A summary of this committee meeting is not yet available.
TRADE AND INDUSTRY PORTFOLIO COMMITTEE; ECONOMIC AND FOREIGN AFFAIRS SELECT COMMITTEE: JOINT MEETING Competition Commission presentation (see Appendix)
14 May 2002
COMPANIES & INTELLECTUAL PROPERTY REGISTRATION OFFICE; COMPETITION COMMISSION: BRIEFING
Chair: Dr R H Davies and Mr. M Moosa
Documents Handed Out:
TRADE AND INDUSTRY PORTFOLIO COMMITTEE; ECONOMIC AND FOREIGN AFFAIRS SELECT COMMITTEE: JOINT MEETING
Competition Commission presentation (see Appendix)
CIPRO Powerpoint presentation
The Companies and Intellectual Property Registration Office, an agency of the Department of Trade and Industry, gave an overview its new strategy, functional structure, projects and achievements. Likewise the Competition Commission accounted to the Committee about its operations and policy with regard to mergers and acquisitions and described certain cases.
Companies and Intellectual Property Registration Office (CIPRO)
Adv Felix Malunga, acting CEO of CIPRO, presented an overview of this DTI agency. He was accompanied by Mr. F Johnson, Registrar of Companies at CIPRO.
Adv Malunga explained the background to CIPRO noting that it is the result of the merger in 2001 of the South African Companies Regulatory Office (SACRO) and the South African Patents and Trademarks Office (SAPTO). Cabinet had approved this in May 2001. Its official launch is 30 July 2002.
Adv Malunga informed members about its drastic new strategy which has as its vision: Gateway to economic participation. He pointed out that 'gateway' here means a one-stop-shop within the bigger DTI picture. This will lead to global participation by empowering businesses. The mission of CIPRO is not static but dynamic as it is driven by customer needs. Amongst others, the agency's mission is to achieve and maintain world-class status, stimulate economic growth and promote investor confidence in synergy with the DTI; registration and promotion of intellectual property rights and business entities through a legal framework that provides protection and the flow of information.
CIPRO sees its five strategic results areas as:
- providing a regulatory framework for economic participation which includes international agreements and regional co-operation;
- organisational transformation which includes developing effective businesses processes, especially full e-lodgement, establishing and practicing corporate governance and change management procedures;
- its customer interface which includes customer relationship management, branding as well as creating awareness through education;
- forming business partnerships which include the DTI (all divisions), international business partners and external stakeholders;
- moving towards self-sustainability which includes financial independence from Treasury, also utilising surplus funds to promote economic participation like SMMEs, BEE and Women empowerment.
CIPRO's business values are to become world class and to do it right the first time. With regard to people values, they are driven by the Batho Pele campaign through the fostering of motivated people to achieve healthy relations as well as to mentor and develop people unselfishly.
Adv Malunga showed a diagram of the functional structure of the CIPRO which includes the CIPRO Board of 8 members, the CEO and three divisions: Companies, Intellectual property and Support services. Each of these divisions have further divided. For example the Intellectual property division is divided into Patents, Designs, Trademarks and Copyrights.
Adv Malunga pointed out that legal issues needing legislation are:
- enabling e-lodgement and e-disclosure (this legislation was passed in 2001)
- effective ways of payment of services (to be passed in 2002)
- annual returns to be introduced to ensure ongoing database integrity (to be passed in 2002)
Corporate law reform is envisaged as a long-term project starting in 2002. This process will be driven by the CCRD policy unit within DTI and the Steering Committee on Company Law.
Intellectual property issues are dealt with in the Copyright Amendment Bill.
CIPRO's projects that it has initiated are the conversion of the agency into a trading entity, its business plan, the handing-over project, the project management office, the revenue collection project as well as company registration. CIPRO has been through a benchmarking exercise. Future projects include the data integrity project, disaster recovery and automation of administration processes.
In the Intellectual Property division, Adv Malunga noted achievements as being software improvement, the appointment of an operations manager, the clearing of backlogs. He commented that in the Netherlands, their trademark office has a five-year backlog, so "we are not alone, in a way it can be said we are better handling the situation".
New initiatives in the Intellectual Property division include becoming an international player, an electronic searchable patent journal, automated certificates for trade Marks, e-lodgement, IP searching facilities on the Internet and a bench-marking exercise.
In the Companies division, he noted a record number of registrations, the backlogs with new registrations had been resolved, improved helpdesks, sixty had been trained on company and close corporations registrations. New initiatives include simplifying the names reservation procedure, reviewing the CIPRO processes to accommodate e-access, lodgement of single copy thus doing away with duplicate copies and the reintroduction of annual returns in order to achieve data integrity.
