On 28 September 2018 at 10h00 the Constitutional Court handed down judgment in an appeal brought by S.O.S Support Broadcasting Coalition, Trustees for the time being of the Media Monitoring Project Benefit Trust and Caxton and CTP Publishers and Printers Limited (applicants) against the decision of the Competition Appeal Court handed down on 28 April 2017 (April 2017 order). At issue in the appeal was the interpretation the Competition Appeal Court gave in its April 2017 order of its own order of 24 June 2016 (June 2016 order). That order concerned the powers of the Competition Commission (Commission) to investigate a matter of considerable public importance, namely whether the channel licensing agreement entered into between the South African Broadcasting Corporation (SABC), and MultiChoice (Pty) Ltd (MultiChoice) gave rise to a notifiable merger as defined in section 12 of the Act (Act). In essence, the appeal concerned whether, in conducting an investigation into whether a merger transaction gives rise to a notifiable merger, the Commission may exercise its powers of investigation, which includes the powers to subpoena witnesses to appear before it.
The channel licensing agreement is controversial as MultiChoice undertook in terms of the agreement to pay the SABC fees of more than R500 million over a period of five years, in exchange for which the SABC agreed that the SABC entertainment channel, to be broadcast on the MultiChoice platform, would consist mainly of content from the SABC’s substantial archive of programmes (SABC archive) and it would not encrypt any of its free to air channels (FTA channels) on South Africa’s migration to Digital Terrestrial Television.
On 24 June 2016, the Competition Appeal Court directed the Commission to investigate whether the channel licensing agreement concluded between the SABC and MultiChoice gave rise to a notifiable merger as defined in the Act. Following the June 2016 order, the SABC and MultiChoice handed over a limited number of documents to the Commission but claimed that the bulk of the documents sought by the Commission either did not exist, could no longer be traced, or were not relevant.
Unable to make a recommendation based on the limited documents received from the SABC and MultiChoice, the Commission wrote to the Competition Tribunal (Tribunal) on 4 October 2016 recording that the documents received were not sufficient for it to discharge its court mandated task, and in order to give proper effect to the June 2016 order it intended to interrogate relevant executives and Board members of the SABC and MultiChoice, who were involved in the negotiation, conclusion and implementation of the agreement. The Commission accordingly requested the Tribunal to issue a directive on whether it was entitled to conduct such interrogations to give effect to the June 2016 order. The SABC and MultiChoice objected on the basis that the Tribunal had no jurisdiction to entertain the Commission’s request. The Tribunal declined the request for a directive on the same basis.
In the face of the impasse, in October 2016 the applicants, supported by the Commission, applied urgently to the Competition Appeal Court for an order declaring that the Commission is authorised under the June 2016 order to exercise its powers of investigation.
On 27 April 2017 the Competition Appeal Court held that its June 2016 order “did not and cannot give the Commission powers in terms of section 49A of the Act to subpoena witnesses to appear before it”. The Competition Appeal Court held further that its June 2016 order was “clear and unambiguous” and expressly confined the inquiry to be conducted by the Commission exclusively to documentation as set out in the order.
It is against the April 2017 order that the applicants sought leave to appeal in the Constitutional Court. In this Court, the applicants, supported by the Commission, contended that the Commission had available to it its full range of standard investigative powers, which includes the ability to interview individuals who were involved in the negotiation and conclusion of the agreement. The SABC and MultiChoice contended that the Commission was limited to a “desktop study” of the documents produced by each of them and was precluded from exercising any further powers of investigation, and was barred from interviewing willing witnesses.
In a unanimous judgment written by Kathree-Setiloane AJ, the Court held that not only does the Commission have the power under the Act to investigate notifiable mergers, but that on a proper interpretation of section 13A(1) and (3) read with section 59(1)(d)(i) of the Act, the Commission is also authorised to investigate transactions to determine whether they constitute or give rise to a notifiable merger as defined in the Act.
The Constitutional Court held that section 13A(1) obliges a party to an intermediate or large merger to notify the Commission of the merger. Section 13A(3) prevents prior implementation of a notifiable merger without the approval of the Commission, the Tribunal or the Competition Appeal Court. If the Commission finds that a notifiable merger has been implemented without approval, it must refer that transaction to the Tribunal for adjudication. Section 59(1)(d)(i) empowers the Tribunal to impose an administrative penalty on firms that fail to give notice of a merger or implement a notifiable merger without prior approval. The necessary implication of these provisions is that the Commission is authorised to investigate transactions to determine whether they constitute or give rise to a notifiable merger as defined in the Act, and whether proceedings should be initiated in the Tribunal to impose appropriate penalties.
The Constitutional Court held that were the Commission found to be without powers to investigate merger transactions to enforce these provisions, this would emasculate the entire edifice of compliance that characterises the merger regime of self-notification under the Act. The need to summons relevant information and documents from persons believed to be in possession or control thereof, as well as the need to summons persons with knowledge of relevant facts under section 49A of the Act, are crucial to the powers of the Commission to investigate mergers and transactions that may give rise to a merger as defined. Any contrary interpretation would defeat the purpose of merger regulation under the Act which is to maintain competitive market structure, by ensuring “that transactions which are likely substantially to prevent or lessen competition should be carefully examined by the competition authorities”.
The Constitutional Court held further that the Commission’s investigative powers, both generally and in relation to merger control specifically, are sourced in the Act itself. These powers were not conferred by the June 2016 order of the Competition Appeal Court, as its April 2017 judgment seemingly suggests. Thus absent any prohibition in the June 2016 order relating to the Commission’s use of its coercive and non-coercive statutory powers in carrying out its mandate under that order, the Commission’s statutory powers remained intact. In other words, the the Court held the June 2016 order did not strip the Commission of its investigatory powers in terms of Part B of Chapter 5 of the Act. In fact, on the face of the order, the statutory investigative powers of the Commission in Part B of Chapter 5 of the Act remained intact.
The Constitutional Court accordingly concluded that the Competition Appeal Court erred in not granting the declaratory relief sought by the applicants confirming that the Commission may exercise its statutory powers of investigation in Part B of Chapter 5 of the Competition Act in investigating whether the agreement entered into between the SABC and MultiChoice gave rise to a merger. In the result, the Constitutional Court granted leave to appeal and upheld the appeal.