Competition law in South Africa: overview

A Q&A guide to competition law in South Africa.

The Q&A gives a high level overview of merger control, restrictive agreements and practices, monopolies and abuse of market power, and joint ventures. In particular, it covers relevant triggering events and thresholds, notification requirements, procedures and timetables, third party claims, exclusions and exemptions, penalties for breach, and proposals for reform.

To compare answers across multiple jurisdictions visit the Competition law Country Q&A tool.

This Q&A is part of the PLC multi-jurisdictional guide to competition and cartel leniency. For a full list of jurisdictional Competition Q&As visit www.practicallaw.com/competition-mjg.

For a full list of jurisdictional Cartel Leniency Q&As, which provide a succinct overview of leniency and immunity, the applicable procedure and the regulatory authorities in multiple jurisdictions, visit www.practicallaw.com/leniency-mjg.

Paul P.J Coetser, Werksmans Attorneys
Contents

Merger control

1. What (if any) merger control rules apply to mergers and acquisitions in your jurisdiction?

Regulatory framework

Mergers and acquisitions are regulated by Chapter 3 of the Competition Act, No. 89 of 1998 (Competition Act) and certain other rules and guidance notes.

Regulatory authority

The Competition Act is enforced by the following agencies:

  • Competition Commission (Commission).

  • Competition Tribunal (Tribunal).

  • Competition Appeal Court.

See box, The regulatory authorities.

Triggering events/thresholds

2. What are the relevant jurisdictional triggering events/thresholds?

Triggering events

The legal definition of a merger involves the acquisition or establishment of control and that the interest, right or entity acquired constitutes a business or part of a business. Mergers are generally achieved through the purchase or lease of another entity's shares, interests, assets or combination of shares, interests or assets.

A merger occurs when one or more business entities (the acquirer) acquires or establishes control, directly or indirectly, over the whole or part of another business entity (the target).

The acquirer has control of the target if it fulfils any of the following:

  • It owns more than half of the target's issued share capital.

  • It is entitled to a majority of the votes that can be cast at a general meeting of the target, or has the ability to control the voting of a majority of these votes, either directly or through a controlled entity of the firm.

  • It can appoint or veto the appointment of a majority of the target's directors.

  • It is a holding company and the target is a subsidiary of that company.

  • It is a trust and has the ability to control the majority of the trustees, or appoint or change the majority of the beneficiaries of the trust.

  • In the case of a close corporation (that is, a business entity set up using a corporate business structure, where the shares are held by a select few individuals closely associated with the business) it owns the majority of the members' interests or controls directly, or has the right to control the majority of members' votes in the close corporation.

  • It can materially influence the policy of the target in a manner comparable to a person who, in ordinary commercial practice, can exercise an element of control referred to in the categories above. This is a "catch-all" provision and is intended to include minority and other interests, but only to the extent that they have the effects as described in the points listed above.

Thresholds

If a transaction is classified as a merger (see above, Triggering events) and the economic activity occurs or has an effect in South Africa, notification is only required if certain thresholds are exceeded. These thresholds are calculated with reference to the annual turnover or asset values (whichever is greater) of the parties to the merger derived in, into or from South Africa, for the preceding financial year.

The thresholds relate to three categories of merger, which are:

  • Small mergers. This is where both:

    • the combined annual turnover/asset value (whichever is the greater) of the acquirer and the target is less than ZAR560 million; and

    • the target's annual turnover/asset value (whichever is the greater) is less than ZAR80 million.

  • Intermediate mergers. This is where both:

    • the combined annual turnover/asset value (whichever is the greater) of the acquirer and the target is between ZAR560 million and ZAR6.6 billion; and

    • the target's annual turnover/asset value (whichever is the greater) is between ZAR80 million and ZAR190 million.

  • Large mergers. This is where both:

    • the combined annual turnover/asset value (whichever is the greater) of the acquirer and the target is more than ZAR6.6 billion; and

    • the target's annual turnover/asset value (whichever is the greater) is more than ZAR190 million.

Notification

3. What are the notification requirements for mergers?

Mandatory or voluntary

For intermediate or large mergers, all transactions which meet the legal definition of a merger and exceed the annual turnover/asset value thresholds (see Question 2) must be notified to the Commission.

For small mergers, notification is voluntary. However, the notification will be mandatory if either:

  • Within six months of implementation of the merger, the Commission considers that it may substantially prevent or lessen competition.

  • When entering the transaction, any of the parties to the transaction are subject to an investigation by the Commission or involved in proceedings before the Tribunal due to a contravention of the Competition Act.

Timing

There is no specific timing requirement, but if notification is mandatory, merger transactions must be notified before they are implemented.

Formal/informal guidance

If a business entity is uncertain whether a transaction constitutes a notifiable merger, a non-binding advisory opinion detailing the nature of the business proposal can be obtained from the Commission, for ZAR2,500. The advisory opinion will provide both:

  • Guidance on the matters that the Commission would consider in the case of a merger.

  • An indication of potential difficulties.

Business entities can also request a pre-notification meeting with the manager of the Mergers and Acquisition division to obtain any other necessary guidance related to merger procedure.

Responsibility for notification

Both the acquirer and the target are responsible for notification, which should be made jointly to the Commission. If joint notification is not possible (for example, in the event of a hostile takeover), the Competition Act makes provision for a separate filing. However, the Commission's permission must be obtained if parties wish to provide separate filings.

Relevant authority

Notifications must be made to the Commission, which takes the final decision on small and intermediate mergers. For large mergers, the Commission will make a recommendation to the Tribunal, which will then issue a decision (see Question 4, Large mergers).