Adv Malunga then showed graphs mapping the growth in company registrations, trademark and patent applications and international applications.
Adv M S Simelane, the Commissioner, was accompanied by Mr. N Hlatswayo, Head: Mergers and Acquisitions and Ms N Ntuli, Head: Compliance Division.
Adv Simelane noted that this presentation is a pre-publication and audit version of the annual report, so the details can be said to be at least 97% accurate. Some points he made were::
- There has been a decrease in mergers and acquisitions in the 2001/02 financial year.
- In terms of productivity, the average turn-around time per case has been reduced from 48 days to a month; this is an improvement upon which they can only build.
- Horizontal mergers, that is those between competitors, increased from 62% in 2000/01 to 66% in 2001/02.
- 4,5% of the cases had a black economic empowerment dimension to them whilst 10% of the cases involved some form of foreign direct investment.
- The percentage of cases with a foreign direct investment dimension decreased from 19% in 2000/01 to 10% in 2001/02.
- The percentage of cases where job losses were anticipated was 6% in 2000/01 but nearly 25% in 2001/02.
- A sectoral breakdown of these mergers shows that manufacturing accounts for the highest stake: 33% in 2000/01 and 28.5% in 2001/02. Mining had the least stake in both years with 4% in 2000/01 and 6.5% in 2001/02.
Adv Simelane highlighted specific cases such as Unilever/Robertsons, Shell/Tepco and Saldanha Steel/Iscor. In the Shell/Tepco case, Shell proposed buying Tepco, a Thebe Investment Corporation company. The matter had been referred to the Minister of Minerals and Energy, Ms Phumzile Mlambo-Ngcuka, and her Director General, Mr. Sandile Nogxina. He noted that there were no real competition constraints except that the two, as they are, are competing against one another. However, there were issues of public interest which could block the acquisition. It was recommended by the Commission that the two companies remain as competitors so as not to undermine fair competition and that the acquisition could go ahead provided that Tepco remained independent and retained its brand as well. However, the tribunal overruled the Commission's recommendations and authorised the deal. It later transpired that Tepco was not really willing to sell, it had financial problems which persuaded them to go this route. The Commission then proposed that Shell acquire 49% of Tepco whereas Thebe Investments would retain 51%. However, this still was not accepted. He noted that the matter is still under discussion and a decision is likely to set a precedent in the competition arena in South Africa.
Regarding enforcement and exceptions, he pointed out that these have decreased over the three-year period from 1999, specifically on cases notified. Resolved cases include the Papercor/Sappi situation, Anglo American Medical Scheme and USAP as well as Ring Pharmaceuticals distributors who were granted an exemption to compete as a group of entities with the bigger companies for 5 years.
- See document for full details of the Competition Commission presentation.
Adv Simelane's final point was about the Southern and Eastern African Competition Forum which was initiated by the Commission at a workshop held in Pretoria in November 2001. The SEACF is to meet twice a year and will be officially launched in Zimbabwe between the 17-21 June 2002 at a meeting there with the help of UNCTAD.
Ms Sono (DP) asked Adv Malunga how far the agency has progressed on the issue of the electronic journal of patents?
Mr. Rasmeni (ANC) asked Adv Malunga if CIPRO would be able to give outputs after a certain time period on BEE, Women empowerment, etc. Addressing the Competition Commission, he noted that he is worried about the loss of jobs. Is there a social plan for the retrenched? Are there any structures in place to empower these people?
Adv Madasa (UCDP) asked Adv Simelane to what extent is the Commission empowered in terms of pushing forward BEE. He added that it is very important that people become more aware of the Commission and its role.
Ms Mahomed (ANC) asked Adv Malunga about the issue of the European Trade Office. Also did CIPRO have a website and if not, when can one be expected?
Ms September (ANC) asked Adv Malunga to elaborate on the issue of indigenous knowledge. She commented that one could see that the Competition Commission was beginning to gain some maturity in its duties since its inception. She asked if it felt that the current legislation is helping in the execution of its mandate.
Mr. Lockey (ANC) expressed concern that BEE consortiums are falling short because they are not actually involved in the entities in which they invest, much like investment holdings institutions. He also felt that more needed to be done to force Iscor to be more committed to issues of BEE, particularly because it has enjoyed taxpayer support for so many years, actually since its inception. On the issue of registration files, he pointed out that a computer-based filing system should be employed in this regard to reduce security risks.
The Chair asked if there is anyone looking at the concentration of markets at this point to gauge competition levels. What has been the impact herein? He also asked about the decline in mergers. Are the conglomerates (TNCs) having an impact on the issue?
