Enforcing Competition Rules in South Africa To Terry (like I mean it) Enforcing Competition Rules in South Africa Thieves at the Dinner Table David Lewis Executive Director,Corruption Watch and Extraordinary Professor,Gordon Institute of Business Science, South Africa Edward Elgar Cheltenham, UK + Northampton, MA, USA International Development Research Centre Ottawa + Cairo + Montevideo + Nairobi + New Delhi © International Development Research Centre 2013 First published in SouthAfrica in 2012 by Jacana Media as Thieves at the Dinner Table: Enforcing the Competition Act All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form or by any means, electronic, mechanical or photocopying, recording, or otherwise without the prior permission of the publisher. Published by Edward Elgar Publishing Limited The Lypiatts 15 Lansdown Road Cheltenham Glos GL50 2JA UK Edward Elgar Publishing, Inc. William Pratt House 9 Dewey Court Northampton Massachusetts 01060 USA International Development Research Centre PO Box 8500 Ottawa, ON, K1G 3H9 Canada www.idrc.ca / [email protected] ISBN 978 1 55250 550 2 (IDRC e-book) A catalogue record for this book is available from the British Library Library of Congress Control Number: 2012950432 This book is available electronically in the ElgarOnline.com Law Subject Collection, E-ISBN 978 1 78195 375 4 ISBN 978 1 78195 374 7 (cased) Typeset by Columns Design XML Ltd, Reading Printed and bound by MPG Books Group, UK Contents Preface vi 1. Beginnings 1 2. The new competition regime 24 3. Mergers 70 4. Abuse of dominance 130 5. Cartels 191 6. Competition enforcement on the world stage 228 7. Conclusion and a postscript 261 Index 283 v Preface To all the details that I undoubtedly got wrong in this book, I am most concerned not to add a failure to acknowledge and thank all of those who are responsible for much of what I got right. That having been said, I’ve undoubtedly omitted some important names from this list and to these people I should apologise. Several people read extracts as the book unfolded in the fits and starts that seem to characterise the writing enterprise, especially for those who, like me, are cursed with a maddeningly short attention span. In particular I want to thank Yasmin Carrim, Ann Crotty, Eleanor Fox, Brenda Goldblatt, Norman Manoim, Wouter Meyer, Mike Morris, Shan Ramburuth and Simon Roberts. They helped me with both style and substance but are, as the traditional disclaimer goes, not to be held responsible for either. Annalee van Reenen and Ntsako Mgwena at the library of the competition authorities and Rietsie Badenhorst, Lerato Motaung and Tebogo Mputle, dear friends in the Tribunal office, were constantly asked to recall illustrative cases and examples and track down references and the like, a key element of any research process and one that I am particularly ill-equipped to undertake. Lebo Moleko was my able and patient research assistant during an important period of the writing and research. Nick Binedell, the dean of the Gordon Institute of Business Science (GIBS), and the GIBS staff, provided me with a stimulating and supportive home during much of the period that I spent working on this book. Catherine Garson was my editor, the one person to whom the frequently-used tribute ‘this could not have been done without her’ truly applies. I would also like to thank Nicolas Wilson, my editor at Edward Elgar. The International Development Research Centre (IDRC), the Canadian foundation that has played such a vital role in stimulating research in developing countries, provided me with a generous grant. I’m particularly grateful to Susan Joekes, my point person and friend at the IDRC, for her confidence in this project. vi Preface vii Terry – to whom this book is dedicated – and Jonah and Jessie, who have had to cope with the mess, the swearing, the irritability and, above all, the great sense of displacement and loss I experienced when my term of office at the Tribunal ended, are owed a debt of gratitude too great to express. And finally I want to acknowledge the people with whom I worked. Some are recognised on this page and others in the text. But many are unacknowledged. If this book leaves its readers with no other lasting impression, I hope that they will be struck by how much I loved my work at the Tribunal. And that just has to come down to the people with whom I worked. They came from all over the world, and from many varied backgrounds. But mostly I think of the small group of people in the Tribunal office and on the panels with whom I had the privilege to work. On this score I really lucked out, and for that I am eternally grateful. This page intentionally left blank 1. Beginnings When I sat down in front of my computer, setting out to tell the story of South Africa’s competition institutions and confronted by a blank screen headed ‘Chapter 1’, the only opening sentence that came to mind – and