Competition Amendment Bill: deliberations

Economic Development

05 September 2018
Chairperson: Ms E Coleman (ANC)
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Meeting Summary

The Portfolio Committee on Economic Development met to discuss all sections of the Competition Amendment Bill, 2018. As this was a very technical Bill, the Members agreed to refer what seemed unclear to them to the Minister for a response. Guidelines were a contentious issue, with the state law adviser advising Members that the proposed amendments provided for a process of consultation before the guidelines could be published. The amendment required a body interpreting or applying the Act to take the guidelines into account, even though they were not binding.

Some Members objected to the 25% of turnover punitive penalty clause for repeat offending firms, arguing that it was far too high and could potentially cripple firms. Others pointed to the removal of the “yellow card” approach, based on the input from Business Unity South Africa (BUSA).

South Africa did not have a provision in law that enabled the national executive to consider national security issues involving a foreign acquiring firm. The government, as a result, had reviewed the legal systems of many different countries in the world that provided for national security reviews of investments by foreign acquiring firms.  The Committee was of the view the matter should be consulted further before it could take a decision on it, and asked the legal advisers to do a comparative analysis that paid close attention to other developing countries.

When the Committee was deliberating, it kept its mind on three focus areas in the Bill which covered market inquiry and remedies; clarifications on the role of competition and public interest in mergers, including national security provisions during mergers; and the overview of the Bill on institutional improvements. While it agreed on a number of concerns and proposals brought forward, three issues would be referred to the Minister for advice. These were the 10-day period within which appeals should be lodged regarding the outcomes of a market inquiry; the new clause or provision dealing with the powers of the Competition Commission or Tribunal on divestiture orders, which had to be confirmed by the Competition Appeals Court; and institutional improvements and the cost of the Bill. Members commented that the core business of the Bill was to empower previously disadvantaged individuals, and said it was better for South Africa to have its own laws that were addressing its own problems.

Meeting report

The Chairperson said the Committee had received the Minister’s presentation and the analysis from the Committee’s researcher, Ms Mwabisa Mbelekane. Today’s agenda was to focus on discuss everything relating to the Competition Amendment Bill, and the Committee would be led by the researcher and the state law adviser to clarify some of the provisions.

Competition Amendment Bill: deliberation

Ms Mbelekane said the first focus area would be on prohibited practices.

Prohibited practices -- Collusion between firms -- Abuse of dominance by a firm

About 30 submissions had been received, and the documents sent to members summarised the key issues that had been raised.

In Sections 4 & 5, the aim of the proposed sections was to provide greater certainty on what was permitted, collaboration, and prohibited collusion between competitors, customers and suppliers.

Section 4 of the principal Act was amended:

(a) by the substitution in subsection (1)(b) for subparagraph (ii) of the following subparagraph:

“(ii) dividing markets by allocating market shares, customers, suppliers, territories or specific types of goods or services.” Or/and:

(b) by the addition after subsection (5) of the following subsection:

“(6) The Competition Commission must publish the guidelines in terms of section 79 regarding the application of this section.”

The main issue here was that “market shares” was being inserting just before “customers.” Were Members happy with the proposed changes, or what were their opinions and views?

The Chairperson reminded Members that the proposed insertion was that the Commission must publish a guideline in terms of Section 79 regarding the application of the section.

Dr J Cardo (DA) said the Law Society, in their written submission, had argued that the new proposed Sec 83(f), which would cover the new Sec 5(ii), had referred to a Constitutional Court case early this year which had found that guidelines had a limited application. This should be considered by the Committee in their deliberations as it might encroach in the separation of powers principle.

The Chairperson asked whether guidelines could be the basis for a court contest.

Mr Sisa Makabeni, State Legal Advisor answered in the affirmative, although that could not be the sole condition to be considered, because other factors also could be considered.

The Chairperson referred the Committee to  the amended guideline in Sec 79 of the previous Act stating that the new following section had been substituted for section 79 of the principal Act;

Guidelines

79. (1) The Competition Commission may prepare, amend, replace and issue guidelines to indicate the Commission’s policy approach to any matter within its jurisdiction in terms of this Act.