Adv Malunga responded as follows:
- The electronic patent journal is an initiative, so things are only getting started at this point. They have signed a 12-month contract with a French company to help them set this up, so progress at this stage is very much slow. He noted that he wants this to be a reality by the end of October.
- The European Intellectual Property Office, staffed by about 1000 people, is a very big player on the global stage. They had offered to install software locally which is compatible to their international dimensions. The agency felt that this needed careful contemplation as they did not want embrace systems which would quickly lose touch with the rest of the world as it is apparently not well used outside Europe.
- The unit dealing with indigenous knowledge is doing a lot of work. The main problem is that there was no capacity previously, so the time frame given to the newly appointed DDG for that is not very clear because of the pioneering nature of the unit's work.
- On the issue of files, they do have a scanning IT system for the files. The problem up to this point has been the extensive nature of the process plus the Department of Justice insists on hard/physical copies. However, they are busy rectifying this issue by authenticating the electronic versions of these files.
- The Commission does take development issues (BEE, Women Empowerment, etc) into consideration in its operations.
- Whether the Shell/Tepco saga sets a precedent will depend on the eventual outcome of the matter.
- Job losses cannot be avoided completely, rather, the Commission aims at minimising these losses. As to how laid-off workers are catered for, the Commission believes that this is in terms of the Labour Relations Act, in which case they cannot intervene any further - barring the non-compliance thereof.
- On promoting BEE, he pointed out that they cannot restrict new entrants to BEE ventures
- There is a growing awareness about the Commission and its workings.
- With regard to BEE and women empowerment, especially women, there have been several increases in transactions as in the case of Nozala Investments, WhipHold, etc
- On the issue of Shell and Tepco, the Commission did not appeal because they felt that the tribunal's decision was not necessarily wrong - it was just a matter of interpretation. - Regarding legislation, he pointed out that it is empowering and thus far, the Commission has no complaints about its provisions (the Competition Act, Competition Commission Act, etc) and as pointed out, it is very helpful.
- He agreed that there has indeed been little progress where BEE issues are concerned and involvement thereof. This question of participation has a lot to do with broader issues of support services such as development finance, the sustainability of BEE ventures in the communities as well as input by financial institutions such banks amongst other things.
PRESENTATION BY THE COMPETITION COMMISSION TO THE PORTFOLIO COMMITTEE ON TRADE AND INDUSTRY
PRESENTED BY ADV. MENZI SIMELANE - COMMISSIONER
14 MAY 2002
The Competition Commission would like to thank the Portfolio Committee on Trade and Industry for the opportunity to participate in these proceedings.
Competition policy is no doubt, a very important policy instrument. This view has been recognised and accepted internationally and has also found a place at the domestic level. The main issue to be understood though is the benefits of competition policy to business, consumer and employees. Commentators and scholars on the subject of competition policy have for many years identified that competition policy and law is there to help nations achieve economic prosperity and increase the welfare of society through the free and fair participation of enterprises in a competitive environment. What may not be easily understood is how this is achieved. Competition policy seeks to encourage firms to compete in a market. In order to be able to compete, these firms must minimise their costs and be more innovative. This means that they have to operate efficiently, resulting in lower prices and improved choices for consumers. Quite clearly, the more efficient a firm, the more competitive it will be. Efficient firms allocate scarce resources optimally, resulting in less "waste" and freeing up resources for alternative applications.
As a result of the efficiencies, a firm will be able to allocate resources towards innovating more and better products. Competition therefore leads to remuneration, which leads to more products, which are also cheaper. The consumer will get the benefit of cheaper and higher quality products.
2 MERGERS AND ACQUISITIONS
Table 1: Overview of cases notified and finalised
Number of cases notified
Number of cases finalised
Average number of cases finalised per investigator per year
Average number of cases finalised per investigator per month
Table 2: Productivity
Average turnaround time
30 7 days
Case load per investigator per annum
Case Load per investigator per month
The year ending 31 March 2002 saw a significant decrease in the number of merger notifications to the Commission. 407 cases were notified in 2000/01 and 220 in 2001/02. This decrease can be attributed to the change in thresholds for notification. Interesting to note is that although the number of mergers decreased, the number of large mergers increased from 16 to 47. In addition to the number of large mergers the Commission also found that the complexity of cases increased during the past financial year. More and more cases require team members from other Divisions in order to do thorough analysis.
Table 3: Mergers by type
Type of merger
The year 2001/02 saw a decrease in conglomerate mergers, but an increase in management buy-outs. Management buy-outs are considered to be non-problematic and pro-competitive as it usually signifies a new entrant into the market. The increase in the complexity of cases thus cannot be explained by changes in the types of mergers notified.
