UNLEASHING MORE RIVALRY - RP310/2019 ISBN: 978-0-621-47821-1 - The Competition Commission
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UNLEASHING
MORE RIVALRY
RP310/2019
ISBN: 978-0-621-47821-1
II U N L E A S H I N G M O R E R I V A L R Y
III C H A P T E R 5 : A D V O C A C Y A N D C O M P L I A N C E
HIGHLIGHTS OVER TIME
1999/00 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10
70 132
176 93 93 94 82 105 93 125 131 172
Complaints
2
Large mergers
52
Settlements
5
Notified
103 4 11 221 197 273 294 385 406 470 447 190
Approved with conditions
0 0 0 4 6 9 7 7 10 9 8
Prohibited
2 3 2 1 1 3 3 4 3 7 1
Applications granted
1
Applications rejected
2
3 2 3 10 13 79
18 872 400 86 575 000 43 810 600 99 384 870 331 423 704 487 262 183
1999/00 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09 2009/10
IV U N L E A S H I N G M O R E R I V A L R Y
2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19
GROWTH IN NUMBER OF EMPLOYEES OVER 20 YEARS
220
COMPLAINTS RECEIVED FROM THE PUBLIC
236 156 177 167 144 160 205 313 256 2 967
N U M B E R O F C O M M I S S I O N M AT T E R S H E A R D , O R O R D E R S I S S U E D , B Y T H E T R I B U N A L O V E R T E N Y E A R S
3 2 4 1 2 1 18 14 18 65
54 80 69 97 98 127 103 121 101 902
21 27 14 42 43 27 27 29 45 280
NUMBER OF MERGERS ASSESSED OVER 20 YEARS
Notified
229 291 324 320 395 391 418 377 348 6 490
Approved with conditions
13 33 37 22 43 37 31 52 41 369
Prohibited
2 8 0 1 5 7 5 12 4 74
E X E M P T I O N A P P L I C AT I O N S G R A N T E D A N D R E J E C T E D O V E R 1 0 Y E A R S
3 4 1 0 4 3 1 0 2 19
3 2 0 0 0 13 1 1 0 22
N U M B E R O F C O R P O R AT E L E N I E N C Y A P P L I C AT I O N S R E C E I V E D S I N C E I N C E P T I O N
33 244 15 5 121 10 6 2 7 553
A D M I N I S T R AT I V E P E N A LT I E S I M P O S E D O V E R T H E L A S T 1 5 Y E A R S ( I N R A N D S )
794 190 704 548 494 066 731 407 807 1 670 120 054 191 452 737 337 842 490 1 628 000 000 354 495 349 333 768 729 7 657 190 693
2010/11 2011/12 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19
V
U N L E A S H I N G M O R E R I V A L R Y
MINISTER’S
FOREWORD
T
he fifth administration has recently to small and medium enterprises and to
concluded, thus marking the end of Black South Africans. The bill addresses two
first quarter of a century of democratic persistent structural constraints on dynamic
rule in South Africa. Many institutions have and inclusive growth in South Africa: (1)
been established by the previous democratic The high levels of economic concentration;
administrations in this period, none more and (2) the skewed ownership profile of the
important than the competition authorities. economy.
The political gains of the first 25 years The signing of the Competition
of democratic South Africa would have Amendment Bill marks the culmination of 20
been meaningless, had there not been the years of regulation, where we find ourselves
corollary of looking to find similar gains in closest to meeting the objectives that were
commerce and industry – for effecting the identified in the RDP of 1994:
broader socio-economic objectives that are “[T]o remove or reduce the distorting
imbedded in our constitution and sacred effects of excessive economic concentration,
for the protection of the democracy itself. collusive practices, and the abuse of
Competition law and policy regulation is thus economic power by enterprises in a
an integral feature of, and foundational to, our dominant position. In addition, the policy will
Ebrahim Patel democracy. ensure that participation of efficient small and
Minister of Trade, Industry and Competition This importance was identified in medium-sized enterprises in the economy
President Mandela’s administration with is not jeopardised by anti-competitive
the promulgation of the Competition Act in structures and conduct”.
1998, for implementation and effect from In light of the above, it is most appropriate
1999. This instrument remains the most that the sixth administration, coinciding
significant economic legislation that has been with the third decade of competition law
impressively regulated by the competition and policy regulation, will commence in a
authorities to date. regulatory environment that has never been
Most recently, in February this year, better suited to addressing the shrinking
President Ramaphosa signed into law economy and continued high levels of
the Competition Amendment Bill. The Bill economic concentration (both factors that
represents the most substantial series of see consumers seriously squeezed), all in an
amendments in the past 20 years, where the attempt to meet the objectives highlighted
focus was on revamping and strengthening above and in section 2 of the Competition
the Competition Act so as to place greater Act. This will, indeed, do much to help deliver
focus on economic transformation and President Ramaphosa’s “New Dawn”.
inclusivity. The main objective of these
amendments is to open up the economy
VI U N L E A S H I N G M O R E R I V A L R Y
As policy makers, the department has form the Department of Trade, Industry and small and medium businesses.
to continue to find ways of engaging all Competition must be seized, and indeed The Commissioner, Tembinkosi Bonakele,
stakeholders (especially business) to try maximised in order to deliver the much- assisted by the Deputy Commissioner,
and make for a conducive commercial needed alignment in government policy and Hardin Ratshisusu, and the entire staff of the
environment, such that the competition programmes. Commission (past and present) continue to
authorities and business can find each other Finally, the opportunity to celebrate deliver despite ever changing conditions.
quicker, and in a manner continuously less cannot, and must not, be lost. In 1999, I wish to thank them for another wonderful
adversarial. It is this that has led, in part, to as mentioned earlier, the Competition Act year. We look forward to celebrating
the merging of the Economic Development came into force. This Act, singularly, has 20 years of competition law and policy
Department and the Department of Trade done much to advance the socio-economic regulation this year, as we enter the third
and Industry. This merger will be completed transformation that is demanded by the Act decade determined to making optimal use
within the ensuing financial year, and shall itself. The Commission (and the Tribunal) has of the Commission’s unique contributions
(1) bring together 17 agencies with the grown into an effective institution, developing to protecting our nation’s democracy and
capacity to provide targeted industrial and a sterling track record in competition law and development.
