The Tribunal had approached the non-government organisation ProBono, who co-ordinated the taking of pro bono cases by members of the Law Society of South Africa, asking it to take on Tribunal cases, but the Law Society had expressed some opposition to this as the parties were not indigent and substantial costs could be incurred. The Tribunal noted that further training of members was essential to widen the pool of writers. Two members would be sent to the UK on a writing course and locally retired judges would be used to assist with training.
In relation to the financial matters, the Tribunal had received an unqualified audit report. It had underspent on the 2010/11 budget by 20%. This was largely due to the difficulty in making an accurate assessment of the money that would be required for legal costs. Money was earmarked for capital expenditure on the electronic case document maintenance management system, which had largely been developed, and was about to move into the testing phase. There was further earmarking of costs for training and personnel, but there was still a vacancy that needed to be filled. The Tribunal received 32% of its income from filing fees, and 62% from government grants. Personnel costs accounted for 55% of expenditure, whilst administration accounted for 20%. The Tribunal noted that it faced challenges in receiving continuous funding from government, keeping its costs low while maintaining standards, and aligning its budget to targets. Other challenges were the appointment of additional members, the further training of members, expedition of cases, improving access to justice, increasing the intern uptake, office space and the implementation of the case management system. The Tribunal also noted two issues that had arisen since the preparation of the Annual Report. Firstly, the Competition Commission was beset by procedural challenges, having received some adverse technical rulings, and the Tribunal and Commission wanted to approach the Constitutional Court for rulings. Secondly, some further reforms may be needed to the legislation. Although the Companies Amendment Act contained clauses on the criminalisation of cartels, these were not yet in force. A market inquiry provision may also need to be inserted into the legislation, which was less adversarial in nature.
Members asked how many more members needed to be appointed, asked if the same offenders had been penalised more than once, and what those penalties would be, asked for clarification of some of the terms in the financial report and asked about the staff establishment, the granting of bursaries and the intake of interns. They asked if the Tribunal considered acquisitions in addition to mergers, whether it was affected, as was the Commission, by space constraints, and asked whether it would apply for a rollover of funds. They cautioned that under-expenditure should be kept under 5%. They also asked for further clarity on the ProBono issue.
Competition Tribunal: 2010/11 Annual Report briefing
Mr Norman Manoim, Chairperson, Competition Tribunal, said that the role that the Competition Tribunal (the Tribunal) played was as the court for the competition authorities. It had the mandate to deal with mergers, which it either authorised, or prohibited. It also heard appeals against the decisions of the Competition Commission (CC or the Commission). It adjudicated on restrictive practices, heard contested applications, and granted interim relief while investigations were being completed. It also heard applications for exemptions, although there had not been such an application for twelve years. Its core business was in competition hearings. In the past year, the Tribunal had heard 116 cases and issued 74 reasons. The bulk of the cases dealt with large mergers, which accounted for 55 out of 86 cases. In regard to restrictive practise cases, 22 out of 29 cases resulted in consent orders being granted. Consent orders were negotiated plea bargains which resulted in settlements. This was a positive outcome, because it resolved issues quickly, avoided wasting State resources in opposed proceedings, and agreements by both parties were better than a solution being imposed. He noted that in interim relief cases it was difficult to establish facts, and not all relief granted was entirely suitable. as there was only a six month period allowed for by the Tribunal. It was a remedy that was available, but was not one that was widely or easily utilised.
Mr Manoim noted that the much publicised case of the Walmart/Massmart proposed merger was an example of a large merger case. Generally speaking, large mergers were reflective of the economic activity in a country, although they could lag by about one year. Out of a total of 766 decided cases over the last ten years, 90% were decided unconditionally, while 8% were subject to conditions, and 1% was prohibited. In the last financial year 54 cases had been decided, 94% approved unconditionally and 5% were subject to conditions.
He then outlined some of the cases of interest where conditions had been applied to mergers. In the proposed merger of Metropolitan and Momentum Life Assurers, owing to a possible loss of jobs, a moratorium on retrenchments was placed for a period of two years. The significance of this case was that it set out the Tribunal’s approach to cases where job losses could occur. The Tribunal had to decide whether the job losses were effected to enrich the shareholders, or to rescue a firm that was likely to collapse, and to assist it to become more competitive. In the matter of AECI and Quemico Distributors, a condition was imposed by the Tribunal on the sale of a brand. Here, merger processes had to be resolved as soon as possible. The Tribunal needed to give an order within ten days of the hearings and was obliged to give reasons.
