Competition Tribunal on their 2011 Strategic Plan

Economic Development

17 March 2011
Chairperson: Mr Z Ntuli (ANC)
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Meeting Summary

The Competition Tribunal was an independent body established by the Competition Act to supervise mergers and adjudicate on matters of unfair trading practice. Its members were appointed by the President on the advice of the Minister of Economic Development. It had a small staff complement. It had been operating within its budget for some time, retaining a small surplus. A number of performance targets had been set, but they could not determine the number of cases brought to the Tribunal.

Members were told that any person could approach the Tribunal to adjudicate on a matter. Some of its cases were as a result of a finding of the Competition Commission. The Tribunal often came to a different conclusion. The Tribunal operated differently in that if followed court procedure with witnesses giving evidence and being subject to cross-examination. People without means to hire legal assistance could call on pro bono representation arranged by the Tribunal.

Members were told that the Tribunal was making a small contribution to the green economy by, amongst other things, running a recycling project.

Meeting report

Mr Z Ntuli (ANC) announced that he would be the Acting Chairperson in the absence of Ms Coleman.

Presentation by Competition Tribunal
Mr Norman Manoim, Chairperson: Competition Tribunal, told the Members that the Competition Tribunal was an independent body created in terms of the Competition Act of 1998. Its purpose was to regulate mergers and to adjudicate on cases of prohibitive practices. The Tribunal consisted of ten members appointed by the President, supported by a Secretariat of fourteen staff members. He presented the Tribunal's vision, mission and values. The focus on employment in the New Growth Plan was consistent with the aims of the Competition Act.


Mr Manoim said that the Tribunal was an adjudicative body. Its ability to set objectives was limited and it could not affect the outcomes and drivers set by the Economic Development Department (EDD). However, the legislative mandate entrusted to the Tribunal could assist with the realisation of some of the EDD's planned outcomes.

Mr Manoim said that the Tribunal had three outcomes. Firstly, it had a role to promote and maintain competition within South Africa under the guidance of the Competition Act. It would achieved this outcome by holding hearings and adjudicating on matters brought before it. The second outcome was to educate the Tribunal's stakeholders and to create awareness about competitive practices. The third outcome was to improve the effectiveness of the Tribunal by strengthening its organisational capacity and performance in delivering on its mandate.

Mr Manoim said that the Tribunal had spent R18.48 million of its budget of R26.40 million during 2010, which equated to 70%. This was the lowest percentage of budget spent since 2004. The highest allocation in the 2010/11 budget was 51% on staff, with capital expenses and professional services each accounting for 16%. The percentage of the budget allocated to staff would increase gradually in the projected budgets until the 2015/16 financial year (FY).

Mr Manoim presented a breakdown of the budget for 2011/12. The budgeted income was R26.4 million (R27.4 million in 2010/11). Of this, R15.2 million was expected from the EDD grant (R13.6 million), R7.2 million from fees (R5.7 million), R3.3 million brought forward (R7.3 million) and R700 thousand from interest (R700 thousand). The budgeted expenses for 2011/12 were R14.8 million for personnel (R14.1 million in 2010/11), R1.6 million for training (R1.6 million), R5.1 million for professional services (R4.4 million), R120 thousand for recruitment (R108 thousand), R1.9 million for administrative expenses (R2.0 million) and R2.1 million for facilities and capital expenses (R4.5 million). This was a total budget for expenses of R25.7 million (R26.7 million). The balance or R710 thousand (R750 thousand in 2010/11) would go to provide for appeal court cases. There would be gradual increases in all the figures leading to a budgeted income of R34.0 million in the 2016/17 FY with expenses of R33.1 million.

Mr Manoim presented targets in each of the focus areas. In terms of the regulation of mergers, the first target was to send out 75% of notices of set-downs within ten business days of the filed merger. The average performance in this regard from 2006 to 2010 was 74%. The next output was orders. The target set was 98% of orders being sent to concerned parties within ten business days of the last hearing (average performance 98.9%). A target of 56% was set for issuing ‘reasons for decision’ documents within 20 business days of the last hearing (current performance 51%). These targets were constant for the next five years. In terms of opposed prohibited practices, the Tribunal had set a target of 90% in sending invitations to concerned parties within 20 days of closure of pleadings. The target was constant for the following five years. There was no comparable data as this was a new indicator. A target of 80% had been set for sending orders and reasons for decisions within sixty days of the hearing (historical data 80.6%). A target of 75% had been set for consent orders being sent within ten days of the last hearing date. This was also a new indicator. In terms of procedural matters, a target of 95% had been set for issuing orders within 20 business days of the last hearing date (historical data 94%). Finally, in terms of interim relief cases, a target of 85% had been set for reasons for decisions being issued within 20 business days of the last hearing date. This was also a new indicator.