transformation funding; (2) regulate the policy regulation that commands the world’s
consumer and corporate environments to respect. The stability in leadership over the
foster a vibrant business ecosystem; and (3) last two decades has also allowed for the
open up the economy for real and inclusive Commission to earn the public trust. And
growth. The opportunities that come with because of this earned trust, more and more Ebrahim Patel
the pooling of government resources to people look to it for protection, especially Minister of Trade, Industry and Competition
VII
U N L E A S H I N G M O R E R I V A L R Y
W E H AV E C O M E
A L O N G W AY
I
t is my pleasure to present the Competition Act 89 of 1998. The Act set out
Commission’s report in celebration of to level the playing fields for corporate South
20 years of competition enforcement. Africa so that consumers would enjoy the
For the past five years our motto has been benefits of competition: the best price and
“competition regulation for a growing and quality a competitive market could deliver.
inclusive economy”. This positioning reflects Much like the traditional Western competition
more than our hope for the future of the laws South Africa borrowed from, these
competition agencies. It reflects the journey founding objectives found their application in
we have travelled in 20 years of administering the current merger regulations and provisions
the Competition Act 89 of 1989. prohibiting anti-competitive conduct. The Act
The earliest economic ideals of the current also established the Competition Commission
democratic government can be traced and the Competition Tribunal to deliver on
back to the Freedom Charter of 1955 which these goals.
expressed that: In our establishment years, which
represents the first stage of the Commission’s
“The national wealth of our existence, we focused our efforts on staffing
country, the heritage of South the organisation, establishing systems
Tembinkosi Bonakele Africans, shall be restored to and processes and on developing our
Commissioner of the the people; The mineral wealth investigative, research and prosecutorial
Competition Commission beneath the soil, the banks skills. We were assisted, in this task, by
and monopoly industry shall be the compulsory merger notification regime
transferred to the ownership which meant that all firms above a certain
of the people as a whole; All value threshold were compelled to notify
other industry and trade shall be their mergers and acquisitions to the
controlled to assist the well being Commission. Our consequential access
of the people; All people shall to the inner workings of markets led us to
have equal rights to trade where identify competition failures and thus turn
they choose, to manufacture and our attention to anti-competitive conduct
to enter all trades, crafts and taking place in the market. With the help of
professions.” the Corporate Leniency Policy, which we
established in 2004, the Commission was
The architects of our modern democracy able to detect and prosecute cartels in many
never lost sight of these goals and, from different industries: the wheat and maize
1994, saw to it that these goals were weaved milling industry being one of the first. It was
into various new laws set to govern the around this time when the public at large
new dispensation. One such law was the became more aware of the Commission and
VIII U N L E A S H I N G M O R E R I V A L R Y
began to participate meaningfully in its work. abuse of dominance which was evident in
This valuable input from our communities and some priority sectors and beyond. Although
ongoing interaction undoubtedly set the tone the Commission had some success in this
for the stages of development that would area – such as the Tribunal’s finding of
soon follow. excessive pricing against Sasol Chemical
The collective voice of our stakeholders Industries (Pty) Ltd or its finding of predatory
made it clear to us in those days that pricing against Media24 Ltd – these
South Africa was a unique community decisions were overturned on appeal.
with its own development goals separate Once again it became clear that in order
from those of the developed economies to effectively tackle abuse of dominance,
we initially borrowed our competition laws the competition agencies would need laws
from. The public demanded a responsive and regulations that would strengthen
competition authority with its finger firmly the agencies’ ability to do so. In pursuit
on the pulse of South Africa’s need for an of this goal, the government recently
inclusive economy. I remember the calls for promulgated far reaching amendments to the
executives to be jailed for corporate theft Competition Act, prompting the beginning
following the revelations of the bread cartel. of the competition agencies’ next stage of
These calls became even louder after the competition regulation.
large scale construction cartel came to light. I have witnessed and fully participated
I can recall the week long protest outside in the first 20 years of the Commission’s
the Commission building when it looked development. In all this time I have
like Wal-Mart Inc, an American based retail supported, whole heartedly, the noble
giant, might threaten the development of objectives of our law and I am grateful for the
small business in South Africa. I heard civil opportunity to contribute to the Commission’s
society’s concerns for food security when history. I have been immensely privileged
Pioneer Hi-Bred International, a global plant to partner with the hard working men and
genetics company, sought to gain ownership women staffing the Commission in our efforts
of South Africa’s maize germplasm. These to deliver on the uniquely South African goals
interactions influenced the Commission’s of competition regulation. Now at the start our
decision to identify priority industries and third decade on this journey, I am confident
target these for pro-active interventions that the Commission will work even harder to
designed to promote South Africa’s growth fulfil the important mandate the South African
and development. The public’s input also led public has placed on us.
to the introduction of personal criminal liability
for executives who knew of, or participated
in, cartel conduct.
