Public Interest in Mergers: South Africa

• Published date: 01 June 2020
• DOI: 10.1177/0003603X20912882
• Date: 01 June 2020

Article

Public Interest in Mergers:

South Africa

Maryanne Angumuthoo*, Derek Lotter**,

and Shakti Wood*

Abstract

In the pursuit of national policy objectives aimed at social and economic welfare for all South Africans,

South African competition authorities have to use competition policy to achieve industrial policy goals

through the implementation of public interest provisions in the Competition Act No. 89 of 1998. The

recent amendments to the legislation further bolster these broader policy objectives. This issue of the

AntitrustBulletin examinesthe history, development,and impact of public interest considerations in merger

proceedingsthrough an analysisof seminal cases and keylegislative reforms.Public interest considerations

constitute a significant component to the merger review process and may involve interests represented

by the competitionauthorities,government and employees,trade unions,and other affected thirdparties.

Keywords

mergers, conditions, BEE, intervention, minister, competition policy, public interest, industrial policy

Whereas the Competition Tribunal has sought to afford due deference to the Competition Commis-

sion’s recommendations in mergers, the Minister of Trade, Industry and Competition has taken a far

more interventionist approach in certain cases. Trade unions and/or employees also play an active

interventionist role with respect to job preservation and union representation. As such, merging parties

may need to engage on several fronts with the Commission, government, trade unions, and other third

parties in order to address public interest concerns. Such interventions and engagements may introduce

unpredictability, complexity, cost, and delay to the merger clearance process. It is therefore important

that merging parties formulate a strategy with respect to public interest and factor such considerations

into the transaction structure and timeline.

I. Competition Legislation and Background

The South African competition law forms an important part of reforms designed to both address the

historical economic structure and encourage broad-based economic growth. Competition policy is seen

* Partner, Competition Practice Group, Bowmans, Johannesburg, South Africa

** Partner and Co-Head, Competition Practice Group, Bowmans, Johannesburg, South Africa

Corresponding Author:

Maryanne Angumuthoo, Partner, Competition Practice Group, Bowmans, Johannesburg, South Africa.

Email: maryanne.angumuthoo@bowmanslaw.com

The Antitrust Bulletin

2020, Vol. 65(2) 312-332

ªThe Author(s) 2020

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DOI: 10.1177/0003603X20912882

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as important in increasing competitive market pressures, leading to firms becoming more efficient and

internationally competitive, a nd for the improved participation of black-o wned companies in the

economy.

1

A. Policy Considerations

The history that informs the policy considerations underpinning the present competition legislation

was well encapsulated by the former Minister of Trade and Industry (responsible for oversight of the

competition authorities) in an address that dealt with “Strengthening the Competition Regime and its

Link with Industrial Policy”:

[W]e inherited from apartheid and colonialism a highly concentrated and centralised economy. The origins

of this date back to the structure of ownership that was established in the mining industry at the end of the

nineteenth century, and whi ch became extended throughout the entire economy du ring the period of

colonialism and apartheid. According to the Mouton Commission which reported in 1976, two thirds of

the turnover in the manufacturing industry at that time was controlled by a mere five percent of firms. At the

end of the apartheid era, the vast bulk of economic activity in this country was dominated and controlled by

half a dozen conglomerates.

2

A peer review report on South Africa issued by the Organisation for Economic Co-operation and

Development further detailed this history:

Economic policy in South Africa has been shaped by dependence on extractive industries and isolation

from many world markets ...Monopoly concessions were granted to some industries around the turn of the

19th century. Manufacturers benefited from low costs of inputs such as steel and electricity, which were

supplied by state monopolies, and from a protective tarif f barrier. State-owned enterprises dominated

manufacturing by the end of the 1930s. Another theme of policy in that era was racial discrimination, one

effect of which was to keep labour costs down. Discrimination and protection were combined in policy

measures that shielded white farmers and businesses against African competition, by reserving most of the

land for white ownership and giving white farmers and white-owned firms preferences in subsidy and

support programs. Black entrepreneurs were outside of the formal economy.

3

Following the change from the apartheid regime, reviewing competition policy was high on the

agenda of the first democratic government, which was elected in 1994.

4

The general framework for

policy during the post-1994 period was set out in the ruling party’s, the African National Congress’,

Reconstruction and Development Programme (RDP), and its macro-economic strategy for Growth,

Employment and Redistribution. The aim of the RDP was to “introduce strict antitrust legislation”

5

in

order to “create a more competitive and dynamic business environment.”

6

The “objectives [of the

RDP] began with reforming the structure of the politi cal economy, ‘to systematically discourage

1. Simon Roberts, The Role for Competition Policy in Economic Development: The South African Experience, TRADE AND

INDUSTRIAL POLICY STRATEGIES - WP8-2004 (March 2004), http://www.tips.org.za/files/747.pdf.

2. Rob Davies, Address to Competit ion Commission Public Sector Consultative Forum by Deputy Minister of Trade and

Industry, Dr Rob Davies, Sheraton Hotel, Pretoria, DEPARTMENT OF TRADE AND INDUSTRY (February 13, 2009),

https://www.gov.za/r-davies-competition-commission-public-sector-consultative-forum.

3. Competition Law and Policy in South Africa, An OECD Peer Review, ORGANISATION FOR ECONOMIC CO-

OPERATION AND DEVELOPMENT (May 2003), http://www.oecd.org/southafrica/34823812.pdf, at 9.

4. Id. at 16.

5. Id. at 15.

6. Id.

Angumuthoo et al. 313