 (2) A guideline (prepared in terms of) referred to in subsection (1)

(a) Must be published in the Gazette: but

(b) was not binding on the Competition Commission, the Competition Tribunal or the           Competition Appeal Court in the exercise of their respective discretion, or their interpretation of this Act

In subsection 4, it states that the guidelines referred to in section 1 was not binding, and any person interpreting or applying this Act must take it into account.

The summary of the Bill, where it speaks to the emended section 79, states that it seeks to amend Sec 79 of the Act . Sec 79 concerns guidelines issued by the Commission, and the amendments provide for a process of consultation before the guidelines may be published. The amendment requires a body interpreting or applying the Act to take the guidelines into account, even though they are not binding.

Mr S Tleane (ANC) stated that though the language seemed technical, the main focus of the Committee must be on the guidelines which create an avenue for the Committee to deal with, even though it was not specific. The guidelines, though they give some directions, were not necessarily binding. As a result, it was unwise for organisations such as the Law Society to project these guidelines as a rule or law, because there was a difference between the two. At the end of the day, a roadmap was still needed which could be developed through guidelines.

Dr Cardo proposed that the Minister, when he cames next week to respond to the Committee’s general discussions, points 27 to 39 in the law society’s written submissions should be addressed. The Minister should state whether he believed there was any validity to the guidelines. The Law Society’s point 38 in the written submissions did not reject the powers of the Competition Commission to issue guidelines, but it believed those powers should not extend to determining the factors and benchmarks that would be relevant to determining prohibited conduct, as this lacked constraints and effectively amounted to exercising a law-making function. It would be interesting to see the response of the Minister to these inputs.

Ms Mbelekane said in relation to the guidelines, the Competition Commission when presenting to Committee had said that when they prosecuted some cases involving collusion and price fixing, some companies feigned ignorance of the law. The reason for this section therefore was to give an indication of what was, and was not, prohibited in terms of price fixing, market allocation and all other prohibited practices under the section.  As a result, these guidelines were necessary.

The Chairperson asked, why not put regulations instead of guidelines? Why did one not just regulate so that it became legal?

Ms A Mfulo (ANC) agreed with the Chairperson, mainly because guidelines were not binding, and therefore had no force of law. The same companies could turn around and still claim ignorance if they were governed only by guidelines instead of regulations. The reasons the companies agreed with guidelines instead of regulations was because they knew guidelines could be manipulated, just as they had done before.  There were just too many loopholes in guidelines which, of course, were not binding.  There was a need for regulation.

Mr Makabeni interjected to say that some submissions had also suggested codes of practice instead of guidelines. What the Law Society was saying was that they were not against guidelines, but rather whether the guidelines determined the conducts that were prohibited. He suggested further consultations before this Bill was passed so that the sector was properly guided.  

He said that looking at section 4 of the existing Act, it stated what practices were restricted. There was a new insertion, such as it was prohibited for a dominant firm to charge an excessive price to the detriment of customers.  Though the Act stated what was prohibited, there were still some grey areas. Guidelines were already there in the Act.

The Chairperson sought clarity of what constitutes a “horizontal practice.”

Ms Mbelekane clarified that for instance if SASKO and ALBANY -- both bakers and on the same level --colluded to fix the price of bread, or allocate customers and suppliers, that would constitute a horizontal practice. If a wholesaler and retailer colluded, that would represent a vertical practice.

Mr Makabeni further clarified that Sec 78 of Act empowered the Minister to make regulations for the purpose of the Act. These regulations were typically issued to govern the rules of mergers, and they were all in the Act at the moment, issued by previous ministers. He further clarified that there was the Act, the regulations -- which were referred to as a subordinate regulation which was binding but was not law -- and then guidelines, which were one step below and not binding. However, with regard to Sections 4 and 5, there had been no regulations and guidelines issued previously in connection with this two sections, but rather in connection to other sections of the Act -- for example, with respect to section 12 that dealt with mergers. There were regulations that were issued there.