With the Corporate Leniency Policy Tembinkosi Bonakele
working to eradicate cartels from our Commissioner of the
economy, the Commission pursued the Competition Commission
IX
U N L E A S H I N G M O R E R I V A L R Y
CONTENTS
CHAPTER 1: OVERVIEW 1
The dawn of a new dispensation 2
Establishing the law and its administrators 4
The evolution of competition law and policy over 20 years 6
The Competition Commission 7
The Competition Tribunal 8
The Competition Appeal Court 8
CHAPTER 2: IMPACT ASSESSMENTS 15
Measuring the impact of competition interventions 16
Concrete outcomes 17
Considering the indirect effects of competition enforcement 18
Evaluating the Competition Tribunal’s performance 19
Observing the Wal-Mart effect 21
CHAPTER 3: MERGER REVIEW 29
Introduction 30
How mergers are assessed 31
Developments in merger evaluation practice 32
Merger trends 33
Public interest 34
Merger remedies 38
CHAPTER 4: PROHIBITED PRACTICES 43
Introduction 44
How investigations are initiated 46
The Commission’s powers of investigation 46
Prioritising inclusive growth and development 47
Developments in prohibited practice regulation over ten years 51
Increased focus on abuse of dominance 55
Exemptions 57
CHAPTER 5: ADVOCACY AND COMPLIANCE 61
Introduction 62
Education and training 63
Issuing advisory opinions 64
Communications 64
Influencing legislation and policy 65
Building domestic and international relations 67
X U N L E A S H I N G M O R E R I V A L R YLIST OF BOXES
Box 1: Explosive beginnings 5
Box 2: Government intervention secures development fund in Wal-Mart take over 35
Box 3: Tribunal sets criteria for assessing job losses in a merger 37
Box 4: Infant nutrition deal balances local and international considerations 39
Box 5: Tribunal reaches ground breaking finding on excessive pricing 45
Box 6: Terminating high prices 55
Box 7: Driving change in the automotive industry through advocacy 63
Box 8: ACF and World Bank partner to increase knowledge 70
LIST OF DIAGRAMS
Diagram 1: Percentage share of JSE market capitalisation in 1990, 2009 and 2018 2
Diagram 2: Three indicators of the growth of South Africa’s competition regime since 1999 6
Diagram 3: Growth of the competition agencies mandate over 20 years 7
Diagram 4: Leadership of the Commission, Tribunal and CAC over 20 years 7
Diagram 5: Hierarchy of entities that regulate competition in South Africa 8
Diagram 6: Structural and functional overview of the competition agencies 9
Diagram 7: Functions assessed and ratings given in the stakeholder satisfaction survey 20
Diagram 8: Decrease in mergers notified following the 2009 and 2017 merger threshold
adjustments
30
Diagram 9: Revisions in merger thresholds and filing fees over 20 years
31
Diagram 10: Time frames for assessing mergers of varying complexities
32
Diagram 11: Mergers notified and decided over the last ten years
33
Diagram 12: Merger trends by sector since 2009/10
33
Diagram 13: Increase in number of raids since 2009/10
46
Diagram 14: Noteworthy interventions in priority sectors since 2009/10
47
Diagram 15: Number of corporate leniency applications over the last ten years
52
Diagram 16: Market inquiries instituted
53
Diagram 17: Number of exemption applications received over ten years
57
Diagram 18: Number of advisory opinions issued over ten years
64
Diagram 19: International reach of the Tribunal’s website
65
Diagram 20: MoU’s with regulators and industry bodies
68
XI
U N L E A S H I N G M O R E R I V A L R YXII U N L E A S H I N G M O R E R I V A L R Y
XIII U N L E A S H I N G M O R E R I V A L R Y
O V ERVIEW 1 U N L E A S H I N G M O R E R I V A L R Y
T H E D AW N O F A N E W
D I S P E N S AT I O N
I
n 1994, South Africa emerged from a long D I A G R A M 1 : P E R C E N TA G E S H A R E O F J S E M A R K E T C A P I TA L I S AT I O N I N 1 9 9 0 ,
2009 AND 2018
and damaging history of racial inequality.
Prior to this, the right-wing Nationalist
government had adopted an apartheid policy
which created and maintained an inferior
quality of life for black South Africans. An
1990
inevitable consequence of apartheid policy
was the economic isolation of black South
Africans. The resulting skewed development
of business in South Africa lead to many
weaknesses in the actual operation of local
44.2% 13.6% 1 3 .2 % 6 .7 %
Anglo American Rembrandt / Sanlam
markets. Some of these weaknesses were: Corporation Remgro Directors
• exceptionally high levels of 1 0 .2 %
concentration and monopolisation; SA Mutual /
2009
Old Mutual
• low levels of consumer choice and
highly priced basic commodities;
• a poorly developed small-medium
enterprise sector;
• ownership structures that benefitted a
handful of citizens at the expense of
the majority; and
• low levels of productivity that resulted 10.6% 7.0%
from excessive rent-taking in the Anglo American
Corporation
Black controlled
groups
economic process.
7.7% 5.9% 4.3%
Directors SAB Miller Liberty Life /
To illustrate the above, by 1994 the Standard Bank
largest five conglomerates controlled entities
2018
accounting for 84% of the capitalisation of the
stock exchange, and the largest conglomerate
alone accounted for 43%. In addition, the
conglomerates were characterised by
a network of cross-holdings and shared
directorships which enabled control to be
exerted over far reaching pyramid structures.
Diagram 1 tracks how these figures have 19.9% 7.89%
evolved from 1990 to 2018. Data shows that Naspers Compagnie
Financiere
by July 2018, seven shares made up 50% of Richemont
the market capital of shares listed on the JSE
and top 20 shares made up 67% or two thirds
8.32% 3.96% 3.86%
BHP Billiton Anglo American Sasol
of the overall market capital. Corporation
2
C H A P T E R 1 : O V E R V I E WTherefore, when many South Africans and practices, to curb monopolies and continued market failures however it had not done its
the international community began to strongly domination of the economy by a minority work. The two decades of its existence were
oppose apartheid, there was a growing within the white minority and to promote characterised by an increasing concentration
understanding that economic emancipation greater efficiency in the private sector.” of economic power and widespread abuse.
was necessary in order to achieve lasting In 1994, when the left-of-centre ANC The powers of the Competition Board
equality amongst all the people of South government came into power, it produced were narrowly circumscribed and its ability
Africa. Accordingly, in the struggle for ideals its Reconstruction and Development to act was limited. The limited influence of
such as freedom of movement, freedom Programme (RDP) for South Africa which, the Competition Board and Act No. 96 of
of expression and freedom of association, once again, outlined its policy framework 1979 reflected the then government’s lack
economic freedom featured prominently as a to redress apartheid’s inequalities and of commitment to even the limited objectives
tool for lasting liberation. dealt specifically with competition in the incorporated in that Act.
