Anglo South Africa Capital (Pty) Ltd and Others v Industrial Development Corporation of South Africa and Another (26/CAC/Dec02) [2003] ZACAC 2; [2003] 1 CPLR 10 (CAC); 2004 (6) SA 196 (CAC) (28 March 2003)

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[2003] ZACAC 2
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Anglo South Africa Capital (Pty) Ltd and Others v Industrial Development Corporation of South Africa and Another (26/CAC/Dec02) [2003] ZACAC 2; [2003] 1 CPLR 10 (CAC); 2004 (6) SA 196 (CAC) (28 March 2003)

IN
THE COMPETITION APPEAL COURT OF SOUTH AFRICA
CAC
Case No.:
26/CAC/Dec02
Tribunal
Case Nos.:
45/LM/Jun02
and
46/LM/Jun02.
In the matter
between :
ANGLO
SOUTH AFRICA CAPITAL [PTY] LTD. 1
st
Appellant
ANGLOVAAL
MINING LIMITED 2
nd
Appellant
ANGLO
AMERICAN HOLDINGS LIMITED 3
rd
Appellant
KUMBA
RESOURCES LIMITED 4
th
Appellant
and
INDUSTRIAL
DEVELOPMENT CORPORATION
OF SOUTH
AFRICA 1
st
Respondent
THE
COMPETITION COMMISSION OF
SOUTH
AFRICA LIMITED 2
nd
Respondent
J U D G
E M E N T
JALI J A.
INTRODUCTION
:
This is an
appeal against the decision of the Competition Tribunal (“the
Tribunal”) handed down on the 24
th
December 2002. The
Competition Tribunal gave the First Respondent leave to participate
in the two large merger proceedings between
the First Appellant and
the Second Appellant (“the Anglovaal merger”)and also between the
Third Appellant and the Fourth Appellant
(“the Kumba merger”).
The Tribunal also decided on the scope of the second respondent’s
participation, and granted access
to all the confidential documents
relating to these mergers. Costs were reserved for determination at
the merger hearing or at a
time agreed upon by the parties.
The
Appellants have appealed against this Order. In their appeal, they
have challenged the Tribunal’s finding that the Respondents
have
shown “good cause” to participate in the aforesaid merger
proceedings.
FACTUAL
BACKGROUND:
On the
20
th
June 2002, the Appellants notified the Competition
Commission (“the Commission”) of the two large mergers. Notice
was given
of a proposed Anglovaal merger. On the same day another
merger notification was filed regarding the proposed Kumba merger.
In
both of these mergers, first and third appellants were to acquire
a material interest over the second and fourth appellants
respectively.
The Commission conducted an investigation in
accordance with its statutory duties in terms of
section 12A
of the
Competition Act No. 89 of 1998
, as amended. (“the Act”). The
Commission concluded that both the Anglovaal merger and the Kumba
merger should be approved unconditionally
by the Tribunal.
On the 6
th
September 2002, the Commission submitted its written recommendations
to the Tribunal in terms of
section 14A(1)(b)
of the Act.
On the 18
th
September 2002, the First Respondent filed an application for leave
to participate in merger proceedings. On the 20
th
September 2002, the Tribunal granted the First Respondent leave to
participate in these merger proceedings. On the 18
th
October 2002, the Tribunal made a decision in delineating the scope
of the First Respondent’s participation in the merger proceedings.
The
Appellants appealed these decisions to this Court. On the 15
th
November 2002, this Court granted an order in which the two decisions
of the 20
th
September and 18
th
October 2002,
were set aside. This Court’s order was to the effect that the
aforesaid decisions should not have been granted by
a single member
of the Tribunal but by a full panel of the Tribunal. Accordingly,
the matter was referred back to the Tribunal.
A full panel
of the Tribunal was constituted. It considered the application to
intervene by the First Respondent in the mergers.
It is the
decision of the newly constituted panel, which is the subject matter
of this appeal.
APPLICATION
TO AMEND:
The
original application to intervene was lodged by the First Respondent
in terms of Tribunal
Rule 46(1)(a).
However, after the hearing of
the 15
th
November 2002, before this Court, the application
was amended. On the 22
nd
November 2002, the First
Respondent filed a new application under Rule 42 of the Tribunal
Rules as well as an amendment of the original
application. The
original application was substituted in its entirety and the First
Respondent applied to participate under Rule
42. In the alternative,
and only in the event of the Tribunal finding that the Rule 42 was
not the correct prescribed procedure,
an application was brought in
terms of Rule 46(1)(a).
At the
Tribunal hearing, the Appellants objected to the amendment submitting
that there was no proper basis for the amendment to
be allowed. The
amendment would have caused substantial prejudice to the Appellants.
