Supreme Health Administrators (Pty) Ltd / Network Healthcare Holdings Limited / Council for Medical Schemes and Competition Commission / Phodiclinics (Pty) Ltd / DJF Defty (Pty) Ltd and 10 Others (122/LM/Dec05) [2006] ZACT 45; [2006] 1 CPLR 422 (CT) (26 May 2006)

78 Reportability
Competition Law

Brief Summary

Competition — Merger proceedings — Application for participation in merger proceedings — Applicants seeking recognition as participants in the merger between Phodiclinics (Pty) Ltd and Protector Group Medical Services (Pty) Ltd — Tribunal granting leave for participation under section 53(1)(c)(v) of the Competition Act — Applicants asserting material interest due to potential impact on competition in the healthcare sector — Tribunal finding that applicants met the necessary criteria for participation.

Comprehensive Summary

Summary of Judgment


1. Introduction


This decision was delivered by the Competition Tribunal of South Africa in proceedings arising from a proposed merger referred to the Tribunal by the Competition Commission under the Competition Act 89 of 1998. The immediate matter before the Tribunal was not the merger merits itself, but an interlocutory application for leave to participate in the merger proceedings.


The applicants seeking recognition as participants were Supreme Health Administrators (Pty) Ltd (first applicant), Network Healthcare Holdings Limited (Netcare) (second applicant), and the Council for Medical Schemes (CMS) (third applicant). The respondents included the Competition Commission (first respondent) and various corporate entities connected to the merging parties and target group, including Phodiclinics (Pty) Ltd and entities within the Protector Group (some in liquidation), as well as Medi-Clinic Corporation Limited and related entities.


Procedurally, Supreme Health and Netcare filed their participation application on 13 March 2006 in terms of section 53(1)(c)(v) of the Act, and CMS filed its participation application on 12 April 2006, also invoking section 53(1)(c)(v). The participation applications were heard on 19 April 2006. By agreement between the parties, the Tribunal issued an order first and furnished reasons later. The Tribunal granted the requested participation on 24 April 2006, with reasons dated 26 May 2006.


The broader subject-matter of the underlying merger concerned the acquisition of control involving Phodiclinics (Pty) Ltd and Protector Group Medical Services (Pty) Ltd (in liquidation) (referred to in the reasons as “the merger”), with particular competitive concern in relation to private hospitals, most notably Medivaal Hospital in Vanderbijlpark.


2. Material Facts


The Tribunal recorded that the merger was referred to it by the Competition Commission in terms of section 14A of the Competition Act, and that the Commission had recommended unconditional approval of the merger. The applicants indicated that they disputed the Commission’s findings, including aspects connected to the merging parties’ reliance on a failing firm position.


On the structure of the acquiring firm, the Tribunal noted that Phodiclinics (Pty) Ltd was a joint venture between Medi-Clinic and Phodiso Clinics (Pty) Ltd, with 51% held by Medi-Clinic and 49% by Phodiso Clinics. The reasons further recorded that Phodiclinics purchased the Protector Group on 21 December 2004, being the date on which the liquidator accepted Phodiclinics’ offer. The Protector Group had been placed in liquidation on 2 September 2004.


The Protector Group’s assets included, among other divisions, four private hospitals, namely Medivaal Hospital (Vanderbijlpark), Maraphong Hospital (Ellisras/Lephalala), Kathu Hospital (Northern Cape/Kalahari region), and the Kingsley Day Theatre (Pretoria). The Tribunal identified Medivaal Hospital as “by far” the most contentious facility in the dispute as presented to it.


As to the participation applications, CMS advanced two broad grounds. First, it contended that the transaction would increase concentration in the healthcare industry and adversely affect medical schemes’ ability to price-compete, including in the context of government policy initiatives such as the Risk Equalisation Fund, which CMS indicated would be housed within it. Second, CMS stated it intended to challenge the Commission’s acceptance of a failing firm-type argument advanced by the merging parties.


Supreme Health’s application relied on the involvement of two of its directors (Mr Wotshela and Dr Clarence Mini) who had been directors of Tradeworx (Pty) Ltd, described as a BEE company that previously owned 51% of the issued shares in the Protector Health Group prior to liquidation. Supreme Health asserted that it had relevant knowledge of the private health sector and sought to challenge the failing firm position, including by indicating that less anti-competitive options might exist and that it (or its shareholders) would be willing to purchase hospitals if a less anti-competitive route were accepted.


