Competition Tribunal: briefing

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Trade and Industry

14 October 2002
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TRADE AND INDUSTRY PORTFOLIO COMMITTEE
15 October 2002
COMPETITION TRIBUNAL: BRIEFING

Acting Chairperson: Ms C September (ANC)

Documents handed out:
 

 

Competition Tribunal briefing document

Competition Tribunal website
Competition Commission website

SUMMARY
· Efficiency of hearings
The Tribunal would like decisions to be made as expeditiously as possible. These decisions have been taken away from the police and ordinary courts because they were too complex and therefore this special system was introduced. The Tribunal would like to vindicate this view and feels that efficiency has increased compared to the past.

· Quality of adjudication
Mr. Lewis encouraged their decisions to be read on their website and for people to comment. The fact that eight out of the ten members were part-time posed a problem for the Tribunal and could affect the quality of its work. These part-time members lose income as a result of their involvement on the Tribunal since many of these hearings could take a few days to decide. Fees paid to these members remains an unresolved issue at present.

· Communication of decisions
Mr. Lewis stated that this was a complex area. Many decisions that were made were contrary to what one might think they would be. It was therefore important that the public understood why decisions were made. He stated that the Tribunal should work closely with the media so that decisions were understood.

Discussion
Mr. N Bruce (DA) wanted know how the Tribunal would rate itself in creating a more efficient economy. He also wanted to know whether the Tribunal was proactive or whether it waited for agents such as the media to approach it.

Mr. Lewis responded that the Tribunal and the Commission had different powers and that the Tribunal was limited, but that the Commission did research. As to whether the Tribunal had created a more efficient economy, Mr. Lewis stated that it was a difficult question and that was possibly too early to tell. He did add that it has probably influenced some behaviour change in some businesses.

Mr. S Rasmeni (ANC) inquired if the Tribunal made judgments regarding the tendering process as a matter of public interest. It was his feeling that companies were still disregarding previously disadvantaged companies in tendering procedures.

Mr. Lewis stated that where the state had set certain regulations, such as the tendering process, the Tribunal could not interfere. He felt it was an area that the Competition Commission could comment on.

Ms. F Mahomed (ANC) wanted to know more details about the Portnet case. She also wanted to know if the Tribunal considered job creation when decisions were made. She inquired about the racial and gender balance of the Tribunal and how accessible the Tribunal was to previously disadvantaged communities. Lastly, she wanted clarity around the specified threshold which Mr. Lewis had mentioned earlier.

In addressing the Portnet case, Mr.Lewis explained that Portnet had a long relationship with Cape Span for it to use their cold storages at their harbours. SA Fruit Terminals felt that they were being denied the use of these facilities for their goods.

Mr. Lewis went on to explain the composition of the Tribunal: six of the members of the Tribunal were black and four white. The Tribunal comprised five women and five men. On the question of accessibility, he said that the unions were very active in the Tribunal and that there was an attempt to make the proceedings informal and accessible to all.

Prof. B Turok (ANC) raised a number of questions. Firstly, did the Tribunal make any decisions about collusion of food prices? He also asked if poverty was considered as part of public interest and whether the Tribunal decided on mergers in the financial sector. Lastly, he felt that the Tribunal has important information about the economy which was not commonly known and which needed to be passed on.

Mr. Lewis replied that the Minister had appointed a commission to investigate the collusion of food prices and that this would be released soon. He stated that poverty was taken into account when deciding on mergers. The prices of goods as a result of a merger was considered especially if it would impact on low income consumers. He cited the proposed merger between the JD Group and Ellerines as an example. It was the Tribunal's opinion in this case that prices would have increased and therefore the merger was prohibited. Mr. Lewis continued to say that the Minister of Finance could issue a certificate removing the jurisdiction of the Commission. This was happening in particular with potential banks merging. The fear was that the Tribunal might prevent a merger when the financial sector might require it. The Tribunal however does hear mergers involving other financial institutions such as insurance companies. Mr. Lewis stated that the Commission had a research section and does give out papers which are generally available.

Ms. J Moloi (ANC) wanted clarity about conditions which were put on mergers. Mr. Lewis responded that if competition was lessened, conditions were imposed. If one part of the public interest such as employment was threatened, conditions were also imposed so the merger could proceed.