Form of notification

The following forms must be completed when notifying the Commission of a merger:

  • Merger Notice in Form CC4(1). This form must declare both the names of the primary acquiring business entity and the target. In this form, the primary acquiring business entity must also indicate whether the merger is a small, intermediate or large merger.

  • Statement of Merger Information in Form CC4(2). This must be provided by each of the acquiring business entities and the target. The primary acquiring and target firms must provide the specific information set out in the form and attach all documents which the form requires. These documents include:

    • a Competitiveness Report, which informs the Commission of the details and rationale for the merger transaction and contains:

      • an overview of the market and its characteristics;

      • the pro-competitive benefits;

      • the public interest issues; and

      • any available defences.

    • a list of the shareholders of the primary acquiring group and their respective shareholding (including minority shareholders); and

    • the merging parties' strategic documents, including:

      • business plans;

      • marketing documents;

      • strategic presentations; and

      • board minutes.

Filing fee

The filing fees are as follows:

  • For an intermediate merger, ZAR100,000.

  • For a large merger, ZAR350,000.

There is no filing fee for a small merger notification.

There is no rule regulating who must pay the merger filing fee. This is usually agreed between the parties before submitting the notification.

Obligation to suspend

Large and intermediate mergers must not be implemented before approval from the competition authorities. If a notifiable merger is implemented prior to approval, the parties will be liable to pay an administrative penalty of up to 10% of the merging parties' turnover in South Africa and their exports from South Africa, for the preceding financial year.

Procedure and timetable

4. What are the applicable procedures and timetable?

Small mergers

If it is established that the merger qualifies as a small merger (see Question 2, Thresholds), notification is voluntary. However, notification will be mandatory if:

  • Within six months of implementation of the merger, the Commission considers that it may substantially prevent or lessen competition. If the Commission requires the parties to notify the small merger, they may take no further steps to implement that merger until it has been approved or conditionally approved.

  • When entering the transaction, any of the parties to the transaction are subject to an investigation by the Commission or involved in proceedings before the Tribunal due to a contravention of the Competition Act.

See Question 3, Mandatory or voluntary.

If a notification is requested, on receiving notification, the Commission has 20 business days to review the merger. This can be extended for a further 40 business days (up to a maximum of 60 days).

Intermediate mergers

Once it is established that the merger qualifies as an intermediate merger (see Question 2, Thresholds), notification is mandatory. The parties must pay the required filing fee and not implement the transaction prior to approval from the Commission. On receiving notification, the Commission has 20 business days to review the merger. This can be extended for a further 40 business days (up to a maximum of 60 business days).

After the Commission has reviewed the merger, it will then do one of the following:

  • Approve the transaction unconditionally.

  • Approve the transaction subject to conditions.

  • Prohibit the transaction.

Large mergers

Once it is established that the merger qualifies as a large merger (see Question 2, Thresholds), notification is mandatory. The parties must pay the required filing fee and not implement the transaction prior to approval from the Tribunal. On receiving notification, the Commission will investigate the merger and refer the merger to the Tribunal with a written recommendation and reasons within 40 business days (this can be extended for periods of no more than 15 business days at a time). On receiving the Commission's recommendations, the Tribunal will set a hearing date within ten days. The Tribunal gives its decision within ten business days from the completion of the hearing, where it will either:

  • Approve the transaction unconditionally.

  • Approve the transaction subject to conditions.

  • Prohibit the transaction.

Once an approval certificate is issued, the parties are free to implement the merger (subject to any conditions imposed).

For an overview of the notification process, see flowchart, South Africa: merger notifications.

Publicity and confidentiality

5. How much information is made publicly available concerning merger inquiries? Is any information made automatically confidential and is confidentiality available on request?

Publicity

A merger filing is made public to the following extent:

  • The Commission and Tribunal must publish a notice of its merger decision in the Government Gazette.

  • Parties to intermediate and large mergers must notify the transaction with the registered trade unions representing the employees of the merging parties. If the employees are not represented by a trade union, the employees concerned (or their employee representatives) must be notified of the transaction.

Procedural stage

The Commission will contact market participants during the investigation phase to test their views on the merger. The views of the market participants are not publicly available.

Automatic confidentiality

Information submitted as part of the merger filing (merger filing forms, documents annexed to the filing forms, or any document accompanying the filing) is not automatically confidential. The merging parties must specifically request information to be treated as confidential if they want it to be treated as such.

Confidentiality on request

Confidential information is defined as trade, business or industrial information that belongs to a firm, has a particular economic value, and is not generally available to or known by others.

A party to a merger can request confidentiality over information contained in the merger filing by completing a Form CC7.

Rights of third parties

6. What rights (if any) do third parties have to make representations, access documents or be heard during the course of an investigation?

Representations

Any person (whether or not a party or participant in the proceedings) can voluntarily file any document, affidavit, statement or other relevant information regarding the merger during the investigation.

Competitors of the parties, customers and other participants can also approach the Commission to submit their concerns or demonstrate support for a particular transaction.

Document access

During the investigation phase, third parties are not entitled to receive any information or documentation that was submitted to the Commission concerning the transaction, unless they have obtained express consent from the merging parties.

Be heard

During the investigation phase, third parties with an interest can make representations or give input directly to the Commission.

Third parties cannot formally participate in merger proceedings. However, in the case of a large merger, any third party who wishes to intervene in the proceedings before the Tribunal can file an application, together with a supporting affidavit setting out its interest, motivation and the matters for which the representations will be made. If the Tribunal approves the right to participate as an intervener, the third party is entitled to (among other things):

  • Cause the Tribunal to issue a summons to compel testimony or to obtain access to documents from a witness.