Netcare’s application broadly aligned with Supreme Health’s concerns, while additionally emphasising Netcare’s position as a large competitor of Medi-Clinic and its asserted capacity to assist the Tribunal regarding competitive conditions at both national and regional level. Netcare referred to its operation in the Vaal Triangle (Vaalpark Hospital) and an established referral pattern to Medivaal, and expressed concern that the merger would increase concentration and facilitate anti-competitive conduct.


The merging parties did not oppose CMS’s intervention, but opposed Supreme Health’s and Netcare’s participation on the basis that they allegedly lacked adequate substantive information beyond generic assertions, that their intervention would prolong proceedings and increase costs, and that the merger did not raise serious competition concerns given the dispersed location of the four hospitals and the asserted small increase in Medi-Clinic’s national market share. The merging parties also challenged Supreme Health’s standing as a juristic person, contending that only its directors had relevant knowledge.


3. Legal Issues


The central legal questions the Tribunal was required to determine were whether each applicant should be granted leave to be recognised as a participant in the merger proceedings in terms of section 53(1)(c)(v) of the Competition Act, and what the appropriate scope of that participation should be.


A related legal issue concerned the relationship between section 53(1)(c)(v) and Tribunal Rule 46, particularly whether participation required the applicant to demonstrate a material interest or meet a common-law locus standi threshold. This issue was primarily a question of law, informed by binding appellate authority, and it also involved the Tribunal’s discretionary evaluation of whether the applicants could assist the Tribunal’s merger assessment and truth-seeking function.


Further issues included whether participation should be limited to issues specified in the applicants’ papers, and the extent to which the interveners (and specifically their legal representatives) should have access to confidential components of the Commission’s recommendation and record. These issues involved the application of legal principles to procedural facts and the exercise of discretion to manage merger proceedings fairly and effectively.


4. Court’s Reasoning


The Tribunal approached participation by applying section 53(1)(c)(v) and the principles articulated by the Competition Appeal Court. It treated the CAC’s decision in Anglo SA Capital (Pty) Ltd and Industrial Development Corporation of South Africa & Another 2004 (6) SA 196 (CAC) as setting the controlling test.


Relying on that authority, the Tribunal recorded that the language of section 53(1)(c)(v) does not require a participant to demonstrate an interest in the merger proceedings as a prerequisite for participation. It further accepted that Rule 46 cannot be used to interpret or restrict the express statutory provisions in section 53(1)(c)(v), because the rule-making power under section 27(2) concerns procedure and form rather than substantive thresholds for participation. The Tribunal also accepted that common-law locus standi requirements are not determinative in this context because merger proceedings are not adversarial litigation in the ordinary sense.


Within that legal framework, the Tribunal identified its role as exercising a judicial discretion in a manner consistent with the policy of encouraging participation in merger deliberations. In this connection, the Tribunal referenced the rationale articulated in The Competition Commission and Others v American Natural Soda Ash Corp and Others (Case Number 49/CRApr00 and 87/CR/Sep00, decision of 30 November 2001), emphasising that hearing from market participants (including competitors and customers) is valuable to informed adjudication of market behaviour.


Applying these principles, the Tribunal dealt with each applicant. CMS’s intervention was granted, and the Tribunal stated that even if opposed, CMS had a clear material and substantial interest arising from its statutory mandate under the Medical Schemes Act 131 of 1998, which it understood to require CMS to protect the interests of medical scheme members and to disseminate information about private health care.


Regarding Netcare, the Tribunal accepted that Netcare, as a major competitor of Medi-Clinic nationally and in the Vaal Triangle, had demonstrated a material and substantial interest. It rejected the merging parties’ criticism that Netcare’s founding papers were generic, noting the explanation that the application was filed before Netcare had access to the Commission’s record and therefore could not be more detailed at that stage. The Tribunal concluded that Netcare’s participation would assist its truth-seeking function.