The Tribunal considered the submissions and
exercised its discretion
in favour of allowing the amendment. The Tribunal based its decision
on the provisions of section 27(1)(d)
and section 53(1)(c) of the
Act.
Before this
Court, Mr Gauntlett who appeared together with Messrs Unterhalter,
Fagan and Gotz on behalf of the appellants, attacked
the Tribunal’s
decision to grant the First Respondent’s leave to amend its notice
of motion, as set out above. In particular,
the Appellants were of
the view that the Tribunal misdirected itself in deciding that the
“precise juristic niche” into which
to place the application for
such participation or a precise form of the application is not
essential. In this regard, the Tribunal
was of the view that the
First Respondent showed good cause for such an amendment.
This Court
cannot fault the Tribunal’s finding with regards to the granting of
the amendment. I am not aware and we have not
been referred to
any authority which suggests that once a matter has been referred
back to a court a quo for hearing
de novo
by a court of
appeal, a party cannot amend the pleadings in the matter. Indeed
there is an authority that a party can amend its
pleadings at any
stage of the proceedings, subject to the normal considerations of
prejudice and whether it would facilitate the
proper ventilation of
the dispute between the parties so that justice may be done (See
Morgan and Ramsay v Cornelius and Hollis
1910 N.P.D. 262
at 264;
Rishton v Rishton
1912 TPD 718
at 719 and Trans-Drakensberg Bank Ltd.
(under judicial management) v Combined Engineering (Pty) Ltd. and
Another
1967 (3) S.A. 632
(D) at 638 A and 642 H).
On the
general object of pleadings (see
Robinson v Randfontein Estates
G.M. Co. Ltd.
1925 A.D. 173
at 198);
Shill v Milner
1937 A.D.
101
at 105
and
Van Mentz v Provident Assurance Corporation of
Africa Limited 1961(1) S.A. 115 (AD) at 122).
The Tribunal
has the discretion to make the necessary Order as provided for in
section 27(1)(d) of the Act, so long as it does so
judicially. There
has been no indication that the Tribunal did not exercise its
discretion properly or that the First Respondent
acted mala fide.
The mere delay in bringing the application for leave to amend is not
per se
a ground for refusal of an application for amendment.
(See also
Commercial Union Assurance Co. Ltd. v Waymark N.O.
1995
(2) S.A. 73
(TK) at 77).
The Tribunal correctly decided, that
there was a good cause for the amendment. The amendment finds
support in the First Respondent’s
founding affidavit to the notice
of motion. Accordingly, the Tribunal’s ruling in this regard is
confirmed.
APPLICATION
TO PARTICIPATE:
The
Appellants case is that the First Respondent does not have the
substantial or material interest for it to be granted leave to
intervene in the merger proceedings. In the premises, the Tribunal
erred in firstly, “reading down” the explicit requirement
of
material interest in Tribunal Rule 46 and in finding that it had
“unfettered discretion” to allow intervention under that
rule.
Secondly, it erred in determining the scope of the intervention in
wide and vague terms. Thirdly, it erred in allowing
the First
Respondent to have access to confidential information.
On the other
hand, the First Respondent ‘s case is that the Tribunal was correct
in giving leave to participate in the merger proceedings
and access
to confidential information. In its submissions, it relied on
section 53(c)(v) of the Act, read together with Tribunal
Rule 42.
In the alternative, it relied on Rule 46(1) of the Tribunal Rules.
Furthermore, the first respondent submitted that it
is entitled to
fair administrative justice as anticipated in section 36 of the
Promotion of Access to Information Act 2 of 2000 (“the
Pai Act”).
Section 53 of
the Act, provides that:
“
53. Right
to participate in hearing
The
following persons may participate in a hearing, in person or through
a representative, or may put questions to witnesses and
inspect any
books, documents or items presented at the hearing;
(a) If the hearings in terms of Part C –
the
Commissioner, or any person appointed by the Commissioner;
the
complainant
, if –
the
complainant
referred the complaint to the Competition
Tribunal; or
in
the opinion of the presiding member of the Competition Tribunal,
the
complainant’s
interest is not adequately represented
by another participant, and then only to the extent required for
the
complainant’s
interest to be adequately represented;
the
respondent
; and
any
other person who has a
material interest
in the hearing,
unless, in the opinion of the presiding member of the Competition
Tribunal, that interest is adequately represented
by another
participant, but only to the extent required for the
complainant’s
interest to be adequately represented;
If
the hearing is in terms of section 10 or Schedule 1-
the
applicant for an exemption;
the
Competition Commission;
the
appellant, if the appellant is not the applicant for an exemption;
an
interested person contemplated in section 10(8)
who
submitted a representation to the Competition Commission, unless,
in the opinion of the presiding member of the Competition
Tribunal,
that person’s interest is adequately represented by another
participant, but only to the extent required for the
person’s
interest
to be adequately represented; and
the
Minister
or member of the Executive Council if consulted in
terms of Schedule 1;
if
the hearing is in terms of Chapter 3 –
any
party to the merger;
the
Competition Commission;
any
person who was entitled to receive a notice in terms of section
13A(2) and who indicated to the Commission an intention to
participate, in the
prescribed
form;
the
Minister
, if the
Minister
has indicated an intention
to participate; and
any
other person whom the Competition Tribunal
recognized as a
participant. (Own emphasis).
