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Tight & Loose?

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Tight & Loose?

27th July 2018

By: Terence Creamer
Creamer Media Editor

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The national security veto included in the Competition Amendment Bill, tabled before Parliament last week, has attracted much attention and criticism. Economic Development Minister Ebrahim Patel argues that the veto is so tightly framed that it should pose no deterrent to potential foreign investors seeking to enter sensitive sectors in South Africa. Others are less convinced, describing the list of national security interests as extremely broad.

Possible triggers for a national security review include any deal involving the use or transfer of sensitive technology or know-how outside South Africa; deals impacting on the security of infrastructure essential to the health, safety, security or economic wellbeing of citizens and the effective functioning of government; mergers involving important goods or services to citizens or government; transactions where South Africa’s international interests, including foreign relationships, could be affected; acquisitions that could affect the economic and social stability of South Africa; instances where a merger could enable foreign surveillance or espionage, or hinder intelligence or law enforcement operations; and instances where an acquisition could enable or facilitate the activities of illicit actors, such as terrorists or organised criminals. In addition, the committee the President convenes to deliberate on whether a merger is justifiable on national security grounds can also consider other relevant factors, including whether a foreign government might control the acquiring firm.

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Critics warn that the level of discretion is simply too high, making the committee vulnerable to penetration by corrupt actors. No doubt, these concerns will be ventilated as lawmakers consider the legislation before sending it back for the President’s signature.

The provision is one of several designed to tighten the current law and to give the competition authorities even more teeth in dealing with both anticompetitive behaviour and market structures that undermine economic inclusion and transformation.

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However, there are components of the Bill, outlined in sections on exemptions and advisory opinions, that could potentially also loosen the constraints on large firms. For instance, if larger firms can demonstrate a public benefit (such as increased production or employment) of a cooperative venture, the activity can be exempted from the Act.

The Bill also empowers the Minister to designate an industry for purposes of possible exemption from parts of the Act if it promotes economic development, growth or transformation in an industry. In addition, the Minister can publish regulations to fast-track exemptions for certain types of collaboration. If approved, the legislation will also enable the Competition Commission to provide firms with nonbinding advisory opinions on collaborative activities.

The Bill also states that the commission should publish guidelines on issues ranging from restrictions on horizontal and vertical practices to determinations of excessive prices, so as to create greater market certainty. Patel describes the provisions as a “flexibility package”, which he says is the outcome of rigorous engagements with the business community, which raised concerns about the scope for cooperation between large firms.

Again, it will be interesting to see how lawmakers treat these provisions during their deliberations in the coming months.

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