Competition Litigation

The Competition Act (‘Act’) is first and foremost national in its focus. This is clear from its objects set out in the Act’s Preamble and Purpose. Although the Act makes reference to international law obligations, participation in world markets and the role of foreign competition in the Republic, to look at the role of South Africa in competition law’s global village, the key is not to be found in that language, but rather in the continuing development and application of South Africa’s competition policy.

Now in its 19th year, the South African authorities (that includes the Competition Commission, Tribunal and Appeal Court) have enjoyed a leading status amongst developing competition law jurisdictions. The authorities have been recognized by peers in other jurisdictions, global bodies and practitioners for their pioneering role in development of a comprehensive body of competition law and policy, often punching above their weight category, particularly in relation to the role of competition law in socio- and development economics. Some have taken fright at the suggestions advanced which appear to promote the well-being of local businesses and the public interest above consumer welfare as the true-north of anti-trust.

This development of law and policy as well as the well-earned status does not come about simply by practicing in one’s back garden. Far from that, South Africa has gone out in the international arena participating and joining allegiance with others, perhaps sometimes as a more junior partner and in other cases as a more experienced adopter of the competition global wave. There are MOU’s enshrining cooperation with the EC, Brazil, Russia, India, China, Mauritius, Kenya and Namibia. In addition, South Africa has membership of the SADC, African Competition and BRICS fora. The authorities have also benefitted greatly from their active participation in ICN and UNCTAD networks and their staff continue to receive extensive training from leading world authorities and experts. The authorities learn from others and take an active lead in passing on their experience and challenging orthodox views.


Continue Reading South Africa: a citizen in the global village of competition law

This post was originally published as a bulletin on Fasken.com under the title “Unpacking the Competition Amendment Bill: Market Inquiries“.

The Competition Amendment Bill seeks to address two key structural challenges in the South African economy: concentration, and the racially-skewed spread of ownership of firms in the economy.

At the 11th Annual Competition Law, Economics and Policy Conference in September 2017, the Minister of Economic Development, Ebrahim Patel, made the following comment when explaining how economic concentration might be tackled:

It seems to me to be better that it be done through the trusted and predictable processes of competition regulation and its sound institutions than that it be left to laws that simply mandate the breakup of companies irrespective of the economic logic…”.

Market inquiries are seen as one of the five priorities in addressing this objective.  The Background Note published with the Amendment Bill states –

The package of amendments… envisage that market inquiries will become the chief mechanism for analysing and tackling the structural problems in a market, thereby advancing the purposes of the Act. The proposed amendments to the chapter relating to market inquiries will enhance the market inquiry process and will ensure that its outcomes include measures to address concentration and the transformation of ownership.


Continue Reading South Africa: Unpacking the Competition Amendment Bill – Market Inquiries

On October 26, 2017, the Canadian Competition Bureau (“Bureau”) released for public comment a revised version of its Immunity Program, under which a party may receive immunity from criminal prosecution if the party is the first to disclose an offence and agrees to cooperate with the Bureau’s investigation and prosecution of others. The revisions, discussed below, has led to comments and concerns from, among others, the CBA National Competition Law Section and the ABA Section of Antitrust Law. These comments and concerns are discussed below.

According to the press release, the program is being updated to increase transparency and predictability in light of legal and policy developments.

The Bureau has advised that the changes are prompted partly by the outcome of recent unsuccessful prosecutions and include the following:

  • Interim Grant of Immunity: Documentary and testimonial evidence will be provided under an interim grant of immunity (IGI). Final immunity will be provided when the applicant’s cooperation and assistance is no longer required.
  • End of Automatic Corporate Immunity for Directors, Officers and Employees: Automatic coverage under a corporate immunity agreement for all directors, officers and employees will no longer be provided. Instead, individuals that require immunity will need to demonstrate their knowledge of the conduct in question and their willingness to cooperate with the Bureau’s investigation.
  • Greater Use of Recordings: Witness interviews may be conducted under oath and may be video or audio recorded. Proffers, statements made by an applicant (usually through counsel) to the Bureau where the applicant is expected to reveal its identity and describe in detail the anti-competitive activity, may also be audio recorded.
  • Privileged Documents: Non-privileged records from companies’ internal investigations will be treated as presumptively disclosable facts in the possession of cooperating parties. And while privileged records will continue to be protected from disclosure, applicants will now be required to justify their claims of privilege.


Continue Reading Proposed Revisions to the CCB’s Immunity Program: Minor Recalibration or Significant Shift?

Tying occurs when a consumer buys one product (the “tying product”) and is required to either purchase an additional product that exists in a separate market (the “tied product”), or agrees not to purchase the additional tied product from any other seller.  Tied selling is only problematic where the practice is likely to have an anti-competitive effect.

A fundamental requirement of tying is the existence of two products, the tying product and the tied product (the “separate products criterion”).  The separate products criterion is not always straight-forward because all value-adding activity involves a degree of bundling of separate components, however no economic test exists to determine where one product should end and another begin.