Rule 42 of
the Tribunal Rules stipulates that::
42.
Initiating
other proceedings
(1) Any proceedings not otherwise provided for in these Rules
may be initiated
only by filing a Notice of Motion in Form CT6 and supporting
affidavit setting out the facts on which the application
is based.
The
applicant must serve a copy of the Notice of Motion and affidavit on
each respondent named in the Notice within 5 business days
after
filing it.
A
Notice of Motion in terms of this Rule must –
indicate
the basis of the application; or
depending
on the context –
set
out the Commission’s decision that is being appealed or
reviewed;
set
out the decision of the Tribunal that the applicant seeks to have
varied or rescinded;
set
out the Tribunal or Commission Rule in respect of which the
applicant seeks condonation;
allege
conduct referred to in –
section
59(1)(c) in respect of which the
Commission seeks an administrative
fine; or
section 60(1) in respect of which the
Commission seeks an order of
divestiture;
indicate
the order sought; and
state
the name and address of each person in respect of whom an order is
sought.
Rule 46 of
the Tribunal Rules also provides:
Intervenors
At
any time that the initiating document is filed with the
Tribunal, any person who has a
material interest
in the
relevant matter may apply to intervene in the Tribunal
proceedings by filing a notice of motion in form
CT6, which
must: -
include
a concise statement of the nature of the person’s interest
in the proceedings and the matters in respect of which
the person
will make representations; and
be
served on every other participant in the proceedings; (own
emphasis).
Section 53
deals with three distinct circumstances in which a party may seek
leave to participate in hearings. Section 53(1)(a)
deals with
hearings in terms of Part C of Chapter 5, that is, complaints against
an alleged prohibited practice. Section 53(1)(b)
deals with
hearings in terms of Section 10 or Schedule 1, that is, application
for exemptions from the application of Chapter 2 (Restrictive
Practices) or exemption of professional rules. Section 53(1)(c)
deals with merger hearings. (Chapter 3 Hearings). Section 53(1)(c)
is the applicable or relevant sub-section in this matter.
In dealing
with mergers, Section 53(1)(c)(v) makes no reference to interest,
whether material or substantial. The reference to a
person with a
material interest is to be found in Section 53(1)(a)(iv) and Rule 46
of the Tribunal Rules. In Section 53(1)(b) the
interested person
must be as contemplated in Section 10(8). In other words, that
interest is qualified or defined, by Section 10(8)
which makes
reference to a person with a “substantial financial interest.”
Mr Gauntlett
submitted that, whilst section 53(1)(c)(v) says nothing about
interest, it does not mean that no interest at all is required
for a
party to be entitled to participate. In support of this submission,
he contended that interventions and merger proceedings
are hardly
envisaged in terms of the Act. He also sought support from the
common law test for standing; that is, for a party to
intervene it
must have a material interest in the proceedings.
I agree with
Mr Gauntlett’s submission with regard to the common law test for
intervening in proceedings where the ground relied
upon is an
interest in the matter. Various authorities dealing with
interventions under common law support the proposition that
an
intervening party must have a substantial and material interest in
the subject matter of the litigation is the decisive criteria,
and
the granting of leave is discretionary. See
Amalgamated
Engineering Union v Minister of Labour
1949 (3) S.A. 637
(AD)at 659;
Henri Viljoen (Pty) Ltd. v Awerbuch Brothers 1953(2) S.A.151(O);
United Watch and Diamond Co. (Pty) Ltd. v Disa Hotels Limited
1972
(4) SA 409
(C) at 416; Wynne v Divisional Commissioner of Police and
Others
1973 (2) SA 770
(E); Minister of Local Government and Land
Tenure and Another v Sizwe Development and Others: In Re Sizwe
Development v Flagstaff
Municipality
1991 (1) SA 677
(TK) at 678 –
679 and Vandenhende v Minister of Agriculture, Planning and Tourism,
Western Cape and Others
2000 (4) S.A. 681
(C) at 689 A).
