Announcements
Webber wentzel wins competition and regulatory team of the year at the 2017 african legal awards
We are delighted to announce that Webber Wentzel has won the Competition and Regulatory Team of the Year award at the 2017 African Legal Awards. The ceremony was held on Friday, 8 September 2017 at The Wanderers Club in Johannesburg. The winners were decided by an independent adjudicating panel made up of general counsel and other senior members of the legal community. Judging criteria included: legal expertise and innovation; project management skills; teamwork; and client satisfaction. We would like to thank our clients for their continued support.
Feedback from the competition commission's 11th annual conference
The Competition Commission's (Commission) 11th Annual Competition Law, Economics and Policy Conference took place last month. Predominantly, the conference highlighted that competition law is facing a new era in which it will be called upon to address a number of unique and complex issues that are specific to South Africa. It is clear that one of the competition authorities' main priorities is to address concentration in certain markets, and the creation of a more inclusive economy. Other issues that dominated the many panel discussions amongst some of the world's most renowned competition experts included civil damages claims, the potential anti-competitive use of "big data" and algorithms, the criminalisation of cartel conduct and the need for regulation in innovative markets.
The Competition Commissioner, Tembinkosi Bonakele, called for a clear competition policy on pricing, cross-subsidisation and bail-outs in relation to State-Owned Enterprises, and for amendments to the Competition Act 89 of 1998 (the Act) to provide for effective criminalisation of cartel conduct. The Minister of Economic Development, Ebrahim Patel, reiterated his statements from earlier this year that amendments to the Act are being considered to address the challenge of concentration in the South African economy. The Minister noted that issues of social equity must loom large for policy makers, and that "it is time to stretch the envelope of thinking" when it comes to using competition regulation to address market concentration.
The address by the Deputy President, Cyril Ramaphosa, served to highlight the view that competition law should be given a more prominent role to address economic transformation. In this regard, the Deputy President stated that competition policy must be an instrument to effect fundamental economic and social change, and called for the use of levers at our disposal to facilitate the entry of new black companies into established markets, and to create space for SMMEs in sectors where until now only large companies have flourished.
There is still much speculation regarding exactly how the competition law landscape may change over the next few months. The key message from the conference, and the only certainty at this stage, is that changes are inevitable and businesses must pay close attention to developments in this regard.
Local News
Agribusiness, Food & Beverage: Updates And Developments
In the agribusiness, food and beverage sector, there are two developments of interest:
- The Commission has referred Beefcor (Pty) Ltd (Beefcor) and Cape Fruit Processors (Pty) Ltd (CFP) to the Competition Tribunal (Tribunal) for prosecution on allegations of market division in contravention of the Act. The Commission's investigation revealed that Beefcor and CFP entered into bilateral agreements which facilitated the allocation of customers. The terms of the agreements include: (i) an undertaking to not compete with each other in the processing of wet peels and citrus peel pulp used to produce livestock feed; and (ii) CFP being precluded from selling wet peels and citrus peel pulp to any other entity without written approval from Beefcor.
- The Tribunal has, on review, set aside the Commission's decision to approve an intermediate merger between Country Bird Holding (Pty) Ltd (Country Bird) and Sovereign Food Investments Ltd (Sovereign). The matter has been referred back to the Commission for reconsideration. Initially, the Commission approved the merger subject to employment conditions which would only be binding on Country Bird if it were to come to control a 50% plus one share in Sovereign. However, Country Bird subsequently issued a circular amending its offer and waiving the condition. In the review application, Sovereign contended that because the conditions only stipulate that employment conditions are activated with a 50% plus one shareholding, it is possible that, by means of the revised offer, Country Bird could obtain de facto control over the firm and not be subject to the employment conditions imposed by the Commission. The Tribunal found that the decision to approve the transaction subject to conditions which may not come into effect was based upon a material error of fact and should thus be set aside.
