Competition Commission, Competition Tribunal & ITAC Annual Performance Plan

Meeting report

Competition Commission (CC)
Mr Tembikosi Bonakele, Competition Commissioner, presented the Annual Performance Plan (APP), inclusive of 35 targets within nine Programmes. The total budget allocation was R340 525 000. The Human Resource capacity was to increase intake of personnel by the recruitment of 100 more people.

Seven sectors were enlisted as Priority Sectors, of which the Commission noted the initiation of three new cases of Abuse of Dominance (AoD) in the Priority Sectors. The volume of Merger Investigations notifications had been on the increase in the past four years; and the aim was to have at least 75% of merger decisions upheld before the courts. Regarding Market Inquiries, there was an aim to initiate two new market enquiries, e.g. public transport, and the target was to complete one enquiry within 2017/18. There were extensive Advocacy Initiatives to be implemented within the year, as the general public was yet oblivious of the existence of the Competition Commission, apart from infrequent media alerts.

The Commission would seek international relations during the financial year, such as chairing the African Competition Forum (ACF), to promote consistency in the principles and application of competition law and policy across the continent and to assist each other with capacity; the promotion of developmental perspectives in the International Competition Network (ICN); the strengthening of BRICS partnerships, and to make contributions to OECD, SADC and UNCTAD.

The 2017/18 APP was implemented through nine Programmes
i) Mergers & Acquisitions ii) Cartels iii) Enforcement & Exemptions iv) Legal Services v) Policy & Research vi) Corporate Services vii) Finance and viii) Advocacy iv) Office of the Commissioner.

Key features of the APP included A. Consolidation of decision to improve efficiencies internally; B. Phasing in of new organisational structure, within costs: this included strategic remodeling of the ‘Screening Unit’ as well as redirecting dependence from outsourcing consultants to training the internal staff members up to such competence; C. Implementation of Criminalisation provisions; D. Establishment of Research Programs/ Centers, and E. Revision of ‘Values’ for the Commission.

The annual review of priority sectors was undertaken, and the following remain prioritised for enforcement and advocacy for 2017/18: food and agro processing; intermediate industrial input products; construction and its infrastructure; healthcare; energy; banking and the financial services, and information and communication technology.

Discussion
The Chairperson said it was pleasing that the Competition Commission had sought to reduce outsourcing, as many individuals merely required the appropriate training in the field of economic competition. Such opportunities would enable and foster promotion of those already recruited that was mutually beneficial, as opposed to exhaustive once-off hire that entrenched exclusivity of skills. It was also viable to train those already in the field, as opposed to risking investment of large sums of money to train novices who might yield limited return on investment. The unprecedented constraints were noted.

Dr J Cardo (DA) noted the bank collusion case and the timeframe anticipated for resolution. Which banks have filed their answering papers in the Bank Collusion Case? Are there any other settlements in the pipeline beyond the fine on Citibank for R70 million? Was today the deadline for applications for exception, if not, what was the specified deadline? There was a renewed flurry of press articles over the weekend pertaining to objections by Standard Bank about the manner that the Competition Commission had undergone its investigations. Could CC elaborate on any insights garnered from the liaison it has had with Standard Bank? Had the Competition Commission responded to the application to the Competition Tribunal by Standard Bank to compel the production of its record of evidence? Could insight be given on the supplementary affidavit recently filed about jurisdiction on cartel conduct outside of South Africa?

Mr P Atkinson (DA) noted that the headcount of CC would incur significant increase from 212 to 312 personnel for the sake of functionality. This increase should induce inflation of expenditure for Human Resources. However, the operational costs had decreased from R207 million in 2016/17 to R151 million in 2017/18. The operational costs will further decrease in 2018/19 to R115 million. Since operational costs encompass the expenditure of Human Resource, how could the simultaneous decrease of operational costs occur along with the increase of costs for human resources? Secondly, a conference occurred in November 2015 with other international agencies. How had CC interacted with international competition agencies since? Were good information and intelligence derived from these interactions? Were there any formal processes or were these interactions conducted on an ad hoc basis?

Mr S Tleane (ANC) noted that two of the strategic goals were orientated around establishing the Commission as a high performance agency. This was evidenced by the inflated recruitment of personnel from 212 to 312, as means of increased capacity. However, it was cited that the type of support extended by government was a concern. Therefore, could CC elaborate on the type of support that it sought from government for optimal results? Also, it was understood that a burglary took place recently on the premises of CC. Thus, what measures were underway to secure the office space and the equipment? Lastly, it was noted that outsourcing would continue in the interim before training of the internal staff members was completed. How long does CC intend to proceed with such process before the training is concluded?

Dr Cardo asked for a timeframe on the public transport query. What was the status of the Screening Unit and what was envisaged; how many people will be employed; what skills were required, and what were the core functions of the Screening Unit? Also, why had the CC prosecution unit declined a complaint of anti-competition lodged against Vodacom and MTN by Cell C?

The Chairperson commented that CC noted that the volume of merger notifications had increased, thus what economic business had caused such activity? It was pleasing that impact assessment was considered a priority. This was essential, because in the past prosecutions of corporations had occurred, without concern for the impact that it might have thereafter. When had the LPG been handed over to the Minister of Economic Development? Could the Financial Forecasting be clarified? Since 2017/18 there was an increase in Merger Fees, but in the following year 2018/19 the baseline for 2016/17 was reverted to for Merger Fees? He asked for further elaboration on the automotive aftermarket, as collaboration with other African countries was cited. In what manner had the collaboration occurred? It seemed as if CC had included too many Priority Sectors to be able to undertake them all. Were the choices for the Priority Sectors market-dictated or had the choice been self-derived? Would not an extensive number of Priority Sectors divert the attention of CC to matters that it had previously resolved and so exhaust resources on recurring matters? Lastly, how close to implementation was the Memorandum of Understanding (MoU) between CC and the National Prosecuting Authority (NPA)? NPA has highlighted concerns and complaints for review by the CC. What were the issues raised, and how did the CC intend to resolve it?