However,
these cases are distinguishable from this case. This Court cannot
ignore the ordinary grammatical meaning of the provisions
of section
53(1)(c)(v) of the Act and also the purpose of the
Competition Act
as
set out in Section 1(2)(a) of the Act. (See
Public Carriers
Association and Others v Toll Road Concessionaries (Pty) Ltd.
1990
(1) SA 925
(A) at 943C-944A
and also
Standard Bank Investment
Corporation Ltd. v Competition Commission and Others
[2000] ZASCA 20
;
2000 (2) SA 797
(SCA) at 811I-812A.
The language
of the statute is clear. There is no reference to interest at all.
The mere requirement is that a party must be recognized
by the
Tribunal as a participant. The recognition could be on the basis of
some other grounds, other than an interest in the matter
as
stipulated in the common law. Even if it were to be argued that the
party must have an interest, such interest is not qualified.
In
other words, there is no threshold for the interest for a party to
participate. In the absence of specified criteria for participation
this court should be reluctant to read in a test such as “substantial
and material interest”. Where the legislature had sought
to set
out an express criteria for participation in the statute it had done
so. For example, “material interest” is required
in hearings in
terms of Part C of Chapter 5 of the Act (see section 53(1)(a)(iv))
and a
“substantial financial interest” is required in
hearings in terms of Section 10 or Schedule 1 of the Act (see Section
53(1)(b)(iv)
and Section 10(8)
)
. Clearly different criteria
are set for participation in the different hearings. Yet no such
qualifications appear in the case of
Section 53(1)(c)(v).
Section 78 of
the Act empowers the Minister of Trade and Industry (“the
Minister”), by notice in the Gazette, to make regulations
that are
required to give effect to the purpose of the Act. Section 27(2)
empowers the Minister to prescribe regulations for matters
relating
to the functions of the Tribunal, including manner and form of
participation in the Tribunal procedures and other procedures.
On 1
st
February 2001, the Minister, in consultation with the Chairperson of
the Tribunal, published the rules for the conduct of proceedings
in
the Tribunal. (see Government Notice No. 22025 in Government Gazette
No. 428 dated 1
st
February 2001).
Mr Gauntlett
submitted that Rule 42 is a general Rule which has nothing to do with
the recognition of participants in merger proceedings,
whilst Rule 46
is
lex specialis.
It deals with intervention and should be
the applicable Rule. Rule 41 is analogous to Rule 18 of the Uniform
Rules of Court (High
Court Rules).
The
respondents sought to rely upon Rule 42 and Rule 46 only in the
alternative. The Tribunal was of the view that both Rules apply
in
this matter.
It is common
cause that Rule 42 does not specify criteria for the interest which
must be there for one to be able to participate,
whereas

Rule 46 calls for a “material
interest.”
It is clear
that Rule 46 sets out a higher threshold than the one which is
required in terms of the Act for a party to be able to
participate.
The threshold is the common law test which is relied upon by the
appellants.
I have some
difficulties with the appellants’ approach that Rule 46 is of
application and that accordingly the test for intervention
in the
present dispute is the existence of material or substantial interest.
Firstly, Rule 46 cannot introduce a threshold which
the legislature
never introduced in the Act. If Rule 46 is applicable in this case,
the question arises as to its application in
terms of the other
sub-sections of Section 53(1) where a criteria has expressly been set
for participation; for example, substantial
financial interest in
Section 53(1)(b) above. Furthermore, what if participation is being
sought on the basis of “convenience”?
Convenience has been
recognized in our Courts as another ground on which joinder is
competent. (See
Rabinowitz and Another NNO v Ned-Equity Insurance
Co. Limited and Another
1980 (3) S.A. 415
(W) at 419 D – F).
Intervention is closely linked with joinder and is often treated as a
particular facet of joinder (
United Watch and Diamond Co. (Pty)
Ltd. (Supra) at 415C).
In any
event regulations (or Rules in this case) which have not been drafted
by the legislature cannot be treated together with the
Act as a
single piece of legislation nor can these Regulations be employed as
an aid to the interpretation of the Act. (See
Moodley v Minister
of Education and Culture, House of Delegates
1989 (3) SA 221
(AD) at
233 E – F).
Thus, Rule 46 cannot be used to interpret the
provisions of the Act and in particular, Section 53(1) and to
restrict the express
provision of Section 53(1)(c).
Furthermore,“manner”, “form” and
“procedures” of participation, referred to in Section 27(2) of
the Act, do not include
actual thresholds or grounds for
participation.
Secondly,
merger proceedings are not to be equated with ordinary litigation.