One can easily imagine situations where the existence of a stand-alone market for the tied product can coexist with a bundled product.  For example, it is possible to buy shoelaces (tied product) as a stand-alone product in shoe stores, but sellers of new shoes sell their shoes bundled with laces (tying product).  Other examples include cars and GPS systems, cars and satellite radio services, and computers and browsers.  This distinction has led to debate and varying approaches across jurisdictions.


Continue Reading What Constitutes a Separate Product?

The joining of bid rigging and conspiracy charges has questionable utility.

Offences Defined

The definitions of the offence of bid rigging in s. 47(1)(b) of the Competition Act is defined in part as the submission of a bid or tender which is arrived at by arrangement or agreement. A criminal conspiracy in s. 465(3) of

The South African Competition Commission has since the beginning of 2017 prohibited eleven intermediate mergers and has recommended that four large mergers be prohibited.  This number is substantially higher than 2016, when the Commission prohibited three intermediate mergers and recommended that one large merger be prohibited.  For the period end of September to October 2017, the Commission prohibited five mergers.

This note will briefly look at two important and interesting trends that followed from the prohibitions of proposed mergers in South Africa since the beginning of 2017.

A move to take “coordinated effects” of the proposed merger into account

The first trend in the prohibition of mergers is a move to look at the “coordinated effects” of a proposed merger (a change in the market structure which better facilitates tacit collusion). In this regard the Commission adopted a policy favouring less concentration in markets and looking at a history of collusion in the market.


Continue Reading A significant increase in the prohibition of mergers in South Africa

On October 27, 2017, Cardinal Ventilation Inc. was fined $375,000.00 after pleading guilty to one count of bid rigging related to three condominium development projects in Montreal. The contracts in question related to the supply and installation of ventilation and/or air conditioning systems in residential high-rise construction projects in the greater Montreal region.

Cardinal Ventilation Inc. admitted that it conspired with competing Montreal-area companies to obtain a ventilation contract by ensuring it offered the lowest bid on the Faubourg St-Laurent Phase II construction project in Montreal. The company also admitted to its participation in two other agreements to ensure that competing firms would get the contracts for two other projects: Le Roc Fleuri and Tour St-Antoine.

The courts have imposed fines totalling over $1 million in this matter.

Background

The Competition Bureau began investigating this matter following a tip from a former employee of one of the accused companies. Over the course of the investigation, Bureau officers searched many sites, seized thousands of documents and interviewed numerous witnesses. The Bureau eventually uncovered evidence indicating that several companies had coordinated their bids in order to pre-determine the winners of the residential construction contracts, while blocking out competitors. The Bureau’s investigation found evidence of bid rigging in five competitive bidding processes between 2003 and 2005, for contracts worth a total of approximately $8 million. In December 2010, the Bureau laid charges against eight companies and five individuals.

There have been several plea agreements in the matter. To date, four companies and two individuals have pleaded guilty for their participation in the bid-rigging scheme. As part of one individual’s plea agreement, he agreed to complete 50 hours of community service and to collaborate with the Bureau’s ongoing involvement in the matter.

In one case, charges against one of the accused individuals were withdrawn in exchange for the individual’s full cooperation with the Bureau’s investigation.

There is one remaining accused in the matter.


Continue Reading Sixth Guilty Plea in Montreal Condo Development Bid Rigging Scheme

One might think that competition law would applaud a firm that submits an independent and competitive bid, in response to a tender aimed at lowering prices.  Recent experience in South Africa suggests that this is not always the case, and that such a firm may face investigation by the competition authorities precisely because it won the competitive tender.

In October 2017, the South African Competition Commission announced that it has initiated, and is investigating, a complaint of abuse of dominance by Vodacom, the country’s largest cellular network services provider.

The subject of the complaint is a four year exclusive contract, in terms of which Vodacom will supply mobile telecommunications services to 20 government departments.

Although Vodacom bid for the contract in a competitive tender process, the Commission “is of the view” that the contract will (1) further entrench Vodacom’s dominant position in the relevant market; (2) raise barriers to entry and expansion in the relevant market; (3) distort competition in the market; and (4) result in a loss of market share for other network operators.

Leaving aside the merits of the complaint, the announcement is interesting and controversial for a number of reasons.  In particular, it raises important questions about the Commission’s advocacy strategy, and about the obligations on business when participating in significant tenders.


Continue Reading South Africa: When a competitive bid is not enough

(The full version of this bulletin was originally published on Fasken.com – “The Competition Commission’s Market Inquiry into Data Services” – September 12th, 2017.)

On 18 September 2017, the Competition Commission is expected to commence a market inquiry into data services in South Africa. This is the sixth market inquiry to

The Canadian Competition Tribunal recently dismissed a jurisdictional challenge by HarperCollins to the Commissioner of Competition’s application for an order prohibiting the implementation of an alleged agreement between HarperCollins and other e-book publishers.  The Commissioner’s application is under section 90.1 of the Competition Act (“non-criminal agreements between competitors”).  It alleges, broadly speaking, that in