The year of 2014 marked the 15 year anniversary of the South African Competition Authorities. The year’s highlights included some important merger decisions, implementation of the Competition Commission’s powers in relation to market inquiries, development of the law prohibiting excessive pricing, the appointment of a new Commissioner and important clarification of regional merger control laws elsewhere in Africa.


The number of mergers notified in the period April 2013 to March 2014 decreased slightly to 320 from 324 notifications during the prior 12 months.  65% of all notified mergers were intermediate mergers, 5% were small mergers and the remaining 30% were large mergers.  Most of these transactions were in the property (28%) and manufacturing (22%) sectors.

In this period, the Commission approved 302 mergers unconditionally and attached behavioural or structural conditions to only 22 mergers.  Ten of these were subject to behavioural conditions aimed at addressing public interest concerns, rather than traditional competition issues.

The protection and advancement of employment received particular attention during the period.  Of the ten cases subject to public interest conditions, seven related to employment concerns.  Most of the conditions imposed were set to truncate job losses by either imposing a moratorium restricting the overall number of job losses or retrenchments over a specific time period (sometimes up to three years).

In 2014, the Competition Tribunal unconditionally approved 88 mergers and approved 10 mergers subject to conditions. All of these transactions were large mergers, save for a solitary intermediate merger appeal.  In line with the Commission’s focus on the protection and advancement of employment, seven of the ten conditions imposed related to employment concerns. No mergers were prohibited by the Tribunal.

Public Interest Issues – No Job Losses

The extent of the Commissions’ willingness to safeguard employment was well illustrated in a significant merger in the casino industry, in which the acquiring firm was undergoing a large restructuring process that involved the retrenchments of a significant part of the workforce.

The Commission conducted a detailed investigation to determine whether the retrenchments were merger specific.  The Commission found that there was no connection between the merger and the proposed retrenchments.  However, the Commission was still concerned that certain positions may be duplicated and as a result a moratorium on retrenchments for a period of two years was agreed by the parties.

In line with increased focus on employment concerns, the Commission conditionally approved in the bed industry, where the target firm’s parent faced possible liquidation, which was likely to result in the retrenchment of its entire workforce.  The acquiror undertook to offer employment to all employees in ‘non-viable’ stores which might have been negatively affected, as a condition to approval of the transaction.

To address public interest concerns in a merger in the agricultural sector, the Commission agreed with the acquiring firm that it would make R90 million available for loans to emerging farmers over a period of four years, to enroll emerging farmers in a development program and to give assistance to poultry farmers. Included in the conditions was that the merged entity would provide certain qualifying farmers with a grain storage discount and an undertaking that it would not relocate its head office to outside South Africa.

Competition issues – Approvals with Structural Conditions

Where mergers did raise competition issues, the authorities continued to adopt a practical approach to accepting divestitures in order to address the likely harm.

Perhaps the most interesting merger matter of the year took place in the fishing industry. Following a request for consideration of an adverse Commission decision, the Tribunal approved the merger on condition that a key product brand, together with a number of fishing rights in small pelagic fish, should both be divested.

On appeal however, the Competition Appeal Court set aside the conditions imposed by the Tribunal and approved the merger on condition that the merged entity continued to operate the brand in question in accordance with good business practice. There was, in the CAC’s view, no credible evidence to suggest that acquirer would put the brand ‘in the draw’, as was suggested by the Tribunal, or that the brand would no longer provide competition in the market.

A significant transaction in in the resins industry saw the imposition of another structural remedy. The Commission recommended that the Tribunal prohibit the merger. The Tribunal approved the merger subject to pricing and divestiture conditions – a maximum price was set for a two year period for resin sales to certain existing and new customers and the merged entity was required to sell off all product formulations and specifications belonging to the target firm for its unsaturated polyester resin or UPR products.

Control – What is a Merger?

During 2014 the Tribunal also clarified critical aspects of its approach to joint control in mergers. In a contested merger matter, the Tribunal confirmed an approach commonly adopted by practitioners – that for competition law purposes, joint control generally requires an agreement between two or more shareholders. That agreement may be exercised positively or ‘negatively’, by way of a right of veto, in relation to certain strategic decisions of the firm. An agreement between shareholders on issues involving the governance or shareholder structure of the firm is not enough to constitute such control. In the particular case, the Tribunal found that no such agreement existed.  The result was that the acquiring firm was not controlled by any one shareholder.