Mr Gauntlett acknowledged that people do not participate
in merger
proceedings as litigants. There is no plaintiff and no defendant
disputing competing rights and obligations, nor are the
merging
parties prosecuted. The Tribunal, for its part, does not act as an
adjudicator between rivals. Large merger proceedings
are not
adversarial. The Tribunal’s responsibility is to evaluate the
merger in terms of section 12(A) of the Act.
The Tribunal
(and the Commission where applicable) are the critical bodies
enjoined to, regulate competition matters with the view
to
discouraging restrictive practices, abuse of dominance and
controlling mergers and thus promote the purposes of the Act as set
out in Section 2. In seeking to achieve this goal they might even
institute their own investigation and call for their own evidence.

In so doing, the Tribunal is not confined to submissions or evidence
placed before it by the parties to the merger or people who
have “an
interest” in the merger. In particular, the various considerations
which the Tribunal can take into account in assessing
whether a
merger is justified on public interest grounds in terms of Section
12A(3) make it clear that the Tribunal might admit persons
beyond
those persons or bodies who are directly or indirectly involved in
the merger.
Thirdly, the
shortcoming in the appellant’s argument is best illustrated by the
dictum in
Henri Viljoen (Pty) Ltd. v Awerbuch Brothers (supra) 169
H
:
“The above authorities at least point in the same direction as the
English cases referred to, namely, that “the direct interest”
required by the Appellate Division decision must be an interest in
the right which is the subject-matter of the litigation and is
not
merely a
financial interest
which is only an indirect interest
in such litigation.”
Horwitz A
J P went on to state at 170 H :
“If I am correct in interpreting “direct and substantial
interest” as used by the Appellate Division as a legal interest in
the subject-matter of the litigation and as excluding an indirect,
commercial interest
only, then the order asked for could be
granted without reference to Samba or any other buy-aid
organization.” (Own emphasis).
Clearly,
the test propagated by the appellants is a test which is appropriate
for litigation and it is not sufficient for the interest
concerned to
be merely a financial or commercial interest. This is contrary to
the express provisions of the
Competition Act where
a substantial
financial interest is the interest which, in certain circumstances,
should be considered.
The
requirement of “material and substantial interest” is manifestly
the appropriate test for litigation matters because firstly,
in
litigation there may be an issue in dispute, which is not the case in
mergers. The dispute may even be clearly defined and it
may be easy
for the Court to decide whether the applicant who seeks leave to
intervene has an interest in the matter or not. Secondly,
parties
who are involved in litigation, would not want anybody to intervene
and be party to the proceedings because by the very nature
of
litigation there are serious cost implications. Thus, a person
cannot be party to litigation unless he has a material and
substantial
interest in the right, which is the subject matter of
such proceedings. That is not the case with merger proceedings.
In the
present dispute, the first respondent seeks the right to participate
in the proceedings based on the provisions of the Act,
which seems to
set out criteria, which do not necessarily limit access to persons
having a
material or substantial interest in the matter. For
example, it is apparent from the Act that the Minister or a trade
union may
be notified of a merger while they are not party to the
merger proceedings. They may seek to participate even if they do not
have
a substantial and material interest, as contemplated in the
cases referred to above. The purpose thereof is to ensure that the
objectives of the Act are achieved.
In the light
thereof, I cannot agree with appellants that the common law test for
participation in merger proceedings is appropriate.
There is no
cogent reason for adopting a narrow approach as suggested by the
appellants, to the issue of participation in merger
proceedings.
Mr Nelson,
who appeared together with Mr van Dorsten, for the first respondent,
submitted that given the facts of this case, the uncertainty
as to
the precise nature of the test, that should be applied to determine
the threshold for
locus standi
in large merger proceedings,
is academic as the first respondent clearly has
locus standi
irrespective of which test is found to be applicable.
The first
respondent has contended that it relies upon four grounds to seek the
right to participate in these proceedings,being the
first respondents
statutory duties. Its involvement and current role in the industries
in question, its role in the industry’s
future development; and
its minority shareholding in the fourth appellant, Iscor Limited and
Duferco Steel Processing (Pty) Limited.
I will
firstly turn to deal with the first respondent’s statutory duties.