In fact as far back as 1955 the Freedom economy. The ANC stated that the RDP Further to the above, under Act No. 96
Charter, which contained a list of demands would introduce strict competition legislation of 1979, the decisions of the Competition
for a new South Africa, declared that: to create a more competitive and dynamic Board were subject to review and approval
business environment. The objectives of by the Minister of Trade and Industry.
“The national wealth of our such legislation would be, amongst other The Competition Board thus lacked
things, to discourage the system of pyramids independence, and was criticised for making
country, the heritage of South
which had lead to over-concentration and decisions subject to political influence.
Africans, shall be restored to inter-locking directorships and to abolish Some of the criticism levelled at the
the people; The mineral wealth numerous anti-competitive practices. Competition Board was that a lot of informal
beneath the soil, the banks Competition policy also linked with dialogue seemed to have taken place
the new priorities of the Department of between its staff and parties to some of the
and monopoly industry shall be
Trade and Industry (DTI) under the ANC merger transactions, resulting in informal
transferred to the ownership government. The DTI had prioritised small decisions being made on some transactions.
of the people as a whole; All business development, export promotion, Even before Act 96 of 1979, the
other industry and trade shall be market access and investment prior to Regulation of Monopolistic Conditions Act
controlled to assist the well being addressing competition policy. While trade passed in 1955 was widely regarded as a
and industrial policy did not explicitly feeble piece of legislation. In this respect,
of the people; All people shall address competition issues, the emphasis on the 1976 Mouton Commission of inquiry
have equal rights to trade where expansion and creating new entrants into the concluded that the Act and the way it was
they choose, to manufacture and South African economy were consistent and implemented had had “but a modest impact
to enter all trades, crafts and complementary to the policy objectives of as an instrument for ensuring competition.”
South Africa’s new competition law. Following these pieces of legislation and
professions.”
Competition policy thus became firmly the economic context within which they had
entrenched as one of the mechanisms to operated, there was a need for an effective
These ideals were maintained in varying address the imbalances of the past and to law which would, unlike its predecessors,
forms throughout the liberation struggle and eradicate harmful business practices. achieve the objectives it had set for itself.
in 1992, the African National Congress (ANC)
in its Policy Guidelines for a Democratic Shortcomings of the old competition Adopting the new law
South Africa specified the broad outline of the regime
approach they proposed: “The concentration It took just over four years for the
of economic power in the hands of a few Prior to the present regime, competition Competition Bill to be brought to Parliament.
conglomerates has been detrimental to was regulated in terms of the Maintenance Representatives of business and labour in a
balanced economic development in South and Promotion of Competition Act 1979 (Act tripartite negotiating forum known as Nedlac,
Africa. The ANC is not opposed to large firms No. 96 of 1979), which was administered and state officials, all took part in the drafting
as such. However, the ANC will introduce by the Competition Board. Act No. 96 of of the legislation. Crucial for the policy
anti-monopoly, anti-trust and merger policies 1979 was ostensibly designed to address process was the prioritisation given to it by
in accordance with international norms and problems of anti-competitive behaviour and the Minister of Trade and Industry. Equally
3 U N L E A S H I N G M O R E R I V A L R Yimportant was the rise of competition policy previously expressed view that it considered development of competition policy and the
on the international agenda at the point when the Competition Bill as an important pillar enactment of competition legislation. In
South Africa was re-establishing international in the overall economic policy framework. particular it states that:
relationships and undergoing liberalisation of In addressing the necessity of competition
trade and capital markets. policy for the South African economy, the DTI The people of South Africa recognise:
Under the impetus of the Minister of Trade stated that:
and Industry, competition policy principles That apartheid and other discriminatory
were negotiated by business, labour and The Bill seeks to encourage laws and practices of the past resulted in
government representatives in Nedlac. This excessive concentrations of ownership
competition, not because we wish
followed the ethos of participatory policy and control within the national economy,
making and negotiated outcomes which to adhere to some textbook ideal, inadequate restraints against anti-competitive
characterised the transition as a whole. but rather because of what it can trade practices, and unjust restrictions on full
The Parliamentary Committee on Trade and contribute to realising some of and free participation in the economy by all
Industry received over 30 written submissions South Africans.
these important economic and
on draft legislation and conducted public
hearings over four days. These processes social objectives. We need to That the economy must be open to greater
enjoyed the participation of a range of ensure efficiency and adaptability ownership by a greater number of South
organised and powerful groupings who had if we are to survive in the global Africans.
an interest in competition policy. economy. Consumers must have
The drafters of South Africa’s new That credible competition law, and effective
competition law benefited from their
access to a wide range of high structures to administer that law, are necessary
interaction with international expertise and quality products and services for an efficient functioning economy.
best practice. Practitioners and academics at the lowest possible prices.
from no fewer than eight countries, as It is essential that we see the That an efficient, competitive economic
well as from multi-lateral agencies and environment, balancing the interests of
development of a vibrant small,
academic institutions commented on draft workers, owners and consumers and focused
legislation, and interaction with regulators medium and micro enterprise on development, will benefit all South
in other jurisdictions helped in the actual sector. There is necessity for a Africans.
design on South Africa’s institutions. The diversification of ownership in
South African approach drew heavily from IN ORDER TO:
favour of historically disadvantaged
the experience and practice of developed
countries. However, the Competition Bill also communities. These are the provide all South Africans equal opportunity
contained provisions which were unique to potential outcomes of high levels to participate fairly in the national economy;
the development agenda of South Africa, of competition and these are the
specifically the public interest factor and objectives enshrined in the Bill achieve a more effective and efficient
the provisions for exemption, which are economy in South Africa;
discussed further below.
before this House.