Ms Mbelekane added that the Committee was still looking at Sections 4 and 5. Guidelines had been mentioned in that section and in section 8, under the exemptions. Different submissions had spoken to the different guidelines in terms of prohibited practices. Did the Committee want them or not? Looking at the submissions of Genesis, with reference to Sec 8, it had said that should the Committee want to dispense with guidelines, they could have a code of conduct approach that sets out clear guidelines facilitating the enforcement that could help avoid costly litigations. So the legislature could come up with regulations and a code of conduct if it was concerned with the non-binding nature of guidelines in sections 4 and 5.

Dr Cardo said that the two could not be divorced, because the concerns from the Law Society were related to guidelines as they applied to the new section 8 covered by clause 5. The Bowmans submissions had said the following: “Our clients’ primary concern for clarity still persists in the 2018 draft Bill in the sections relating to prohibited practices, including the abuse of dominance. Given the removal of the yellow card provision, absolute clarity was critical.” What they meant was that if guidelines were going to be published, the provisions of this Bill should not actually be operative before those guidelines gave greater clarity.

The Committee agreed to allow the Minister to clarify sections 4 and 5 in relation to guidelines.

Mr Makabeni reminded Members that the requirements with regard to judgments in the court as they pertained to subordinate legislation, was that the Act could not be brought into operation before those provisions were in place. It did not mean that the legislature could not proceed with its work. The requirement, as stated in the last section of Bill, was that it could come into operation only after proclamation by the President. The hurdle was that the guidelines had to be in place before he could sign the proclamation and publish it in the gazette, otherwise his action could be declared irrational and unconstitutional.

The Committee had no problems with amended S4 of the principal Act as follows;

Section 4 of the principal Act was hereby amended:

 (a) by the substitution in subsection (1)(b) for subparagraph (ii) of the following subparagraph:

‘‘(ii) dividing markets by allocating market shares, customers, suppliers, territories[,] or specific types of goods or services; or’’; and (b) by the addition after subsection (5) of the following subsection: ‘‘(6) The Competition Commission must publish guidelines in terms of section 79 regarding the application of this section.’’.

On the issue of dominant firms, the current S7 of the Act states that a firm was classified as dominant if

  1. it had 45% of that market;
  2. it had 35% or less than 45% of that market, unless it could show that it had no market power;
  3. it had less than 35% of that market, but had market power

The issue of abuse of dominance was contentious, because no one firm individually had 45% share of the food market, for instance. As a result, 10% being a threshold to measure dominance had been floated. This was because 95% of the food market was dominated by six companies. If 95% was divided by six, one had only a 15% share individually. How then should dominance be defined, because the Bill stated that a company must have 45% of the market share to be classified as such.

Mr Makabeni explained to the Members that abuse of market power could still come under (c) above, even if a firm had less than 35% of market share, but it was proven that it had market power, and it was still dominant. This Bill did not change the definition of market power.

On excessive pricing, the majority of the stakeholders had asked why the legislator had not defined excessive pricing in the proposed Bill in place of the guidelines, commenting that this was contrary to the rule of law. They had argued that the guideline proposal was potentially unconstitutional, because it delegated the law making power of the legislature to an organ of state (the Competition Commission), which therefore encroached on the separation of powers. This was referred to the Minister for a response and clarification.

S9: Price discrimination

  • Price discrimination was a pricing strategy that charged customers different prices for the same good or service.
  • The Act prohibited price discrimination by dominant firms, if the effect was anti-competitive and the goods or services were comparable in terms of grade quality.
  • Anti-competitive test: The Bill proposed a change to the test for anti-competitive behaviour (i.e. removal of “substantially”), which would allow small and medium businesses to also bring cases against dominant firms.
  • Evidentiary burden: The Bill clarified that if price discrimination had the effect of impeding a class of small and medium businesses and black-owned business, then the dominant firm must show that its actions were justified.
  • Pricing to suppliers: The Bill clarified that price discrimination could apply to a dominant firm that was either a supplier or purchaser of goods or services.

