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South Africa

Limitations on the authority of the competition commission

The South African Competition Act 1998, which recently came into operation, represents a fundamental overhaul of South African competition law, and was intended to bring South African law in line with the laws of South Africa's trading partners. However, the powers of the competition authorities have been curtailed in the courts where recent judgments have limited the application of the Act.

The issue

The controversy centres around the interpretation of Section 3 (1) (d) of the Act. This provides that the Act "applies to all economic activity within or having an effect within the Republic except acts subject to or authorised by public regulation." In the first case, between Nedcor and Standard Bank Investments Corporation (Stanbic), Nedcor announced its intention to acquire control of Stanbic. As a defensive measure to the proposed take-over, Stanbic applied to the High Court for an order that the Act was applicable to the acquisition. Stanbic contended that the acquisition was not an act "subject to or authorised by public regulation", and that therefore the provisions of the Act applied, and both the banking regulators and the competition authorities were obliged to review the acquisition. Nedcor argued that the acquisition was indeed subject to public regulation in that, in terms of the Banks Act, 1990, the acquisition was subject to the approval of the Minister of Finance and the Registrar of Banks (banking regulators). Thus, the Act did not apply to the acquisition, and only the banking regulators had jurisdiction to review the acquisition.

In the other case, between competitors in the raisin industry, a new entrant into the industry laid a complaint against the leading player in the industry and obtained interim relief from the Competition Tribunal pending a full investigation into its business practices. The aggrieved party then applied to the High Court, alleging among other things that the marketing of raisins or grapes was an activity which was subject to public regulation under the Marketing of Agricultural Products Act 1996. As such, the competition authorities did not have jurisdiction over the dispute, and the Tribunal orders were null and void.

The initial judgments

In the Nedcor / Stanbic matter, the court found in favour of Nedcor. It held that the ordinary, grammatical meaning of the section indicated that the legislature had intended certain regulators to have exclusive jurisdiction to determine certain matters. Since that did not in the present instance result in any absurdity, inconsistency or anomaly, the banking regulators had sole jurisdiction to consider the acquisition.

In the raisin case, the court arrived at the same conclusion in principle. As the activities of the parties were regulated in terms of the Marketing of Agricultural Products Act, the Tribunal did not have jurisdiction to adjudicate the dispute. The orders made by the Tribunal were therefore rendered null and void.

Nedcor / Stanbic Appeal

The Nedcor / Stanbic matter was taken on appeal, and judgment has only recently been handed down, confirming the decision of the court a quo. The majority judgment held that the section had to be given its ordinary grammatical meaning. However, companies would not be exempt from the provisions of the Act simply because they were in an industry which fell under the ambit of another regulatory body or to which other legislation applied. The public regulation in question must specifically relate to so-called monopolistic acts, which would include mergers and abuses of dominance. As the Banks Act dealt with transactions such as the acquisitions, the acquisition was not subject to the provisions of the Act, and the competition authorities had no jurisdiction.

An amended Act?

The competition authorities are apparently anxious that the Act be amended as soon as possible to ensure that they have jurisdiction over all competition issues. This will give rise to concerns relating to parallel regulation. It was mentioned in the Appeal Court decision that the essence of the Section 3(1)(d) exclusion was to avoid friction amongst authorities whose approval would be required on the same issue. However, the process of parallel regulation is well known throughout the world, and if the Act is amended, the different regulators will have to come to terms with this.

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