  • Place documentary evidence before the Tribunal.

  • Obtain access to all documents filed by the merging parties.

Substantive test

7. What is the substantive test?

The substantive test is whether the merger is likely to substantially prevent or lessen competition and, if so, whether any technological, efficiency or other pro-competitive gains likely to result from the merger could offset the lessening of competition.

The relevant factors considered are, among others:

  • The strength of competition in the market.

  • The probability that other market participants will behave competitively following the merger.

  • The actual and potential level of import competition.

  • The ease of entry into the market, including tariff and regulatory barriers.

  • The level and trends of concentration and history of collusion in the market.

  • The degree of countervailing power in the market (that is, the strength of opposing market forces).

  • The likelihood of the merged firm having market power.

  • The dynamics of the market, including growth, innovation and product differentiation.

  • The nature and extent of vertical integration.

  • Whether the business of a merging party has failed or is likely to fail.

  • Whether the merger will result in the removal of an effective competitor.

Once the substantive test is applied, the Commission will consider whether the merger can be cleared unconditionally, approved subject to conditions (see Question 8), or whether the transaction must be rejected on substantial public interest grounds.

When approving a merger or imposing conditions to give effect to any public interest grounds, the Commission and/or Tribunal will consider the:

  • Effect of the merger on employment.

  • Ability of small businesses or firms controlled by historically disadvantaged persons to become competitive.

  • Ability of national industries to compete in international markets.

Remedies, penalties and appeal

8. What remedies can be imposed as conditions of clearance to address competition concerns? At what stage of the procedure can they be offered and accepted?

When imposing conditions, the Commission and/or Tribunal must attempt to find an appropriate remedy to counter the anti-competitive effects of the merger. These can be achieved through either:

  • Behavioural conditions. These measures include (among others):

    • ring-fencing conditions to prevent exchanges of information;

    • compliance programmes to prevent business entities from colluding with each other;

    • conditions to ensure supply to vertically related firms, to prevent stagnation within the supply chain.

    • conditions to protect the public interest. For example, a moratorium on the reduction of an entity's workforce is often imposed to protect employees. In particular, the competition authorities have taken care to protect unskilled jobs by making their continued employment a condition for clearance.

  • Conditions to oblige a merged entity to sell any shares, interests or other assets it has acquired under the merger. If shares/assets are being sold to cure an anti-competitive merger, the acquirer must manage the assets efficiently and compete effectively.

The competition authorities often require affidavits, written statements and/or detailed financial statements to be submitted by senior executives on an annual basis, attesting to the firm's compliance with the conditions.

 
9. What are the penalties for failing to comply with the merger control rules?

Failure to notify correctly

Failure to comply with the merger control rules is usually punishable by an administrative fine of up to 10% of the merging parties' total combined turnover in South Africa and its exports from South Africa, for the most recent financial year.

The Tribunal can also order a party to sell any shares, interests or other assets acquired under the merger or declare void any provision of an agreement to which a merger was subject, if the parties:

  • Fail to give notice of the merger.

  • Implement the merger without approval by the competition authorities.

  • Implement the merger in contravention of a condition imposed.

The Tribunal can impose an interdict (that is, a prohibition by court order) if the parties to a merger attempt or intend to implement the merger without sending a formal notification to the Commission.

Implementation before approval or after prohibition

See above, Failure to notify correctly.

Failure to observe

If the parties to a merger proceed to implement a transaction in a manner contrary to the Commission's conditions for approval (unless agreed with the Commission on an acceptable remedial plan), the Tribunal can order:

  • An administrative penalty of up to 10% of the merging parties' total combined annual turnover.

  • The parties to the transaction to sell any shares, interests or other assets acquired under the merger.

 
10. Is there a right of appeal against any decision? If so, which decisions, to which body and within which time limits? Are rights of appeal available to third parties or only the parties to the decision?

Rights of appeal and procedure

Both parties to a transaction and trade unions have a right of appeal. Unfavourable decisions relating to small and intermediate mergers can be appealed to the Tribunal.

Unfavourable decisions by the Tribunal relating to small, intermediate or large mergers can be appealed to the Competition Appeal Court.

The time limits for making appeals are as follows:

  • Decisions by the Commission relating to small and intermediate mergers. The parties (or the trade union representing the employees of the merging parties) can, within ten business days of the Commission's decision, request the Tribunal to consider the prohibited merger or the conditions imposed. When such a request for consideration has been filed with the Tribunal, the Registrar must schedule a date for either the beginning of the hearing or a pre-hearing conference, within ten business days of receipt of the request. The ten-day period can be extended for a further ten business days with the consent of the parties.

  • Decisions by the Tribunal. Within 20 business days after the Tribunal's decision in relation to a small, intermediate or large mergers, any party to the merger (or any person required to be given notice of the merger and who had been a participant in the proceedings before the Tribunal) can appeal the decision of the Tribunal to the Competition Appeal Court.

Third party rights of appeal

Third parties cannot appeal decisions from the Commission or Tribunal. However, if a third party alleges that the Commission or Tribunal has acted irregularly or improperly in reaching its decision, it can apply to the Tribunal or the Competition Appeal Court, for a review of an approval or condition.

The time limits for requesting a review are as follows:

  • Review of Tribunal decisions relating to merger proceedings. The review application must be filed with the Competition Appeal Court within 15 days of the order that is the subject of the review.