Abuse of Dominance

There were two significant decisions by the Competition Tribunal in 2014 which dealt with the notoriously complex area of abuse of dominance – the Sasol case and the South African Breweries case.

South Africa is one of the few competition jurisdictions which actively pursues allegations of ‘excessive pricing’ by dominant firms.  On 5 June 2014 the Competition Tribunal gave further clarity on the issue of excessive pricing in Competition Commission vs Sasol Chemical Industries Ltd and Safripol (Pty) Ltd.

The Commission had alleged that by setting domestic prices at import parity levels, Sasol had charged South African customers excessive prices for purified propylene and polypropylene.

The Tribunal emphasized that there is no ‘hard and fast’ level by which price must exceed cost for the price to be ‘excessive’.  The reasonableness of the relationship between price and the economic value of a product is a value judgment.

Perhaps the most interesting aspect of the decision is that the Tribunal said in exercising that value judgment it is relevant that Sasol’s synfuel production capacity was built and maintained with significant support from the South African government.  Sasol’s failure to ‘pass on’ this inherited special cost advantage was critical in swinging the case in the Commission’s favour.  Sasol’s argument that price should be compared with notional competitive costs rather than actual costs was dismissed by the Tribunal.

The Tribunal ordered Sasol to pay an administrative penalty of ZAR534 million.  It also imposed a number of interventionist pricing remedies of potentially greater financial significance. These bold remedies would in effect place a cap on Sasol’s pricing of the products. Through its order the Tribunal has demonstrated a well-founded desire for outcomes-based, competition-enhancing remedies rather than solitary fines.

Sasol has appealed the Tribunal’s decision to the Competition Appeal Court, which heard the matter during December 2014 and the decision is expected in the first quarter.

In Competition Commission vs South African Breweries Ltd and others, the Commission alleged that South African Breweries the licence and franchise agreements concluded with a number of ‘appointed distributors’ were anti-competitive.

The case arose from aggrieved beer distributors who found themselves disadvantaged by the attractive terms (and in particular, prices) offered by SAB to its appointed distributors.  The Commission said SAB’s differential treatment of appointed and non-appointed distributors amounted to anti-competitive price discrimination and that the agreements themselves had anti-competitive effects which should render them prohibited under section 4(1)(a) or section 5(1) of the Act.

The Tribunal dismissed the complaint on the facts, finding that the Commission had not presented sufficient evidence to prove that SAB’s distribution system substantially lessened or prevented competition.

This very welcome decision places the effects of the relevant conduct at the centre of the analysis.  The decision emphasises that a theory of competitive harm combined with some commercial hardship and disadvantage does not amount to an anti-competitive effect.  This is in keeping with the internationally recognised mantra that competition law protects competition, not competitors.

The Commission appealed the decision to the Competition Appeal Court which heard the matter in late 2014, and in early 2015 upheld the Tribunal’s decision.


The Commission’s cartel division is responsible for administering the Corporate Leniency Policy (CLP).  During the period April 2013 to March 2014, the Commission received only five new leniency applications.

The CLP was put to use in, amongst others, the furniture and media industries. In respect of the furniture industry, the Commission received settlement offers from five furniture removal firms and reviewed evidence which suggests that over 5 000 tenders (private and public) were subjected to collusive tendering.

Three complaints of price fixing and market allocation were initiated by the Commission against the four major media companies in South Africa. The complaints were primarily based on information received from two immunity applicants as well as information revealed in merger hearings before the Tribunal. The Commission is currently investigating these matters.

The Commission’s Construction Settlement Project resulted in 15 construction firms settling a number of instances of collusive tendering. This follows the fast track process in 2014, and the Commission has since focused on firms that did not settle all projects under the fast track process and firms that did not participate in the fast track process but were implicated by other firms. There are six firms that participated but refused to settle and are implicated in a total number of 14 projects. 24 firms which did not participate in the fast track process were implicated in 31 instances of collusive tendering.