Foreign Direct Investment
The percentage of cases with a foreign direct investment component decreased in from 19% in 2000/01 to 10% in 2001/02
Black Economic Empowerment
Of the cases evaluated by the Mergers and Acquisitions Division, 4.5% of the cases had a black economic empowerment dimension to it, whilst 10% of the cases involved some form of foreign direct investment
The failing firm argument or defence was used in 6,5% of cases during the 2001/02 year. This is a slight increase from the 5% of cases in the 2000/01 year. A prominent example of the failing firm argument was the Saldanha Steel/Iscor merger.
The percentage of cases where job losses were anticipated was 6% in 2000/01 and nearly 25% in 2001/02. This is a significant increase in the number of cases with anticipated job losses.
The total number of job losses anticipated was 7 735, Employment gain was estimated at 2 243 jobs. 57,75% of the job losses were due to mergers in the mining sector; 19,6% to mergers in the manufacturing sector and 14,23% to mergers in the financial sector.
Although mining sector mergers were responsible for most of the job losses most of the employment gains due to merger activity could also be found in this sector. 1750 job gains (78% of the total) came from the mining sector. The sector did however have a net loss of 2795 employment opportunities.
Other sectors with employment gains were manufacturing and forestry. Forestry was the only sector with a net employment gain of 146 opportunities.
Table 4: Sectoral breakdown of main merger activities
The manufacturing sector remain the area of most consolation activity, although with decline from a third of cases in 2000/01 to 28%in 2001/02 .The increase in real estate transaction are a percentage of all transaction continue at a steady pace indicative probably of not only the activity in the sector, but also the acceptance of competition legislation by parties active in this area. The other point to note is that property merges are analysed on small geographic level, thus seldom raising competition concerns. The financial service sector also afforded an increase in transactions, a trend that will probably continue as consolidation in the financial service sector take place
Figure 1;Sectoral Overview of Merger Activity (Not available)
In terms of quarterly trends merger activity consistently peaked in the manufacturing sector, albeit with a decline in the third and fourth quarters. Furthermore, whilst merger activity increased consistently in the retail, mining and IT sectors during the first three-quarters, all three sectors experienced a decline in the last quarter.
Merger activity in the real estate sector has been erratic, with increases in the second quarter, followed by a decline in the third quarter and a further increase in the fourth quarter
The year ending March 2002 saw a number of complex and interesting mergers taking place in the S.A economy. One of the more prominent ones was the Unilever/Robertson merger. The merger analysis revealed a horizon overlap, in particular in the soups and sauces. In addition the commission found that the parties would, post-merge, have high market shares and despite countervailing power be able to execute market power in highly concentrated marked. The commission therefore recommended the divestiture of main brand. The recommendation was accepted by the tribunal
This transaction never raised competition concerns but public interest issues. From a competition standpoint, Tepco had less than 10% of market share in the petroleum and petroleum products market and Shell had much significant market share compared to Tepco. Shell would not be increasing market power with the transaction considering the public interest issues; the Commission had to determine how the transaction would assist firms controlled by historically disadvantaged persons to become competitive. The Commission found that were the merger to be approved, Tepco as a BEE firm would exit the market and Tepco, as a brand would disappear, i.e. Tepco service stations would be converted to Shell service stations. On this basis the Commission was of the view that whilst the transaction did not raise competition concerns, it could not be justified on public interest grounds. Therefore the Commission recommended to the Tribunal that the transaction be approved on condition that Tepco be maintained as an independent firm and be kept as an independent brand. The Tribunal however overruled the Commission on the basis that Tepco was in financial trouble and that if it was allowed to continue in the market, it would drain the financial resources of its parent company, The be Investment Corporation.
This transaction never raised competition concern but public interest issues. From a competition standpoint Tepco has less than 1% of market shares in the petroleum and petroleum products market and shell had much signification market share compared to Tepco. Shell would not be increasing market power with the transaction .In considering the public interest issues; the commission had to determine how the transaction would assist firm controlled by historically disadvantaged person to become a competitive. That commission found that were the merger to be approved, Tepco service station would exit the market and Tepco as a brand would disappear i.e. Tepco service station as a BEE firm would exit the market
The use of the "failing firm" defence was prominent in this case where parent company, Iscor, purchased the outstanding shares in Saldanha Steel from the Industrial Development Corporation. Iscor claimed that it could only get finance to support the failing Saldanha Steel plant when it had full control over Saldanha. In addition to the merger analysis, the Commission, and subsequently the Tribunal looked at the market allocation agreement between Iscor and Saldanha, where Saldanha was not allowed to manufacture for the local market. During the merger proceedings, this particular aspect of market allocation and the resulting arrangement with Duferco was addressed. This ties in with an investigation by the Enforcement and Exemptions Division. The merger was conditionally approved on condition that the market allocation agreement be abandoned
3. ENFORCEMENT AND EXEMPTIONS
Table 5: Overview of cases notified and finalised (Not available)
The Enforcement and Exemption Division considered 128 cases in 2001/02 of which 35 were brought forward from 2000/01 and 93 new complaints were received. In 70 of these cases notices of non-referral were issued and 4 complaints were referred to the Tribunal for prosecution. In addition, the Commission won its first prosecution involving Patensie, an agricultural co-operative. One consent order was signed. 53 cases remained under investigation at the end of Mach 2002.
