PRESENTATIONTOTHEPARLIAMENTARYPORTFOLIOCOMMITTEEONTHECOMPETITION

AMENDMENTBILL

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PresentationbyTebogoMalatjietBonangMasia

28August2018

STRUCTURE• FOCUSOFTHESUBMISSIONS• SECTION8– ABUSEOFDOMINANCE• SECTION15;16&17– CONSIDERATIONOFMERGERS&REVOCATIONOFAPPROVAL• SECTION18A–INTERVENTIONINMERGERSINVOLVINGFOREIGNFIRMS• CONCLUSION

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FOCUSOFTHESUBMISSIONS• “The main objective of these amendments is to address two persistentstructural constraints on the South African economy, namely, the high levelsof economic concentration in the economy and the skewed ownershipprofile of the economy” - Paragraph 2 of the Memorandum on the Objects of the CompetitionAmendment Bill, 2008.

• “The amendments also strengthen the available interventions that will beundertaken to redress the specific challenges posed by concentration anduntransformed ownership”. - Remarks by the Honourable Minister Ebrahim Patel, MP at theIntroduction of the Competition Amendment Bill, 2018, at the Portfolio Committee on EconomicDevelopment, 17 July 2018.

• We are in support of the proposed amendments, particularly theprovisions proposed with a view to advance the public interests. Oursubmissions focus squarely on these provisions. We also tackle thecriticisms levelled against these provisions to the extent necessary.3

SECTION8– ABUSEOFDOMINANCE• Specificcriticism–

• First,istheso-calledshiftinonusasencapsulatedundertheproposedsection8(2).

• Second,istheconcernabouttheCommission’spowerstopublishguidelinesregardingthecalculationanddeterminationofanexcessivepriceundertheproposedsection8(3)(f)andsection8(4)forsettingoutrelevantfactorsandbenchmarksfordeterminingwhethertheabuseofdominanceconductcontemplatedundersection8(1)(d)(vii)impedestheabilityofSMEsandHDIstoparticipateeffectively.ThecriticismisthattheCommissionwillhavelawmakingpowersreservedforlegislature,andaccordingly,separationofpowerswillbeencroachedupon.

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SECTION8– ABUSEOFDOMINANCE

• Specificcriticism–• Shiftinonus:- Thereareconcernsraisedonwhatamountstoaprimafacie casebeingmadeout.TheissueisatwhatpointintheprocesswilltheCompetitionTribunal(“theTribunal”)beabletodeterminethataprima faciecasehasbeenmet.• Thethresholdintheproposedsection8(2)isprimafacie.ThelegaldefinitionthereofissimplythattheCommissionmustbeinpossessionoffactswhichifobjectivelyprovenwithoutcontradictionconstituteanabuseofdominanceassetoutinsection8(1).

SECTION8– ABUSEOFDOMINANCE

• Specificcriticism–• TheCommission’spowerstopublishguidelines:– DotheguidelineshavethesameforceoflawastheCompetitionActanditsRegulations?No!Thenewproposedsection79(4)specificallyprovidesthattheguidelinesarenotbinding.• In the hierarchy of laws in the Republic of South Africa, theConstitution reigns supreme, followed by legislation passed byParliament and Provincial legislatures; and then subordinatelegislation in the form of Regulations, Proclamations, Ordinances,and By-Laws. A guideline issued by a public functionary of bodydoes not the acquire the status of a law which must be rigidlyapplied without deviation.

SECTION8– ABUSEOFDOMINANCE

• Guidelineshavenoforceoflawandinaccordancewithcaselaw,theymerelyprovidepersuasiveexplanationsinrelationtotheinterpretationandapplicationofthestatutoryprovisioninquestion.

• Irrespectiveofthewordingofsection8(3)(f)andsection8(4),theguidelineswillbeexactlythat,guidelineswithnoforceoflaw.

Sections15&16– MERGERREVOCATIONS

• The nub of the concerns raised here is that the proposed amendments,particularly making any appropriate decision or order on conditions of themerger approvals after a merger has been approved, such as the publicinterest issues set out in section 12A(3)(b) and (c), with or withoutconditions by the Commission or the Tribunal, as the case may be, willamount to the competition authorities being functus officio.