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Leisure: Tribunal dismisses hci and tsogo sun's urgent application
The Tribunal has dismissed an urgent application by Hosken Consolidated Investment Ltd (HCI) and Tsogo Sun Holdings Ltd (Tsogo). The application arose as a result of an advisory opinion from the Commission (after being approached by HCI) advising that the proposed transaction be notified as a merger. By way of a declaratory order, HCI and Tsogo requested that the transfer of gaming interests, owned indirectly by Niveus Investment Ltd, to Tsogo be declared "not notifiable", contrary to the advisory opinion. HCI and Tsogo argued that the proposed transaction does not constitute a merger but a consolidation of some of its gaming interests and that the transaction amounted to an internal restructuring. The Tribunal's reasons for dismissal are yet to be published.
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Oil and Gas: Update on the implementation of the lpg market inquiry recommendations
Following the recommendations made in April 2017, as part of the Commission's liquefied petroleum gas (LPG) market inquiry, the Commission has warned that it may open cases against wholesalers of liquefied petroleum gas (LPG) that choose to ignore recommendations to end long-term supply agreements by 30 September 2017. The Commission has also presented its recommendations from the LPG market inquiry to the National Assembly's Committee on Energy. The Department of Energy has indicated that it supports the Commission’s recommendation to monitor the market structure for collusive behaviour and to align the regulatory processes.
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Telecoms, Media & Technology: Commission calls for submissions in the data services market inquiry
Further to our August update (available here), the Commission has called for formal submissions from all relevant stakeholders in the data services market. Stakeholders include all consumers, companies, organisations and other bodies that have an interest in data and telecommunications markets, including those directly involved in these markets and those that are affected by such markets more broadly. The closing date for submissions is 1 November 2017.
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Transport: Updates And Developments
In the transport sector, there are two developments of interest:
- Further to our August update (available here), the Commission has published a Draft Code of Conduct for Competition in the South African Automotive Industry (the Draft Code). Earlier this year, the Commission conducted advocacy work in the automotive aftermarkets industry following concerns of anti-competitive conduct. The Commission has invited automotive industry participants (especially small and independent repairers and maintenance service providers), consumers and any other interested parties to submit their views and comments on the Draft Code. The deadline for the receipt of all submissions is 3 November 2017. A copy of the Draft Code is available
here.
- The Commission has elected to refer eleven furniture removal companies and their respective movers' association, the Northern Provinces Professional Movers Association of South Africa (NPPMA), to the Tribunal for prosecution in respect of allegations relating to price fixing, involving the e-toll levy charged to consumers. The Commission's investigation found that from January 2014, the respondent companies, within the auspices of the NPPMA, agreed to add a levy of ZAR 350 to the amount charged to their consumers.
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Regulatory: Updates And Developments
In the regulatory sector, there have been two developments of interest:
- New merger notification thresholds and filing fees will be effective from 1 October 2017. The new 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; and (ii) the target firm has turnover or assets (whichever is the higher) of at least ZAR 100 million. The thresholds for large mergers (combined threshold of ZAR 6.6 billion and target firm threshold of ZAR 190 million) remain unchanged. New filing fees for intermediate and large mergers will also be effective from 1 October 2017: (i) ZAR 150,000.00 for an intermediate merger; and (ii) ZAR 500,000.00 for a large merger. In addition, the public are also invited to comment on the proposed amendments (also published in Government Gazette No. 41124 - available
here) to the Method of Calculation (General Notice 216 of 2009) by 15 October 2017.
- The Commission has entered into a Memorandum of Understanding with the Fair Trading Commission of Seychelles. This is in line with continuing efforts between competition authorities in Africa to cooperate in relation to the enforcement of competition law across the continent.