The issue here was the reverse onus, because the evidentiary burden was on big businesses who had to justify their actions. It also applied to dominant firms that were either a supplier or purchaser of goods. 

Section 9 of the principal Act was hereby amended:

(a) by the substitution in subsection (1) for paragraph (a) of the following paragraph:

(a) ‘‘it was likely to have the effect of [substantially] preventing or lessening competition;’’ and

(b) by the addition of the following subsections after subsection (2):

“ (3) When determining whether the dominant firm’s action is prohibited price discrimination, the dominant firm must show that its action does not impede the ability of snall and medium businesses and firms controlled or owned by historically disadvantaged persons to participate effectively.

  (4) The provisions of subsections (1) to (3), read with the changes required by the context, apply to a dominant firm as the purchaser of goods or services.”

Objections raised in the submissions were that deleting substantially under this section and introducing “prevent or lessen competition” under this section would make it easier to prove price discrimination; it would make it difficult for large firms that victimized small and medium enterprises (SMEs) and black owned firms, by charging higher prices and preventing such firms from participating in the market.

Dr Cardo wanted to know the rationale behind the Minister removing “substantially” from the amended Bill, and walked the Members through the negative consequences of that term.

S59: Penalties

S59(1)(b) Removal of “yellow-card” provisions: The Bill removes the so-called yellow-card provision for rule of reason offences, and provides for guidelines to be published by the Commission.

S59 (2A) Tougher penalties for repeat offenders: The Bill provides for higher penalties for repeat offences, up to a maximum of 25% of annual turnover.

S59(3A) Penalties for controlling companies: The Bill provides the Tribunal with the power to extend the penalties to companies who control a respondent firm, if they knew or reasonably ought to have known about the offence; and introduces joint and several liability.

S59 (3)(d) Aggravating factors: The impact on small and medium businesses or black-owned businesses may result in higher penalties.

S59 (3)(h) Mitigating factors: If the firm was not previously guilty, or if the offence was not covered by guidelines, this may be taken into account when determining the appropriate penalty.

S67 (1) Prescription: The amendment clarifies the wording of the section so that firms could not argue that the Commission was unable to investigate the matter because it had prescribed.

Ms Mbelekane reminded Members that the main issue here was the removal of the yellow card provision. In the submissions made, stakeholders were split between agreeing and disagreeing. Others were concerned about the tougher penalties of repeat offenders, to 25% of annual turnover.

Dr Cardo objected to the 25% of turnover clause, because it was far too high and could potentially cripple firms. He also objected to the removal of the yellow card, based on the input from Business Unity South Africa (BUSA), which had suggested that the yellow card be kept and only do away with what the Competition Commission had found in respect of a prohibited practice. This objection should form part of the issues to be addressed by the Minister.

Mr S Tleane (ANC) added that the observation from the public submissions was that the majority of the stakeholders felt that the current system of penalties for defaulting companies was not enough deterrent; and that was why one saw many repeat offenders. The current proposed 25% of turnover fine was not going to happen if the law was not broken. It served as enough of a deterrent to errant companies.

Ms Mfulo agreed with the yellow card removal, because the system was abused. Companies knew that nothing happened to them if they broke the law even for a second time. Its removal would cut down the rate of abuse of the process. The 25% penalty was not for first offenders, but rather for second and consecutive offenders.

The Chairperson also agreed with the proposed penalties, because companies had virtually been getting away with murder. She asked the state legal adviser whether the proposed fines could lead to legal challenges in court.

Mr Makabeni answered that he did not think so, and that mitigating and aggravating circumstances would rather be considered by the courts before imposing those fines.

Questions were asked on how the Department had arrived at the 25% penalty for companies that were continually found to have broken anti-competition laws. The Chairperson agreed that the Minister would be called to explain the rationale behind the 25% penalty for repeat offenders.

Mr Tleane contributed on the issue of holding a parent company responsible for any transgression of the law by its subsidiary in SA. He supported the proposed Act by arguing that it was the right thing to do.

