South African competition law, in its current form, commenced almost 15 years ago. The institutions responsible for regulating competition law have developed a stable and respected regime. However, as is the nature of law, new issues arise regularly to cater for economic developments and to rectify unforeseen concerns.
For example, public interest considerations in merger proceedings have become a focus area in recent years. In addition to establishing whether a proposed transaction will “substantially lessen or prevent competition”, the competition authorities are required, in terms of the Competition Act, to consider the effect which a proposed transaction will have on (i) a particular industrial sector or region, (ii) employment, (iii) the ability of small businesses or those controlled or owned by historically disadvantaged persons to become competitive, and (iv) the ability of national industries to compete in international markets.
The Metropolitan / Momentum merger in 2010 was the first indication of an increased focus on public interest considerations in merger analyses. This trend has continued to develop in the cases of Kansai / Freeworld, Massmart / Walmart and most recently the Glencore / Xtstrata merger. The jurisprudence emerging from the cases highlights the competition authorities’ attempts to balance the interests of business with public interest considerations. Of particular relevance is the stance adopted by the Competition Appeal Court (the “CAC”) in the Massmart / Walmart transaction, which is that the competition authorities are limited to evaluating the public interest issues arising from the transaction under scrutiny and that competition law cannot usurp Government’s role in determining industrial policy. Notwithstanding this, it is clear that the conditions imposed on merging entities are becoming more onerous. By way of example, in the recent Glencore / Xstrata merger, in addition to imposing a limitation on retrenchments, the Competition Tribunal required the merging parties to reach consensus with trade unions before retrenching any employees. These developments are clearly important to parties engaging in merger transactions, who must cost an embargo on retrenchments into their calculation of the purchase price.
In addition, a growing number of countries across the African continent are introducing competition regimes as a means of spurring economic growth and ensuring that consumers have access to the widest range of the best products at the best prices. In particular, the Common Market for Eastern and Southern Africa (“COMESA”) comprises a group of African countries with the overriding purpose of achieving sustainable growth, as well as economic and social progress within the eastern and southern regions of our continent.
As a means of fulfilling its objectives, COMESA has developed a regional competition authority. In general terms, the COMESA Competition Commission (the “COMESA Commission”) will exercise jurisdiction over all economic activities within or having an effect within its current 19 member states (collectively referred to herein as the “Common Market”) being Burundi, Comoros, Democratic Republic of the Congo, Djibouti, Eritrea, Ethiopia, Egypt, Kenya, Libya, Madagascar, Malawi, Mauritius, Rwanda, Seychelles, Sudan, Swaziland, Uganda, Zambia and Zimbabwe. The Commission will regulate anti-competitive business practices, mergers and issues of consumer protection that will have an appreciable effect on trade between the aforementioned member states and which will restrict competition in the Common Market (the exact boundaries of which are still subject to clarification).
There is no prescribed lower threshold for merger notifications and, as such, mergers between companies with any operations in 2 or more of the Member States within the Common Market will have to notify the COMESA Commission of that transaction. Although the immediate reaction of business and legal practitioners has been that this will simply add costs and increase the already high regulatory burden for firms doing business in Africa, it must be recognized that a well-functioning competition regulator can increase consumer welfare.
Finally, the Constitution 17th Amendment Act was signed by the President earlier this year, but there is currently little indication as to when this will take effect. The amendments contained therein are far reaching and will likely have a significant effect on the appellate regime in competition matters. In this regard, the Act removes the jurisdiction of the Supreme Court of Appeal (the “SCA”) to hear reviews and appeals from the Competition Appeal Court (the “CAC”) and the Labour Appeal Court (the “LAC”).
In addition, the Act makes significant amendments to the jurisdiction of the Constitutional Court (the “CC”) and expands its authority to include matters of a non-constitutional nature. In this regard, the CC may now evaluate matters which raise “an arguable point of law of general public importance”. It appears that, although the SCA will no longer be able to hear competition law matters of appeal, the CC may have appeal jurisdiction in this regard and, as such, since competition matters often involve public interest issues, the CC may well become an important avenue for competition litigation respondents.
In short, therefore, there are significant developments that will impact on the practice of competition law in South Africa. These developments will clearly impact upon business and, in our view, should be watched with interest.