  • Review of Commission decisions relating to merger proceedings. Applications for the review of decisions by the Commission in merger proceedings can be filed with the Tribunal. Although the Competition Act does not contain provisions regulating the time periods and procedure of such a review application, it must be brought without unreasonable delay but in any event no later than 180 days from the date of the Commission's decision.

Automatic clearance of restrictive provisions

 
11. If a merger is cleared, are any restrictive provisions in the agreements automatically cleared? If they are not automatically cleared, how are they regulated?

Approval from the Commission or Tribunal does not automatically result in clearance of any restrictive provisions in the merger agreement.

However, prohibited practices in the agreement may be condoned by the competition authorities if the parties have obtained a specific exemption (see Question 15).

Regulation of specific industries

 
12. What industries (if any) are specifically regulated?

The following industries are specifically regulated:

  • Stock exchanges.

  • Banking and related sectors.

  • Insurance.

  • Mining and gas exploration.

  • Telecommunications.

  • Financial services.

  • Gaming/lotteries.

  • Professional services.

  • Defence.

  • Private healthcare.

  • Pharmaceuticals.

  • Healthcare funding.

  • Construction.

  • Broadcasting.

  • Electricity provision.

  • Mail delivery.

 

Restrictive agreements and practices

Scope of rules

13. Are restrictive agreements and practices regulated? If so, what are the substantive provisions and regulatory authority?

Restrictive horizontal practices

The rules on restrictive horizontal practices between competitors are set out in Chapter 2 of the Competition Act. Certain horizontal practices carried out between competitors have an absolute prohibition. These practices include:

  • Directly or indirectly fixing a purchase/selling price or any other trading condition.

  • Dividing markets by allocating customers, suppliers, territories or specific types of goods or services.

  • Collusive tendering or bid-rigging (that is, where the providers of the services sought in the tender co-ordinate among themselves who is to submit the lowest, and therefore, the winning bid. The purpose is to allocate tenders between tenderers over a period of time so that each obtains a share of the market.)

Other horizontal restrictive practices are subject to a rule of reason prohibition. Therefore, competitors are able to argue that the anti-competitive effects of the restrictive practice are outweighed by pro-competitive or technological gains.

Restrictive vertical practices

Vertical agreements (that is, agreements between suppliers and their customers) are regulated by the Competition Act. A vertical agreement will be prohibited if it substantially prevents or lessens competition in the market, unless a party to the agreement can raise a defence of demonstrable efficiency, pro-competitive or technological gains. For exemptions, see Question 15.

Further, the practice of maintaining a minimum resale price between the supplier/producer and reseller (for example, a retailer) is prohibited on an absolute basis unless the following steps are taken:

  • The supplier/producer merely recommends a minimum resale price to the reseller.

  • The supplier/producer makes it clear that the recommendation is not binding.

  • The words "recommended price" appear next to the price on the product.

 
14. Do the regulations only apply to formal agreements or can they apply to informal practices?

For arrangements between competitors, the Competition Act applies to both formal and informal agreements and practices, as the definition of "agreement" in the Competition Act covers both a formal contract and an informal arrangement or understanding, whether or not this is legally enforceable.

The Competition Act also prohibits concerted practices, which is defined as co-operative, or co-ordinated conduct between firms achieved through direct or indirect contact, that replaces their independent action, but which does not amount to an agreement.

Exemptions

15. Are there any exemptions? If so, what are the criteria for individual exemption and any applicable block exemptions?

A party who wishes to apply for an exemption can do so if it can show that the practice or agreement:

  • Is essential to achieve certain socio-economic and political objectives, for example:

    • promotion of exports;

    • industrial stability;

    • development of small businesses.

  • Is necessary for the exercise of intellectual property rights.

  • Relates to the activities of a professional association.

These grounds are different from the rule of reason prohibition (see Questions 13 to 14), which implies that in certain instances, technological, efficiency or other pro-competitive gains resulting from certain conduct can outweigh the anti-competitive effect of the conduct and therefore, the conduct is not prohibited.

The factors here relate to an exemption from the Competition Act, which is granted to achieve certain socio-economic and political objectives.

The following categories of exemptions are possible:

  • Selected agreements and practices (individual exemptions).

  • Categories of agreements and practices (block exemptions).

  • Rules of professional associations.

Exclusions and statutes of limitation

16. Are there any exclusions? Are there statutes of limitation associated with restrictive agreements and practices?

Exclusions

The Competition Act does not set out formal de minimis exclusions for small arrangements.

However, the prohibitions on restrictive horizontal practices (see Question 13, Restrictive Horizontal Practices) do not apply to:

  • A business entity's wholly owned subsidiary.

  • A wholly owned subsidiary of such a subsidiary.

  • Any combination of the above or constituent firms within a single economic entity.

Statutes of limitation

The statute of limitation is three years after the prohibited practice has ceased. After this time, the complaint cannot be initiated.

Notification

 
17. What are the notification requirements for restrictive agreements and practices?

Notification

There is no legal obligation to notify horizontal or vertical restrictive practices. However, if the parties require a formal exemption from Chapter 2 of the Competition Act (see Question 13) they must notify the Commission. An exemption implies an acknowledgement that past or future conduct will constitute a contravention of the Competition Act and therefore careful consideration must be given before an exemption is applied for.

Informal guidance/opinion

This is the same as for acquisitions and mergers (see Question 3, Formal/informal guidance).

Responsibility for notification

The party who wishes to obtain the exemption from the provisions of the Competition Act is responsible for notifying.

Relevant authority

Notification is made to the Commission.