Dr Cardo agreed with the submission of the Law Society, which had submitted that it was too broadly drafted as it stood, arguing that it applied only if the controlling firm had actively directed the conduct of the respondent or subsidiary.

Mr Makabeni clarified that the reverse onus provision was not applicable to this section, but the Act allowed the Commission to issue guidelines to any part of the section. As a result, it was open to the Competition Commission to issue guidelines on what would be reasonable knowledge.

The Chairperson supported the Law Society’s objections to a certain extent, saying that she wished it was not as broad as it was. She said the Minister would shed more light on it next week.

Ms A Mfulo (ANC) remarked that even if the country was following international trends or laws, it was important for South Africa to have its own clause about what should be done or not done.

The Chairperson said that was why in some countries, foreigners were not allowed to own companies.

Mr Makabeni explained that the current Act stated that normal court orders applied. The same rules that would be applied to one in another country would also apply locally.

The Chairperson said the country was a signatory to many international agreements. The country was able to contact other countries, just like the other countries which were able to contact SA.

Mr Makabeni stated the decision of the Competition Tribunal had the same status as a large court.

Market inquiries

Ms Mbelekane introduced the Committee to Focus Area 2 of the Bill, which dealt with expanding the use of market inquiries to deal directly with economic inclusion and economic concentration, and it was providing the Competition Commission with the power to take action to remedy the adverse effects.

She indicated a market inquiry may be held on the state of competition as well as the levels of concentration and the structure of a market to determine if there was an adverse effect on competition. The Bill stated that the Commission may initiate a market inquiry if it had a reason to believe there were factors which impeded, restricted or distorted competition. She proposed the insertion of a new phrase in S43A.

Dr Cardo disagreed with the removal of the words “impede, restrict or distort competition” in S43A (2). He said these words could not be removed just because they were seen to be vague, and there was no motivation for their removal.

Mr Tleane said the desire was to maintain South Africa’s own laws, to be in line with international laws. The core business of the Bill was to empower previously disadvantaged individuals. The amendments were directly about that.

Dr Cardo said his other problem was the use of the term “adverse effects,” which should be replaced with “substantial prevention or lessening of competition,” which was more generic.

Ms Mfulo said it was better to have our own laws that were addressing our own problems.

The Chairperson said there were two arguments. One argument was about not lowering the standards amend the Bill was amended, and the second stated that the Bill should be amended in order to solve our own problems.

Mr P Atkinson (DA) said if the terminology was easily defined, then that was fine. However, if it was not easily defined, that was going to be problematic. He warned the Committee to be careful about changing laws that would result in it being taken to the courts.

Mr Mbulelo Ruda, Parliamentary legal adviser, said that Bowmans’ submission had been more on “adverse effects” than on “substantial prevention”. He suggested the threshold in inquiring about the market should be higher, whereas the state had indicated that if one started inquiring about the market, the threshold should have low adverse effects.

Mr Atkinson said by lowering the threshold one would be putting existing companies or reputable players in danger.

The Chairperson pointed out that S43A (1) stated that there was no firm that could say it had been affected by the lowering of standards. Each and every country had its own policies. It must be noted that standards might be ideal for one person’s situation, but not ideal for another. The term “lowering of standards” was relative, and should be contextualised.

Ms Mfulo indicated that Bowmans’ standpoint was all about self-interest, and they had not been honest in their submission.

Mr Tleane reasoned that by looking at a sentence and accepting it the way it was, rather than thinking of it, did assist the Committee. He said that “adverse effect” implied one did not wait until the damage was big. By making an inquiry about the market, one was not affecting any company.

The Committee then agreed to accept S43A1 and 2.

Ms Mbelekane informed the Committee that S43B was about initiating and conducting market inquiries.

The Chairperson indicated this section was said to be not fully implemented, though it had the attention of the President. She then wanted to know if there was a need to amend something that was partially, or not fully, implemented.

Mr Makabeni said his understanding was that Parliament was empowered to change legislation if the President had signed the Bill into law.

Mr Atkinson asked what the timeframes for the commencement of market inquiry were.