Mr Nelson submitted that because of its statutory duty,
the first
respondent has a direct interest in the merger proceedings. In this
regard, he sought to rely upon the provisions of section
3 of the
Industrial Development Corporation Act No. 22 of 1940, as amended by
Act 49 of 2001. Section 3 of the Industrial Development
Corporation
Act reads as follows:
“The
objects of the Corporation shall be:
with the approval of the Minister to establish and conduct any
industrial undertaking;
to
facilitate, promote, guide and assist in the financing of-
new
industries and industrial, or ancillary or
related economic, undertakings; and
schemes
for the expansion, better organization and modernisation of and
the more efficient carrying out of operations in existing
industries and industrial, or ancillary or related economic,
undertakings, to the end that the economic requirements of the
Republic may be met and industrial development within the
Republic, the Southern African region and the rest of Africa may
be planned, expedited and conducted on sound business principles;
to
promote the economic empowerment of the
historically disadvantaged communities and persons;
to
foster the development of small and medium
enterprises and co-operatives;
to
promote employment-creating activities, particularly
in underdeveloped areas;
(f)
to leverage foreign direct investment in South Africa,
the Southern African region and the rest of Africa
through the use of its international network and presence;
(g)
to encourage the creation of new knowledge-based
industries and services and the establishment and
growth of new technology-based firms; and
(h)
to enhance corporate governance so as to achieve
business excellence.”
The first
respondent has a responsibility to promote economic empowerment of
previously disadvantaged people and to foster development
of small
and medium enterprises. The intention is to spread wealth so that
it is not concentrated in the hands of a few South Africans.
The preamble to the Act recognizes that past laws
and practices in South Africa resulted in, inter alia, excessive
concentrations
of ownership and control within the national economy
and unjust restrictions on full and free participation in the economy
by all
South Africans. It also recognizes the need for the economy
to be open to greater ownership by a greater number of South
Africans.
In
section
1
of the
Competition Act, the
purpose of the Act is stipulated as
“to
promote and maintain competition in the Republic in order:
to
promote the efficiency, adaptability and development of the economy;
to
provide consumers with competitive prices and product choices;
to
promote employment and advance the social and economic quality of
South Africans;
to
expand opportunities for South African participation in the world
markets and recognize the role of foreign competition in the
Republic;
to
ensure that small and medium size enterprises have an equitable
opportunity to participate in the economy; and
to
promote wide spread of ownership, in particular to increase the
ownership stakes of the historically disadvantaged persons.”
The purpose
of the Act as set out in section 2(f) is unique to the South African
Competition regime. Such an objective is contained
in neither the
United States of America Anti-trust laws nor the European Union
Competition Laws. This objective seeks to incorporate
in
Competition
Act the
constitutional principles as contained in the Constitution of
the Republic of South Africa Act No. 108 of 1996 (“the
Constitution”).
Section 9(2)
of the Constitution recognizes that it might be necessary for
legislation and other measures to be adopted to protect
or advance
persons or categories of persons, disadvantaged by unfair
discrimination. Whilst the
Competition Act is
not such legislation,
this provision seeks to recognize that there might be a need for
corrective measures to be implemented to rectify
previous
discrimination or disadvantage, which was suffered by some of the
people of South Africa. The discrimination or disadvantage
includes
financial subordination.
Accordingly,
the preamble and the provision of Section 2(f) of the Act, which is a
unique South African provision, falls within the
spirit of the
Constitution. In turn the objects of the first respondent as set out
in Section 3 of the Industrial Development Corporation
Act, are
within the same spirit.
In
considering whether a person may participate or not, the
constitutional provisions as well as the provisions of the
Competition Act, should
not be overlooked, particularly insofar as
the mischief they seek to remedy, the people they seek to protect and
the objects of the
Act. Hence the scope of the South African
Competition regime has been widened, beyond traditional anti-trust
concerns.
It is clear,
that insofar as the objects relate to the advancement of the
previously disadvantaged people and the development of small
and
medium enterprises are concerned, the Industrial Development
Corporation Act and the Commission Act have a number of similarities.
They seek to achieve similar objectives.
In the
circumstances, I agree with Mr Nelson’s submissions that the
statutory provisions of the Industrial Development Corporation
Act
give the first respondent a direct interest in this merger, which in
turn affords it the necessary standing to participate in
these
proceedings. (See
Grove Primary School v Minister of Education
and Others
1997 (4) SA 982(C)
at 996).
Mr Gauntlett
submitted that the first respondent in this matter cannot seek to
participate in the proceedings on public interest grounds
because in
terms of the Act it is the Minister of Trade and Industry who is
empowered to intervene on public interest grounds.
Section 18 of
the Act stipulates that, in order to make representations on any
public interest grounds referred to in section 12A(3),
the Minister
may participate as a party in any intermediate or large merger
proceedings before the Commission, Tribunal or the Competition
Appeal
Court in the prescribed manner.
Section
12A(3) provides that:
“When determining whether a merger can or cannot be justified on
public interest grounds the Competition Commission or the Competition
Tribunal must consider the effect that the merger will have on :
particular
industrial sector origin;
employment;
the
ability of small business of firms controlled or owned by
historically disadvantaged persons to become competitive; and
the
ability of national industries to compete in the international
markets.”
Section 18
read together with section 12A(3) of the Act sets out the basis upon
which the Minister may intervene on public interest
grounds.