Figure 2: Complaints received per section of the Act (not available)
The trend continues that most complaints fall within sections 8 and 9 of the Act; which is abuse of dominance. This is indicative of the concentrated nature of the South African economy. The trend flows through to the number of complaints resolved per section of the Act.
Figure 3: Complaints resolved per section of the Act (not Available)
Figure 4: Sectoral overview of complaints under investigation (not Available)
Figure 4 represents a sectoral breakdown of a sample of 50 cases from the total of 67 cases under investigation at the end of March 2002. Most of the cases pertain to complaints of anti-competitive behaviour in the manufacturing sector (24%), followed by the retail and energy and gas sector, both with 14%, and the other services at 12%. This trend is similar to the previous years, where the manufacturing and retail sectors had the highest level of complaints. There are a significant number of complaints falling within the energy and gas sector, which did not feature in previous statistics. With regards to this sector, the complaints relate mainly to the distribution of electricity and the retail of fuel and gas. Most of the complaints fall within section 8 of the Act, which prohibits the abuse of a dominant position.
Figure 5: Sectoral Breakdown of Resolved Complaints (not available)
Figure 5 represents a sectoral breakdown of a sample of (32 cases drawn from a total of 203 concluded cases. This figure presents a similar trend identified in the sectoral breakdown of complaints under investigation, with the retail and manufacturing sectors with the highest percentages at 24% and 19% respectively.
The complainant filed a number of complaints under this one complaint. In the majority of the instances no evidence could be found to support a referral. However, one alleged practice by Sappi in the Commission's view justified a referral.
The history of the conduct may be traced to an interim relief application to the Competition Tribunal by the Complainant that was subsequently withdrawn Sappi
averred that the application was filed in bad faith and although no decision on charges was handed down by the Tribunal, Sappi refused to supply product to the Complainant until such time as its legal costs relating to the aborted interim relief application were paid by the Complainant.
In the opinion of the Commission:
Sappi is dominant as is required by the Act in sections 6 and 7.
Linking the supply of product to the payment of a sum of money that was unrelated to the object of the contract is a contravention of section 8(d)(iii).
On the basis of the above the complaint has been referred to the Competition Tribunal for a decision.
Anglo American Medical Scheme/USAP
These complaints related to an alleged cartel in the supply of prescription medicines to members of the two schemes. It was averred that a large number of retail pharmacies had formed an association named United South African Pharmacies (USAP) which negotiated with medical schemes on their behalves and which recommended the terms on which the schemes should be supplied. Moreover a form of boycott was also recommended against certain schemes that insisted on discounts that were above what USAP considered to be reasonable.
The Commission was satisfied that a referral in terms of section 4(1)(a) and 4(1)(b) could be substantiated on the evidence before it.
The number of applications for exemption remains surprisingly low. This may probably be ascribed to one of a number of factors, inter alia:
Ignorance of the provisions of the Act;
A misguided belief that the practices fall outside of the ambit of the Act; or A belief that the practices will escape notice.
Ring Pharmaceutical Distributors
Ring applied to the Commission for an exemption from certain of the provisions of section 4 of the Act.
Ring is essentially a buying group that, through its buying power, is able to negotiate the best prices on certain pharmaceutical products from pharmaceutical manufacturers.
To act as a wholesaler
To act as a distributor of pharmaceutical products
To deal with the promotional aspects thereof through the Ring pharmacies (its members).
The application was based on section 10(3(u). Exemption was granted for five years.
Shell South Africa /Tepco Petroleum
Shell and Tepco applied for an exemption from certain of the provisions of section 4 of the Act. This relates to a joint venture (JV) that was created to handle certain specific aspects of their business. The Agreement regulates the relationship between the parties with regard to their commercial fuels and lubricants businesses.
The exemption was granted for a period of five years, subject to the condition that the parties should supply the Competition Commission with a progress report, detailing how the exemption has made Tepco more competitive (in performance as well as in winning of contracts) in the bulk supply market segment (the market segment targeted by the JV).