The international and domestic aspects to provide for markets in which consumers have
the policy development process were both
Establishing the law and its access to, and can freely select, the quality
administrators
very important in building the commitment of and variety of goods and services they desire;
key groupings in the economy to competition
The Competition Act of 1998, as amended,
policy principles. In so doing they laid the create greater capability and an environment
(“the Competition Act” or “the Act”)
foundation for the credibility of the new for South Africans to compete effectively in
commenced certain sections on 30
institutions. international markets;
November 1998 and the Competition Act
Upon presenting the Competition Bill, the
became fully operational on 1 September
DTI acknowledged the role of business and restrain particular trade practices which
1999. In its preamble, the Competition
labour in Nedlac as well as the numerous undermine a competitive economy;
Act reflects the concerns that led to the
state officials. The DTI also reiterated the
4
C H A P T E R 1 : O V E R V I E Wregulate the transfer of economic ownership The Competition Act also provided for the Independence and accountability of
in keeping with the public interest; mandatory filing of mergers and acquisitions, South Africa’s competition authorities
a departure from the previous competition
establish independent institutions to monitor law, and provided for the filing of exemption In the discussions leading up to the
economic competition; and applications. promulgation of the Competition Act, the
Further to this, the Competition Act independence of the institutions which were
give effect to the international law obligations established new competition authorities to regulate competition in South Africa played
of the Republic. with enhanced powers of investigation and a key role in shaping the framework of the
adjudication. These were the Competition institutions and the provisions of the Act.
The new Competition Act prohibited: Commission (Commission), the Competition Under the Maintenance and Promotion
• restrictive horizontal practices in Tribunal (Tribunal) and the Competition of Competition Act, the decisions of the
general and, in particular, price Appeal Court (CAC) which are all discussed Competition Board, which as stated
fixing, market allocation and in further detail below. above, was the predecessor to the present
collusive tendering; There were significant institutional competition authorities, were subject to
• restrictive vertical practices in and procedural differences between the review and approval by the Minister of Trade
general and, in particular, minimum Competition Act and the old dispensation, and Industry. The Competition Board thus
resale price maintenance; the most striking of which were: lacked independence, and was criticised
• abuse of dominance through, inter • the independence and accountability for making decisions subject to political
alia, general exclusionary acts of the new institutions implementing influence. Moreover, the Board was criticised
and through specific exclusionary the Competition Act; and for making informal decisions on merger
acts such as predatory pricing, • the development objectives of the transactions.
product bundling, the buying up Competition Act. Consequently, in drafting the current
of scarce resources, inducements legislation, political independence was
not to deal with a competitor and seen as an element crucial to ensuring
price discrimination. the success and competence of the
BOX 1:
EXPLOSIVE
BEGINNINGS
How was independence drafted into the law? Well that is a matter of circumstance. Dave Lewis recalls, in his book , that the
early drafts of the Competition Bill gave the competition authority an unusual degree of independence, a move that represented
a controversial policy change. However just as the then Minister of Water Affairs – jokingly referred to as the Minister of All Affairs
for his tendency to intervene in all affairs – queried this degree of independence, State officials received news of a bomb that had
exploded in the vicinity of their discussions. This derailed their meeting and left the minutes of that meeting unclear on the subject.
When he was later approached for clarity, the then Minister of Trade and Industry advised that the meeting had approved the bill
and the minutes were signed off accordingly.
The rest, as they say, is history.
5 U N L E A S H I N G M O R E R I V A L R Ycompetition agency that was to come.
The independence of the competition THE EVOLUTION OF
C O M P E T I T I O N L AW A N D
authorities from the influence of each
other, the state and private stakeholders
is now entrenched in the provisions of the
present Act as well as in the design of the
competition institutions. POLICY OVER 20 YEARS
The competition authorities’
responsibility to account for its activities M O N E Y: G R O W T H O F T H E C O M M I S S I O N A N D T R I B U N A L’ S B U D G E T S O V E R T I M E
are entrenched in the formal reporting
Competition Commission
requirements set out in the Competition Competition Tribunal
Act and the internal procedures which the
institutions have developed. The public 51 870 094 10 400 000
2000
2000
and private stakeholders of the institution
also hold the authorities to account in
various forums. 99 254 000 20 597 000
2009
2009
The development objectives of the Act
352 756 000 44 400 000
2018
2018
Another significant difference
from the previous competition
regime and from most other P E O P L E : G R O W T H O F T H E C O M M I S S I O N A N D T R I B U N A L’ S H U M A N R E S O U R C E S
(INCLUDING TRIBUNAL MEMBERS) OVER TIME
jurisdictions was that the Act
specified a range of objectives to Competition Commission Competition Tribunal
be served by competition law and
to be promoted by the agencies 70 22
2000
2000
responsible for its enforcement.
132 25
2009
2009
Some of these objectives were contrary
to pure competition policy, however, the
South African government opted to take
development objectives into account in 229 47
2018
2018
decision making, particularly given the
economic and political context within which
the competition law was implemented. C A S E S : I N C R E A S E I N T H E C O M M I S S I O N A N D T R I B U N A L’ S C A S E L O A D O V E R T I M E
The development objectives of the
Competition Act were particularly set out as Competition Commission Competition Tribunal
a factor in the evaluation of mergers, namely
the public interest grounds, and in the criteria
527 43
2000
2000
provided for the assessment of exemption
applications. These areas of the law are
discussed further in chapter 3 and 4 below.
738 140
2009
2009
775 213
2018
2018
6
C H A P T E R 1 : O V E R V I E WD I A G R A M 3 : G R O W T H O F T H E C O M P E T I T I O N A G E N C I E S M A N D AT E O V E R 2 0 Y E A R S DIAGRAM 4: LEADERSHIP OF THE
COMMISSION, TRIBUNAL AND CAC
Year Significant changes introduced OVER 20 YEARS
2001 Competition Commission
The Competition Act initially ousted the Commission’s jurisdiction in
all industries that were under public authority but, confusingly, gave Commissioner Time served
the Commission exclusive jurisdiction over all competition issues. The
Alistair Ruiters 1999
amendment gave the Commission concurrent jurisdiction with other
regulators. Menzi Simelane 1999 - 2009
Shan Ramburuth 2009 - 2013
The amendment introduced a new class of “small mergers” and gave
the Commission powers to require parties to small mergers, in specific Tembinkosi Bonakele 2013 to date
circumstances, to notify the merger within six months of implementation.
