Regulatory regime faces test
• Competition Appeal Court case could result in merger parties sidestepping competition authorities
The Competition Appeal Court is due to hear an extraordinary case on Monday that could upend the entire competition regulatory regime. HCI is seeking a court order that its proposed plan to merge the gaming businesses of two of its subsidiaries, Niveus and Tsogo Sun, does not require approval from the competition authorities.
An extraordinary case that could upend the entire competition regulatory regime is due to be heard by the Competition Appeal Court on Monday.
HCI is seeking a court order that its proposed plan to merge the gaming businesses of its subsidiaries Niveus and Tsogo Sun does not require the approval of competition authorities.
If granted, the order would establish a precedent for other merger hopefuls to sidestep competition authorities by going directly to the Competition Appeal Court for a ruling.
In a related move on Friday, Tsogo informed shareholders the transaction would be dropped if it had to notify the competition authorities. Friday’s Stock Exchange News Service statement is the first mention of the competition authorities in a transaction that was initially announced in December 2016.
The statement said the fulfilment date of the transaction had been extended to October 30 from September 30 to facilitate the Competition Appeal Court appeal. If at any time before October 30, HCI and Tsogo were informed they had to notify the competition authorities of the transaction “then, unless the parties otherwise agree in writing, the agreement will lapse on the seventh day after such judgment is delivered”.
HCI, whose CEO is Johnny Copelyn, turned to the Competition Appeal Court after failing to get the Competition Tribunal to overturn an advisory opinion from the Competition Commission that the transaction had to be notified. The tribunal said on September 12 that it could not rule on the matter because it did not have jurisdiction as the transaction had not been notified. On Friday, the tribunal released its reasons for its order. In an extraordinary postscript to the reasons, presiding judge Yasmin Carrim noted that HCI and Tsogo had lodged an appeal with the Competition Appeal Court on September 12 before they had any insight into the reasons for the tribunal’s dismissal.
In a stinging rebuke of HCI and Tsogo’s attempt to seek an order from the tribunal and then seek an appeal against its decision, Carrim said it “suggests that the applicants are involved in nothing but a cynical attempt to exclude the commission’s regulatory oversight, at great expense to the public purse”.
HCI believes it is not required to notify the transaction because it is the ultimate controller of Tsogo and Niveus. In addition, it believed that in 2014, when it bought SABMiller’s stake in Tsogo, the commission had granted approval for acquiring more than 50% of Tsogo. Ahead of the gaming merger, HCI holds 47.6% of Tsogo.
In July, seven months after first announcing the transaction and having never approached the competition authorities, HCI requested an advisory opinion from the commission. “They submitted that they wished to avoid the expense and inconvenience of filing a larger merger with all its concomitant bureaucracy,” said Carrim.
The commission disagreed. The proposed transaction would result in HCI “crossing a bright line”, which had legal implications, as its holding in Tsogo would move above 50%. The transaction was critically different from the SABMiller deal.
While the commission had acknowledged there were unlikely to be competition issues it said the proposed transaction had to be notified to determine whether or not it raised publicinterest issues, in particular relating to retrenchments.
IT SUGGESTS THE APPLICANTS ARE INVOLVED IN AN ATTEMPT TO EXCLUDE THE COMMISSION’S OVERSIGHT