Mr Molatlhegi Kgauwe, Chief Financial Officer, Competition Commission, answered that CC had a similar discussion with National Treasury and Economic Development Department (EDD) on the fluctuation of Merger Fees, and they had deduced that due to the nature of the figure it was uncertain about the outer years. However, the increase of the Merger Fees in 2017/18 was informed by the increase of fining fees incurred. Next year the figure shall be modified accordingly so the baseline will not be R75 million, but instead the initial R55 million. However, as the year elapses a more concrete figure for Merger Fees for 2018/19 shall be forecast, contingent to the definitive budget that was yet to be confirmed.

The Operational Costs had decreased, because the costs previously incurred were due to enquiries on health care services. During 2017/18 the health care enquiries had scaled down, as the balance of the work for this financial year had just entailed conclusion, thus the operational costs had subsequently minimised. Also, the operational costs had decreased due to the shift from outsourcing. Since outsourcing involved highly skilled individuals and was usually more expensive, the reduction of its usage had decreased operational costs. The Human Resources expense had increased, however, because of the escalation of recruitment of personnel. This had shown inflation, because it was a direct expense on personnel costs, whereas the operational costs previously had included services from non-direct employees.

The Chairperson asked if the Merger Costs had been part of operational costs or human resource costs.

Mr Kgauwe replied that the merger costs were derivative of the operational costs.

The Chairperson requested clarity for the significant decrease in operational costs as it entailed human resources amongst other costs.

Mr Kgauwe answered that the majority of the operational costs were spent on outsourcing and consultants that shall no longer be pursued.
 
The Chairperson understood that the services of consultants were no longer going to be utilised. However, human resources were human capital of which 100 new employees were to be recruited. If so, how would the 100 new employees be adequately compensated if the total operational costs had decreased? Had this insinuated that remuneration had minimised? Also, how would the Goods and Services cost be adequately accommodated given the decrease?

Mr Kgauwe explained that within the stipulated amount for Human Resource there also existed an HR related cost that might have contributed to the large amount for the financial year under review.

Mr Bonakele added that the amount for Human Resource had also encompassed an anticipation of greater volume of employees, of which the expenditure incurred was a reflection of the unprecedented expense CC shall induced for HR going forward. The reduction of consultants, due to the probable nullification of outsourcing, was one of the fundamental reasons for the reduction in operational costs, as employing such services created extortionate costs.

Ms Khanyisa Qobo, Manager: Advocacy, Competition Commission, accounted for the economic reasons that prompted increases in the Merger Costs by noting that there were no exact indication or signs in relation to it. CC had observed trends relating to it, and had discovered that when the economy was moving on either side of the pendulum, i.e. if the economy had grown excessively or was contracting, there was a tendency for greater frequency of merger activity. Therefore, when the economy was growing, escalated foreign investments, acquisitions and, subsequently, merger notifications took place. The last four years had encountered a decline of economic growth, which was a situation that mandated innovation for sustenance. Hence, firms were rationalising and consolidating for their businesses to survive, which results in an increase of transactions for CC. This observation could possibly explain the increase in notifications.

In other words, merger notifications escalated in either a dwindling economy for the sake of sustenance or when the economy was booming for the sake of exponential profit margins amongst businesses, since businesses might perceive it as a larger risk to merge in a stabilised economy. Secondly, the Screening Unit had five employees, which was headed by a manager. Since the Deputy Commissioner has had direct oversight over the unit it was relocated to the Office of the Commissioner. From the five employees, four of them had derived directly from the Cartel, Enforcement and Exemptions (E&E) divisions. The aim of the Screening Unit was to screen the complaints that CC received with the objective to resolve it within three months, thus the level of seniority to ensure the oversight that it had. If cases required full investigations after screening, it would be delegated to the relevant division, such as the division of Cartel, E&E. The team comprises of lawyers and economists. The Screening Unit was also used as training ground for staff to familiarise themselves with cases and the dynamics involved, as the unit was the first interface in which the public had complained to the Commission.

Mr Bonakele answered the questions about the banks, although he expressed reluctance to do so because it was an ongoing case. He had noted that in the public domain, one of the complaints of Standard Bank was that it was not treated equally, however such complaint was devoid of substance. CC has a leniency policy, for which one bank had applied, whilst another bank had settled its balance and the rest of the banks should be dealt with in accordance with the law in the normal course. CC had observed that, thus far, there was no answer to the case of the Commission. However, as soon the Competition Tribunal confirmed the court date, the case shall undergo prosecution.

Next, on jurisdictions, CC has had multiple interactions with other authorities that were beneficial for investigations and merger regulations. CC would co-ordinate national mergers across the board. For instance, CC was reviewing the merger of Monsanto, which had involved cooperation with the USA, EU and the BRICS countries. Some of the mergers were of such a complex nature that the information on how other international agencies had operated within similar scenarios was appreciated. This did not equate to the same decision being replicated in South Africa; instead their approach was observed. Another example of international cooperation was in the banking sector, as the current contravention had occurred elsewhere in the world. Hence, many international cooperation arrangements had existed; some of which were formalised with MoUs, whilst others were informal bilateral interactions. Thus, the undertakings of CC were of an international nature. This had entailed that the Head of Mergers was acquainted with the Head of Mergers of neighbouring countries as well, as interaction often took place between them. This was applicable to the Head of the Cartel division too. International bodies sometimes had initiated requests, such as upon the announcement of the bank collusion case, the Australians had contacted CC, since they too were considering a similar action.