The merger of Tsogo Sun and Gold Reef Resorts was approved, subject to the condition that the Silver Lakes Casino be sold off, as the merged group would own most of the casinos in Gauteng. However, after an appeal was lodged, the merger was allowed to go ahead unconditionally. Mr Manoim noted the absence of consumer representation at the hearings. In the matter of Bedrock Mining Support and Mondi, the Tribunal recommended that the merger should be subject to conditions. Two third parties, a supplier to one of the companies and a rival company, presented their own views on the matter. This resulted in a settlement a few days later.
In the matter of prohibited practices, Mr Manoim noted that these would generally arise where it was shown that it could result in the formation of cartels and abusive dominance. Some cases of interest were described. In the matter of SPC, a concrete pipe company which had formed a cartel, the Tribunal needed to check the Appeal Court’s findings. The well-publicised hearings against Pioneer Foods were investigated, and finally the order was made by consent. The fine was diluted in favour of payment in other forms. The firm would discount flour for a period of time (this was done to break up cartel practices) and part of the fine would be diverted to the Industrial Development Corporation (IDC). There had been conflict over whether this had been permissible, as fines had generally to be paid into the National Revenue Fund. The issue was resolved by getting the money paid into the National Revenue Fund, and from there the money would be appropriated to the IDC.
The imposition of administrative penalties had increased in the 2010/11 financial year, from R292 million in the previous year, to R787 million. R500 million was paid by Pioneer Foods, R111.69 million by Sasol Chemical Industries and R6 million by Foskor. Mr Manoim asked Members to note a correction to the Annual Report, on page 88, where the consent order mentioned had in fact had a fine imposed.
Mr Manoim noted that the Tribunal was a member of the Organisation for Economic Co-operation and Development (OECD).
There had been an increase in prohibited practise cases from 10 to 30. Credit for this had to go to the Competition Commission. There was a 73% settlement of cases. The Tribunal’s website had crashed as people had attempted to access the site to get information on the Walmart merger. The Tribunal would continue to put cases of public interest on the website. He said the Tribunal wanted to be more aggressive in resolving cases, by setting a timetable for cases to be heard, which would result in a restriction on the number of witnesses who could be called, and the cross examination time allowed for witnesses. This procedural issue had been challenged in the Walmart case, and the Tribunal was awaiting the ruling of the Appeal Court on this matter.
Mr Manoim outlined the staffing, He noted that in 2010/11 two staff members had resigned, and there were now three new case managers.
Ms Lerato Motaung, Registrar, Competition Tribunal, added that the staff complement was 15, with one vacancy.
Ms Janeen De Klerk, Chief Financial Officer, Competition Tribunal, said the budget had been under-spent by 20%. This money had been earmarked for capital expenditure on the electronic case document maintenance management system, and for training and personnel costs. The Tribunal had budgeted for a higher increase in salaries and filling of vacant case manager posts.
She noted that the Competition Tribunal had received an unqualified audit report. The Auditor General had noted that the Tribunal showed a preference for particular suppliers because of these suppliers’ good service history, while still utilising other suppliers for smaller cases. 32% of its income came from filing fees, while 62% came from government grants. Personnel costs accounted for 55% of expenses while administration accounted for 20%.
The Tribunal faced some financial challenges, which included its need to get continuous funding from government, to keep its costs low while maintaining standards, and to align the budget with its targets. Other challenges were the appointment of additional members, the further training of members, expediting cases, improving access to justice, increasing the intern uptake, office space and the implementation of the case management system.
In respect of the intern programme, she reported that the Tribunal has taken on four interns, of whom three were from the University of Pretoria and one from the Alexandra Educational Committee. Only the Alexandra student was paid, whilst the others worked at the Tribunal as part of their course requirements. The Tribunal would be taking on a hearing impaired person from DeafSA. The e-case management system was nearing the end of its developmental phase, and the testing phase would soon start.