Regarding Supreme Health, the Tribunal accepted that Mr Wotshela and Dr Mini could assist in understanding the Protector Group’s operations and decline into liquidation, and could provide a smaller competitor’s perspective distinct from Netcare and CMS. While recognising that Supreme Health might lack an independent direct interest beyond that of its directors, the Tribunal concluded that the relevant issues would be better ventilated if those individuals participated under the banner of Supreme Health rather than being summoned as witnesses. The Tribunal therefore granted Supreme Health participation subject to a condition: its participation would continue only so long as Dr Mini and Mr Wotshela remained directors and/or shareholders of Supreme Health, and they would testify at Supreme Health’s instance.


On the scope of intervention, the Tribunal declined to limit participation to the issues explicitly set out in the applicants’ papers. It regarded pre-emptive limits as problematic in circumstances where the evidence to be led by the merging parties was not yet clear and where CMS intended opposing the merger on multiple grounds. The Tribunal aligned itself with the approach reflected in Anglo SA Capital (Pty) Ltd and Industrial Development Corporation of South Africa & Another 2004 (6) SA 196 (CAC), which indicated that the Tribunal must consider all factors under section 12A(2) and section 12A(3) and that it is for the Tribunal to manage participation as it deems fit. The Tribunal also reasoned that imposing limits could itself cause delays through disputes about interpretation. It nonetheless indicated it would manage proceedings to avoid unnecessary duplication by requiring coordination of evidence and cross-examination where possible.


On confidentiality, the Tribunal addressed the interveners’ request for access to a non-confidential version of the Commission’s recommendation and for their legal counsel to access confidential versions. It applied the principle in Competition Commission v Unilever plc & others (CAC 13/CAC/Jan02, 14.2.2.2002), granting legal experts access to confidential information subject to appropriate confidentiality undertakings, to enable proper advice and protection of rights.


5. Outcome and Relief


The Tribunal granted leave to intervene to all three applicants, namely Supreme Health Administrators (Pty) Ltd, Network Healthcare Holdings Limited (Netcare), and the Council for Medical Schemes, as participants in the merger proceedings under Case No: 122/LM/Dec05, in terms of section 53(1)(c)(v) of the Competition Act.


The Tribunal allowed participation without limitation as to scope, rejecting proposals to restrict intervention to the issues set out in the applicants’ papers. It granted participants procedural rights to adduce evidence and cross-examine witnesses in relation to the merger assessment factors under section 12A(2) and section 12A(3), and granted access arrangements to the Commission’s record, including access for legal representatives to confidential material subject to confidentiality undertakings.


Supreme Health’s participation was granted conditionally, limited to the period during which Dr Clarence Mini and Mr Kevin Wotshela remained directors and/or shareholders, and subject to their testifying as witnesses at Supreme Health’s instance.


No order was made as to costs.


Cases Cited


Anglo SA Capital (Pty) Ltd and Industrial Development Corporation of South Africa & Another 2004 (6) SA 196 (CAC).


Community Healthcare Holdings (Pty) Ltd and Another and The Competition Tribunal and Others 44 CAC Feb05.


The Competition Commission and Others v American Natural Soda Ash Corp and Others, Case Number 49/CRApr00 and 87/CR/Sep00, decision of 30 November 2001.


Competition Commission v Unilever plc & others, CAC 13/CAC/Jan02, 14.2.2.2002.


Legislation Cited


Competition Act No. 89 of 1998, sections 1, 12A(1)(a)(i), 12A(2), 12A(3), 14A, 27(2), and 53(1)(c)(v).


Medical Schemes Act 131 of 1998, section 7.


Rules of Court Cited


Competition Tribunal Rule 46.


Held


The Tribunal held that participation in merger proceedings under section 53(1)(c)(v) does not require an applicant to satisfy a common-law locus standi test, and that Rule 46 cannot be used to restrict the express statutory entitlement to seek participation. The Tribunal held further that it retains a judicial discretion to admit participants and that this discretion should be exercised consistently with the policy of encouraging participation so as to assist the Tribunal’s truth-seeking and evaluative functions in merger analysis.


On the facts, the Tribunal held that CMS should be admitted (and in any event had a material and substantial interest linked to its statutory mandate), that Netcare had shown a material and substantial interest as a competitor capable of assisting the Tribunal, and that Supreme Health should be admitted on a conditional basis because its directors could provide relevant assistance and their participation would facilitate fuller ventilation of issues.