this after chairing the Competition Tribunal for 10 years and writing many thousands of words on the subject of competition – was that which opens so many junior school essays: ‘It was a dark and stormy night …’ But, strange to tell, this may well be an appropriate opening for the story that I want to recount. At the time that this tale begins, darkness or, at least, secretiveness and a profound lack of accountability did indeed mark the workings of the South African business sector. Storminess did not characterise inter-corporate relations – indeed the marked absence of storminess or, conversely, the perceived cosiness that characterised these relations was precisely the problem that the new competition policy was expected to confront. However, a definite element of inclemency was provided by the nature of the interface between a new government and an old business establishment whose relationship, certainly at that time, may euphemistically be described as one of mutual suspicion, marked by fairly regular bouts of considerable turbulence. In the eye of that particular storm was the stated intention of the new government and its allies in the trade union movement to introduce a robust competition policy, centred on a new antitrust statute.1 I vividly recall a conference on competition policy held sometime in 1994 at the University of Cape Town’s Graduate School of Business addressed by the newly-appointed Minister of Trade and Industry, Trevor Manuel. As Manuel has made the transition from community activist to international statesman, he has adopted a rather reflective, ruminative style of address. But he learnt his trade at mass meetings on the Cape Flats and he used this occasion to deliver a particularly stirring address, condemning, in the strongest terms, both the anticompetitive structure and conduct of busi- ness and promising a new competition statute equal to the task of reducing ownership concentration and correcting a century of anti- competitive conduct. It was just the sort of bugle call heralding the cavalry’s arrival that a wannabe competition enforcer wanted to hear. 1 2 Enforcing competition rules in South Africa I recall just as vividly the vote of thanks delivered by Michael Spicer, then the public affairs executive of the Anglo American Corporation, the largest of South Africa’s conglomerates and for long perceived by those now in government as a prime target of antitrust law. Spicer began his contribution with the observation that the only possible comfort he could draw from the minister’s speech was that ministers enjoyed ‘short shelf lives’. Ironically, although Manuel’s tenure as Minister of Trade and Industry was indeed to be brief, he was soon to assume the office of Minister of Finance and would ultimately become the longest-serving minister in that post in the world. How does this story end? It is ‘common cause’, to use the term beloved of lawyers, whose quaint and pompous phraseology I have come to know so well, that the darkness has lifted somewhat and that this is, in very significant part, due to the Competition Act of 1998 and the manner of its enforcement. The investigations of the Competition Commission and the hearings of the Competition Tribunal have illuminated many of the dark corners of South African business. For the most part these revelations consisted of micro-economic data, as well as corporate strategies and cultures, that in many other countries were long part of the public domain. But the revelations have naturally also included many clandestine conspiracies to fix prices or rig bids. Many of South Africa’s leading business people – including, as it so happens, the then CEO of the Anglo American Corporation – have appeared before the Competition Tribunal obliged to give evidence, to submit themselves to the exacting cross-examinations that are exciting and fascinating to observe but clearly sheer hell to be subject to, and, on many occasions, to contritely admit guilt for one or another truly heinous conspiracy against South African consumers. With the assistance of a small cadre of curious and smart business journalists who soon learnt that the Tribunal hearings were extraordinary venues for getting behind the bland offerings of corporate public relations departments, sunlight began to filter into the hitherto hidden corners of South African business. There is still, to be sure, plenty of storminess surrounding the enforcement of competition law. This is built into much of the activity of law enforcement. And it is a feature of the drama surrounding adversarial courtroom exchanges, especially where the adversaries are, on the one hand, pillars of the business establishment, people more used to giving instructions than answering questions and fielding public criticism, and, on the other, a public authority, the Competition Commission, and, frequently, competitors or customers of the firms under scrutiny.