Mr Manoim said that four targets had been set in terms of stakeholder awareness. The first target was to have 97% of ‘reasons for decisions’ being posted on the Tribunal's website within 24 hours of release (historical data 94%). A target was set for distributing three Tribunal Tribunes to fifty stakeholders by 31 March each year. This was a new indicator. A target of 100% was set for sending merger orders to the Government Gazette for publication within 20 days of the final decision. It was also a new indicator. Finally, a target of 100% had been set for issuing press releases on decisions by the end of the FY. This was also a new indicator.

Mr Manoim said that two targets had been set in the focus area of enhancing the capability of the Tribunal staff. Firstly, staff members should attend 75% of the budgeted international and national courses, workshops and seminars in that year. Secondly a target of 75% of satisfied customers was set for the bi-annual surveys to be conducted. Both of these were new indicators.

Discussion
Mr G Rabie (DA) said that this was an important submission. He asked if the Tribunal had adequate accommodation and if its staff complement would still grow. He asked if members were appointed by the Department of Trade and Industry (dti) or the EDD.


Mr Manoim was not happy with the accommodation at present. It was just adequate. There was no parking for visitors. The EDD knew about the problem. If CIPRO did leave the campus then more space would become available. The Tribunal could not appoint new staff due to space constraints. It was an unpleasant experience for visitors.

Mr S Marais (DA) asked about the demographics of the Tribunal staff. There seemed to be no Coloured or Asian members, nor any persons with disabilities. He knew that there were suitably qualified persons with disabilities available. He asked what the Tribunal's opinion was on the Wal-Mart take-over. He asked what principles were involved and how the Commission would consider the matter. He asked who could initiate the re-opening of a case rejected by the Competition Commission. He asked if anyone could make a submission to the Tribunal. A lot of work would come the Tribunal's way if this were so.

Mr Manoim replied that there were two different appointers. The members were a mixture of full and part time employees, appointed by the President on the advice of the Minister of Economic Development. The Tribunal had no influence over the appointment of new tribunal members. When a vacancy arose the Minister would be approached. Appointments were for a five year period. However, staff were appointed by the Tribunal. The staff complement was fourteen. There was an Asian lady in management. He understood that the equity policy applied only to organisations with a staff complement of fifty or more, but they would look to correct the situation.

Mr Manoim said that Wal-Mart was a good example to illustrate the relationship between the Tribunal and the Commission, and between the Tribunal and the public. The Wal-Mart merger process would start the following week. There was a relationship with Massmart which traded under a number of popular brand names. It was up to the Tribunal to investigate recommendations made by the Commission, although these were not binding. The Tribunal could make a different decision to that of the Commission. The Tribunal had prohibited a proposed merger between Engen and SASOL despite the Commission's recommendation that it should proceed. The Tribunal acted as a court. It had the benefit of the Commission's research, but heard evidence from the parties concerned. Anyone could give the Tribunal advice, but the Tribunal would decide whether it would heed the advice or invite the submitter to present evidence at the hearing. All such cases were treated on their merit. If everybody was allowed in the room the meeting might never come to an end. It could also call on people who had not made a submission if the Tribunal thought there would be value. In the Wal-Mart case, the Tribunal had decided to call on Shoprite to send a witness. Witnesses were subject to cross-examination. The Minister was also entitled to play a role.

Mr X Mabaso (ANC) asked to what degree the Tribunal served the poor. He asked how the Tribunal instrument could be taken to the working class so that they had confidence to use it. He asked if the whole of the country was being covered, or if only the urban areas were being served. The challenge was what strategies the Tribunal was using to market itself. He asked how the Tribunal collaborated with departments other then the EDD. He asked if there was any opportunity for interns to be appointed.

Mr Manoim said that it was the Commission's job to see that all affected communities were consulted. There had been a case where a bus company merger could affect a community as certain routes would be discontinued. It was often a challenge to get the message out to those affected. The Tribunal was dependant on consumer organisations to spread the word. The Tribunal was too small to be proactive in this matter, but could be reactive. In interaction with the Law Society, pro bono representation was made available. Environmental organisations were making use of this option in a current case. Other departments were involved where applicable. There had been a submission from the EDD, dti and Department of Agriculture in the Wal-Mart matter. Interns were taken in twice a year during vacations. Participation was modest given the size of the Tribunal.

The Chairperson referred to the contract order. He asked what caused companies to reach consent. Secondly, he asked what impact was made on small, medium and micro-enterprises (SMME) or if the impact was only with big companies. His third question was if the tribunal could justify its request to retain the surplus from 2009 and 2010. He asked if there was any retention strategy for the Tribunal members. He asked how much work was being outsourced. He asked what contribution the Tribunal was making to the green economy.