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Africa News
Botswana: High court revises competition authority's decision
A decision by the Botswana Competition Authority (BCA) not to approve the proposed acquisition of assets and cession of the main contracts belonging to 4Ms Group Holdings (Pty) Ltd (4Ms) by Transport Holdings Ltd (TH), has been revised by the Gaborone High Court. The merging parties lodged an application for judicial review of the BCA's decision, and following engagements between the parties and the BCA, it was eventually agreed, and confirmed by an order of the High Court, that: (i) TH will not be precluded by the BCA from participating in the tender to be issued by Kgalagadi Breweries (Pty) Ltd (KBL) when 4Ms’ contract with KBL comes to an end; and (ii) TH shall be entitled to submit a merger notification for consideration by the BCA in respect of any new notifiable transaction it may conclude with 4Ms.
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Comesa: CCC committed to strengthening enforcement
George Lipimile, Chief Executive Officer at the COMESA Competition Commission (CCC) has recently remarked that the delay by some of the COMESA member states in domesticating the COMESA treaty has delayed the effective enforcement of competition regulations. Mr Lipimile has also pointed out a number of challenges faced by the CCC, such as weak national competition enforcement regimes in member states, and inadequate financial resources and human resources at regional and national levels. Mr Lipmile said that the CCC has outlined its strategic priorities for the period 2016-20 and is determined to work on conduct harmful to competition in the Common Market, strengthen enforcement, advocacy and strategic collaboration.
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East Africa: Growth in the east african markets delayed by anti-competitive practices
The East African Community (EAC) Secretary General, Mr Liberat Mfumukeko, has emphasised the importance of competition law and policy in the facilitation of regional integration. Mr Mfumukeko was speaking at the second meeting of the EAC Competition Authority (EACCA). It is reported that the purpose of the second meeting of EACCA was to develop the authority's rules of procedure, and to review progress reports for the authority's activities for the period June 2017. The Chairperson of the Commissioners of the EACCA, Mr Sam Watasa reiterated that full operationalisation of the EACCA would help to address market distortions that affect private sector investments
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Kenya: Updates And Developments
In Kenya, there have been two developments of interest:
- The Competition Authority of Kenya (CAK) has rejected an application for exemption by the East African Tea Traders Association in relation to price fixing. The CAK stated that the current practice of setting brokerage commissions and warehouse prices at tea auctions is a "hard-core contravention" of the law and noted that the setting of prices discourage competition and innovation.
- The CAK has recently approved a number of mergers subject to public interest related conditions. The CAK has approved the acquisition of Associated Vehicle Assemblers (AVA) by Simba Corporation Ltd (Simba), on condition that Simba keep the AVA plant open to existing third party brands and any other competing brand that may wish to use the AVA plant for assembly. The CAK has also approved the acquisition of Air Connection Ltd (Air Connection) by Panalpina Airflo Ltd on the condition that merged entity retains, at least, 95 % of the employees of Air Connection for at least one year after completion of the transaction. The CAK imposed the same conditions when it approved the acquisition of Trillvane Ltd by Kuehne and Nagel Ltd.
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Tanzania: New acting deputy general appointed
The Minister for Industry, Trade and Investment, Hon. Charles John Mwijage (MP) has appointed Dr John Kedi Mduma as the Acting Director General of the Fair Competition Commission in Tanzania effective from 28 August 2017, following the expiry of Dr Frederick Ringo’s tenure.
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Zambia: Guidelines on abuse of dominance published for comment
The Competition and Consumer Protection Commission (CCPC) has published guidelines on abuse of dominance for comment. The guidelines provide practical advice and guidance on the application of the relevant procedures and assessment methods for abuse of dominance cases and outlines of the CCPC's general approach to enforcing the abuse of dominance provisions contained in Zambian competition legislation.
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International News
European Union: Updates And Developments
In the European Union, there are four developments of interest:
- Further to our June update (available here), Google has appealed against the record EUR 2.4 billion antitrust fine imposed against it by the European Commission (EC). Google launched its appeal two months after it was fined by the EC for abuse of dominance in relation to its shopping comparison service. The general court, Europe's second highest judicial body, will now hear the matter and it may take several years before a ruling is made on the appeal. Meanwhile, Google has announced that is making changes as to how it displays search results for products in Europe - it has said that price comparison competitors could now bid for ad space in the shopping box at the top of the results page. As a result of this change, Google Shopping will compete on equal terms and will operate as if it were a separate business, participating in the auction in the same way as its competitors.
