The improving South African economy could pave the way for an increase in the number of merger filings this year, says legal practice Norton Rose South Africa head of competition law Heather Irvine.
She believes merger filings are likely to be more numerous as a result of an increase in foreign investment in the country. However, she suggests that the challenge will lie in reviewing the merger filings expeditiously.
“The number of mergers referred to the Competition Tribunal depends on the economic climate. As businesses start getting involved with deals again, there will be an increase in filed mergers. This will also result in an increase in the workload of the South African Competition Commission,” comments Irvine.
Irvine believes that the commission is increasingly focused on public interest issues, such as the impact of mergers on employment. Upon filing for a merger, companies are required to explain the steps they are taking to mitigate the effects of transactions on employees.
Irvine notes that a recent case, currently under review by the Competition Appeals Court, is the merger between South African retail group Massmart and US retailer Walmart, which has drawn criticism from government and trade unions, which have expressed concerns about the merger’s possible significant impact on the country’s employment situation.
The ability of the Commission to investigate mergers efficiently depends on its workload, which is linked to the number of complaints about anticompetitive practices it receives from the public, and initiates itself.
The commission is focused on various sectors of the economy that are regarded as crucial to consumers, especially the poor, such as banking, agriculture, chemicals, construction and infrastructure. The authority monitors possible deals between companies and prioritises complaint investigations according to the effect potentially anticompetitive practices in those sectors may have on consumers. This approach has yielded good results, says Irvine.
She notes that the commission has sharpened its focus and has become more proactive through the investigations it has conducted.
“The commission has also participated in international regulator forums and has taken stricter views on cartel practices over time. Its main focus is on cartels and it is very concerned about price fixing and market division. A significant number of investigations over the past two years have centred on information sharing between competitors,” says Irvine.
However, she believes that many businesses still unintentionally contravene the Competition Act, as there is still significant uncertainty as to what practices breach the Act.
She suggests that guidelines be issued by the commission to clarify its stance regarding the law and uncertainty surrounding the law so that, in that way, businesses limit their chances of con-travening the Act.
Meanwhile, the debate as to whether the commission can expand investigations into complaints that have already been referred to the tribunal is a crucial one, notes Irvine.
“The Competition Act has a prescription period. This means that, for example, if a company has stopped price fixing for more than three years prior to the initiation of a complaint, the commission cannot prosecute it. The issue is whether the commission can add another company, or cause of complaint, to the existing referrals or not,” says Irvine.
She states that competition law is complex and it is difficult to investigate complaints years down the line. The prescription period is in the public interest, not just in the interest of the companies who face huge fines.
Irvine says the rule of law should not be undermined by allowing the commission to have the discretion to refer any complaints it chooses.