• This doctrine encapsulates the principle that once an administrator such asthe competition authorities give a final decision by exercising adiscretionary power he or she may not reverse or alter that decision. Therule is there to eliminate uncertainty.

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Sections15&16• The criticism fails on two scores. First, the powers of revocation havealways been there and therefore inherent in such power is a lessersanction of imposing new conditions.• Second, the functus officio doctrine is a general rule and not anabsolute one. The exception to the functus doctrine has beenaccepted by our courts on the basis that the legislature may authorisean administrator to revisit, reverse or alter his or her decisionprovided that the enabling provision does not have the effect ofsanctioning arbitrary and capricious conduct, and the power to revisitis exercised in a manner that is rational.

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Sections15&16• The proposed amendments are required where a revocation is notindicated, but where another appropriate order is indicated. Theremay be instances where information relating to merger conditions onpublic interest considerations arise after approval. In those instances,the Commission or Tribunal will then be empowered to decide onwhether those conditions must be strengthened or relaxed, oramended in line with the prevailing conditions, whatever action willbe appropriate, provided that fairness is applied. It cannot be said inthose prevailing circumstances that the competition authorities arefunctus.

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SECTION17• The other concern under merger control is in respect of the proposal thatthe Minister has the right of appeal in relation to the Tribunal’s decisionson the public interest grounds. The attack against this proposed section isthat should both the Commission and the Minister have the right of appealthen there will be commercial uncertainty for merging parties. Thisprocess could be a lengthy one, so the argument goes.

• The Commission and the Minister’s right of appeal on pertinent matterscannot be compromised for the sake of commercial certainty. Theproposal for a right of review cannot sufficiently address this. A right ofreview is entrenched by the Constitution in section 33 and by PAJA.

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SECTION17

• We submit that the Minister and the Commission must be placed onequal footing with other interested parties who have a legislated rightof appeal, particularly because the Minister’s interests are of a moresignificant nature, as they relate to public interest conditions and notcommercial interests.• The delay criticism is unmeritorious because merging parties andother interested parties have a right to appeal which will have thesame effect of delaying a proposed merger transaction.

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SECTION18A

• This section creates a legislative framework within which thePresident of the Republic is required to constitute a Committee whichis responsible for considering whether the implementation of amerger involving a foreign acquiring firm may have an adverse effecton the national security interests of the Republic.

• There are various attacks levelled against this proposed provision.Chief amongst which is that there is no provision for a specific appealand/or review process in the event that the appointed Committeedoes not approve a merger due to security reasons.

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SECTION18A

• When this issue is considered, it should be borne in mind that SouthAfrica is a Constitutional State which observes the rule of law. In thecontext of recent Constitutional Court jurisprudence, we should beassured that if the Committee contemplated by Section 18A were toact contrary to the prescripts of the Act and not apply the relevantconsiderations contained in the list of national security interest withinthe context of mergers by foreign acquiring firms as published by thePresident, then their decision will be subject to court review underthe Promotion of Administrative Justice Act, 2000 and also in terms ofthe principle of legality.

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SECTION18A

• There is also criticism levelled relating to the fact that there is nopublication relating to what constitutes a class of matters to beconsidered by the Committee as matters raising national securityinterests.• This criticism ignores the fact that relevant factors are already set outin section 18A(4).• All that the President is required to do is to publish a list of Nationalsecurity interests in the Gazette. It cannot be reasonably expectedthat a closed list of these national security interests must be codifiedin the Bill.

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CONCLUDINGREMARKS• AssetoutintheexplanatorymemorandumontheobjectsoftheBill,theprimaryobjectivesoftheproposedamendmentsaretwofold,namely:

• Toaddressthehighlevelsofeconomicconcentrationintheeconomy;and

• Toaddresstheskewedownershipprofileoftheeconomy.

• Itisourconsideredviewthattheamendments,specificallythoseconcernedwithpublicinterestconsiderationsachievetheobjectsoftheBill.Theydosobychallengingthelevelsofeconomicconcentrationwhichfavordominantfirms,promotesracially-skewedownershipprofiles,thepurchaseofproductsatanunreasonableprice,discriminatorypricingmethodswhichimpedeeffectiveparticipationofSMEsandHDIs.

• OursubmissionisthattherearenomeritoriouslegalconsiderationsmilitatingagainsttheproposedBill.

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THANKYOU

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