However, the Act does not exclude any other party from intervening on
public interest grounds. Furthermore, the interest
which may be
protected by the first respondent is not necessarily the same as that
which the Minister may seek to protect on the
basis of his
intervention on public interest grounds. What if the Minister of
Minerals and Energy Affairs had sought to participate
on public
interest grounds? Should she be refused leave even though mining
falls directly under her Portfolio? A refusal per se
could never
have been the intention of the legislature. She may, in fact, shed
light on some of the factors to be considered in
terms of Section
12A(3) above.
Mr Nelson
also emphasized that the first respondent had in its possession a
report prepared by National Economic Research Associates
(NERA) of
London, regarding the proposed mergers between the appellants which
complains that Lexecon, the appellant’s consultants,
presented
insufficient economic evidence to rebut the presumption of
anti-competitive effects arising from merger to monopoly and
the
serious danger of vertical foreclosure in the steel market arising
from the iron ore monopoly created. Furthermore, it complained
about
the flaws in the Lexecon reasoning and evidence. In his view this
report represented the kind of evidence that would be of
value to the
Tribunal in its deliberations.
Mr Gauntlett
also argued that the first respondent is a self financing national
development finance institution, which focuses on
contributing to
economic growth, industry growth and economic empowerment through its
financing activities. Furthermore, there
was nothing that
fundamentally distinguished the first respondent from other financial
institutions such as banks or property organizations,
which
traditionally amass shareholdings in various companies in exchange
for financial assistance.
This
submission fails to recognize the role of the first respondent after
the amendment of Section 3 of the Industrial Development
Corporation
Act in which additional objectives as set out in, inter alia,
sub-sections (c) to (e) above were incorporated.
It is clear
that by way of this amendment, the legislature sought to extend the
ambit, duties and scope of the Industrial Development
Corporation to
include the “promotion” of black economic empowerment in the
country and this is, amongst others, the very reason
why the first
respondent seeks to participate, namely to ensure the meaningful
participation by the historically disadvantaged persons
in the mining
sector.
I agree with
Mr Gauntlett’s submission that the Tribunal misdirected itself on
the nature of the applicable discretion. The granting
of leave to a
party to participate is discretionary. However, such discretion
cannot be unfettered. The discretion must be exercised
judiciously
or according to rules of reason and justice. (See
Ismail and
Another v Durban City Council 1973(2) SA 362(N) at 371H – 372B).
If one considers the provisions of section 53(1)(c)(v) which does
not set any grounds for participation, the Tribunal has a wide
discretion, albeit, to be exercised in a judicial manner.
For the
reasons set out above, I am of the view that there is clear
justification based on the Section, the functions of first respondent
and the nature of the particular merger for the Tribunal to have so
exercised its discretion in favour of the first respondent.
In short, the
Tribunal has acted judicially when it exercised its discretion in
favour of allowing a party who is in a position to
show that the
party’s participation would assist the Tribunal in fulfilling its
mandate in accordance with the provisions of the
Act.
THE SCOPE
OF PARTICIPATION
Mr
Gauntlett submitted that the appellants fully recognize the
inquisitorial focus of the Tribunal’s process. In this regard,
they did not object to the submission to the Tribunal by the first
respondent or any other person of material, which may assist the
Tribunal in its investigation. They also did not object, within
limits of materiality, to witnesses being tendered to the Tribunal
to
assist in its investigation.
Mr Nelson,
submitted that the first respondent seeks a right to intervene so
that it could call witnesses, to cross-examine and to
adduce
argument.
Whilst there
is a difference in nature of the proceedings before the Tribunal and
those before a Court, there is, in my view, no
basis in law to
refuse the first respondent the right to cross-examine witnesses and
inspect documents presented at the hearing once
the first respondent
has been given the right to participate in the proceedings. Indeed,
Section 53(1) envisages such a process.
The only
issue remaining for this Court to decide is the issue of access to
confidential documents, which have been tendered to the
Tribunal or
the Commission and the calling of respondents’ witnesses.
Whilst the
proceedings in the Tribunal are inquisitorial, it does not mean that
the Tribunal would not benefit from the assistance
from a party in
adducing evidence, cross-examining witnesses and calling witnesses.
The main focus of the hearing before the Tribunal
is the truth
finding process. The appellants have submitted that they have no
objection within limits of materiality, to witnesses
being called by
the first respondent.
The
appellants have also taken issue with the fact that the first
respondent was given an order to participate as a party in the merger
proceedings in respect of all factors that the Tribunal must take
into account in terms of Section 12A(2) of the Act and those factors
to be considered in terms Section 12A(3) of the Act.