The Tribunal held that intervention should not be limited in advance to the issues set out in the applicants’ papers and that interveners’ legal representatives could access confidential portions of the Commission’s materials subject to appropriate confidentiality undertakings.


LEGAL PRINCIPLES


The Tribunal applied the principle that section 53(1)(c)(v) confers a procedural avenue for participation in merger proceedings that is not conditioned on proving a direct legal interest in the manner associated with adversarial litigation. It applied the related principle that tribunal rules, including Rule 46, regulate procedure and cannot lawfully narrow the statutory scope of participation where the statute does not impose such a threshold, particularly in light of the limited rule-making power under section 27(2).


The Tribunal also applied the principle that merger proceedings are inquisitorial and evaluative rather than purely adversarial, and that participation by market participants may promote more accurate assessment of competition and public interest considerations. Within this approach, the Tribunal recognised two routes by which participation may be justified in the exercise of discretion: demonstration of a material and substantial interest, or demonstration of an ability to assist the Tribunal in considering the purposes of the Competition Act in relation to the transaction.


Finally, the Tribunal applied the principle that pre-emptive restrictions on the scope of participation are generally undesirable where the Tribunal must consider all relevant merger factors under section 12A and where the evidentiary trajectory of the merger hearing is not yet clear. It further applied the confidentiality principle that legal experts may be granted access to confidential information on proper undertakings, to enable effective participation without undermining legitimate confidentiality claims.

COMPETITION TRIBUNAL 
REPUBLIC OF SOUTH AFRICA
     Case No: 122/LM/Dec05
In the matter between: 
Supreme Health Administrators (Pty) Ltd First Applicant
Network Healthcare Holdings Limited Second Applicant
Council for Medical Schemes Third Applicant
and
The Competition Commission First Respondent
Phodiclinics (Pty) Ltd Second Respondent
DJH Defty (Pty) Ltd Third Respondent
New Protector Group Holdings (Pty) Ltd (in liquidation) Fourth Respondent
Protector Group Medical Services (Pty) Ltd (in liquidation) Fifth Respondent
President Pharmacy (Pty) Ltd Sixth Respondent
Capstone 177 (Pty) Ltd Seventh Respondent
Blue Dot Properties 446 (Pty) Ltd Eighth Respondent
Limosa Investments 93 (Pty) Ltd Ninth Respondent
Capensis Investments 403 (Pty) Ltd Tenth Respondent
Medi­Clinic Corporation Limited Eleventh Respondent
Phodiso Clinics (Pty) Ltd Twelfth Respondent 
Phodiso Holdings Limited           Thirteenth Respondent
Reasons for decision
_______________________________________________________________________

Introduction
1. On   20   April   2006   the   Competition   Tribunal   (‘the   Tribunal’)   granted   the  
application brought by the first, second and third applicants in terms of the  
provisions of section 53(1)(c)(v) of the Competition Act No. 89 of 1998 (‘the  
Act’) for leave to be recognised as participants in the proceedings before  
the   Tribunal   concerning  the   proposed  merger  between   Phodiclinics  (Pty)  
Ltd and Protector Group Medical Services (Pty) Ltd (‘the merger’). 
2. The merger was referred to the Tribunal  by the  Commission in terms of  
section   14A   of   the   Competition   Act,   1998.   The   Commission   has  
recommended unconditional approval of the merger. 
3. On   13   March   2006   Supreme   Health   Administrators   (Pty)   Ltd   (“Supreme  
Health”)   and   Network   Healthcare   Holdings   Limited   (“Netcare”)   filed   an  
application in terms of section 53(1)(v) of the Act to be recognized by the  
Tribunal as participants in the merger proceedings and to be allowed the full  
scope   of   the   intervention.   On   12   April   2006   the   Council   for   Medical  
Schemes (“CMS”) brought its application to be recognized as a participant  
in the merger proceedings before the Tribunal in terms of section 53(1)(v) of  
the Act.
4. Phodiclinics (Pty) Ltd (“Phodiclinics”) is a joint venture between Medi­Clinic  
and   Phodiso   Clinics   (“Pty)   Ltd   (“Phodiso   Clinics”).   Phodiso   Clinics   holds  
49%   of   the   issued   shares   in   Phodiclinics   while   Medi­Clinic   holds   51%.  
Phodiclinics purchased the Protector Group 1 on 21 December 2004. 2 The  
Protector Group was placed in liquidation on 2 September 2004 and the  
liquidator,   together   with   IDC,   the   major   creditor,   accepted   Phodiclinics’  
offer. The Protector Group has among other business divisions four private  
hospitals namely, Medivaal Hospital located in Vanderbijlpark, Maraphong  
Hospital in Ellisras (Lephalala), Kathu Hospital in the Kalahari region in the

