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The growing importance of public interest considerations, and the uncertainty that it creates, in South Africa and other sub-Saharan jurisdictions, including Zambia, Namibia and Botswana, pose an additional challenge for merging entities attempting to coordinate multi-jurisdictional merger notifications. These difficulties were, most recently, brought to the fore during the much publicized and highly opposed proceedings involving Wal-mart’s takeover of the South African listed retailer Massmart. While the growing importance of public considerations increases the complexity and cost of multi-jurisdictional merger filings, the author suggests that these challenges can be countered by addressing public interest considerations as an integral part of submissions in support of merger filings in the sub-Saharan African region.
Saharan Africa where there has been a proliferation of merger control legislation in recent times. In 2007 Swaziland enacted competition legislation, followed by Botswana and Mauritius in 2009 respectively. The merger control regimes of South Africa, Namibia and Zambia have been in place for some time. South Africa’s competition authorities have made significant contributions to merger jurisprudence in sub-Saharan Africa.
Mergers between multinational and transnational corporations have the potential to have a significant impact on various national economies. The 2008 economic crisis has undoubtedly brought the issue of the impact of transactions on economies (and ultimately affected citizens) into sharp relief. The challenge for companies engaging in multi-jurisdictional mergers (or, in essence, mergers that require notification in more than one jurisdiction) is that the assessments conducted by the respective antitrust agencies in each jurisdiction are not consistent across all these economies and, as in the case of South Africa (and more recently the sub-Saharan region), certain unique merger review considerations have recently re-emerged which have the capacity to increase the costs of and the time required to complete multijurisdictional filings by increasing the scope of the merger investigation process, and therefore the types of remedies which may be imposed.
This paper is intended to provide an overview of the key issues typically considered by competition agencies (and merging parties’ legal practitioners) when fashioning and negotiating merger remedies in the case of multi-jurisdictional and cross-border mergers. The overview is done with specific reference to the South African context. In particular, we consider the jurisdiction-specific issues when designing and implementing remedies in South Africa.
The structure of this paper is as follows:
Part I, by way of introduction, provides certain insights into South African merger remedy design;
Part II provides an overview of the specific factors that are taken into account when remedies are considered in South Africa—this section contains a particular emphasis on so-called “public interest” considerations;
Part III provides a brief review of the approach to merger review and the imposition of merger remedies in the sub-Saharan region is then considered;
Part IV highlights certain practical issues that ought be considered by parties to a proposed merger before making a multi-jurisdictional filing are discussed—including the current trend amongst sub-Saharan agencies to focus on public interest issues; and, finally;
Part V concludes by setting out the practical realities merging parties
of a company4, or certain products or brands5. Behavioural remedies, on the other hand, are designed to regulate or constrain the behaviour of merging parties. For example, within the South African context, behavioural remedies, which have been imposed in the context of vertical transactions, typically include putting in place contracts that regulate supply conditions. In 2008, the international horizontal merger between Yara International ASA and Kemira GrowHow Oyj6 was approved, subject to the merging parties agreeing to supply urea to purchasers in South Africa for a period of two years. Similarly, the transaction involving Current Electric and Alstom Electrical SA (Pty) Ltd.7 was approved subject to the merging parties agreeing to continue their supply of transformers to various switchgear manufacturers.
While the South African competition authorities have displayed a willingness to impose both structural and behavioural remedies (on vertical and horizontal mergers), it appears, like most competition agencies, to favour the imposition of structural remedies in the context of horizontal mergers8. In the context of vertical mergers, the South African competition authorities tend to prefer behavioural remedies. This approach is not dissimilar to that followed in the European Union (“the EU”) and the United States (“the US”)9. However, it has also been observed that the South African authorities, as relatively new participants in the antirust arena, have tended, in the past, to impose a greater number of behavioural remedies in horizontal mergers than its counterparts in the developed antitrust jurisdictions.10
There is no published general consensus as to the South African authorities’ views on what constitutes the optimal remedy, policy or design11. However, in a recently published paper12, representatives of the South African Competition Commission (“the Competition Commission”) acknowledged that certain behavioural conditions that were imposed in
upon each specific public interest criterion. In light of the recent highly politicised proceedings in the merger between Walmart and Massmart, this is the case now more so than ever before. A thorough knowledge of the local requirements and an ability to navigate the local regulatory terrain are therefore essential. Recent precedent is indicative of the need to properly canvass these issues upfront with local counsel and take them into account in the merger notification process. Parties to merger proceedings need to prepare their merger submissions accordingly.
We should also highlight that other sub-Saharan African countries such as Botswana, Malawi, Namibia, Swaziland and Zambia include some form of public interest consideration as part of their competition regulations and these considerations tend to be accorded significant weight in the adjudication process.47 In 2009, the Common Market for Eastern and Southern Africa (“COMESA”) launched the COMESA Competition Commission with the main function of applying the COMESA Competition Regulations, whose function also includes facilitating “exchange of relevant information and expertise”. It is highly likely that authorities and courts in these jurisdictions will look to South African jurisprudence in their treatment of public interest considerations in merger adjudication.