The Competition Commission workshop on automotive aftermarkets had a good outcome. When CC had surveyed the automotive industry internationally, it was discovered that purchasing motor warranty that was specific to the dealership one had bought one’s vehicle from was an occurrence unique to South Africa. In South Africa, when one purchases a vehicle, the exact amount of warranty was concealed from the buyer and it was likely that the warranty was compulsory with an obligation to have the vehicle financed and serviced within the brand’s dealership network. This problem was almost unique to South Africa, because globally every other country had seemingly solved it. Within the EU, there were options to either purchase the warranty or not too. Also, the cost of the warranty was disclosed to prospective purchasers. It was feasible for the buyer not to purchase the warranty only from the dealership, as that would enable the vehicle owner to have the car serviced outside of the network of the brand’s dealerships, as long as the parts used were approved and the mechanics were qualified. The EU have had regulated this system quite well. The Russians had an alternative approach on automotive warranty that entailed a voluntary code of practice by all car manufacturers, which had proven successful. USA and the China have used a cost-system on the automotive warranty. Since many original equipment manufacturer (OEM) were operational across jurisdictions, it could warrant questioning the behaviour of corporations in the countries it traded within.

Addressing the automotive aftermarkets was not restricted to how it had affected the consumers, but involved opening the markets for SME businesses as well. Some mechanics have worked for the branded dealerships and/or qualified, after which they would open up their own workshops. The obligatory warranty with the purchase of a car had prohibited the buyer the freedom to utilise the services of the SME businesses or other mechanics. Allowing the consumer freedom to utilise mechanical services beyond the dealership of purchase, could possibly empower those qualified with TVET certification of Motor Mechanics, as opposed to unemployment or exploitation if proper dealerships would not absorb them into their workforce. This pertained to panel beaters too.

Currently, many forms of restrictions prohibited entry for mechanics and SMEs, which had limited entrepreneurship and competition, and protected the dealerships. The dealerships in many instances consisted of well-known international brands that were already established corporations. A panel beater could become economically self-sustainable and contribute to the domestic economy, by means of competition of services. If services of the SME or of a panel beater were of high quality, it could become part of the industry, as opposed to further empowering international automotive brands which does not influence the perception of South African workmanship as positive or trustworthy, an essential for a viable economy. A culture of entrepreneurship could be cultivated amongst citizens if competition was an opportunity, but this was contingent on the possibility of entry of market. The restrictions of purchase of automotive warranty were a problem currently unique to South Africa.

Next, on the support the Competition Authorities require from government was under discussion with the Economic Development Department (EDD). It was determined that a structure had to be developed first and a submission had been made to the Minister. The structure had included revision of salary to ensure that senior positions would be capable of attracting and retaining the appropriate calibre of person.

Another manner of support that government  could provide was to strengthen the law. The current waiting period for criminal prosecution was a problem, which was a matter that could be fixed by a relatively simple amendment to those particular provisions. CC was of the view that the waiting period could be shortened. This also influenced the MoU with the National Prosecuting Authority (NPA). Currently, the law simply grants authority to the prosecution authorities, such as the police and the NPA, whilst it simultaneously draws the CC and other competition authorities into the matter in a somewhat clumsy way. It was unclear how the investigations from the Competition Authorities were to feed into the criminal investigation process. For example, the provisions in the Competition Act do not provide protocol on how criminal offences were to be investigated. It was seemingly silent on the matter. One would assume that the normal provisions in the Criminal Procedure Act would apply. However, the Criminal Procedure Act does not make allowance for the prior investigation conducted by CC; neither does the legislation provide for investigations conducted by the police. Therefore, those jurisdictions, or rather omissions thereof, were likely to be exploited by defendants or accused persons. Thus it was essential to proceed with caution in harmonising the two pieces of legislation. Subsequently, CC noted a need to respond to the public outcry about criminal offences. An outcry existed, because some felt CC had merely imposed fines without these being a sufficient deterrent. The deterrents consisted of criminal provisions that were difficult to implement, due to the possibility of framing. This loophole required correction that was beyond the scope of the CC. To have it rectified required intervention by government  and the passing of amendments by Parliament.

Similarly, CC has had discussions with EDD about the improvement to eradicate Abuse of Dominance (AoD), which had resulted in useful proposals for amendments to the legislation. It would be advantageous if the process could be quickened. Notably, the legislation proposals by government  was done out of goodwill; also the general and moral support extended was appreciated too. However, there were specific parts of the legislation that required clarification by means of amendments.

Next, the length and extent of outsourcing was peripheral to the resources available. As soon as CC could afford the 100 additional personnel as per the APP, outsourcing would be reduced, and then brought to a halt. However, internal staff members currently could not be relied upon to conduct those outsourced services. As reflected in the document on Focuses, outsourcing had already decreased due to efforts to decrease reliance upon it. However, outsourcing cannot be entirely eliminated until there existed adequate resources for compensation of employees and their training. There were complex cases that required industry knowledge, such as an oil expert, and CC was compelled to outsource the expertise. Therefore, outsourcing might be relied upon for complex cases. However, for the prosecution of simple cases with the Competition Tribunal, internal staff members ideally should be able to prosecute these, and there was no need to hire the services of junior advocates to prosecute such cases.