4. COMPLIANCE ACTIVITIES
ADVISORY OPINIONS AND CLARIFICATIONS
Table 6: Overview of cases notified and finalised
Number of advisory opinions and clarifications received
Number of advisory opinions and clarifications finalised
Number of advisory opinions received
Number of advisory opinions finalised
Number of clarifications received
Number of clarifications finalised
Total number of investigators
Average number of cases finalised per investigator per year
Average number of cases finalised per investigator per month
Table 7: Productivity
Average turnaround time
Case load per investigator per annum
Case load per investigator per annum
Figure 6: Number of opinions received over the period of three years B (not available)
Figure 6 shows the trend of requests received over 3 years. The Commission received 50 requests for advisory opinions this year. Despite the slight decrease in the number of opinions received, the opinions have become more complex and comprehensive as practitioners' knowledge on the Act improves. The decrease may also be an indication that the stakeholders' understanding of the Act has increased through involvement in competition matters and training provided by the Commission.
Figure 7: Opinions received as classified by chapters of the Act (not available)
Out of the total number received, 44 or 92%, related to mergers and acquisitions while six or only 8%, related to prohibited practices. In respect of clarifications, 53% of the requests were on mergers, 43% on prohibited practices while 4% were on other sections of the Act. This is mainly due to a compulsory requirement for mergers to be notified, thus companies need to be certain that they do need to notify the Commission before doing so.
Figure 8: Number of Compliance Cases received per month (not available)
Figure 8 depicts the number of cases received by the Commission per month. The average turnaround time on finalised opinions for 2001/02 was 18 days. This is a significant improvement compared to the 2000/01 figure of 30 days. The improvement can be attributed to the improved alignment of our internal processes and more experience acquired over the period in providing opinions. However, the lack of information from the parties and precedent for formulating opinions still impacts on our turnaround time.
Most of the mergers are filed with the Commission after the parties have received opinions from the Commission. This has significantly reduced the number of cases filed wherein the Commission has no jurisdiction. Approximately 80% of the opinions
issued wherein parties were advised to notify have notified the Commission accordingly.
In order to clarify most of the issues for practitioners and companies, the Commission issued three (3) Notices (Practitioner Updates) informing stakeholders of the approach adopted in respect of certain categories of transactions The Notices issued were on the application of merger provisions of the Act, as amended, to (i) joint ventures, (ii) risk mitigation financial transactions and (iii) asset securitisation schemes. The Notices also addressed the issue of sale and leaseback transactions to a certain extent. These updates clarify a lot of issues on which opinions are requested, hence the reduction in the number of opinions received this year. These Notices were well received by practitioners and have contributed to the decreased number of requests for opinions in the areas covered by the Notices
Presentations, workshops and meetings with practitioners and companies
The aim of these activities is to promote compliance by companies and the accessibility of the Commission to its stakeholders, as well as to strengthen the relationship through continuous interaction. These events are particularly aimed at business entities, mainly big business, either directly or through their advisors and legal representatives.
Through these events, companies are alerted on the practical implications of the Act for their businesses. For practitioners, it is aimed at highlighting the important aspects to consider when preparing a merger filing or drafting agreements for companies.
Approximately 32 meetings were held on request by companies and/or practitioners. This does not include case related meetings on mergers and complaints. The positive impact of these events is seen through the improvement in the quality of filings and submissions to the Commission.
Twelve presentations have been conducted to practitioners, companies and regulatory agencies, reaching approximately 227 people. Three practitioner workshops on the economics of merger analysis were held in Durban, Cape Town and Pretoria, reaching 42 practitioners. The workshops were particularly targeted at NADEL and BLA members with an attempt to introduce competition law and to build capacity in this area.
The Commission also participated in 2 exhibitions, most importantly the SAITEX exhibition, with the aim of raising awareness of the requirements of the Act and the competition authorities to both foreign and local businesses. Thus in total, 516 practitioners and business people were reached through these activities.
Trade Union Participation in the proceedings of the Commission
In order to maximise the participation of trade unions and employee representative in the proceedings of the competition authorities, the Commission embarked on the following initiatives is in recognition of the fact that in most cases where companies merge or take over certain parts of another firm, employees of the firms merging would be affected
Trade Union General Secretaries Consultative Forum was established and met twice during this financial year, and is chaired by the Commissioner, Adv. Menzi Simelane. The purpose of the Forum is to bring together senior trade union officials and senior management of the Commission, to discuss and debate issues of mutual concern in order to facilitate broader, policy-oriented discussions between the Commission and trade unions. It is hoped that this will also serve as a vehicle to facilitate a better working relationship between the Commission and trade unions.