Hospital in Ellisras (Lephalala), Kathu Hospital in the Kalahari region in the  
Northern   Cape   and   the   Kingsley   Day   Theatre   in   Pretoria.   The   most  
contentious   hospital   is   by   far   the   Medivaal   hospital,   located   in  
Vanderbijlpark.   The   Commission   has   recommended   that   the   merger   be  
approved   without   conditions.   The   applicants   dispute   the   findings   of   the  
Commission.
1  The   interveners   have   submitted   that   New   Protector   Group   Holdings   (Pty)   Ltd,   the   fourth  
respondent  is  the   holding  company  of  the  fifth  to   the  tenth   respondens.  These   companies  are  
collectively   called   the   “Protector   Group”.   The   Protector   Group   is   the   primary   target   firm   in   the  
proposed merger. However, the liquidator has argued that though the fourth respondent assumed  
control and acquired the businesses of the relevant companies as a going concern, transfer of the  
relevant shares never took place because of a variety of reasons. See page 158 of the Supreme  
Health record.
2  This was the date on which the offer by Phodiclinics was accepted by the liquidator.
2

5. The hearing of the application took place on 19 April 2006. It was agreed by  
all   parties that,  to  expedite  the  proceedings, the  Tribunal   could  issue an  
order   separately   from   providing   reasons.   On   24   April   2006,   the   Tribunal  
granted   all   three   applicants   the   right   to   participate   in   the   merger  
proceedings. The reasons for the decision follow.
Submissions by the Council
6. CMS   submitted   that   its   application   should   be   granted   for   a   number   of  
reasons which amounted to two broad grounds. CMS is mandated in terms  
of the Medical Schemes Act 131, 1998 (“the MSA”) to protect the interests  
of members of medical schemes at all times. 3  
7. First,   CMS   argued   that   the   merger   will   lead   to   a   higher   degree   of  
concentration   in   the   healthcare   industry   and   will   negatively   impact   on  
medical schemes’ ability to price­compete.  In this regard CMS stated that it  
intended to argue and lead evidence to show that the healthcare industry is  
already   highly   concentrated,   being   dominated   by   three   large   players.  
These   three   large   chains   are   in   the   process   of   buying   up   independent  
hospitals such as those of the target firm.  The merger will lead to an even  
higher degree of concentration and market power in the hands of the three  
main   players.   This   will   negatively   impact   on   medical   schemes’   ability   to  
price­compete by impacting on their ability to negotiate competitive prices  
and product choices for their members.     The merger will also undermine  
the   efforts   by   government   to   provide   incentives   for   medical   schemes   to  
price­compete  through  the   implementation   of   the  Risk  Equalisation  Fund  
(REF), which will be housed within CMS.
8.   Secondly, CMS stated that it would challenge the Commission’s approval  
of the transaction on the merging parties’ argument that Protector was a

of the transaction on the merging parties’ argument that Protector was a  
failing firm, and CMS would lead evidence and argument in relation to this  
issue.
Submissions by Supreme Health
9. Supreme   Health   submitted   that   two  of   its  directors  were  the  directors   of  
Tradeworx (Pty) Ltd, a BEE company that used to own 51% of the issued  
shares   in   the   Protector   Health   Group,   prior   to   its   liquidation.   It   further  
3  See submissions on page 7 CMS’s paginated bundle. Section 7 of the MSA mandates CMS to  
protect the interests of its members at all times and to “collect and disseminate information about  
private health care.
3