The
appellants have submitted that the first respondent has disclosed no
interest in relation to the relevant market which is referred
to in
the draft order it sought. The relevant market is the market in
which the four companies who seek to merge are involved, namely,
zinc, manganese and iron ore. Mr Unterhalter submitted that the
first respondent has shown absolutely no interest in the zinc and
manganese market, except for the limited interest it shows through
shareholding in Iscor.
The first
respondent sought leave to intervene because of its concerns with the
anti-competitive effects of the two larger mergers.
Similarly, the
NERA Report raises the same concerns. There is no reference to any
one section or exclusion of any one sector in
the concerns about the
anti-competitive effects of the mergers.
Furthermore,
the purpose of the participation in the hearings is to assist the
Tribunal in its investigation. The Tribunal will consider
all the
factors listed in Section 12A(2) and 12A(3) of the Act. If that is
the case, then I cannot see any logic in this Court limiting
the
basis upon which the first respondent may participate. It is for the
Tribunal to decide as it deems fit. It is within the Tribunal’s
discretion.
In the
founding affidavit of Mr N A M Tshivhase, who is the general counsel
of the first respondent, he averred that the first respondent
sought
an order to intervene in accordance with the order which was annexed
to the papers marked “NAMC”.
The order
which was sought by the First Respondent as referred to in annexure
“NAMC”, aimed at regulating the scope of the first
respondent’s
participation in the proceedings and also the manner in which the
first respondent would gain access to confidential
documents.
However,
there were problems with the order sought insofar as it sought to
give the first respondent and its experts a blanket permission
or
access to confidential information. At the Tribunal hearing, it
abandoned the request that its experts be afforded access to
confidential information, and rightly so. This Court has previously
had an opportunity to decide on the procedure in Section 45
application for access to confidential documents in the matter of
Competition Commission of S.A. v Unilever (Pty) Ltd. and Others
(Case No. 13/CAC/Jan 02).
This court
does not see any reason why it should deviate from the procedure set
out in the abovementioned matter and restrict access
to the
confidential information as it had previously done, save that the
access to such information should be by the legal representatives.
In view of
the conclusion I have reached herein, I will not deal with the other
submissions which were made by the First Respondent’s
counsel in
this matter.
ORDER:
Accordingly,
the Order which this court will grant is that :
1. The appeal is dismissed;
2. The first respondent is recognized as a participant and is
permitted to participate in the hearing in respect of the factors
that
the Competition Tribunal must take into account in terms of
section 12A(2) of the Act read with Section 12A(1)(a)(i) and in terms
of Section 12(A)(3);
3. The first
respondent’s participation shall be in respect of the iron ore,
manganese and zinc markets (the “relevant markets”);
4. The first
respondent or its legal representatives shall be:
4.1 permitted
to introduce the expert evidence of:
4.1.1 NERA;
AND
4.1.2 Ms
Trudi Hartzenberg.
4.1.3 in relation to the matters alluded to in 2 and 3 above;
4.2 required to provide the representatives of merging parties with
copies of any documents upon which it intends to rely fourteen
(14)
days before the date of hearings;
4.3 permitted
to ask questions of witnesses, after the witnesses of the merging
parties or the Competition Commission have been led
and/or questioned
by the parties, the Competition Commission and the Competition
Tribunal, but only to the extent that such questions
relate to the
matters in respect of which the first respondent may participate;
4.4 be
permitted to inspect non-confidential documents contained in the
hearing record;
4.5 be
permitted to inspect confidential documents contained in the hearing
record, to the extent that they relate to matters in respect
of which
the first respondent may participate, provided that such documents,
be confined to the first respondent’s attorney and
counsel and who
must provide reasonable undertakings to protect such information;
4.6 be
permitted to present oral and written argument in relation to the
matters in respect of which the first respondent may participate.
5. The
appellants are ordered to pay the costs of this appeal, such costs to
include the cost of two Counsel.
_______________________
JALI J A
DAVIS J
P and SELIKOWITZ J A concurred.
DATE OF
HEARING : 15
TH
FEBRUARY 2003
DATE OF
JUDGMENT : 28
th
MARCH 2003
COUNSEL FOR
APPELLANTS : ADVOCATE
J GAUNTLETT S C
ADVOCATE
UNTERHALTER S C
ADVOCATE
E FAGAN
ADVOCATE
A GOTZ
INSTRUCTED
BY : WEBBER WENTZEL BOWENS
CAPE
TOWN
COUNSEL FOR
FIRST
RESPONDENT: ADV A J NELSON S C
ADV J L
VAN DORSTEN
INSTRUCTED
BY : QUNTA INCORPORATED
CAPE
TOWN
COUNSEL FOR
SECOND
RESPONDENT; NO APPEARANCE.