Next, CC anticipates that the Terms of Reference shall be finalised by the end of July 2017 on the public enquiry on public transport. In totality, CC shall spend two years on the completion of the enquiry. Admittedly, it was quite a complex enquiry that involved several sub-sectors; such as the bus, rail and the minibus taxi system. However, for the sake of usefulness the enquiry would need development within two years, as there were many plans for transportation within the various spheres of government  that this may inform the outcome thereof. For instance, government  has intentions to expand the Gautrain, which would provoke CC to survey efficiency. It would pose the question - how efficient was the subsidy between Johannesburg and Pretoria? Was both the Gautrain and Prasa train systems necessary for the same routes? Gautrain had the upper-middle class population as its target market, whilst the Prasa train system mobilised the poor. Were both systems necessary or did plans exist to impart greater volumes of efficiency instead? The core function of the train system was to mobilise masses of people to eliminate other modes of transportation. Therefore, was this supposed efficiency evident in the train system? Many people preferred the Prasa train between Pretoria and Johannesburg, which greatly impacted on the profitability of the Gautrain.

Next, the Competition Commission had decided not to prosecute the complaint by Cell C against Vodacom and MTN, although problems were identified in the mobile telephone sector. The motivation behind the decision was due to the probable repercussions that might occur, because the sector would change more rapidly than other sectors, and prices recently had the tendency to decrease, such as the cost of calls and the price of data. However, even though the volumes of consumers were huge, the cost of data had not declined sufficiently. The complaint by Cell C was a matter of the cost of off-net calls. CC had declined the case, because by the time the case was ready, it was possible that the cost of calls would be of trivial importance, compared to the significance of the cost of data, since data-consumption was overtaking the usage of calls in many facets. Thus, CC had considered that the best manner to address a market as fast-changing as mobile telephone services was to evoke effective change of legislation. The problem of Cell C was that it was a latecomer that had begun when the incumbents were already entrenched in the sector with advantages. Thus, Cell C callers were disadvantaged with high prices, which resulted in fewer callers utilising its network or other latecomer, Telkom Mobile, as opposed to early entrants, Vodacom and MTN. This problem had emanated from regulation of legislation, because legislators were responsible for licensing Vodacom and MTN in the first place, particularly without consideration of possible new entrants into the sector. Amendments to the legislation should consider a manner of incorporating latecomers onto the same platform to make the market more competitive. Indeed, the mobile telephone sector poses problems with competition. However resolution could be faster if the sector was regulated, as opposed to CC intervening minimally or without effect. Cell C understood why CC had declined its complaint, since to incur change was beyond the scope of the Commission.

 

Next, the CC handed over its market inquiry report into the Liquefied Petroleum Gas (LPG) sector to the Minister of Economic Development on 24 April 2017. In terms of the law, the Minister has ten working days to table the report to Parliament.

Next, the expansive list of Priority Sectors was a challenge for CC, because each sector sought priority for its concerns. Within the Sectors of Priority, segments were prioritised. For instance, within the Banking sector CC was undergoing a sector investigation on its regulation, but no work beyond that shall occur. Thus, even though the banking sector was a priority sector, it was imperative to concentrate on certain facets within it. The sector in its entirety cannot be focused on at the expense of other sectors.

Next, CC had engaged with SAPS about the burglary that had recently taken place, as well as on improvement on security measures. Feedback from an assessment conducted by SAPS was awaited. CC had liaised with the State Security organs due to the high profile investigations that CC was involved with.

Mr Tleane said that the concept of inclusive growth was not an event, but an ongoing process. However, in the view of the Competition Commission, what was the immediate change that government could make to accelerate new entrants into the mainstream economy?

Mr Bonakele answered that the addition of new entrants into the economy was a question of policy. Upon review of the economy and the levels of concentration, it was confirmed that the concerns by various bodies about the constraints of economic legislation were justifiable. CC was of the view that regulations had entrenched dominance of market power. A concrete example was that of the banking sector. It had posed the question, were banks regulated to safeguard the top four banks solely? Understandably, the sustenance of the top four banks were of major significance to the economy, due to deposits of citizens’ finance and the extent of employment it provided. Thus, either maintenance of the stance of protectionism for the top four by means of strict regulation applicable to every level of the economy could perpetuate, or an alternative stance could be introduced that would include a second-tier of banking for new entrants which co-existed with relaxed regulation. If a second tier existed that encompassed requirements that were not as stringent as those that were applicable to the top four, it would introduce the possibility of new entrants into the banking sector. Currently, possibility of entry had ceased to exist, let alone with a risk low enough that if a new bank failed there would be limited implications on the economy. If thresholds were imposed, the notion of ‘one-size-fits-all’ would cease to apply. Not every bank would be willing to take on the risk that Capitec has taken, which was that it incurred losses for ten years preceding its eventual turnaround to profitability.

The Chairperson encouraged the Competition Commission to collaborate with other regulators with the aim of protecting South African enterprises, whilst supporting emerging entrepreneurs which was essential. Another point was if voluntary merging, collaboration or cooperation had faltered to occur, it would become necessary to enforce synergy. If so, how would it be enforced? It appears as though collaboration or cooperation was ideologically esteemed among citizens, but as a national interest it was amiss. Side issues should not deter the collective focus of employment. However, at whose expense were jobs meant to become available if no one was willing to sacrifice accordingly for mutual benefit? Job creation had even become incentivised; but that poses concerns. For how long should such incentives exist; how much longer could it exist due to resources, and if incentivised and the resources run dry, would it be taken to task? Hence, what value was the return on investment of the incentives for large businesses? These issues should be raised in the public domain without fear of favour. Transformation mandated that those grassroot, yet empirically significant, challenges were addressed.