- The European Court of Justice (ECJ), EU's highest court, has ordered the review of the antitrust fine levied against Intel Corporation (Intel). In 2009, Intel was fined EUR 1.06 billion (approximately ZAR 15 billion) by the EC for allegedly abusing its monopoly in the computer processor market. The review was granted on the basis that the lower court failed to assess key elements of the EC's case, particularly whether the rebates at issue are capable of restricting competition.
- The ECJ have provided detailed guidelines on the concept of excessive pricing in response to questions posed by the Latvian Supreme Court. The ECJ ruled that national competition authorities have a certain margin of manoeuvre with respect to the methodology that may be followed to determine an excessive price.
- The EC has released proposals to set up a framework for screening foreign direct investments into the EU. The framework aims to protect the EU's strategic interests and would require that foreign direct investments be screened by Member States on grounds of security or public order. The framework also envisages a cooperation mechanism between Member States and the EC, which can be activated when a specific foreign investment in one or several Member States may affect the security or public order of another.
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United Kingdom: Market manipulation by modelling agencies
The Competition and Markets Authority (CMA) has alleged that Britain's biggest modelling agencies - FM Models, Models 1, Premier, Storm and Viva, and their trade association, the Association of Model Agents, have been accused of breaching competition laws. The CMA has alleged that from April 2013 to March 2015, the five modelling agencies agreed to exchange confidential, competitively sensitive information including future pricing information, and in some instances agreed a common approach to pricing.
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United States of America: FTC publishes antitrust guidance following hurricanes Harvey and Irma
The Antitrust Division of the Department of Justice and the Federal Trade Commission (the Agencies) has published antitrust guidance in an effort to protect those affected by Hurricanes Harvey and Irma. The Agencies have stated that, while natural disasters often bring out the best in human compassion and spirit, they can also lead to unscrupulous individuals and organizations taking advantage of those in need. The Agencies have undertaken to hold accountable those who seek to illegally subvert competition and prey on those affected by Hurricanes Harvey and Irma.
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Our Recent Work
Old mutual plc and old mutual (netherlands) b. V. Merger unconditionally approved
The Tribunal has unconditionally approved a large merger between Old Mutual plc (OM plc), the holding company of the Old Mutual Group of companies listed on the London Stock Exchange, and Old Mutual Netherlands (OM BV), which controls Old Mutual Group Holdings (South Africa) (Pty) Ltd. The transaction is part of an internal restructuring.
Robert Wilson,Werner Rysbergen and Elisa Mugabo represented the merger parties.
OM plc is the holding company of Old Mutual Group which provides investment, savings, life assurance, asset management, banking and property and personal insurance in Africa, America and Asia. OM BV is an indirectly wholly-owned subsidiary of OM plc.
The Tribunal found that the proposed merger is unlikely to substantially lessen or prevent competition and did not raise any public interest concerns.
Izimbiwa associated companies (PTY) LTD and moxitorque investments (PTY) LTD merger unconditionally approved
The Tribunal has unconditionally approved a large merger between Izimbiwa Associated Companies (Pty) Ltd (Izimbiwa) and Moxitorque Investments (Pty) Ltd (Moxitorque). Izimbiwa is a wholly-owned subsidiary of Phembani Group (Pty) Ltd.
Mmadika Moloi and Betty Mkatshwa represented the merger parties.
Izimbiwa is an investment holding company with an emphasis on investments in (and the operating of) businesses and interests which fall within the oil, gas, mineral resources, metal and infrastructure related industries. Moxitorque is a shelf company and currently does not conduct any business activities other than holding the non-controlling interests in Lexshell 826 and Lexshell 827.
The Tribunal found that the proposed merger is unlikely to substantially lessen or prevent competition and did not raise any public interest concerns.