The end of the year saw the Commission refer to the Tribunal a case of collusive tendering in respect of tenders for the construction of 2010 FIFA World Cup stadia.  This aspect of the Commission’s fast-track settlement process has enjoyed significant media attention.  All parties contesting the matter and the Commission will probably be keen to see the matter resolved as soon as possible.

Enforcement Policy

For some time, the Commission’s policy has been and remains to be to focus its resources on specific industrial sectors where competition law interventions may have most significant impact – food and agro-processing, intermediate industrial products, and construction and infrastructure.

During 2014, the Commission entered into 35 settlement agreements. All 35 agreements pertained to cartel contraventions..

In these and other priority sectors, 15 cases (from various sectors including the supply of lime and fertilizer, glass, soft drinks, taxi services, horse racing, steel products, liquefied petroleum gas (LPG), retail services, milling and aluminium extruded products) were non-referred during the period in review. The main reason behind the non-referrals was that the Commission could not demonstrate anti-competitive effects. The cases in relation to the LPG market resulted in the decision to initiate a market inquiry.

The following notable developments are expected to impact the Commission’s enforcement work.

The End of an Anti-Competitive Practice

The CAC provided guidance as to when a cartel will be deemed to have ceased for purposes of South African Competition Law.

In the wire mesh case the CAC confirmed the principle that firms which have participated in a cartel must actively and unambiguously distance themselves from the cartel by communicating their unequivocal removal from further participating in cartel activity before they are able to claim that their involvement in the cartel has ended.

The CAC then took the requirement one step further, adding that the firm must also inform customers of the illegal behaviour that led to prevailing prices, and offer the customers an opportunity to reassess their position.  Only at that point, can the firm argue that the cartel activity has sufficiently ceased.

Market Inquiries – Healthcare and LPG

Section 6 of the Competition Amendment Act came into effect on 1 April 2013.  Exercising its new powers, the Commission launched its first market inquiry into the private healthcare sector which commenced from 6 January 2014 and established an inquiry panel comprising five experts led by former Chief Justice Sandile Ngcobo. The concerns expressed by stakeholders including the Department of Health in relation to pricing, costs and the state of competition and innovation in private health care and that assessment of the market will be examined over a period of approximately two years.

The objectives of the inquiry described in the terms of reference are to:

  • evaluate price determination with reference to competition, bargaining power, structuring;
  • evaluate factors in increases in cost of health care;
  • evaluate information access and distribution as it affects consumer choice;
  • make recommendations to appropriate policy and regulatory mechanisms; and
  • make recommendations on the role of competition policy and law in achieving pro-competitive health care outcomes.

During the year in review, the Panel published its final Statement of Issues and invited stakeholders to give comment. The next step is for the Panel to review all commentary and information submitted, and request further information and research where necessary, until the commencement of the public hearings which are scheduled to run for a period of two months, and to be completed by the end of July 2015.

Later in 2014, the Commission also initiated a (second) market inquiry into the Liquefied Petroleum Gas (LPG) sector in South Africa, which commenced in September 2014. The LPG market inquiry was initiated due to particular features of the sector that may prevent, distort or restrict competition. The inquiry will consider issues such as the presence of any supply bottlenecks in the sector which may serve to create circumstances or incentives that distort, prevent or lessen competition, as well as the impact of the regulatory framework and switching costs on competition in the sector. The inquiry also aims to understand how to promote competition in the LPG sector in furtherance of the purposes of the Act. The Terms of Reference for the LPG market inquiry have been published as well as Guidelines for Stakeholder Participation.

Exclusive Lease Agreements

In the first half of 2014, the Commission concluded its investigation into the potential anti-competitive effects of exclusive lease agreements between supermarkets and their landlords.  The Commission’s investigation followed a number of complaints by potential rivals of the three major South African supermarket chains.

Despite being unable to demonstrate to the required legal standard that the exclusivity clauses were anti-competitive, the Commission’s media release following the decision to end its investigation made it clear that it remained concerned about the potential dampening effects of exclusive leases on competition, particularly in relation to the affect they have on small and potential competitors.

