The South African competition law framework extends to both merger regulation and prohibited practices. Despite its relative infancy, the South African competition authorities are recognised internationally as established competition regulators who are increasingly employing sophisticated analytical tools to facilitate the identification and assessment of anti-competitive conduct.
Insofar as merger regulation is concerned, a transaction which would ordinarily require the approval of the competition authorities prior to implementation thereof, needs to satisfy the requisite jurisdictional test, financial thresholds and comprise a “merger” as defined in the Competition Act, 1998 (the “Competition Act”). The substantive assessment of mergers accords consideration both to competitive and public interest considerations. The recognition of public interest considerations is a particular nuance of the South African competition law landscape, and is recognised as a product of the country’s apartheid legacy and the systemic socio-economic inequalities which arose therefrom. Public interest considerations extend to an evaluation of the proposed transaction in light of its effect on (i) a particular industrial sector or region; (ii) employment; (iii) the ability of small and medium sized enterprises controlled or owned by historically disadvantaged persons to become competitive; and (iv) the ability of national industries to compete in international markets. In assessing public interest jurisprudence, the pre-eminence accorded to employment is abundantly clear and furthermore amplified by the proactive role played by trade unions and more recently various government entities. Following the trend of decisions such as Metropolitan/Momentum and Wal-Mart/Massmart, what is noteworthy from the recent Glencore/Xstrata decision is the particularly onerous employment-related conditions that were imposed on the merging parties.
The competition authorities have increasingly cast their eye towards prohibited practices and in particular the various species of cartel conduct, namely price fixing, market division and collusive tendering. The focus on cartel enforcement has been demonstrated in a number of ways, for instance, through the identification of various priority sectors in terms of which the competition authorities’ focus their investigative efforts. Currently priority sectors include (i) food; (ii) agro-processing and forestry; (iii) banking and financial services; (iv) infrastructure and construction; and (v) intermediate industrial products. The authorities have also recently identified the media sector as an “emerging priority sector”. The adoption of the highly successful corporate leniency policy, which has facilitated the discovery of a multitude of cartels within various sectors including the bread, milling, construction and pharmaceutical industries is also testament to the emphasis that has been placed on cartel enforcement. Set against the background of prevailing levels of poverty, the busting of cartels, particularly in areas which directly impact upon the more indigent sectors of the population, has contributed to the credibility of the South African competition authorities. It bears mention that sanctions for cartel conduct can comprise an administrative penalty of at a maximum, 10% of a firm’s financial turnover in South Africa plus its exports from South Africa during the previous financial year.
As the competition authorities vigilantly pursue and prosecute anti-competitive conduct, there has been a recent onslaught of cases which have challenged certain procedural aspects pertaining to the initiation and investigation of complaints pertaining to anti-competitive conduct, most notably as demonstrated in the Yara and Loungefoam matters. Developments in this regard remain in flux and will continue to be monitored with much interest.
Amendments to the existing competition legislation relating to inter alia, the introduction of criminal sanctions for directors (and persons occupying management positions) who engage in cartel conduct, the introduction of complex monopoly provisions, and provision for market inquiries have been contemplated in terms of the Competition Amendment Act (the “Amendment Act”). Although the Amendment Act was signed into law in 2009, it will only be of effect on a date to be determined by the President. There have however been developments on this front. On 8 March 2013, it was announced that the provisions of the Amendment Act relating to market inquiries would come into effect from 1 April 2013. A “market inquiry” is a formal inquiry in respect of the general state of competition in a market for particular goods or services, without necessarily referring to the conduct or activities of any particular named firm. The competition authorities had recently announced that there would be an industry wide inquiry into the healthcare sector. It would appear that the coming into force of the market inquiry provisions of the Amendment Act is by no means coincidental.
From a regional perspective, the Common Market for Eastern and Southern Africa’s (“COMESA”) Competition Commission (the “Commission”) became operational on 14 January 2013. COMESA is a regional organization comprising various states which have established the organization with the intention of promoting economic integration through trade and investment within eastern and southern Africa. The member states of COMESA currently comprise Burundi, Comoros, Democratic Republic of Congo, Djibouti, Eritrea, Ethiopia, Egypt, Kenya, Libya, Madagascar, Malawi, Mauritius, Rwanda, Seychelles, Sudan, Swaziland, Uganda, Zambia and Zimbabwe (the “Common Market”). 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. Due to the infancy of the COMESA regime, there are many aspects thereof which require clarification. However, it is clear that the Commission is set to have far reaching implications for firms operating within the Common Market.