The Chairperson said there was provision in the Bill for the Commission to apply for extension of time from the Minister.

Ms Mbelekane said that some felt the appeal period of 10 days was very short.

Mr Makabeni explained that the legislation usually allowed 15 days to make an appeal. There were no hard or fast rules. If one looked at the days, one would discover it was 35 days in total. The Commission had to look at the confidentiality of information within 20 days. Five days were for considering the parties concerned, and 10 days were for reviewing the applications.

Ms Mbelekane elaborated that during a market inquiry, the Commission would receive information which was confidential, and would then make a determination. If the competition could not access the information, it would appeal the decision.

The Chairperson wanted to know if the competitor would be involved during the five-day determination period.

Mr Makabeni said there was a section in the Act which made provision for the disclosures.

The Chairperson asked if the Minister had to clarify the 10-day period.

Mr Tleane said within 10 days after the determination, one should lodge an appeal.

Mr Makabeni said that some pieces of legislation usually required 15 days, but the one under discussion was requiring 10 days.

The Chairperson wanted to establish if the Committee could not conform to 15 days, and ask for clarification from the Minister.

Mr Tleane said it was important to look at problems that might have happened in the past.

Dr Cardo said that companies like MTN had asked who had the authority to initiate a market inquiry, and suggested the Minister should clarify.

The Chairperson said it was the Commission, and it would consult with the relevant regulator.

The Committee agreed on S43B.

Ms Mbelekane said that S43C and D dealt with matters to be decided or tackled at a market inquiry, and remedies.

Mr Makabeni indicated there was no need for the Minister to provide a clarification.

Ms Mfulo said that the people who had concerns were those in the telecoms industry who were intent on exploiting the regulations.

The Chairperson said the main issue was on remedying the duplications.

Ms Mfulo suggested there should be a clause that dealt with similarities, in order to differentiate them.

Ms Mbelekane informed the Committee the Commission had been given powers to come with remedies. The Communications Commission also had powers to come up with solutions. This situation was presenting an overlap.

Ms Mfulo wanted to know how that could happen if there was always consultation when there was going to be an inquiry.

The Chairperson said the Commission would consult first and see what was being done.

Mr Makabeni suggested that relationships between the Competition Commission and other agencies should be cordial. Agreements had to be discussed with the Competition Commission and it should exercise its jurisdiction in terms of the agreements, and cooperation between the Competition Commission and Communication Commission should be promoted.

The Committee agreed on the proposals.

The Committee then tackled S43E and F which dealt with other outcomes of a market inquiry and procedural matters, including appeals.

Ms Mbelekane said that some submissions suggested the Tribunal should not have limited powers in the market inquiries. Others said it must have limited powers. Divestiture orders in terms of the Act were subject to confirmation by the Competition Appeal Court. The submitters had indicated that the same confirmation should be applicable for divestiture orders made pursuant to a market inquiry, as opposed to confirmation only by the Competition Tribunal, proposed by the amendment to section 60 (3).

Mr Makabeni indicated that all the orders of the Competition Tribunal would have no force of effect unless they were enforced by the Competition Appeal Court.

Mr Ruda said what the submitters were saying was that the Competition Commission must not have the power, and it had to go to the Competition Appeals Court.

Mr Makabeni said the new power for making recommendations given to the Competition Tribunal had to be confirmed by the Competition Appeals Court.

A Ministry legal adviser, who was asked to simplify matters for the Committee, said that when it came to appeals, the aggrieved person/party would appeal to the Tribunal. If that person/party was not satisfied, that matter would then be taken to the Competition Appeals Court. Divestiture orders could only be a recommendation of the Tribunal, and the issue would go to the Competition Appeals Court. The Competition Commission had no powers on divestiture orders, only on inquiries. This was a new provision.

The Committee agreed this part would need to be clarified by the Minister, seeing that it was a new clause or provision. Further, the Committee did not have any comments on 43G which dealt with participation in a market inquiry.

Mergers

The Committee deliberated on Focus Area Three, which had to do with the overview of the Bill on mergers.

