In my column this week I return to Minister Patel’s transformation-through-public-interest merger conditions obsession, which have been straightjacked to some extent by the Tribunal. Initially, the number of large mergers subject to public interest conditions was limited, with just 16 approved by the Competition Tribunal in 2017. These conditions primarily focused on employment matters, preventing staff retrenchment resulting from the merger. However, by 2022 the figure skyrocketed to 74. Alongside employment considerations, acquiring companies were required to commit substantial financial resources towards enterprise and supplier development, as well as bursaries and similar initiatives that pleased the minister.
One notable recent example is the case of Dubai Ports World’s acquisition of Imperial’s SA operations, which necessitated a staggering minimum expenditure of R2.1bn over four years. A brave undertaking in the midst of an ongoing trucking war on the N3 highway and endless power and water cuts.
These developments have been celebrated by the DTIC, with Patel and his team frequently highlighting the positive impact of these conditions on “industrial competitiveness and growth” in reports to parliament, when the outcomes couldn’t be further from the truth. Accordingly, local and foreign investors will heave a sigh of relief at the guidance recently provided by the Competition Tribunal on the scope of the commission’s powers to require these kinds of commitments.
I highlight the case of Epiroc, a Swedish mining machinery group, wanted to invest in Aard, a SA business which supplies loader and other vehicles that are used in low seam mining operations, and by doing so, increase its presence in SA and grow the business based on its global footprint. A manifestly positive transaction from a public interest perspective, you would say, and exactly the kind of investment we spend millions trying to attract?
Not so fast, said the Competition Commission. The seller of the shares was a “historically disadvantaged person”, and as a result, the transaction would not “promote a greater spread of ownership” as envisaged by the Competition Act. Remember Burger King?
Hopefully, the tribunal’s decision will assist to limit the application of public interest conditions to those (relatively rare) cases in which the competition authorities identify that there is a real risk that a proposed acquisition will actually negatively affect small suppliers or customers or suppliers, or flood the country with imports. On that point, a wandering albatross tells me that firms are giving up on trade remedies due to Patel’s prevarication, but that’s a column for another day.
D. ONE Consulting LLC Owner at D.ONE
1wGreat news! This will be a powerhouse for the food industry! Great synergy!