The Forum seeks to address both policy issues and problems arising from the administration of the Act. The effective running of the forum will promote a greater understanding of the needs of trade unions and the Commission, the constraints both face with administration of the Act and available resources. This will offer trade union officials and the Commission an opportunity to reflect on experiences in
various transactions and to propose solutions to common problems. The Forum has been well received by members of the trade union fraternity.
Trade Union Training Events. Two other major events reaching out to various trade unions and federations were held in addition to the Consultative Forum. The first event was a presentation to Ditsela; an educational organisation for trade unions was attended by 26 trade unionists.
In Durban, 16 senior union officials attended the General Workshop from the three major federations and a number of independent trade unions 10 more other training sessions were conducted in various areas, including Nelspruit, East London and Johannesburg. These events were targeted at a certain category within the labour movement, particularly those unions that are mostly affected by the mergers. Thus senior representatives such as training and legal officers were invited to attend these sessions.
While the Commission continues with its education drive on competition and employment issues, the strategic planning of these events will hopefully ensure that information filters down to all the union structures. In total, 257 trade union officials were reached through the above events and activities
Trade Union Participation has remained static but spread across different sectors of the economy vis-à-vis the number of transactions filed with the Commission. The participation of trade unions has gone beyond just filing of notice of intention to participate in respect employment issues on transactions. The Commission has seen representations and participation by trade unions on various issues, including market-related arguments, complaints on alleged mergers as well as participation at Competition Tribunal level.
An example is the Unilever/Robertson case where 3 different trade unions submitted a joint submission arguing employment loss, price increases and compliance with conditions of approval. This clearly highlights the increased understanding of the Act by trade unions, which could safely be attributed to the training and presentation, conducted with officials from time to time.
In order to reach more union officials, the following Articles on Union Participation were printed in various publications to raise awareness and keeping trade unions updated on issues. The articles generated positive spin-offs in that more enquiries were received across sectors on trade union rights in competition matters.
'Trade unions and mergers and acquisitions' published in the South African Typographical Journal
'SA's 'unique' consultative forum on competition issues' - SASBO News
Mergers and Acquisitions, it is a union's right to be informed' - Numsa Bulletin advetorial.
Trade union participation during 2001' - South African Labour Bulletin
The above activities have contributed significantly in improving the implementation of the Act and ensuring that the interests of unions vis-à-vis competition issues are well balanced. It also contributed to the execution of the Commission's mandate in promoting employment and advancing the social and economic welfare of South Africans through awareness raising and training
The table below indicates the cases where trade unions made representations Most industries, such as mining, food and manufacturing have more than one trade union, hence the bigger number of unions affected. Of the number of times trade unions participated, that submitted a notice of intention to participate, only a total of 20 trade union participated in all merger cases and only four unions participated up to or more than 5 times, and those are unions we have given training workshop to on the Competition Act and its implications.
Table 8: Union participation in mergers that may affect employment
No of Cases affected
Number of affecting Unions
Education and awareness Activities for Consumers and SME
In a drive to raise awareness and to increase participation by public interest groups, presentations and workshops were held targeted at advocates of consumer rights, non-governmental organisations that play an active role in addressing public interest issues, empowerment forums and representatives of small and medium sized enterprises.
The Commission also reaches out to consumers and SME's through exhibitions at various functions. The ability of exhibitions to draw crowds has proved not only to provide a worthwhile networking experience where both the Commission - as a regulator - and its stakeholders meet on friendly ground, but also enables the Commission to show case its services to clients.
During this year, the Commission also made use of magazine articles and radio aimed at raising awareness and educating consumers. 2 radio interviews targeting consumers in general were hosted by SAfm and Radio 702. The coming financial year will see the Commission aggressively engaging the media in an awareness campaign.
It is a point worth noting that during the financial year 200012001 the Commission has directly reached approximately 574 people and initiated a total of 24 events. The table below gives an indication of the activities performed by the Commission in rai$in9 awareness among consumers and small/black businesses.
Table 9: The number of events and participants targeting consumer representatives and
Small/black businesses (not available)
Conclusion of Memorandum of Agreements with other regulatory authorities
This year the Commission and ICASA have in principle concluded an agreement in terms of which concurrent jurisdiction will be exercised in respect of competition matters in the broadcasting and telecommunications sectors. The agreement was made public in a joint press briefing on 23 April 2002 at the Commission. As this is the first agreement to be finalised, the authorities decided to publish it for public comments for 30 days, after which it would become effective. The conclusion of this agreement is a milestone for the authorities, particularly in view of the difficulty in negotiating these agreements.