Competition Tribunal
Mr Norman Manoim, Competition Tribunal chairperson, noted its three strategic objectives are to ensure effective and efficient adjudication; develop effective stakeholder relationships, and adhere to good corporate governance and sound business practice.

Strategic Objective 1 Effective and Efficient Adjudication included Tribunal hearing matters within adopted delivery time frames; expeditious conclusion of hearings, and an improved management of information.
• Large Merger Targets include: 75% of large mergers to be set down within 10 business days of filing. Orders issued Target: 95% of orders issued within 10 business days of the last hearing date. Reasons Issued Target: 70% of reasons issued within 10 business days of the order being issued.
• Intermediate and small merger targets include: 75% set down within 10 business days of filing. Orders issued Target: 95% issued within 10 business days of last hearing date. Reasons Issued Target: 60% of reasons issued within 20 business days of order being issued.
• Prohibited practice case targets include: Reasons issued within 100 days after the last hearing date on a simple matter, within 125 days for a complex matter and within 150 days for a very complex matter.
• Procedural matters, consent orders, settlement agreements and interim relief orders: 85% to be issued within 20 business days of the last hearing date for procedural matters. Reasons to be issued within 20 business days of the last hearing date for 90% of those with a consent order/ settlement agreement. 100% of orders to be issued within 10 business days of the last hearing date for interim relief.

Objective 2: Effective stakeholder relationships encompassed communicating with stakeholders; public –press releases, website, social media, learner programs, and stakeholders.
• Targets included: 75% of final merger decisions issued to the press within two business days of the order date. 100% of final prohibited practice decisions issued to the press within two business days of order date. This objective also constituted of revamping the website; publishing an online magazine, and the releasing of an in-house newsletter, all of which required regular commitment.

Objective 3: Accountable, transparent and sustainable entity encapsulated the maintenance of an unqualified audit outcome and compliance requirements, and continued implementation of case management internship.

Challenges for the Tribunal was the limitation of funds to recruit a senior economist in a full-time position. Total income was R48 million (slide 29). Future challenges that could be envisaged were that the tribunal members currently available were insufficient in number to address the volume of cases and hearings pending to be set-down.

Discussion
The Chairperson asked for the job specifications, duties and function of the newly appointed Deputy Chairperson. In essence, what did the role entail?

Mr Manoim replied that this was the first time that the Competition Tribunal had an appointee recruited for the role of the Deputy Chairperson on a full-time basis. The manner of execution is yet be discussed with Mr Daniels. However, currently Mr Daniels was sitting in cases to acquaint himself. The statute itself does not delineate specific tasks for the Deputy to undertake but simply notes that in the absence of the Chairperson the Deputy Chairperson should assume the role and functions. Thus, there was a degree of flexibility, which shall be concluded with Mr Daniels, such as administrative functions; appearing before the Portfolio Committee on Economic Development, and addressing the public, as well as involvement on panels.

The Chairperson asked if the Deputy Chairperson had done nothing beyond attending court cases since his appointment in January 2017? Since it was already May and almost mid-way through the year, there was an assumption that the Deputy would have been entrusted with a case. It was presumed that the duties of such role were clearly outlined. However, the outline could be finalised in discussion, which the Minister of Economic Development could possibly contribute to. The job specification of the Deputy Chairperson should be devised and confirmed when it reports on its Quarter 1 performance.

Mr Atkinson noted that a perennial problem of the Competition Tribunal was personnel, including sufficient persons to deal with the cases. It appears that the problem was resolved by the filling of the vacant positions, yet it seems as though a corrective requirement was necessary for human resources. Was the Tribunal taking measures to employ more personnel? There were court cases scheduled for February 2018 - would there be sufficient persons employed by then?

Dr Cardo asked the Competition Tribunal about the bank collusion case. Were there any other settlements in the pipeline apart from the R70 million fine on Citibank? Since the deadline for acceptance of applications for exception was today, was the Tribunal aware of any being filed? On excessive pricing, he recently read that CC had referred a case to the Tribunal about supply of clinker ash for bricks. Why were excessive pricing cases not as well publicised? What was the timeframe for resolving this excessive pricing case?

Mr Tleane asked for clarity on the aftermath of matters that had been adjudicated. Once a position was announced, which might have been inclusive of conditionality, did the Tribunal continue to have a relationship or once the judgement was made was the matter entirely redirected back to the Competition Commission or other authorities? Had some follow-up on the implementation of judgements been done? The improvements on the website were greatly appreciated, as the constraints on resources were noted. Had the Tribunal any plans to translate its website to Sesotho or isiZulu? It was understandable that the website could not be translated into all eleven official languages, but the most-spoken language after English could be considered. Given the fact that Apartheid was a living history, many citizens may not have the ability to fully comprehend the technicality of the law in English. Lastly, the backlog of cases was a concern. There were 96 complaint referrals enlisted for set down hearings, however merely 15 set down hearings took place. Notably, the legislation required change, but in the interim, what would the Tribunal advise as an enhancement to accelerate the pending time.

Mr A Cele (ANC) asked what the duration of the Learner Program was.

The Chairperson noted that the Tribunal spoke about challenges around constraints of personnel, despite  two executive vacant positions being filled. Was this personnel for the legal sector or economists? Perhaps the Tribunal should consider one or two economists on a permanent basis as the field of economics contained technical calculations. Could the Tribunal outline its additional personnel needs, as opposed to insinuations? The Portfolio Committee was interested in supporting the Tribunal, but it essential to be informed of the particulars that it required support for.