Form of notification

The party applying for an individual exemption or a block exemption must complete and lodge the following with the Commission:

  • Form CC3(1).

  • A statement in support of the exemption application.

Filing fee

The party lodging the exemption application must pay the exemption filing fee. The exemption filing fee payable to the Commission depends on the type of exemption application.

The fees are as follows:

  • For a single exemption: ZAR5,000 and an annual fee of ZAR500.

  • For a block exemption: ZAR100,000 and an annual fee of ZAR1,000.

  • For an exemption in respect of a professional association, a one-off payment of ZAR100,000.

Investigations

 
18. Who can start an investigation into a restrictive agreement or practice?

Regulators

The Commission can initiate a complaint on its own initiative if it has a reasonable belief that a business entity has:

  • Committed a prohibited practice.

  • Is abusing its dominant position in a market (see Questions 27 to 33).

In addition to prohibited practice investigations, the Commission can conduct a market inquiry into anti-competitive market conditions on its own initiative.

The Commission has the power to conduct market inquiries in relation to the general state of competition in a market for particular goods or services.

During its conduct of a market inquiry, the Commission can both:

  • Issue summons to compel persons to appear before the inquiry.

  • Compel evidence which has a bearing on the subject matter to be presented (similar to its powers and functions when conducting an investigation).

In addition, when performing a market inquiry, the scope of powers afforded to the Commission is wider than the Commission's power to conduct an investigation (for example, in an investigation, the Commission is limited to the allegations contained in the complaint). A market inquiry can result in the Commission initiating a complaint against market participants if it is found that they have engaged in prohibited practices.

Third parties

Any third party can lodge a complaint with the Commission about a perceived prohibited practice. This will trigger an investigation by the Commission.

 
19. What rights (if any) does a complainant or other third party have to make representations, access documents or be heard during the course of an investigation?

Representations

This is the same as for acquisitions and mergers (see Question 6, Representations).

Document access

This is the same as for acquisitions and mergers (see Question 6, Document access).

Be heard

This is the same as for acquisitions and mergers (see Question 6, Be heard).

 
20. What are the stages of the investigation and timetable?

The stages for investigation/timetable are as follows:

  • On receiving the complaint (either from a third party or commenced by the Commission on its own initiative), an investigator is appointed, who will:

    • commence a preliminary review of the matter and the industry involved;

    • source any publicly available information.

  • The Commission has one year from the date of receiving a complaint (or from such extended time period as agreed by the complainant/ordered by the Tribunal), to investigate the complaint. The Commission can refer the complaint to the Tribunal at any time after initiating a complaint, and is therefore not subject to any time bar.

  • On the expiry of the above time period, the Commission must either:

    • issue a notice of non-referral; or

    • refer the complaint to the Tribunal for adjudication, where a prosecution will take place by way of an adversarial process. This process can take several years to conclude.

  • If the matter is referred to the Tribunal, the Tribunal will make an order as set out in Question 24.

Publicity and confidentiality

21. How much information is made publicly available concerning investigations into potentially restrictive agreements or practices? Is any information made automatically confidential and is confidentiality available on request?

Publicity

This is the same as for acquisitions and mergers (see Question 5, Publicity).

Automatic confidentiality

This is the same as for acquisitions and mergers (see Question 5, Automatic confidentiality).

Confidentiality on request

This is the same as for acquisitions and mergers (see Question 5, Confidentiality on request).

 
22. What are the powers (if any) that the relevant regulator has to investigate potentially restrictive agreements or practices?

The Commission is granted extensive powers to investigate prohibited practices, including the right to do the following at the company's business premises:

  • Conduct unannounced on-site inspections pursuant to obtaining a warrant, or, in limited circumstances, without obtaining a warrant.

  • Seize or make copies of any document or access any computer system.

The Commission or Tribunal can also summon individuals for interrogation under oath if it believes they have documents or information under their control which could assist in the investigation. The Commission can also conduct an extensive market inquiry.

Settlements

23. Can the regulator reach settlements with the parties without reaching an infringement decision? If so, what are the circumstances in which settlements can be reached and the applicable procedure?

The Commission and the parties can reach a settlement at any stage during the investigation, provided the:

  • Parties admit to the conduct.

  • Conduct is ceased.

However, a settlement agreement is only binding once the Tribunal has confirmed it, on application from the Commission.

Penalties and enforcement

24. What are the regulator's enforcement powers in relation to a prohibited restrictive agreement or practice?

Orders

The Tribunal can make an appropriate order in relation to a prohibited practice. These orders include:

  • Ordering the restriction or cancellation of any prohibited practice.

  • Ordering a party to supply or distribute goods or services to another party on terms reasonably required to end a prohibited practice.

  • Administrative penalties.

  • Ordering the sale of any shares, interests or other assets it has acquired from the prohibited practice.

  • Declaring that a business entity has committed a prohibited activity, thereby enabling a person who has suffered loss or damage as a result of such conduct to institute an action for civil damages (see Question 25).

  • Declaring the whole or any part of an agreement to be void.

  • Ordering access to an essential facility (that is, an infrastructure or resource that cannot reasonably be duplicated, and without access to which competitors cannot reasonably provide goods or services to their customers) on terms reasonably required.

Fines

Contravention of the Competition Act is punishable by an administrative penalty or fine from the Tribunal, of up to 10% of the company's annual turnover in South Africa and its exports from South Africa during the company's preceding financial year.

Failure to pay the fine is a criminal offence, punishable by one or both:

  • A fine of up to ZAR500,000.

  • Imprisonment up to ten years.