2009 Competition Tribunal
The Competition Amendment Act of 2009 introduced criminal sanctions
Signed in 2009 against directors and managers who participate in cartel conduct or tacitly
Chairperson Time served
but effective in consent to such conduct. Previously only corporate entities could be
2016 Dave Lewis 1999 - 2009
penalised for cartel conduct within the civil regime.
Norman Manoim 2009 to date
The amendment introduced a market inquiry provision thus enabling the
Commission to inquire into the state of competition in a particular market
Competition Appeal Court
without being limited to the conduct of individual firms within the market.
President Time served
The amendment introduced leniency provisions in order to authorise the
Dennis Davis 2000 to date
Commission’s Corporate Leniency Policy and to protect whistleblowers.
2019 • In terms of the February 2019 amendments:
Signed but not The Competition Commission
• small and medium businesses, and firms controlled by historically
effective, in
disadvantaged persons, enjoy protection against price discrimination and The Commission is a statutory body
its entirety, at
unfair purchasing practices by dominant firms; constituted in terms of the Competition Act.
publishing
• the rules applicable to dominant firms have been refined, particularly It is one of three independent competition
as regards predatory pricing, margin squeeze, and excessive pricing, regulatory authorities established by the
including a "reasonableness" justification for the latter; Act, with the other two being the Tribunal
• the penalty regime has been strengthened in that the scope of first-time and the CAC. While the Commission is the
offences subjected to administrative penalties has increased and repeat investigative and enforcement agency, the
offenders can incur higher administrative penalties; Tribunal is the adjudicative body and the
• the competition authorities have greater flexibility in granting exemptions CAC considers appeals against decisions
that promote economic development, transformation and growth; of the Tribunal. The Competition authorities
• the competition authorities are mandated to consider additional competitive are functionally-independent institutions,
and public interest factors in a merger review; but are administratively accountable to the
• the National Executive can intervene in relation to mergers that affect the Economic Development Department (EDD).
national security interests of South Africa; The functions of the Commission, as set
• the Commission has the power to conduct impact studies; out in the Act, are to:
• the Minister of Economic Development is empowered to require that the • implement measures to increase
Commission conduct a market inquiry, after consultation; and market transparency;
• the Commission's findings and actions following a market inquiry are • implement measures to develop
binding, unless challenged in the Tribunal. public awareness of the provisions
of the Act;
7 U N L E A S H I N G M O R E R I V A L R Y• investigate and evaluate alleged • adjudicate complaints of The amendment provided that
anti-competitive conduct; prohibited conduct; the SCA “may decide appeals in
• conduct formal inquiries in respect • impose a remedy; any matter arising from the High
of the general state of competition in • award costs; Court of South Africa or a court of
a market; • grant an order for interim relief; a similar status to the High Court
• grant or refuse exemptions from the • authorise or prohibit a large of South Africa, except where
application of the Act; merger; and an Act of Parliament provides
• authorise, with or without conditions, • decide appeals from the otherwise”.
prohibit or refer mergers notified to it; Commission’s decisions on
• negotiate and conclude consent intermediate mergers and The Competition Act set out a number of
orders; exemption applications. matters over which the Tribunal and CAC
• refer matters to the Tribunal and shared exclusive jurisdiction, including the
appear before the Tribunal when The Competition Appeal Court interpretation and application of chapter 2
required; (prohibited practices), chapter 3 (merger
• negotiate agreements with any The CAC may consider any appeal from, control) and chapter 5 (investigation and
regulatory authority to coordinate or review of, a decision of the Tribunal. Its adjudication proceedings) of the Act, and
and harmonise the exercise of status is similar to that of a High Court and it certain of the functions of the Commission,
jurisdiction over competition matters has jurisdiction throughout the Republic. Tribunal and CAC.
within the relevant industry or The effect of the constitutional
sector, and ensure the consistent Before 2012 the Supreme amendment was that the CAC became the
application of the principles of the Court of Appeal (SCA) could hear final court of appeal in respect of these
Act; appeals from the CAC however matters. The amendment, however, did not
• participate in the proceedings of the Constitution Seventeenth affect the right to appeal any constitutional
any regulatory authority; Amendment Bill restricted the matter arising in terms of the Competition
• advise – and receive advice from – SCA’s jurisdiction in certain Act to the Constitutional Court.
any regulatory authority; matters.
• review legislation and public
regulations, and report to the
D I A G R A M 5 : H I E R A R C H Y O F E N T I T I E S T H AT R E G U L AT E C O M P E T I T I O N I N S O U T H A F R I C A
Minister concerning any provision
that permits uncompetitive
behaviour; and The Constitutional Court of South Africa (Johannesburg)
• deal with any other matter referred Hears competition matters in so far as they raise constitutional issues.
to it by the Tribunal.
The Competition Tribunal The Competition Appeal Court (Cape Town)
A higher court which hears appeals and reviews of Tribunal cases.
The Tribunal adjudicates competition
matters in accordance with the Act and has The Competition Tribunal of South Africa (Pretoria)
jurisdiction throughout South Africa. It is An adjudicative body which hears appeals and reviews of Commission matters and
independent and subject to the constitution decides large mergers as court of first instance.
and the law. According to the Act it must be
impartial and perform its functions without
fear, favour or prejudice. When a matter is The Competition Tribunal of South Africa (Pretoria)
An investigative body set up to investigate and prosecute complaints of anti-competitive
referred to it in terms of the Act the Tribunal
behaviour and assess mergers and acquisitions
must:
8
C H A P T E R 1 : O V E R V I E WDIAGRAM 6: STRUCTURAL AND FUNCTIONAL OVERVIEW OF THE COMPETITION AGENCIES
Competition Competition Appeal
Competition Tribunal Constitutional Court
Commission Court
Prohibited
Practices Adjudicates and impose
penalty or remedy
Investigates and prosecutes
Hears directly from
complainant
Interim Relief
Small Mergers
May assess and decide to Hears appeals or reviews
approve or not and decides the outcome
Intermediate Assesses and decides to Hears appeals or reviews
Mergers approve or not and decides the outcome Hears appeals or Hears appeals or reviews if
reviews constitutional matters arise
Assesses and recommends Assesses the merger and
on outcome decides the outcome
Large Mergers
Exemption Assesses and decides to Hears appeals or reviews
Applications grant or not and decides the outcome
Procedural Arise from any of the above
Matters vary greatly in procedure
High Court
Consent Orders Settles prohibited practice
Hears the settlement and
case or non-compliance
decides to conform or not Awards damages arising
with merger regulations
from a Tribunal order
Source: IThe Competition Tribunal’s annual report 2016/2017.