asserted that it  has  knowledge  of the private health sector being both a  
small participant in the Healthcare market in SA as well as being a BEE  
participant   in   this  market.   Supreme  Health   regards   this  knowledge  as   of  
direct relevance to the assessment of competition law issues arising from  
this  merger. 4  Supreme  Health   further  challenges  the  failing  firm   defence  
advanced by the merging parties and the Commission. 5   It submitted that  
the failing firm defence should not be upheld because there are less anti­
competitive options available to the Tribunal 6 and that it itself was willing to  
purchase the hospitals should the Tribunal accept a less anti­competitive  
route.7   It also wished to lead evidence on offers that were made to the  
liquidator   by   parties   other   than   Phodiclinics   in   the   course   of   the   sale  
negotiations.  
Submissions by Netcare
10. Netcare made similar submissions to those advanced by Supreme Health.  
In addition, Netcare stated that it should be allowed to intervene because,  
as a large competitor of Medi­Clinic (the ultimate acquiring firm), it has wide  
knowledge of the private healthcare industry from a perspective different to  
that   of   CMS   or   Supreme   Health.     It   could   assist   the   Tribunal   in  
understanding competitive conditions and the relevant market on a national  
level   and   in   the   Vaal   Triangle.     Netcare   submitted   that   it   had   a   small  
operation   in   the   Vaal   triangle   called   Vaalpark   Hospital,   which   had  
established   a   pattern   of   patient   referral   to   the   Protector   facilities   at  
Medivaal.     Hence   it   was   specifically   concerned   about   the   impact   of   the  
merger on its operations at Vaalpark.  In its view the merger will lead to an  
increase   in   concentration   levels   in   the   Vaal   Triangle   and   that   such  
imbalance of market power in favour of Medi­Clinic will result in the latter

imbalance of market power in favour of Medi­Clinic will result in the latter  
engaging in anticompetitive behaviour. 8
Submissions by the merging parties
11. The merging parties indicated that they did not oppose the application by  
4  On page 16 of the founding affidavit Mr. Wotshela stated that he was involved in the restructuring  
plan   for   the   Protector   Group.   He   later   provided   a   copy   of   the   New   Protector   Group   Holdings  
Restructuring Plan in his replying affidavit. See page 220 of the Supreme Health record.
5  See page 23 of the Supreme Health record.
6  See page 23 of the Supreme Health record.
7  On page 206 of the Supreme Health record Mr. Wotshela states that Supreme Health, or its  
shareholders wish to acquire assets in the Protector Group should the Tribunal decide on a less  
competitive   route.   In   this   regard   Supreme   Health   is   exploring   funding   opportunities   from   the  
National Empowerment Fund. 
8  See page 16 of the Netcare record.
4

CMS.   9    However,   they   were   opposed   to   the   applications   brought   by  
Supreme Health and Netcare on three broad grounds. Firstly, the merging  
parties   argued   that   the   interveners   do   not   have   adequate   substantive  
information to aid the Tribunal in its truth­seeking function save on a purely  
generic   level.   Secondly,   that   the   interveners   will   unnecessarily   cause  
prejudice to the merging parties by lengthening the time of the hearing. This  
will add to the merging parties’ costs. Such prejudice is said to outweigh the  
benefits   of   allowing   the   intervention.   Lastly,   the   merger   does   not   raise  
serious   competition   concerns   since   it   results   in   Medi­   Clinic   raising   its  
market   share   by   1%on   a   national   basis   through   the   acquisition   of   four  
hospitals spread throughout the whole of South Africa, from Kathu in the  
Kalahari to Ellisras, to Vanderbijlpark to Pretoria. 10
12. The merging parties further argued that Supreme Health as a juristic person  
did not have any interest in this matter because it had no knowledge of the  
healthcare   industry   or   the   history   of   the   transaction.     It   was   only   its  
directors, Mr Wotshela and Dr Clarence Mini, in their personal capacities by  
virtue of their association with Tradeworx who had the relevant knowledge  
and   information.       Accordingly   the   Tribunal   ought   to   dismiss   Supreme  
Health’s application.  
Decision
13. Section 53(1)(c) deals with participation in merger proceedings.     Section  
53(1)(c)(v)   and   rule   46   specifically   regulate   an   applicant’s   rights   to  
participate in these proceedings.  Rule 46 requires that a participant have a  
material interest in the proceedings.   The test for this Tribunal in deciding  
whether parties, such as the applicants, should be permitted to participate  
in a merger has been set out by the Competition Appeal Court in  Anglo SA

