Final Guidelines On Public Interest Published
07 Jul 2016
On 2 June 2016, The Competition Commission (“Commission”) published final Guidelines on the Assessment of Public Interest Provisions in Merger Regulation (“Guidelines”) under the Competition Act, Act 89 of 1998 (“Competition Act”).
According to Acting Deputy Commissioner Hardin Ratshisusu, the Guidelines will provide much needed clarity on how the Commission will consider public interest grounds in assessing mergers, with the increased focus on public interest considerations in merger regulation. Over the past 16 years, the Competition Appeal Court and the Competition Tribunal have given valuable guidance with regard to the interpretation and application of public interest considerations in terms of the Competition Act. However, up until now no detailed guidelines have been in existence to empower business and practitioners alike, with the necessary knowledge to understand the fundamental approach and interpretation by the competition authorities.
The Competition Act requires that a merger must be assessed with regard to both competition issues as well as public interest grounds. Where there is a merger that raises no competition issues, the specific merger can still be prohibited or conditionally approved on public interest grounds. On the other hand, if a merger is found to be anti‑competitive, it can still be approved if the public interest outweighs the anti‑competitive effects of the merger.
The Guidelines consider in detail the basis of arguing public interest grounds when evaluating the effect of a merger on a particular industrial sector or region, employment, the ability of small businesses controlled or owned by historically disadvantaged persons to become competitive; and the ability to national industries to compete in international markets. It is clear that going forward, based on the Guidelines, far more detailed information will have to be presented to the Commission during the merger evaluation process.
Even though the Guidelines set out the general approach the Commission will follow in assessing public interest implications of a merger, one should bear in mind that the detailed evaluation based on the Guidelines, will be conducted on a case by case. Therefore, clearly formulated arguments must be presented to the Commission during the merger evaluation process in order to empower the Commission to expedite the investigation on the one hand, but on the other hand for it to understand the public interest benefits that a transaction will bring about. Such benefits which will serve as motivation for the approval of a transaction.
In terms of the Guidelines, the Commission outlines a broad stepped analysis which it will undertake in respect of all proposed transactions when considering public interest aspects. In terms of this stepped approach, the Commission will –
- determine the likely effect of the transaction on the public interest;
- determine whether or not the effect is merger specific;
- assess whether the effect is substantial;
- assess whether the merging parties can justify the likely effect based on public interest considerations; and
- consider possible remedies to address any negative public interest effect.
It is often argued that competition concerns should always remain the central consideration for merger control in South Africa and not public interest considerations. However, public interests are of vital importance especially when one considers job creation and economic growth. The Guidelines are an attempt to identify and put forward a clear and predictable approach when it comes to public interest issues. It is hoped that the detailed guidance will facilitate certainty, transparency and bring about expeditious assessment of mergers notified to the Commission. However, it would seem that there remains less quantifiable or then discretionary public interest factors within the Guidelines that do not create certainty and predictability going forward. Amongst others, reference to constitutionally entrenched rights.
It might be that the Guidelines will provide obvious benefits to the merging parties, but it is suggested that the Guidelines will definitely prove to be beneficial to the Commission itself, in terms of establishing “best practice”. It has been emphasised by the OECD that it is important to put in place measures that will ensure public interest provisions are never misapplied. Indeed, although the Guidelines are not legally binding on the Commission, they nonetheless pose as a symbolic value which creates informal standards and criteria of all involved in the merger assessment process.
The guidance of the Competition Appeal Court and Competition Tribunal will prove valuable in years to come, in enabling merging parties to understand how they will discharge the onus placed on them in terms of the Guidelines and what exactly the standard of proof is that they are required to meet in terms of the Guidelines.
In conclusion, the critical question that companies will have to ask themselves and seek advice on in light of the Guidelines are –
- what information must be submitted and what is the extent of the information to be submitted in order to meet the “guideline tests” as set by the Guidelines?
How do you tilt the scales in your favour taking into consideration the balancing act between competition law and public interest?(This article is provided for informational purposes only and not for the purpose of providing legal advice. For more information on the topic, please contact the author/s or the relevant provider.)