acquire Main Street 1574 (Pty) Ltd (Main Street 1574).
Robert Wilson,
Sarah Manley and
Clare-Alice Vertue represented the merger parties.
EHI is ultimately controlled by one or more private equity investment fund(s), all of whose discretionary investment manager is Ethos Private Equity (Pty) Ltd (Ethos). Ethos is a private equity firm which, through various private equity funds, makes investments on behalf of investors. Main Street 1574 is a specially created vehicle for the transaction, which will hold the business of Amayeza Abantu Bio Medical (Pty) Ltd, a distributor of medical technology solutions.
The Tribunal found that the merger is unlikely to substantially lessen or prevent competition and did not raise any public interest concerns.
Ethos mid-market fund I and Echotel (PTY) LTD merger approved
The Commission has unconditionally approved the merger between Ethos Mid-Market Fund I (EMMF) and Echotel (Pty) Ltd (Echotel).
Shawn van der Meulen and
Sarah Manley represented the merger parties.
EMMF is a black-managed, mid-market focused private equity investment fund, which focuses on family-owned and/or entrepreneurial businesses, corporate spin-offs and optimisation opportunities. Echotel is an independent integrator of advanced network and cloud computing services. It offers an aggregation of internet service provider services to the South African market.
The Commission found that the merger is unlikely to substantially lessen or prevent competition and did not raise any public interest concerns.
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Main Street 1511 (PTY) LTD and Roossenekal Foods investments holdings
The Tribunal has unconditionally approved the merger between Main Street 1511 (Pty) Ltd (Bidco) and Roossenekal Foods Investments Holdings (Pty) Ltd (Roossenekal).
Shawn van der Meulen and
Kajal Tulsi represented the merger parties.
Bidco is a special purpose vehicle wholly owned by Abraaj Private Equity Fund VI L.P., which is managed by Abraaj Investment Management Ltd, and which is ultimately controlled by Abraaj Holdings. Abraaj Holdings manages private equity funds which directly and indirectly control Bidco and Libstar Holdings (Pty) Ltd (Libstar). Roossenekal, controlled by Schaffer Family Trust, owns and operates 45 KFC food outlets. Roossenekal also controls Roossenekal Two (Pty) Ltd, which owns and operates 17 KFC outlets.
The Tribunal found that the merger is unlikely to substantially lessen or prevent competition and did not raise any public interest concerns.
SGB-SMIT GMBH and Powertech Transformers PTY LTD merger approved
The South African Commission and Namibian Competition Commission (NaCC) have unconditionally approved the merger between SGB-SMIT GmbH (Smit) and Powertech Transformers (Pty) Ltd (PTT).
Shawn van der Meulen and
Andriza Liebenberg represented the merger parties.
Smit is a wholly owned subsidiary of SGB-SMIT. The SGB-SMIT Group is a manufacturer of power and distribution transformers. PTT is active in the power transmission industry and designs, manufactures, tests and supplies a large range of transformers.
Both the Commission and the NaCC found that the merger is unlikely to substantially lessen or prevent competition and did not raise any public interest concerns.