Mr. Rasmeni (ANC) reiterated that the Commission should act on companies who were still not considering black companies in the tendering process. Mr. Lewis responded by saying that black empowerment remained a complicated one to deal with.

The acting chairperson, Ms. C September, commented on the synergy which existed between the Competition Commission and Tribunal. She went on to ask whether State owned enterprises also appeared before the Tribunal.

Mr. Lewis replied that he expected to hear more cases by state owned enterprises in the future. For example, he expected Telkom's monopoly in the telecommunications sector to be heard in the future.

At this point the chairperson adjourned the meeting.

 

The mandate, procedures and the Tribunal's relationship with the Competition Commission and Appeal Court was explained to the committee. The Tribunal's work as far as mergers and restrictive practices was also outlined and some specific cases elaborated on. The challenges facing the Tribunal concluded the briefing.

BRIEFING
Mr. David Lewis, chairperson of the Competition Tribunal, began by referring to the Competition Act of 1998. This Act aims at regulating anti-competitive practices and regulates mergers and acquisitions. It has brought into being the three statutory bodies: the Competition Commission, the Competition Tribunal and the Competition Appeal Court. The Commission is the investigative and prosecutorial body and receives submissions from the public. It then has the authority to make decisions. The Tribunal is the adjudicative body. Its ten members are lawyers and economists of which two are full-time and the rest on a part-time basis. It will deal with decisions which the Commission has judged and where the parties are not satisfied. Submissions can also be made directly to the Tribunal if it is not taken up the Commission. If parties are not happy with decision handed down by the Tribunal, they would then go the Competition Appeal Court.

The Tribunal's mandate is to adjudicate on mergers and alleged restrictive practices.

I. Mergers
Mr. Lewis noted that since the Tribunal's inception, in 2000 up to March 2002, it has handed down decisions on 77 large mergers. Out of these, 67 were unconditionally approved, seven were approved with conditions and three were prohibited.

The three that were prohibited were mergers between JD Group and Ellerines, Transvaal Sugar and Tongaat Hulett and Schumann Sasol and Price's Daelite. These mergers were prohibited as it was the Tribunal's opinion that it would have resulted in a lessening of competition in all three cases.

Conditions which were placed on some mergers involved the divestiture of some assets. For example, the merger between Unilever and Unifoods was approved on condition that Unifoods divest some of its assets such as the Royco brand name. Fifty three of these decisions were issued on the day of the hearing. Four of these decisions took more than one week.

The criteria used to decide on these mergers are threefold. Firstly, the impact that the merger would make in lessening competition is considered. The efficiency gains as a result of the merger is also considered. These two criteria are weighed up before a decision is made. A third criteria which determines the outcome of a decision would be the public consideration. If a merger has a negative effect on competition, but a positive impact on public interests, it will still be granted. Public interest considerations are in three areas viz. black economic empowerment, regional impact and employment.

The public interest considerations would normally cause conditions to be placed on the merger. An example was made of the merger between Shell and Tepco Petroleum. Tepco, which was part of the Thebe group, merged with Shell on condition that Thebe was offered a 25% share of Shell.

II. Restrictive Practices
Mr. Lewis explained that cases involving restrictive practices took longer to come to the tribunal than anticipated. Many of these cases were still pending and will still be for a long time. Many of these cases are delayed because the procedures of the Tribunal are being tested by the High Court.

Since the Tribunal was formed in 2000 until March 2002, 29 cases have been brought before it. Seven of these have been decided, three have been withdrawn while nineteen are pending. In twenty cases, interim relief was granted.

Mr. Lewis continued to explain that restrictive practices are of three types: horizontal, vertical and abuse. Vertical practices were the most common and this occurred when a wholesaler will restrict prices at which a distributor can sell goods. The case brought by SA Fruit Terminals was cited as an example of abuse: SA Fruit Terminals believe that Cape Span have sole access to Portnet's cold storages as a result of the long relationship they have with one another.

The briefing was concluded when Mr. Lewis mentioned the challenges which he believed faced the Tribunal. These are:

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