9 U N L E A S H I N G M O R E R I V A L R YTHE COMPETITION COMMISSION,
20 YEARS ON
We often underestimate the amount individuals and institutions with massive the coordinator. Much debate ensued, but
of work done prior to the transition to experience and resources and we cutting a long story short we agreed that
democracy and in the first ten years benefitted from the range of practical and a competition commission was necessary.
of that dispensation. Many important theoretical inputs that this provided. Once government was formed Dr Alistair
institutions were put in place that are In a movement as broad as Ruiters was tasked with setting it up.
central to the functioning of a modern Key factors that were taken into account
the Alliance there is an inherent
industrial economy. Now we tend to take were the exceptional concentration in the
these for granted, not fully appreciating tension between those on the left, economy and the strategy to open our
the important role that they play in the who see a key role for the state, economy in a managed fashion. This led
economy. The Competition Commission is and those closer to the centre, who to important provisions in the law, namely,
one such important institution and twenty we accepted that size would be necessary
place the decisive influence with
years on it is appropriate to reflect on its if the market was global and we allowed
formation and functions. the market. for interventions in mergers to achieve
Economic policy in the transition was specific objectives (we learnt this from the
largely informed by research projects The challenge, as we see in successful EU and Minister Patel used it in deals such
the Alliance had been involved in prior development elsewhere, is not to follow as Massmart).
to transition. These were undertaken by dogma, but to evolve the correct balance The point here is that the Competition
COSATU and the ANC – the former inside of forces that suit both the structure and Commission is an important structural
and the latter outside South Africa. By conjuncture of an economy. institution that must intervene intelligently
1992 these projects were being brought The question of competition policy is one in order to achieve sophisticated and
together in meetings in London, Paris and of these areas. For the far left competition important objectives in the political
Harare. With the formation of the Economic is just another word for capitalism and for economy. It is one of the most nuanced
Transformation Committee, in the ANC, the orthodox neo-classical economists and effective forms of regulation, if well
the work was increasingly coordinated competition is essential to the efficient implemented.
and aired in major conferences - Ready working of capitalism. Neither position Twenty years seems like yesterday in
to Govern and the Reconstruction and is particularly helpful or accurate – more our battle to build a better life for all.
Development Programme. The Alliance dogma than analysis.
was fortunate in having a major solidarity We had to work out our own position.
movement around the world that it An important workshop on the issue was Alec Erwin
could draw on. This gave us access to organised – as I recall Tito Mboweni was Former Minister of Trade and Industry
10
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COMPETITION COMMISSION, 20 YEARS ON
In 1997, the Department of Trade and were appointed by Ministers Manuel and constraints. The DTI setup a legal drafting
Industry initiated a regulatory reform Erwin to strengthen the Board. team to begin work on the legislation in
process concentrating on all consumer Against the backdrop of SA’s highly tandem with the policy process. As each
related legislation. Driven by South Africa’s concentrated economy and with a long position was agreed the legal drafters would
history of social and economic exclusion history of unchecked anti-competitive convert a policy position into a drafter’s
and a negligible consumer rights culture, conduct by SA business, the RDP and memorandum, which then served as the
the reform process was both urgent several ANC resolutions called for a new, basis for drafting the legislation. Working
and necessary. Furthermore, the new more robust competition law. Since 1995 with three documents simultaneously, the
constitution instructed the devolution of two attempts had been made to draft a new process was expedited. At key points in the
certain consumer related and sector specific competition law. Both were false starts, in process we convened panels of experts,
functions to SA’s embryonic nine provinces. part because of organisational difficulties from Australia, the EU, Norway, the USA and
Lastly, there was a growing consensus that and opposition from business. They argued Canada to review the policy positions and
a comprehensive overhaul of SA’s outdated, that the 1987 Competition Act was sufficient the Act.
racially and economically exclusive and should be amended. Notwithstanding Key drafters and government policy
corporate legislation was required. the opposition, Minister Erwin announced advisors were also given the opportunity
Working together with several the start of the competition policy process to interact in global policy fora and
international, national and provincial in 1997. An agreement was reached with were exposed to World Bank training
government departments, interest groups, the Nedlac constituencies that there would opportunities. Wherever possible
constituencies, international aid agencies be active engagement and consultation on colleagues from SADC were included in all
and consultants, the Usury Act, Liquor Act, the policy process but limited consultation of the training opportunities.
Trade Metrology Act, the Consumer Affairs on the legislation itself. Further legal And the act started to take shape. Work
Act, Gambling Act, Lotteries Act, parts consultation, it was agreed, would be started in January 1999 to setup the three
of the Intellectual Property Acts and the facilitated through the parliamentary process institutions and in particular to manage the
Companies Act were all replaced by new or which would include both the National transition process from the Competition
amended legislation. Assembly and the NCOP. Board to the Commission.