Ms Janeen de Klerk, Chief Operating Officer, Competition Tribunal, answered that this was the first occurrence of the Learner Program, and extensive time and preparation from the Operations office had been invested into it. It was a one-day visit, where both the Competition Commission and the Competition Tribunal had addressed the learners. The difference between the two institutions was outlined; the CC had briefed the learners on the dynamics involved in their work and an internal case manager had explained the relevance of the Tribunal. Prior to the arrival of the learners, a case study on the bread cartel that elapsed years ago was prepared for their engagement. It was not a long-winded program, but was sufficiently short for impact, ensuring that the learners were fully equipped with understanding the dynamics involved. If any pupils had further interest in the institution, they could contact the office of the Operations Officer, and be assisted to undergo work during vacations as a means of gaining experience. The program was meant to introduce pupils to competition law and provoke interest for competition law and law in government.

The Chairperson asked if constituency offices could arrange for their local schools to attend future Learner programs in Pretoria too? Or could an employee from the Tribunal be assigned to go to schools and present talks during their career workshops?

Ms de Klerk replied that the main person to contact would be the Media Liaison Officer, Chantelle Benjamin. The Tribunal encourages anyone who is interested, to visit the premises and be enlightened on how cases were conducted by the Tribunal. However, the logistics may be prove challenging, because the Tribunal currently does not have a budget allocation for the transportation of scholars. Accommodating one small group of learners was feasible, but if it were to become an obligation, the Tribunal would require enablement to execute it. Initially, the schools located in close proximity are considered, but if any other situated further away are interested, they may connect with Ms Benjamin or herself - the details was on the website. Another initiative was collaboration with youth projects offering skills training and internship placement. The Tribunal has secured three vacation interns through this partnership.

Mr Manoim answered the queries about human resource capacity by noting that the Tribunal was constrained by legislation to have 11 members only. As a result, the Tribunal had exercised caution with case management and the ‘doubling up’ of panels. One panel was run at a time, and occasionally two panels had run simultaneously. Panels contained three to four Tribunal members. The second panel would not have more than one sitting a day. Therefore, the Tribunal had considered having two to three panels sitting simultaneously, but this may be problematic as the part-time personnel have full-time careers elsewhere. The part-time staff can make allowances for one day at the Court, but they might not be able to warrant ten days at a time. Better case management could also include the American ‘rocket docket’ method. This would entail that instead of ten working days for Court proceedings the case would be completed within three working days, but this would require immense discipline from the lawyers.

Mr Manoim said the Merger cases were successfully completed quickly, because having the transaction completed as soon as possible was incentivised. The same method could work successfully with the Restrictive practice cases, because lawyers had the tendency to prolong those cases, in the hope of getting someone off. The method was a manner of altering the legal culture.

On the query about absorbing economists as Tribunal members. Three out of the 11 members were economists, and the Tribunal would appreciate raising that ratio, due to their technical ability to analyze data as it was of paramount importance. However, the decision was for the Minister and the President to perform. Within the staff make-up there was an economist, who was a case manager. The Tribunal had, from time to time, considered employing a more senior person in the Economics role as a Case Manager and not an actual Tribunal Member, who would be on a panel. The recruitment of more Economists was a challenge that needed to be addressed. In fact, an economist had written the decision taken by the Tribunal in the Sasol case. Yet, a judge/lawyer made the appeal court decision and has drawn conclusions on the stance/decision taken.

On the banks collusion case, the Tribunal was aware of only one settlement, i.e. Citibank. Other discussions that were pending with the Commission cannot be commented on. 18 firms had been respondents in the case; three firms were linked and it was the applicants for, Citibank had settled, which left 14 respondents. Today was the deadline for filing exceptions. Exceptions could be explained as not an answer to the case, but it was a procedure by which the firms could say to the Commission, “that the case and referral against it was deficient”. The Tribunal had set up a timeframe to accept these exceptions by today. Thus far, only two respondents,  Standard Bank and HSBC, had filed their exceptions. However, more applications were expected by the end of the day, as lawyers have a tendency to file late in Tribunal proceedings. Only once the exceptions were decided by the Tribunal, respondents would be obliged to file their answers. The reason for this was that if the exceptions were accepted, the Tribunal would give the Competition Commission opportunity to amend its referral, because it would be unfair for a firm to have to answer only to have the referral changed. This was to ensure fairness. According to the timetable, Tribunal will hear argument around exceptions around 20 and 21 July. Exceptions would be accepted as good or partially good, if the Commission should amend or whether the case ends in relation to the referred and the process of such time. Litigation of this nature, unfortunately takes a long time to proceed.

Next, to answer the query on the imposition of conditions, it should be noted that conditions could be posed either in a case of a Merger or a Restrictive Practice Case. When conditions were imposed in a matter, it was the job of the Commission to enforce that the conditions were carried out - this was expected within the timeframe of submission deadline given by the Tribunal, and if the Commission had discovered that the conditions were violated, it would revert to the Tribunal for further enforcement. The Tribunal did not have the resources or design too carry out the enforcement, because if so, it would embrace the role of prosecution, and no longer serve its role of jurisdiction.

Next, the Tribunal shall consider the recommendation to add other official languages to the website. Jargon like Abuse of Dominance and Restrictive Practices specific to Competition Law required intelligent translation ensuring that the essence of the explanation was not lost. Translation could be introduced for major public cases that were transpiring in the public domain, for instance the bank collusion case could be translated to inform the public about what it had comprised of and where it was heading.

