There have been significant amendments to laws affecting business in SA recently. In May, a section of the Competition Amendment Act of 2009 relating to the criminalisation of cartel conduct became effective.

It is now a criminal offence for directors or managers to cause their companies to be engaged in, or knowingly acquiesce to, collusion with competitors to fix prices, divide markets, or win tenders.

This has profound implications in respect of the competition commission’s activities over recent years in investigating collusion in industries related to infrastructure — ranging from cement to steel and construction.

Stiff penalties have been apportioned in some cases, especially relating to the construction industry. Many such companies are still exposed to potential lawsuits.

Meanwhile, SA’s largest steel maker, ArcelorMittal SA, has just settled on a record competition commission fine of R1.5bn for monopoly pricing.

SA has now joined other jurisdictions around the world that have criminal enforcement as part of competition enforcement.

But the criminalisation of cartel conduct in SA may also have the unintended consequence of diluting the effectiveness of the corporate leniency policy. This encourages voluntary disclosure of cartels by promising lesser penalties for whistle-blowers.

Amendments to many laws, including those relating to broad-based black economic empowerment and preferential procurement, have added complexity to competition law, amid notable government merger interventions.

This complexity of compliance and enforcement has just become even more acute, since thecommission in June published final public interest guidelines for company mergers, which are immediately effective.

Daryl Dingley, a partner in the competition practice at Webber Wentzel, says the guidelines fail to regulate or detail the role to be played by government through the ministry of economic development. He says this has become increasingly relevant because of minister Ebrahim Patel’s intervention in mergers.

Law firm Cliffe Dekker Hofmeyr says the recently gazetted merger guidelines indicate that the competition commission, when assessing whether merger-related job losses are justified, will consider whether the merging parties have provided sufficient information to staff. "Even if merging parties can prove that there is a rational connection between the job losses and purported reasons for them, such job losses will not be justified if the parties did not properly engage with employees," says Susan Meyer, a director in the firm’s competition practice.

Meanwhile, Achmat Toefy, a partner in the public law practice at Webber Wentzel, says there are large parts of the draft preferential procurement regulations that are potentially in conflict with the Preferential Procurement Policy Framework Act. These have exponentially increased thresholds allocated for broad-based black economic empowerment criteria and tender values.

"It is likely to result in government paying more for goods or services than the act envisages. If implemented incorrectly, it may impermissibly exclude categories of service providers from government business," he says.

"[This can happen], for instance, if an organ of state irrationally requires that only bids from entities with a broad-based black economic empowerment rating of 1 will be considered, which is notionally possible in terms of the draft regulations," he says.

Toefy says Webber Wentzel is expecting legal contestation of these draft regulations — especially from the private sector, unsuccessful bidders, or professional bodies whose members are likely to be negatively affected.

Webber Wentzel says the final public interest guidelines for company mergers are mainly in line with draft guidelines circulated in December last year. But certain provisions have been reworded to broaden their scope and effect — and this may affect merger parties significantly.

Dingley says the guidelines contain a number of key concepts that have been left undefined. For example, they say that the commission is entitled to take into account "public policy goals" and "social projects".

"Such broad and undefined terms may have far-reaching implications for merger parties, as the exact scope and limitations of these concepts are unknown," Dingley says.

"However, while the guidelines aim to provide transparency and legal certainty for merger parties and other relevant stakeholders, it is important to note that the guidelines are not binding on the [competition] commission and the list of public interest grounds provided in section 12A(3) of the Competition Act is not exhaustive," Dingley says.

But he also says the guidelines do not prevent the commission from exercising its discretion in requesting additional information, or assessing other factors not provided in the guidelines, on a case-by-case basis.

"However ... the use of vague and overly broad terms such as ‘public policy goals’ and ‘social projects’ may present a challenge for the commission in adopting a consistent approach to public interest considerations," Dingley says.

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