The Tribunal can also commence civil debt recovery proceedings to recover the penalty, and/or cancel any settlement agreement reached between the company and the Commission.

Personal liability

There is no personal liability, although this may very well change in the near future (see Question 39).

Immunity

The Commission's Corporate Leniency Policy (CLP) sets out the leniency regime.

Under this procedure, economic entities participating in cartel conduct are encouraged to disclose information in return for immunity from prosecution.

Under the CLP, the first self-confessing cartel member to approach the Commission will be granted immunity for its participation in cartel activity, once the cartel member has fulfilled specific requirements and conditions set out under the CLP.

The requirements and conditions to qualify for immunity under the CLP are as follows:

  • The applicant must honestly provide the Commission with complete and truthful disclosure of all evidence, information and documents in its possession or under its control, relating to any cartel activity.

  • The applicant must offer full and expeditious co-operation with the Commission concerning the reported cartel activity, which must be continuously offered until the Commission's investigations are finalised, and any subsequent proceedings in the Tribunal or Competition Appeal Court are finalised.

  • The applicant must immediately stop the cartel activity or act as directed by the Commission.

  • The applicant must not alert other cartel members or any other third party that it has applied for immunity.

  • The applicant must not destroy, falsify or conceal information, evidence and documents relevant to any cartel activity.

  • The applicant must not make any misrepresentation concerning the material facts of any cartel activity or act dishonestly.

This is to encourage cartel participants to disclose cartel activity to the Commission and discourage or prevent the formation of cartels and to eradicate this harmful conduct.

In this context, immunity means that the Commission will allow the first applicant to have:

  • 100% immunity from administrative fines.

  • No adjudication before the Tribunal.

There are no automatic specified penalty reductions for second or third applicants and only a firm that is "first to the door" to confess and provide information in accordance with the CLP will qualify for immunity. However, a cartel member who approaches the Commission shortly after the CLP applicant, will be treated with a greater degree of leniency than the cartel members who persist in their conduct and/or denials.

There are no time limits for bringing an application under the CLP.

However, immunity does not protect a business entity from damages claims from third parties who suffered a loss as a result of the conduct (see Question 25).

Impact on agreements

The Tribunal can declare that the whole or part of an agreement is void following a determination of a prohibited practice.

Third party damages claims and appeals

25. Can third parties claim damages for losses suffered as a result of a prohibited restrictive agreement or practice? If so, what special procedures or rules (if any) apply? Are class actions possible?

Third party damages

Third parties seeking to claim damages in relation to a prohibited practice require a declaration or certification from the Tribunal that the conduct of the respondent qualifies as a prohibited practice under the Competition Act. If a third party has suffered loss or damage as a result of the prohibited practice, the third party must use the declaration to bring a civil action for damages in the High Court.

Special procedures/rules

See above, Third party damages.

Class actions

The party seeking to represent a class must apply to court before the issue of summons to certify the action as a class action. The following are required to secure certification:

  • The class on whose behalf the action is brought must be identifiable.

  • The applicant must show that the class has a cause of action which raises triable issues.

  • The various claims by members must raise common issues of fact or law.

  • A representative, in whose name the class action is brought, must be identified.

This is effectively an opt-in system.

 
26. Is there a right of appeal against any decision of the regulator? If so, which decisions, to which body and within which time limits? Are rights of appeal available to third parties, or only to the parties to the agreement or practice?

Rights of appeal and procedure

Any person affected by any decision of the Tribunal can appeal against such a decision to the Competition Appeal Court within 15 business days of the Tribunal's decision /order. If the appeal is unsuccessful, a further appeal can be made, with special leave, to the Constitutional Court.

Third party rights of appeal

Third parties do not have the right to appeal the decision of the Commission or Tribunal. However, third parties can apply for a review of the proceedings if it is alleged that the Commission or Tribunal has acted irregularly or improperly in reaching its decision.

 

Monopolies and abuses of market power

Scope of rules

27. Are monopolies and abuses of market power regulated under administrative and/or criminal law? If so, what are the substantive provisions and regulatory authority?

Monopolies and abuses of dominance are regulated under administrative law in the same way as prohibited practices (see Questions 13 to 26). The relevant provisions are from Chapter 2 of the Competition Act.

 
28. How is dominance/market power determined?

The Competition Act uses the concept of "market power" within the relevant market. This is used to describe the power of a firm to:

  • Control prices.

  • Exclude competition.

  • Behave to an appreciable extent independently of its competitors, customers or suppliers.

A firm will be considered "dominant" in a market if it has any of the following:

  • At least 45% of the relevant market.

  • At least 35%, but less than 45% of the relevant market, unless it can show that it does not have market power.

  • Less than 35% of the relevant market, but has market power.

 
29. Are there any broad categories of behaviour that may constitute abusive conduct?

The following types of behaviour constitute abusive conduct and are prohibited :

  • Charging excessive prices to the detriment of consumers.

  • Refusing to give a competitor access to an essential facility (see Question 24, Orders) when it is economically feasible to do so.

  • Engaging in an exclusionary act, other than the acts listed below, if the anti-competitive effect of that act outweighs its technological, efficiency or other pro-competitive gain.

  • Engaging in any of the following exclusionary acts, unless the business entity can show there are technological, efficiency or other pro-competitive gains which outweigh the anti-competitive effect of its act:

    • requiring or inducing a supplier or customer to not deal with a competitor;

    • refusing to supply scarce goods to a competitor when the supply of those goods is economically feasible;

    • selling goods or services on condition that the buyer purchases separate goods or services unrelated to the object of a contract or forcing a buyer to accept a condition unrelated to the object of a contract;

    • selling goods or services below their marginal or average variable cost; and

    • buying-up a scarce supply of intermediate goods and/or other resources required by a competitor.

