Submission on Competition Second Amendment Bill [B41-2000]

  1. COSATU has examined the above Bill and does not have fundamental concerns with it. We do, however, have certain concerns which we would like to take up. This submission covers two areas: the proposed amendment with respect to the jurisdiction of the competition authorities; and technical amendments which we are proposing to enhance the participation of trade unions in competition matters.
  2. Jurisdiction of the Competition Authorities
    1. In terms of jurisdictional issues, while COSATU supports the apparent intention of the proposed amendment (deletion of section 3(1)(d)), we are concerned that it may have certain unintended consequences and in trying to close one loophole may well create others. Whilst it may be true that no legislation can be absolutely watertight and litigation-proof, the proposed amendment may create more regulatory confusion by relying on general understandings which are not made explicit in the Bill. Our impression is that COSATU is not alone in these concerns, and that not all regulatory bodies are in agreement with the proposed amendment.
    2. There are certain restrictive practices which may be "uncompetitive" and considered undesirable in general, but which may be justifiable and necessary in the context of public enterprises attempting to achieve their mandated objectives. Examples of this could include price fixing, market division, selling of goods or services below their marginal or average variable cost, or price discrimination. COSATU is concerned about a situation where such practices become subject to the jurisdiction or concurrent jurisdiction of the competition authorities rather than of the sector regulator. Where the state has taken a political decision to allow or mandate such practices in order to ensure universal delivery of affordable services, it may not be appropriate for the competition authorities to have any jurisdiction at all. Similarly, what may in other circumstances be regarded as a dominant position or even a monopoly may be the appropriate structure for a particular sector and if this is the decision of government it should not be subject to competition jurisdiction.
    3. We do note that section 3(1)(e), which exempts "concerted conduct designed to achieve a non-commercial socio-economic objective or similar purpose" is of relevance in this regard, but we are not convinced that it is sufficient to avoid regulatory and policy ambiguity. While noting the effect of the "specific trumps the general" principle, this is not necessarily the same as concurrent jurisdiction and it is not clear which would prevail. The confusion could potentially be exacerbated by another rule of interpretation that the latest statute repeals an earlier statute to the extent that they deal with the same issues. We do also note the provision for a consultation process with the other regulatory bodies to discuss jurisdictional issues, but are concerned that insufficient legislative guidance is provided in this regard.
    4. COSATU thus proposes some tightening of the proposed amendments in order to completely clarify the intentions and likely consequences of the proposed amendment. As pointed out in Tuesday’s hearings this could either be achieved through appropriate amendments to all other pieces of legislation dealing with regulation in the different sectors, or – more simply – modifying the amendments under discussion today. We propose that the Portfolio Committee requests the State Law Advisors to develop tighter formulations which meet the intended purposes. The formulation should be aimed at closing loopholes arising from the ambiguity in the current Act, without inappropriately extending the jurisdiction of the competition authorities.
    5. COSATU is surprised that, although the experience of the Nedcor-Stanbic case is being used to motivate for the proposed amendment, an exception is actually being proposed for the banking sector (in terms of section 18). We do not understand why financial stability should be privileged above other policy objectives which could potentially justify exemption of other sectors from the jurisdiction of the competition authorities. Thus the original motivation for the amendment is being negated in another section, while the amendment can end up having negative effects on the regulation of other sectors. Section 16(2) of the Act includes as a factor to be taken into account in assessing the impact on competition, whether the business or part of the business of a party to the merger or proposed merger has failed or is likely to fail. Furthermore, in assessing whether a merger can or cannot be justified on public interest grounds, the authorities must consider the effects the merger would have on inter alia a particular industrial sector or region, employment, and the ability of national industries to compete in international markets. It would appear to us that these provisions adequately cover concerns that the application of competition policy as per the current Act would undermine financial stability.

  3. Labour participation in competition proceedings
    1. An innovative aspect of our competition policy is the intention to include trade unions. The Competition Commission has, however, raised a concern that unions have not participated more fully in competition matters. The Commission has noted that this might partly be related to insufficient information being provided by companies, which had to be provided by the Commission at later stages. In the light of this COSATU is proposing three technical amendments aimed at better facilitating union participation.
    2. Although the Act, at section 13(a)(2), provides that merging parties must notify the unions about a merger, the section does not state what the notice should entail. The form CC4(1) which does not require the merging parties to state the implications of the merger on employment in particular. This makes it difficult for the unions to participate in the merger. We propose that union should also be served with form CC4(2) which specifically details the effect of the merger on employment. This would better empower them to participate effectively in merger proceedings.
    3. During the final legislative stages on the Competition Act itself, COSATU proposed two further technical amendments intended to enhance the participation of union representatives during merger control proceedings. The response from DTI was that they were of the view that no amendments would be necessary to achieve the intended objectives, but if during the implementation of the Act it emerged that existing provisions did not achieve the objective of trade union participation at all levels of merger consideration, the Act would be amended accordingly. In the light of experience since the implementation of the Act, COSATU would now like to retable these proposals as follows.
    4. An additional 16(4) to read as follows:
    5. In considering a merger in terms of section 16, the Competition Commission or Competition Tribunal may in the prescribed manner receive representations from a party to a merger, or any other person who, in terms of section 13(2), is required to be given notice of the merger.

      [note: the prescribed manner of this participation would be outlined in the regulations contemplated in terms of section 21(4)]

    6. Secondly, amending section 15(1) to read as follows:

Following a decision by the Competition Commission in terms of section 14(1)(b), a party to a merger, including persons notified in terms of section 13(2), may, by written notice in the prescribed form, request the Competition Tribunal to consider the Competition Commission’s decision.

We motivated the latter proposal to correct the defect that there is no mechanism for trade unions to refer to the Competition Tribunal "intermediate mergers" unconditionally approved by the Competition Commission. This would be anomalous as there is no such limitation on trade union appeals to the Competition Appeal Court on Tribunal decisions regarding mergers of this kind.

We hope that the above issues will meet your favourable consideration. COSATU will be available for further interaction with the committee to contribute to the strengthening and clarification of the proposed Bill.