The agreement follows the amendment of section 3(1)(d) of the Act and the subsequent creation of concurrent jurisdiction between the Commission and other regulatory institutions in respect of competition matters. The Commission thus embarked on the negotiation of agreements required in terms of section 21(h) read with sections 3(1A) and 82(1)-(3) of the Act.
The purpose of these agreements is to co-ordinate and harmonise the exercise of jurisdiction over competition matters within the relevant industry or sector, and to ensure the consistent application of the principles of the Act. In the year under review, the negotiation process had started with the NER, FSB and the Reserve
Bank as well.
It has been difficult to conclude these agreements, especially as they may raise legal and constitutional challenges if not well researched and drafted. As this is a new regime in South Africa, regulatory institutions have also been very cautious in an attempt not to been seen as abdicating their responsibilities and mandate through these agreements. The FSB agreement has been put on hold due to some of these factors and uncertainties.
Some of the difficulties are caused by the fact that legislative changes need to happen in respect of specific sector legislations such as the Banks Act, in order to ensure consistency of the Reserve Banks' mandate with the Competition Act. The doubt by reaction of stakeholders affected is also not predictable hence regulatory authority to make a decision around this- however, it has been made clear to the institutions that the agreements should not interfere with their independence and mandate and terms of their legislations but needs to create a framework within Wh.1Qh concurrency can be exercised Thus, despite the difficulty, the Commission hopes to conclude the three other agreement that are currently in negotiation fairly soon in the next financial year. Interaction and discussions with other regulators such as the SABS, Postal Regulator and the council for Medical Schemes, are underway.
These agreements will provide certainty to stakeholders or players in markets that are subjects of concurrent jurisdiction and will to the extent possible not unnecessarily interfere the rights of stakeholders The commission and the regulatory authorities consider factors and balance them against their impact on the stakeholders
To ensure that this is done, the negotiation process involves workshops/meetings where issues specific to a sectors or industry are discussed and solutions proposed similar workshops were held with ICASA and NEP and meeting with the FSB and the Reserve Bank.
Launch of the South African Regulators' Forum
This year saw the launch of a South African Regulators' Forum (Forum), which will serve as a platform for regulators to discuss issues of common interest and to facilitate coherence and consistency in the apparently fragmented and often contradictory regulators frameworks in South Africa. Is hoped that this forum will help build and strengthen the relationship among regulatory institutions in South Africa, particularly in view of the imminent introduction of competition, convergence and deregulation various sectors of the economy.
The forum culminated from a dinner hosted by the Commission on 30 May 200, to discuss the possibility of forming the Forum. 30 delegates representing 15 regulatory authorities among them the National Electricity regulators (NER) Independent Communications Authority of South African (ICASA) and the Bank (SARB) attended the dinner. A concept document prepared by the Commission outlining the aims and objectives of the Forum. Participants unanimously decided in favour of the initiative.
The Forum has since held three meetings. As an outcome of these meetings, the representatives agreed that in order to establish an effective consultative and collaborative body it is necessary for the Forum to adopt a constitution The adoption and signing of the constitution took place on the 25th March 2002, the day on which the Forum was launched as well.
Advocate Menzi Simelane, the Commissioner, was elected Chairperson of the Forum while Dr Snowy Khoza of the National Electricity Regulator was elected Deputy Chairperson. The Commission was elected Secretariat of the Forum.
The significance of this Forum is already apparent in that it has assisted in accelerating the process of negotiating agreements in respect of concurrent jurisdiction. As almost all regulators are represented, there is increased interaction among the people who are responsible for drafting and negotiating these agreements.
5.SOUTHERN AND EASTERN AFRICAN COMPETITION FORUM
The Competition Commission initiated the formation of the Southern and Eastern African Competition Forum with a workshop held in Pretoria from 2 to 22 November 2001 The workshop was attended by delegates from Kenya Malawi Mozambique Seychelles Mauritius Swaziland Zambia, Zimbabwe SADC Secretariat and Comesa.
The purpose of the workshop was to discuss the need for a regional forum in the SADC region which would be a coherent group aimed at assisting countries in the region in the development of competition policies and establishment of competition agencies.
It is intended that the SEACF meet at least twice per year to discuss common issues The SEACF will be launched in Zimbabwe between 17 - 21 June 2002 with the assistance of UNClAD.
In an assessment of the past two and a half years, one can conclude that there is an increased awareness about competition issues in the economy. As a result of the operations of the Commission, we have seen a number of mergers prohibited, that would have resulted in higher concentration levels in some markets. Transactions that have resulted in increased efficiencies have been approved.
With respect to restrictive business practices, we have noted a change in behaviour patterns of firms in that more firms are prepared to complain about restrictive practices in a market and are more willing to complain before the Competition Commission.
Thank you for your attention.
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