Ms Mbelekana said this section of the Bill sought to clarify the role of the competition and public interest in mergers. The public interest criteria had been expanded to include the spread of ownership. It provided for a national security provision during mergers in sensitive sectors, where a foreign acquiring firm was involved. Currently there was no provision in SA law that enabled the national executive to consider national security issues in a merger involving an acquiring foreign firm.

The Committee had no comments on clause 9, section 12A and its sub-sections. It was in agreement with the submissions.

The Committee then discussed 18A, which dealt with national security matters in a merger involving a foreign acquiring firm.

Mr Atkinson pointed out that the first submission from the International Bar Association had indicated that the definition of 18A was very broad, and it had made recommendations on what needed to be done. He suggested the Committee should take note of the proposals and recommendations.

The Chairperson indicated the problem with the submission was that it was from an individual who admitted he was not representing the interests of the International Bar Association, but only his own, while using the letterhead of the International Bar Association.

Ms Mbelekana said critics had concerns that the national security interest was not clearly defined.

Mr Tleane said the amendments that had been proposed in the Committee were in line with what had been practiced in foreign countries.

Mr I Pikinini (ANC) said the concern about national security involved some aspects that were uniquely South African, because in other countries national security was something taken very seriously.

Ms Mbelekana informed the Committee that many legal systems in the world were providing for national security reviews of investments by foreign acquiring firms, and that the government had reviewed systems applicable in countries like the European Union (EU), United States (US), China, Australia and Canada, where a merger could be vetoed by the executive members or President if national security was at risk, and that decision was not subject to a judicial review, but could be challenged. She indicated the Bill provided for a national security veto in line with the constitutional responsibility of the national executive for national security. The President must appoint a committee of ministers and other suitable public officials to determine if a merger by a foreign firm could be justified on national security grounds. The committee could also consider other relevant factors, such as finding out if the foreign firm was controlled by a foreign government.

The Chairperson suggested the Committee should get clarity and consult further on the matter before taking a decision and look at other jurisdictions, especially developing countries.

Ms Mfulo said that when it came to national security, the President had the final say. But when it cames to the constitution, it was not clear what the final say of the president was regarding national security.

Mr Makabeni said that when they did a comparative analysis on the matter, they would keep in mind what the constitution states. He said our constitution stated the decision of the President would be considered only in the Constitutional Court.

The Chairperson suggested the Committee should take note of what Mr Makabeni had said, because it was dealing with mergers acquired by foreign countries, and that was where international law came in. However, in the case of SA, the President constituted a committee to look at the matter and see if it did not have an adverse effect on national security. The President did not veto anything. She asked the Parliamentary legal adviser to seek an opinion on the matter.

Mr Ruda indicated there were some difficulties with South Africa’s constitutional make up. The legislation was subordinate to the constitution. The process could be reviewed to impinge on one’s decision and the court would set aside the decision one took to arrive at the determination.

Mr Tleane said the matters being talked about now were a result of the negotiations that had taken place a long time ago. For instance, section 25 of the Constitution was likely to amended because there had been many developments taking place in the country. In due course, the Committee had to amend in the Constitution over what it was discussing regarding national security.

Ms Mfulo said that if the Constitution had a loophole in respect of national security, then that should be interrogated and amended.

The Chairperson said that was the reason she had asked the legal advisers to research and verify what the Committee had asked them to do, because the Committee had never heard of a decision that had been challenged on national security. Unfortunately, the matter would not go on the list that had to go to the Minister.

The Committee was in agreement with concerns raised.

Institutional improvements

The Committee then gave attention to Focus Area Four, which dealt with the overview of the Bill on institutional improvements.

Ms Mbelekana enlightened the Committee that this area was dealing with increasing the capacity of the Commission to conduct market inquiries, undertaking impact studies, issue guidelines and advisory opinions, and develop policies and assess applications for leniency.

The Chairperson suggested the Minister should be allowed to come with a clear picture of what was needed in terms of increasing capacity, including the cost of the Bill.

The meeting was adjourned.

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