Mr Manoim said he had approached ProBono, with the request that it reconsider its business model to allow it to take on Tribunal cases. The Law Society of South Africa was more reluctant and wanted the Tribunal to apply only to firms who qualified for pro bono funds. The Law Committee agreed to take cases even if they did not qualify. He said that further training of members was essential to widen the pool of writers. Currently, writing was done by three full time members. Two members would be sent to the UK on a writing course and locally retired judges would be used to assist with training.
Mr Manoim then noted that subsequent to the preparation of the Annual Report, two issues had arisen. The Competition Commission had been beset by procedural challenges. It had received adverse opinions of a technical nature against it. Both the Commission and the Tribunal were concerned about this trend and wanted to take the matter to the Constitutional Court to get the legal principle of access to justice upheld. The Competition Commission may come back to the Committee on the issue of law reform. The recent Companies Amendment Act, which included clauses on the criminalisation of cartels, had been signed by the President but no proclamation had yet been made on the starting date. The Commission wanted to raise the issue of including a Market Inquiry provision in the law, which was less adversarial and could be useful for use against dominant firms. This needed to be brought into force soon.
Dr P Rabie (DA) asked how many additional members were required.
Mr Manoim replied that the number of additional members was laid down in the Competitions Act. The number of members would be a maximum of 11, at the moment. The responsibility lay with the President and the Department of Economic Development. The Tribunal was awaiting the filling of the one vacancy. Some members had indicated that they could not continue to be as active, and if more were appointed these members would resign.
Ms D Tsotestsi (ANC) asked if the companies that were penalised were the “same offenders guilty of the same offence”.
Mr Manoim replied that the Act said that if previous offenders were found guilty of the same offence, then the fine could be increased. This had not occurred yet.
Ms Tsotetsi asked for a breakdown of the interns.
Ms De Klerk replied that there were three black and one white interns. All the interns were from South Africa. Their work was done mainly in student vacation time.
Ms Tsotetsi asked for clarification of what was meant by “cash and cash equivalents”.
Ms De Klerk explained that this referred to money that was not tied up in fixed deposits.
Mr S Marais (DA) asked if the Tribunal also looked at acquisitions.
Mr Manoim replied that the definition of mergers in the Act was a wide one, and that the Tribunal accordingly treated acquisitions in the same way as mergers.
Mr Z Ntuli (ANC) asked the reasons why the Appeal Court had overturned decisions of the Tribunal.
Mr Ntuli asked if the staff establishment was fully funded.
Mr Ntuli asked if the Tribunal offered any bursaries.
Mr Manoim replied that the Tribunal gave no bursaries to students. It gave bursaries to its own staff, up to a maximum of R8 000. These were used by the administrative staff to improve their qualifications through part time learning. If they did not pass their courses, then the bursary had to be repaid in full. If the course was of value to the Tribunal, then they did not have to repay the amounts.
The Chairperson asked how seriously the Tribunal was affected by space constraints.
Ms De Klerk responded that the office space problem was not as severe as the one faced by the Commission, which was unable to perform its work. The Tribunal did have a storage problem. If the Commission moved from the campus then the Tribunal would have to move also.
The Chairperson asked for clarification of the ProBono matters.
Mr Manoim replied that the Law Society of South Africa required that attorneys spend some time doing pro bono work. ProBono was a non-government organisation (NGO) that co-ordinated these services. The Tribunal was trying to persuade ProBono to take on Tribunal work. The Law Society had indicated that it would not be satisfied with recognising this work as pro bono, because the companies were not indigent. If the request was for advice, then it would approve it, but it was a different matter with litigation, which became more costly for firms to undertake.
Mr Ntuli noted that the Tribunal should keep its under-expenditure below five percent.
The Chairperson asked if the Tribunal would apply for a rollover of funds.
Ms De Klerk replied that there had been under-spending as the Tribunal could not predict how much would be spent on the hearings. There had, however, been savings on overseas flights through purchasing more inflexible but cheaper tickets. Payments for capital expenditure were phase driven so the Tribunal still needed to pay for work. It had applied for a rollover of funds and was awaiting a reply. In addition, on-going support payments had not been made yet.
In respect of the irregular expenditure, she noted that the Tribunal had followed the procurement procedures and were correcting the deviations, in order to be fully compliant.
The meeting was adjourned.
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