In comparison to the more archaic pieces To kickstart the policy process, the DTI These were certainly nine busy months.
of legislation, the Competition Act of 1987 circulated a policy paper amongst key Using a combination of DTI secondees
was relatively new. The Competition Board, constituencies. The Nedlac secretariat and donor funds, the beginnings of the
led by Dr Pierre Brooks, was seen as soft was used to facilitate the process. Lengthy Competition Commission, Tribunal and
regulator. The Board’s focus was on anti- negotiating sessions were arranged to work Competition Appeal Court started to take
competitive behaviour and not economic through policy positions. Key to the success shape. Over the next few months we
concentration. Between 1995 and 1998 of the process were both formal and informal recruited, trained staff, developed a case
several new Competition Board members negotiating sessions. Given the tight time management system, an IT system, a very
11
U N L E A S H I N G M O R E R I V A L R Yspecific corporate identity, moved into a new a positive outcome. At the same time, it
building, all while the new legislation had would have been impossible to anticipate
not been passed. We worked closely with all all of the challenges that our economy
of the role players and in particular with the and society would face. But through the
Trade and Industry Portfolio Committee chair management of the policy process, the
Rob Davies, to ensure that by the time the Act drafting of the legislation and the setting up
came into force, the institutions were ready of the institutions we spawned a new legal
to function. It was a fine balancing act as we discipline. Furthermore, we created a solid
were also aware that we could not run ahead foundation for a piece of legislation that has
of ourselves by anticipating or pre-empting stood the test of time. And finally, created
Parliament’s right to legislate and therefore a set of institutions which have recognised
assume that the final piece of legislation both nationally and internationally as
would be exactly the same as the one we amongst the best.
submitted. The process was led by Minister Notwithstanding the process
Erwin who shepherded all role players and achievements and the outcome of both the
constituencies to ensure the success of a time legislative and institutional process, the
compressed and rigorous process. key question still remains as to whether we
By September 1999 as the act came into achieved our policy objectives? We may
force, we were able to transition from the need to ask ourselves honestly, have we
Competition Act of 1987 to the Competition progressed? In this regard our country is
Act of 1999. We also successfully navigated still characterised by many of the social
the winding down of the Competition and economic characteristics that defined
Board, and all the concomitant transitional it in 1997 at the start of this process. We
measures, to the Competition Commission may, indeed, need to fundamentally revisit
and the Tribunal. On I September 1999 both the law and the institutions that are
we opened our doors and the competition watchdogs to our economy.
authorities were born.
Twenty years on and it now seems a
long time ago. The excitement and the
energy created during this process is
however still palpable. Bound together by
a common vision of a more competitive Dr Alistair Ruiters
economy all role players worked to ensure Former Competition Commissioner
12
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1 :R EO VR EI V
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14 C H A P T E R 5 : A D V O C A C Y A N D C O M P L I A N C E
IMPAC T A S S E S S ME N T S 15 U N L E A S H I N G M O R E R I V A L R Y
M E A S U R I N G T H E I M PA C T O F
COMPETITION INTERVENTIONS
T
he Commission conducted its first increasingly being required to account
impact assessment in the year ended for its contribution to transformation and
March 2012, paving the way for impact empowerment, in line with the objectives of
assessments to feature regularly in the work of the Act and in response to past exclusions.
its Economic Research Bureau (ERB). Impact assessments have yielded
An impact assessment is defined as two main benefits for the competition
any activity that is designed to measure or agencies: (1) they have helped to increase
estimate, (1) the effectiveness, cost and transparency and awareness of the agencies
benefit to society of competition decisions, activities; and (2) they help the Commission
or (2) the effectiveness, cost and benefit of to learn from past performance in order to
competition policy as a whole. improve the quality of analysis and decision
Several factors led to the Commission’s making in the future.
decision to conduct impact assessments. The Commission’s work on impact
assessment falls into three distinct
categories. First, for selected cases,
The need to assess the direct it involves ex-post evaluation and
impact of the agencies competition monitoring. An ex-post evaluation involves
interventions arose partly out of the assessment, a few years after a
the Competition Commission’s decision has been made, of the actual
effects of that individual decision. Since
prioritisation process. In its quest
competition decisions require some time
for agency effectiveness the to produce their effects, this implies that
Competition Commission, during ex-post evaluations can identify and
2008, identified specific industries assess the actual effects they generate.
Second, for selected cases, it involves
for pro-active and targeted
impact estimation assessments. Impact
competition interventions. estimation assessments determine the
likely impact of competition decisions on
These sectors were selected for their the basis of assumptions. Finally, research
potential to drive economic growth in South is conducted on an ongoing basis into
Africa. Impact assessments became the the wider benefits of the activities of
means by which to measure the agencies competition authorities including factors
effectiveness, particularly in the priority such as the deterrent effect of competition
sectors identified, and to determine if policy.
the Commission was indeed achieving Impact assessments are set to
demonstrable competitive outcomes in gain statutory backing when the 2019
the economy. Secondly the Commission amendments to the Competition Act
observed a growing call amongst social, become effective as the new law expressly
business and political stakeholders to provides for the Commission to conduct
show the benefits of competition policy impact studies.
enforcement. The Commission was
16
C H A P T E R 2 : I M P A C T A S S E S S M E N T SConcrete outcomes conduct involving price fixing, market Only Rocla was allowed to supply outside
allocation and collusive tendering in the these areas across the remainder of South
The Commissions review of the concrete production and supply of precast concrete Africa. Cartel members also agreed to
pipes market, following its investigation of pipes, culverts and manholes. charge similar prices and to increase these
a long running cartel in the industry, was Members of the cartel agreed to divide prices by the same percentage twice a
among the first impact assessments the the market both in terms of the products year. The cartel operated at both national
Commission conducted. they manufactured and the geographical and regional levels. In Gauteng the cartel
As a result of a leniency application by areas they traded in. Their conduct covered members monitored their collusion by
Rocla (Pty) Ltd (Rocla), in December the Gauteng, KwaZulu-Natal and the Western meeting on the second Tuesday of every
Commission uncovered a 34-year-old cartel Cape. Firms that were allocated market month, after their Concrete Manufacturers
in the precast concrete products market. shares in each of the three provinces Association (CMA) meetings. The cartel
In its application, Rocla informed the agreed to only supply within a 150 km was so effective that the Tribunal would
Commission that, together with nine other radius of Johannesburg and in defined later note that, throughout its existence,
firms, it had engaged in anti-competitive areas around Durban and Cape Town. its members “enjoyed a quiet and hugely
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