While parties continue to seek certainty in the merger review context, the additional public interest criteria contained in the South African Competition Act, which have recently been brought to the fore (during the Wal-mart matter and as emphasized by the Minister for Economic Development) will no doubt result in greater transactional costs for international parties filing notifications in South Africa with the concomitant risk of unique remedy conditions being imposed by the competition authorities. It is likely, given the South African government’s stated emphasis on providing opportunities to participate in the formal economy to previously disadvantaged persons, that this public interest factor will also become a hotly debated factor in future merger proceedings.
Saharan Africa where there has been a proliferation of merger control legislation in recent times. In 2007 Swaziland enacted competition legislation, followed by Botswana and Mauritius in 2009 respectively. The merger control regimes of South Africa, Namibia and Zambia have been in place for some time. South Africa’s competition authorities have made significant contributions to merger jurisprudence in sub-Saharan Africa.
Mergers between multinational and transnational corporations have the potential to have a significant impact on various national economies. The 2008 economic crisis has undoubtedly brought the issue of the impact of transactions on economies (and ultimately affected citizens) into sharp relief. The challenge for companies engaging in multi-jurisdictional mergers (or, in essence, mergers that require notification in more than one jurisdiction) is that the assessments conducted by the respective antitrust agencies in each jurisdiction are not consistent across all these economies and, as in the case of South Africa (and more recently the sub-Saharan region), certain unique merger review considerations have recently re-emerged which have the capacity to increase the costs of and the time required to complete multijurisdictional filings by increasing the scope of the merger investigation process, and therefore the types of remedies which may be imposed.
This paper is intended to provide an overview of the key issues typically considered by competition agencies (and merging parties’ legal practitioners) when fashioning and negotiating merger remedies in the case of multi-jurisdictional and cross-border mergers. The overview is done with specific reference to the South African context. In particular, we consider the jurisdiction-specific issues when designing and implementing remedies in South Africa.
The structure of this paper is as follows:
Part I, by way of introduction, provides certain insights into South African merger remedy design;
Part II provides an overview of the specific factors that are taken into account when remedies are considered in South Africa—this section contains a particular emphasis on so-called “public interest” considerations;
Part III provides a brief review of the approach to merger review and the imposition of merger remedies in the sub-Saharan region is then considered;
Part IV highlights certain practical issues that ought be considered by parties to a proposed merger before making a multi-jurisdictional filing are discussed—including the current trend amongst sub-Saharan agencies to focus on public interest issues; and, finally;
Part V concludes by setting out the practical realities merging parties
of a company4, or certain products or brands5. Behavioural remedies, on the other hand, are designed to regulate or constrain the behaviour of merging parties. For example, within the South African context, behavioural remedies, which have been imposed in the context of vertical transactions, typically include putting in place contracts that regulate supply conditions. In 2008, the international horizontal merger between Yara International ASA and Kemira GrowHow Oyj6 was approved, subject to the merging parties agreeing to supply urea to purchasers in South Africa for a period of two years. Similarly, the transaction involving Current Electric and Alstom Electrical SA (Pty) Ltd.7 was approved subject to the merging parties agreeing to continue their supply of transformers to various switchgear manufacturers.
While the South African competition authorities have displayed a willingness to impose both structural and behavioural remedies (on vertical and horizontal mergers), it appears, like most competition agencies, to favour the imposition of structural remedies in the context of horizontal mergers8. In the context of vertical mergers, the South African competition authorities tend to prefer behavioural remedies. This approach is not dissimilar to that followed in the European Union (“the EU”) and the United States (“the US”)9. However, it has also been observed that the South African authorities, as relatively new participants in the antirust arena, have tended, in the past, to impose a greater number of behavioural remedies in horizontal mergers than its counterparts in the developed antitrust jurisdictions.10
There is no published general consensus as to the South African authorities’ views on what constitutes the optimal remedy, policy or design11. However, in a recently published paper12, representatives of the South African Competition Commission (“the Competition Commission”) acknowledged that certain behavioural conditions that were imposed in
upon each specific public interest criterion. In light of the recent highly politicised proceedings in the merger between Walmart and Massmart, this is the case now more so than ever before. A thorough knowledge of the local requirements and an ability to navigate the local regulatory terrain are therefore essential. Recent precedent is indicative of the need to properly canvass these issues upfront with local counsel and take them into account in the merger notification process. Parties to merger proceedings need to prepare their merger submissions accordingly.
We should also highlight that other sub-Saharan African countries such as Botswana, Malawi, Namibia, Swaziland and Zambia include some form of public interest consideration as part of their competition regulations and these considerations tend to be accorded significant weight in the adjudication process.47 In 2009, the Common Market for Eastern and Southern Africa (“COMESA”) launched the COMESA Competition Commission with the main function of applying the COMESA Competition Regulations, whose function also includes facilitating “exchange of relevant information and expertise”. It is highly likely that authorities and courts in these jurisdictions will look to South African jurisprudence in their treatment of public interest considerations in merger adjudication.
While parties continue to seek certainty in the merger review context, the additional public interest criteria contained in the South African Competition Act, which have recently been brought to the fore (during the Wal-mart matter and as emphasized by the Minister for Economic Development) will no doubt result in greater transactional costs for international parties filing notifications in South Africa with the concomitant risk of unique remedy conditions being imposed by the competition authorities. It is likely, given the South African government’s stated emphasis on providing opportunities to participate in the formal economy to previously disadvantaged persons, that this public interest factor will also become a hotly debated factor in future merger proceedings.