Next, the excessive pricing case cited was still with the Commission and had not yet been referred to the Tribunal. The reason it was rarely heard of, was not because few excessive pricing cases had taken place, but because the precedent set by the Court was quite demanding of the Commission to such an extent that all of the litigation it had undergone on it was unsuccessful such as Arcelor-Mittal and Sasol. There had been, however, instances of settlement of excessive pricing. And interestingly, Arcelor-Mittal in the recent excessive price case had settled a fine of R1.5 billion and settled the excessive pricing case by warranting a pricing remedy, but it had not acknowledged it had imposed excessive pricing. There had been a previous case of excessive pricing with Sasol that it had settled by selling off a plant.

Lastly, on the pending 96 complaint referrals from the Commission; the procedure was that the Commission would need to send a complaint referral to the Tribunal, after which the respondent firm would need to file its defence, which was an answering affidavit, followed by reply paper by the Commission and then the process of discovery, which was the exchange of documents, was pursued. Until this entire process had taken place, the case was not ready to be set down. Therefore, the 96 were simply the number of complaints referred to the Tribunal, and was not the number of cases ready to be set down, thus slide 34 gives the wrong impression about it.

The Chairperson asked if that was inclusive of the 60 which were not yet ready.

Mr Manoim replied that the statistic of 60 was a different manner in which the Competition Commission counted complaint referrals, as opposed to the manner the Tribunal used. Sometimes if the Commission wanted the same team on four or five cases it would object to the possibility of it occurring at the same time. Therefore, the cases were conducted simply on the basis of the need of the Tribunal, but were peripheral to the needs of the Commission and the private parties involved as well.

The Chairperson noted that the statistics were confusing. Slide 33 reflects 96 cartel complaint referrals and 16 other type of complaint referrals. The same amount was used on slide 34 to divide the categories of pending set down (96) and actual set down for hearing (15); whilst a pending decision was one complaint referral.

Mr Manoim agreed with the Chairperson but said it was a mere coincidence that the same number was reflected for both. Altogether there were 112 referrals, of which 15 were already set down, and inclusive of either type.

The Chairperson advised that the revision of the 96 complaint referrals were to be done for the sake of accuracy, as it currently appears confusing.

Ms de Klerk clarified that the technical error would be improved upon in the next presentation.

Mr Tleane said the presentation indicated that for the Tribunal to work effectively in the future, it might need to expand its human resource capacity. Was an organogram submitted to the Minister of Economic Development to that effect as a means of evoking change?

Mr Manoim answered that the main problem in the increase of Tribunal Members was discussed with the Minister including various ideas on how to resolve the matter. An increase of intake would entail legislative amendment. Regarding recruitment of a full-time economist, a proposed candidate was listed on the organogram sent to the Minister. However, having funds for adequate compensation is the question, as the salary level of economists at that level was quite high as it would need to compete with the private sector.

The Chairperson asked if the Tribunal was satisfied with the value that the enlisted economist had brought to the institution.

Mr Manoim replied that the Tribunal had not yet recruited the services of the proposed candidate. At the moment there was an economist in a junior role that was fulfilling the function, but he was being developed, and he had derived from employment within the Commission. The organogram outlines the intention to recruit an economist in a much more senior role, as the economist in the junior role only had a few years experience.

In reply to the Chairperson repeating if the request was outlined in the organogram to the Minister, Mr Manoim said that it was, indeed, outlined in the organogram to the Minister of Economic Development.

The Chairperson concluded that the concerns raised have been noted for consideration, and evaluations on it as well as overall progress was expected in engagement on the Quarter 1 report. The Competition Tribunal and the newly appointed Deputy Chairperson was wished well.

International Trade Administration Commission of South Africa (ITAC)
Mr Siyabulela Tsengiwe, ITAC Chief Commissioner, noted its key objectives were to ensure:

• contribution to employment creating growth and development through effective delivery of international trade instruments
• strategic alignment and relevance with the Economic Development Department and national agenda
• organisational efficiency and effectiveness of ITAC.

The make-up of its human resources was 131 funded positions within its establishment which excludes 20 contract and internship positions (see document). The workforce at 31 March 2017 was 126 with 5 vacant positions; these excluded contract and internship positions. Of the 126, core business pertained to 69; and support services had 55 personnel; excluding two executive management positions. Employment equity was:
• Gender: Males (44%); and Females (56%).
• Race: African (83%); Whites (10%); Coloured (2%); and Indians (5%).
Mr Tsengiwe noted that having incurred reduction in personnel, those yet employed were expected to do additional tasks. However, those entrusted with additional tasks beyond their call of duty would require due remunerative compensation.

ITAC expenditure had steadily risen against total revenue. The resources of ITAC could be compartmentalised as follows: during the 2014 MTEF allocation, ITAC’s baseline budget for 2015/16 and 2016/17 was reduced by R4.8 million and R7.3 million respectively which totalled R12.1 million. The shortfall caused by that reduction was financed from ITAC accumulated surpluses, which at the end of 15/16 was R19.9 million. The remaining accumulated surplus was expected to be fully utilised by the end of2017/18.

He concluded that ITAC had prioritised the following projects for 2017/18: International Trade Administration Amendment Bill (ITA) Amendment Bill; review of Anti-Dumping (AD) Regulations; strengthening reciprocal commitments; impact assessments; review of Safeguard Guidelines in line with the Economic Partnership Agreement (EPA) and the impact study on the Price Preference System.