Exemptions and exclusions

30. Are there any exemptions or exclusions?

The exemptions/exclusions for monopolistic behaviour and abuses of market power are the same as for restrictive agreements and practices (see Question 15).

Notification

31. Is it necessary (or, if not necessary, possible/advisable) to notify the conduct to obtain clearance or (formal or informal) guidance from the regulator? If so, what is the applicable procedure?

The procedure is the same as for restrictive agreements and practices (see Question 17).

Investigations

32. What (if any) procedural differences are there between investigations into monopolies and abuses of market power and investigations into restrictive agreements and practices?

There are no differences between the procedure for investigations into monopolies and abuses of market power and investigations into restrictive agreements and practices. See Questions 18 to 21 and Question 23.

 
33. What are the regulator's powers of investigation?

The regulator's powers of investigation into monopolies and abuses of market power and investigations are the same as for restrictive agreements and practices (see Question 22).

Penalties and enforcement

34. What are the penalties for abuse of market power and what orders can the regulator make?

The penalties for abuse of market power are the same as for restrictive agreements and practices (see Question 24).

Third party damages claims

35. Can third parties claim damages for losses suffered as a result of abuse of market power? If so, what special procedures or rules (if any) apply? Are class actions possible?

Third party damages

These are the same as for restrictive agreements (see Question 25, Third party damages).

Special procedures/rules

These are the same as for restrictive agreements (see Question 25, Special procedures/rules).

Class actions

These are the same as for restrictive agreements (see Question 25, Class actions).

 

EU law

36. Are there any differences between the powers of the national regulatory authority(ies) and courts in relation to cases dealt with under Article 101 and/or Article 102 of the TFEU, and those dealt with only under national law?

Not applicable.

 

Joint ventures

37. How are joint ventures analysed under competition law?

There is no formal regulation or definition of a joint venture. If a joint venture formation includes a change of control over an existing business or assets, the merger control provisions will be triggered (see Questions 1 to 12).

Under certain circumstances, joint ventures can also constitute anti-competitive restrictive practices, which are prohibited (see Questions 13 to 26).

 

Inter-agency co-operation

38. Does the regulatory authority in your jurisdiction co-operate with regulatory authorities in other jurisdictions in relation to infringements of competition law? If so, what is the legal basis for and extent of co-operation (in particular, in relation to the exchange of information)?

Although there is no specific legal basis for co-operation with agencies in other jurisdictions in the Competition Act, the Commission and the Tribunal have benefitted from informal relationships with various international competition institutions and agencies.

However, since many business entities are competing in international markets where cartels can form and cross-border mergers take place, a number of the activities of the Commission and the Tribunal involve interaction with international competition authorities and international networks are used in joint enforcement.

South African competition authorities are members of the International Competition Network (ICN) and have been involved with the ICN since its creation.

The South African competition authorities also have relationships with competition authorities in:

  • The United Kingdom.

  • Norway.

  • Australia.

  • Canada.

  • The Netherlands.

 

Proposals for reform

39. Are there any proposals for reform of competition law?

The Competition Amendment Act, No. 1 of 2009, introduces new provisions and amends certain existing provisions in the current Competition Act.

Though this provision is not yet in force, under the new Act, a director or manager of a business entity will commit a criminal offence if he either:

  • Causes a business entity to engage in cartel conduct.

  • Knowingly acquiesces in the business entity's engagement in cartel conduct while having actual knowledge of the conduct.

A director or manager found guilty of contravening this provision will be liable for one or both:

  • A fine not exceeding ZAR500,000.

  • Imprisonment for up to ten years.

In addition, a business entity will be prohibited from directly or indirectly paying a fine imposed on a director or manager convicted of this offence. This includes indemnifying, reimbursing, compensating or otherwise defraying the expenses of a director or manager in defending a prosecution, unless the prosecution is abandoned or the individual is acquitted.

 

Online resources

Competition Commission website

W www.compcom.co.za

Description. Official website, containing an overview of the structure of the Commission and guidance on how to file a merger, lodge a complaint, apply for leniency or an exemption and to request an advisory opinion. The website also contains important judgments (including judgments of the Constitutional Court of South Africa), a list of the mergers filed with the Commission, annual reports, practice notes and a newsletter. Information is up-to-date.

Competition Tribunal website

W www.comptirb.co.za

Description. Official website, containing an overview of the structure of the Tribunal, Tribunal decisions regarding complaints, consent orders, interim relief applications, mergers, exemption applications and High Court and Competition Appeal Court judgments. The website also contains information concerning scheduled hearings, annual reports, press releases and strategic plans. Information is up-to-date.



The regulatory authorities

Competition Commission (Commission)

Head. Tembinkosi Bonakele (Acting Commissioner)

Contact details. The DTI Campus, Mulayo (Block C), 77 Meintjies Street, Sunnyside, Pretoria, Gauteng, South Africa.

T +27 12 394 3332

F +27 12 394 4332

E sesulem@compcom.co.za

Outline structure. The Commission has jurisdiction throughout South Africa and must exercise its functions in accordance with the Competition Act. The Commission consists of the Commissioner and one or more Deputy Commissioners, appointed by the Minister of Economic Development.

The Commission is made up of seven divisions:

  • Enforcement and Exemptions.

  • Mergers and Acquisitions.

  • Advocacy and Stakeholder Relations.

  • Legal Services.