Mr Manoim said that some parties agreed to consent orders according to the attitude of management and legal advice. Their decisions puzzled the Tribunal at times. New management at SASOL had settled a case rather than engage in dragged-out legal action. This had happened in other cases as well. SMME could be complainants at times. When a merger was considered, then the impact on SMME had to be taken into account. This would be particularly relevant in the Wal-Mart deliberations. Staff retention was generally quite good. Case managers were normally legal graduates who moved on to better opportunities. This was to be expected, and many graduated to the Commission. The Commission had many more internships available. Retention of Tribunal members depended on the Minister. There had been a degree of continuity. There was a modest office programme on the green economy. The effect on an industry was a broad concern that the Tribunal would address. There was a case of two environmental organisations taking on the merger of two seed companies. The merger might impact food security.

Ms Janeen de Klerk, Head of Corporate Services, Competition Tribunal, said that the Tribunal had accumulated surpluses. This was due to larger grants being received than expected. The thinking was that the surpluses would be used in future to cover shortfalls between the budget awarded and the Tribunal's requirements. They drew on this money as required. There was continual negotiation with the National Treasury. The surplus for 2009/10 was R1.2 million. Over the next three to four years it would probably not be necessary to ask for more funding, but this might increase from four years on. There was a greening initiative at the Tribunal. There was a recycling initiative at the office. They would look at obtaining recycled paper for its needs. They could not do much about electricity as they were on the dti campus. Members and staff were encouraged to use public transport and lift clubs.

Mr Marais assumed that anyone who made a submission to the Commission could approach the Tribunal if they were not happy with the Commission's decision. Regarding the fines, there was a recommendation that the fine issued to Premier Foods should be ring-fenced. This recommendation was ignored by National Treasury. He asked if there had been any discussion with Treasury on this matter. Many members of the public wanted to know why the money raised by the fines was not given back to the public in some form. Many consumers made a point on what was felt to be uncompetitive practices. This was particularly seen in the relationship between banks and vehicle manufacturers. This was seen as collusion. He asked how this matter could be dealt with.

Mr Mabaso had not often heard of departments contributing to environmentally-friendly activities such as recycling. He asked if this experience could be passed over easily to other departments. He asked what concerns the Auditor General had regarding the Tribunal. It was a thorny issue. When cases were reported to the Tribunal and they felt that it was not a matter for their concern, he asked if there was a mechanism to transfer the case to some other responsible body. He was worried that if companies exploited the public but this went unchallenged, the trend would grow further.

The Chairperson asked if the Tribunal saw itself participating in the taxi industry. They had dealt with an issue regarding bus companies.

Mr Manoim replied that any person could make a submission to the Tribunal even if it had already been presented to the Commission. The courts did keep the Tribunal in line if they felt it was being too relaxed. Premier Foods had paid a fine of R250 million. This was supposed to go to the Industrial Development Corporation (IDC) for agricultural research. This should have gone back to the national revenue fund. Premier Foods had disputed the decision to divert the money to the revenue fund. There was a last minute agreement that it would go back to the national revenue fund but would be included in the IDC's budget. This had happened. The public did feel angry that money did not go to victims of abuse. It was difficult to work out how the public could be compensated. Civil claims could be made but were rarely used. It would be difficult for individual consumers to pursue such a case. A class action had failed recently as the court felt each claimant should make his or her own case. It was not a simple answer. There had been some interaction with European Union (EU) officials. Fines issued by the EU there also went to the EU revenue fund. People there felt they were being compensated as this resulted in lower taxes. In cases where a company misrepresented its product, it would be a case for consumer protection agencies. If, however, a group of companies agreed to downgrade their products it would be a matter for the competition authorities. If a motor manufacturer had a relationship with one finance house then the public could go to another manufacturer using a different finance institute. The public could complain to the Commission. It was a complicated answer even to an expert. The Tribunal had not yet dealt with issues in the taxi industry. Competition in this industry should rather be governed by regulation. Competition might have to be traded off for order. This should rather be left to government.

Ms de Klerk was a firm believer in recycling. The dti had indicated that it was doing something. She felt all departments should do something, especially in light of the King lll report which had also addressed environmental issues.  Regarding the Auditor General 's comments, the Tribunal had never had a qualified report since its inception. A new focus was on performance information. In the last two reports the Auditor General had made some comments on this issue. One issue was policy and procedure. The most recent was that the Tribunal's objectives were not following the SMART [Specific, Measurable, Achievable, Realistic and Time Framed] model. It was difficult for the Tribunal to set SMART targets, as it could not determine the number of cases brought to it. An interim audit had been held and it seemed there was no negative report. A meeting would be held the following week.

The Chairperson thanked the Tribunal for providing the presentation in good time. This helped the Members in preparing for the meeting.

Mr Manoim found the interaction valuable.

The Chairperson said that the agenda of the meeting included the adoption of a Committee Report on the SMME hearings. This could not be done due to a lack of quorum. He reminded Members that they should have given submissions to the Secretary about the Committee Report. There had been no submissions to date.

The meeting was adjourned.












 



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