Discussion
Dr Cardo queried the proposed changes around the price preferences of December 2015. It was known that ITAC was to undergo written and oral submissions, as backlash was encountered from the players of the scrap metal industry. There was particular concern about the proposed change making Port Elizabeth the sole port for such import and export, since the impact of probable loss of jobs were dreaded. Could ITAC grant the outcome of those oral and written submissions? When will the guidelines be finalised by way of a policy directive?

Mr Tleane asked about the investigation on anti-dumping duties, as China posed a major concern. However, were any challenges incurred due to anti-dumping duties by the USA and Europe, and if so what were their roles? On tariffs on interventions, could the benefits on downstream users be clarified? It was assumed that ITAC was conducting ongoing monitoring and assessment. What was the tangible benefit for downstream users? When shall ITAC establish a committee of stakeholders to monitor the impact of the change in tariff on steel prices, for downstream users, as well as the performance of Arcelor-Mittal (AMSA) on the commitments it had made?

Mr Tsengiwe replied that ITAC had undergone a consultative process involving all stakeholders, which was completed. ITAC had considered all relevant comments and submissions made by the stakeholders. The guidelines administered by ITAC, as per the policy directive of the Economic Development Department (EDD), were not finalised yet, thus no administrative changes could occur to the price preference system.

With reference to slide 12 on the trend analysis on anti-dumping investigations, from 2005/6 there was a decline in ITAC initiating investigation on anti-dumping duties, due to bilateral trade arrangements with China. As of 2005, China was granted market economy status. This means that when ITAC was calculating anti-dumping duties, ITAC was prohibited from usage of alternative information, such as third party countries and normal values that were based on cost of production. Once the Chinese companies cooperate, ITAC was obligated to use the information that the Chinese had provided on what was known as normal value. When this occurs, the difficulty to decipher the dumping margin would be induced, which poses a challenge. The fiercest competition on industrial goods comes from China. The USA and Europe pose a challenge mostly on agricultural goods. Industrialised nations tended to highly subsidise their agricultural sector. However, when ITAC had tried to act against subsidised goods, it had encountered that the rules were quite stringent. Experience notes that the developed countries had astutely designed their subsidies to entail negation of the WTO rules.

On the benefits to the downstream steel industry, ITAC had self-initiated an increase in duty on the finished products by the downstream, because the industry had experienced input cost pressures from the increases that ITAC had effected on primary steel. This had provided some relief for the products that were initially recommended to the Minister for increased tariffs. In some cases, ITAC had created rebates for the downstream on input products that were not manufactured domestically.

On the performance of AMSA, a committee to monitor its performance against its commitments was established by the Minister. The first report produced by the committee was submitted to ITAC in December 2016, was subsequently submitted to the Minister and revised for pragmatism.

Mr Tleane commented that in the presentation it says ITAC will establish but the committee was already established. The preamble of the presentation holds both the Minister of Economic Development and the Minister of Trade and Industry extensively around the political economy, as opposed to satisfying the economic situation within the global realm. From ITAC's assessment, how would that affect the trade development and cooperation agreements, as well as contingency plans? Secondly, by use of its instruments, what role can ITAC play in economic integration of the continent of Africa, given the challenges of the G22 partners?

Dr Cardo queried the priority project plans of ITAC. Since the ITA Amendment Bill was stipulated as a priority, what were its objectives and when does ITAC envisage it being tabled in Parliament?

Mr Tsengiwe replied about the changed global trade policy landscape, and said ITAC was responsible for the unilateral aspects of trade policy. The bilateral, original and multilateral trade arrangements were within the scope of the Department of Trade and Industry (DTI). The Minister made statements on what Brexit meant for South Africa. It poses no threat with the trade arrangements between South Africa and Britain. Emphasis was made to focus upon maintaining the relation of give-and-take under the Economic Partnership Agreement (EPA) that South Africa has with the EU. On continental integration, the scope of ITAC was limited, as this also pertained to the DTI. The negotiation of the tripartite; continental free trade area designation, and value chain development within Africa to ensure that industrialisation takes place were examples of pursuits of continental integration executed by DTI.

He explained that the proposals made to DTI on the ITA Amendment Bill cannot be publicly stated yet. However, EDD was responsible for the legislation. Yet, some of the administrative areas that ITAC sought strengthen were the control measures of import and export, particularly for investigations and successful prosecution of players that were found to be non-compliant. Currently there was a weakness around enforcement. Hence, ITAC had proposed changes to these administrative loopholes that required strengthening. It was advisable that DTI presents on this matter to the Portfolio Committee.

Dr Cardo noted that in the budget speech last year, the Minister of Finance had mentioned issuing a directive for ITAC to consider commitments on investment, jobs and so forth. How had the directive manifest in the daily happenstances of ITAC? Could an illustration be given?

Mr Tsengiwe replied that at the time that the Minister had issued the directive on the reciprocal commitments, in particular domestic production, investment, jobs and prices; ITAC had already started requesting these commitments. However, the directive of the Minister had strengthened the legal arm of ITAC for these reciprocal commitments. Thus, in all of the investigations going forward, the applicant has to provide ITAC with the commitments. Once support was provided for, ITAC would monitor their performance using the impact assessments after one year. Three-year reviews also existed. In the particular case of steel, the earlier cited monitoring committee had existed. Resources posed a challenge to effectively monitor all of the industries on the reciprocal commitments made. However, ITAC was proceeding with its available resources, because it was financially impractical to have a structured mechanism, as with the steel monitoring committee, for every industry. Currently, ITAC had utilised the Chief Economist Impact Assessment to monitor performance on the commitments.

The Chairperson thanked the three entities for their contributions.

The meeting was adjourned.