  • Policy and Research.

  • Corporate Services.

  • Cartels.

Responsibilities. The Commission must:

  • Implement measures to increase market transparency.

  • Implement measures to develop public awareness of the provisions of the Competition Act.

  • Investigate and evaluate alleged prohibited practices.

  • Grant or refuse applications for exemption.

  • Authorise, with or without conditions, prohibit or refer mergers of which it receives notice.

  • Negotiate and conclude consent orders.

  • Refer matters to the Tribunal, and appear before the Tribunal, as required by the Competition Act.

  • Negotiate agreements with any regulatory authority to co-ordinate and harmonise the exercise of jurisdiction over competition matters within the relevant industry or sector, and ensure the consistent application of the principles of the Competition Act.

  • Participate in the proceedings of any regulatory authority.

  • Advise, and receive advice from, any regulatory authority.

  • Over time, review legislation and public regulations, and report to the Minister of Trade and Industry concerning any provision that permits uncompetitive behaviour.

  • Deal with any other matter referred to it by the Tribunal.

Procedure for obtaining documents. Any information which is not confidential or restricted can be inspected or copied at the Commission on the payment of a fee.

Competition Tribunal (Tribunal)

Head. Norman Manoim (Chairperson)

Contact details. The DTI Campus, Mulayo (Block C), 77 Meintjies Street, Sunnyside, Pretoria, Gauteng, South Africa.

T +27 12 394 3300

F +27 12 394 0169

E leratom@comptrib.co.za

Outline structure. The Tribunal has jurisdiction throughout South Africa and must exercise its functions in accordance with the Competition Act.

Tribunal members are appointed by the President on the recommendation of the Minister of Trade and Industry.

Cases are assigned by the Chairperson to panels of three Tribunal members for adjudication. The Tribunal secretariat provides administrative, research and organisational support to the chairperson and Tribunal members.

Responsibilities. The functions of the Tribunal are to:

  • Adjudicate on any conduct prohibited to determine whether prohibited conduct has occurred, and if so, impose any remedy provided for in the Competition Act.

  • Adjudicate on any other matter relating to the Competition Act and make any order required under the Competition Act.

  • Hear appeals from, or review decisions referred to it by the Commission.

  • Make any ruling or order necessary or incidental to the performance of its functions under the Competition Act.

Procedure for obtaining documents. Any information which is not confidential or restricted can be inspected or copied at the Tribunal on the payment of a fee. If information is claimed to be confidential, the Tribunal can determine whether it will remain confidential or made publicly available.

Competition Appeal Court

Head. DM Davis J (Judge President)

Contact details The DTI Campus, Mulayo (Block C), 77 Meintjies Street, Sunnyside, Pretoria, Gauteng, South Africa.

T +27 12 394 3355

F +27 12 394 0169

E leratom@comptrib.co.za

Outline structure. The Court is established under section 36 of the Competition Act and has a similar status to a High Court.

The members of the CAC are appointed by the State President. Members must be judges of the High Court. In addition, two other members with suitable qualifications and experience in economics, law, commerce industry or public affairs must be appointed.

Responsibilities. The Court can consider or review any appeal from a decision of the Tribunal, or confirm, amend or set aside a decision or order that is the subject of appeal or review by the Tribunal and give any judgment or make any order that the circumstances require. The Court must confirm any orders by the Tribunal for the sale of any shares or assets by parties who have merged in contravention of the Competition Act.

Procedure for obtaining documents. Any information which is not confidential or restricted can be inspected or copied on the payment of a fee. If information is claimed to be confidential, the Court can determine whether it will remain confidential or be made publicly available.



Contributor profiles

Paul P.J. Coetser, Director & Head of Competition Department

Werksmans Attorneys

T +27 11 535 8290

F +27 11 535 8790

E pcoetser@werksmas.com

W www.werksmans.co.za

Professional qualifications. South Africa, 1982; Virginia, United States, 1987

Areas of practice. Merger control, complaint proceedings, market investigations and exemptions in the IT, telecommunications, media, mining and financial services industries; compliance and strategy.

Non-professional qualifications. B Juris LLB degree, South Africa; LLM, South Africa; LLM, Virginia, United States

Recent transactions

  • Represented Glencore and Xstrata in contested merger approval proceedings before the Competition Tribunal in which Eskom intervened.

  • Represented DuPont JV in contested merger proceedings before the Competition Tribunal in the Kansai/Freeworld Coatings hostile merger.

  • Represented textile industry grouping in the contested takeover of Massmart by Walmart before the Competition Tribunal.

  • Acted for Telkom SA Limited (the South African incumbent telecommunications fixed-line operator) in several abuse of dominance complaints before the Competition Tribunal.

  • Represented Bankserv, the only national payment system operator in South Africa, in the first market enquiry by the Competition Commission and several merger transactions.

  • Represented Altron Limited in a 3:2 merger approval application for a joint venture between two telecommunications cable manufacturers in South Africa.

Languages. English, Afrikaans.

Professional associations/memberships

  • Chairperson of the Standing Committee on Competition Law of the Law Society of South Africa (LSSA).

  • Chairperson of the Competition Law Committee of the Law Society of the Northern Provinces (South Africa).

  • Served as the Africa Regional liaison of the International Bar Association's Antitrust Committee (2009-2010).

  • Member of the Virginia State Bar.

Publications

  • Competition Laws Outside the United States (South African chapter), Co-rapporteur, American Bar Association.

  • Merger Control Worldwide (South African chapter), Co-author, Cambridge Press.

  • Several articles on the application of competition law in local and international journals.


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