Towards the end of 2014, the matter seemed to resurface with both aggrieved retailers and shopping mall owners filing complaints with the Commission.

This coming year promises to provide more developments, and hopefully clarity, in this area of competition law.

Administrative Penalties

Towards the end of 2014, the Commission issued draft Guidelines for the Determination of Administrative Penalties. The Guidelines aim to provide objectivity and transparency in the method of determining administrative penalties and confirm that, as a general approach, the Commission will apply the Tribunal’s six-step approach when determining administrative penalties for contraventions of the Act. The six-step approach has been developed by the Tribunal in case law and has also been confirmed by the CAC.

Importantly, the Guidelines are not intended to replace or limit the authorities’ discretion in determining administrative penalties on a case by case basis.

Changes of Personnel at the Commission

This year, a re-elected South African government confirmed the re-appointment of Minister of Economic Development, Mr Ebrahim Patel. The ministry is responsible for the implementation of South Africa’s competition policy.

Minister Patel went on to announce the appointment of Mr Tembinkosi Bonakele as Competition Commissioner for the next five years. Mr Bonakele is not new to the authority. He has acted as Deputy Commissioner, head of mergers, head of compliance and senior legal counsel. He left the Commission for seven months in 2013 but returned to be Acting Commissioner from October 2013, following the resignation of former Commissioner Shan Ramburuth.

In addition, and with effect from 1 January 2014, Liberty Mncube was appointed as Chief Economist and Manager of the Policy and Research division, Junior Khumalo as Divisional Manager of Enforcement and Exemptions and Thomas Kgokolo as Chief Financial Officer. Hardin Ratshisusu was appointed from 1 March 2014 as the Divisional Manager of Mergers and Acquisitions.

Towards the middle of the year, Mava Scott was appointed as Spokesperson of the Commission and Makgale Mohlala as Divisional Manager of the Cartels division.

The final changes for 2014 saw the Minister appoint Hardin Ratshisusu as Acting Deputy Commissioner, for six months, and extended Advocate Oliver Josie’s appointment by the same period, beginning 1 October 2014.

Competition Law in Africa

COMESA (Common Market for Eastern and Southern Africa) is a regional body established to foster economic development within its 19 member countries.  On 31 October 2014 the COMESA Competition Commission (CCC) published Merger Assessment Guidelines to give clarity to the relevant provisions of the COMESA Competition Regulations.

The Regulations require notification of mergers to the CCC at a regional level.  Filing requirements are triggered if a merger involves parties operating in two or more member states, and the prescribed financial thresholds are exceeded. Currently, the thresholds are zero, so all such transactions are notifiable in theory, however, in terms of the new Guidelines a firm will only ‘operate’ in a Member State if it has an annual turnover in that Member State exceeding US$5 million.  Although this would mean that the monetary threshold of US$0 would still be met even if the firm has an annual turnover of less than US$5 million, but as it would fail the ‘regional dimension’ test, no notification would be required.

To summarise the clarity given by the Guidelines, a merger need only be notified to the CCC when:

  1. At least one merging party operates in two or more Member States. It will ‘operate’ in a Member State if it has annual turnover in that state exceeding US $5 million in a year;
  2. A target firm operates in at least one Member State; and
  3. More than 2/3 of the annual turnover in the Common Market of each of the merging parties is not derived from or achieved within the same Member State.

Failure to notify exposes the merging parties to the risk of a maximum penalty of 10% of their turnover within the common COMESA market during the preceding financial year.

The CCC reported a total of twelve notifications in 2013 and sixteen mergers notified in 2014. Although effectively decreasing the number of transactions which meet the notification thresholds, the Guidelines are expected to significantly increase these numbers in 2015 as a result of increased certainty. Firms doing business within the COMESA (and broader Africa) region should therefore continue to be mindful of the possibility of their merger transactions requiring COMESA approval.

Developments of competition law in several African territories continues independent of regional bodies, primarily in relation to merger control, including Namibia, Botswana, Kenya and Zambia.  Each jurisdiction has its own thresholds and procedures which must be checked against the relevant facts at the time.