in a merger has been set out by the Competition Appeal Court in  Anglo SA  
Capital (Pty) Ltd and Industrial Development Corporation of South Africa &  
Another11 (“ Anglo/Kumba case”).  
14. In   that  case  the  Court   held  that   the  language  of   section  53(1)(c)(v)   was  
clear in that it did not require a participant to have an interest in the merger  
proceedings.  Rule 46 could not be used to interpret or restrict the express  
provisions of section 53(1)(c)(v) since the Minister of Trade and Industry  
and not the legislature drafted it. The Minister of Trade and Industry was  
only empowered by section 27(2) to make rules relating to the manner, form  
and procedures for participation and not in respect of thresholds for such  
9  See page 4 of the transcript where Mr. Van der Linde indicated that the merging parties will not  
oppose the application brought by CMS.
10  In Gauteng the merging parties submitted that the market share will increase by 1.3%. See  
page 44 of the Supreme Health record and page 34 of the Netcare record.
11  2004 (6) SA 196 (CAC) at 16.
5

participation.     Furthermore   the   common   law   test   for   locus   standi   is   not  
applicable   to   merger   proceedings   of   the   Tribunal   as   these   are   not  
adversarial in nature and not like ordinary litigation.  Accordingly the Court  
held that the Tribunal had a discretion to grant an application to participate  
in merger proceedings since no grounds of participation were required in  
terms of section 53(1)(c)(v).  However such discretion had to be exercised  
judicially. It held further that where a party is able to demonstrate that it has  
a material and substantial interest then such party would fall into a class of  
parties who may be admitted upon the exercise of the judicial discretion by  
the  Tribunal.     A  party   who  is  unable  to  show   a  material   and   substantial  
interest may well be admitted if it is able to provide evidence of its ability to  
assist   the   Tribunal   in   “its   consideration   of   the   application   of   the   various  
purposes of the Act as contained in section 1 thereof to the relevant merger  
transaction.”12  The position in the   Anglo/Kumba  case is reiterated in the  
Community   Healthcare   Holdings   (Pty)   Ltd   and   Another   and   The  
Competition Tribunal and Others 13  (at paragraph 28).  
15. The   Tribunal’s   discretion,   while   being   exercised   judicially   must   serve   to  
promote   the   legislature’s   policy   of   encouraging   participation   in   the  
deliberations of the Tribunal.  In the case of  The Competition Commission  
and Others v American Natural Soda Ash Corp and Others 14 it was stated  
that 
“The   legislature’s   policy…   seems   to   be   to   encourage   as   much  
participation in deliberations as this is considered to be healthy for  
arriving   at   optimal   decisions.   To   understand   what   happens   in   a  
market one must hear from its participants – customers, suppliers,  
competitors,  etc.   To   come   to   conclusions   about   market   behaviour

competitors,  etc.   To   come   to   conclusions   about   market   behaviour  
without   their   participation   can   only   impoverish   the   process   of  
adjudication”
16. There   is   no   basis   for   the   Tribunal   to   deviate   from   this   rationale   when  
considering whether the applicants should be permitted to intervene in the  
present case.
17. CMS’ application to intervene was not opposed by the merging parties and  
is   accordingly   granted.     Even   if   it   had   been   opposed   CMS   has   a   clear  
material and substantial interest in the matter, as mandated by the MSA.  
The relief granted to  CMS is  as contained  in its  notice of  motion and in  
paragraph 24 below.
18.  In relation to Netcare, the Tribunal is of the view that Netcare, as a major  
12  Anglo/Kumba page 1­18.
13  44 CAC Feb05 at page 11.
14  Case Number 49/CRApr00 and 87/CR/Sep00, decision of 30 November 2001.
6

competitor of the ultimate acquiring firm Medi­Clinic,  both at the  national  
level and in the Vaal Triangle has demonstrated that it has a material and  
substantial interest in the outcome of this hearing.   It was argued by the  
merging   parties   that   the   founding   papers   of   Netcare   did   not   reveal   any  
specific   concerns   but   were   rather   framed   in   a   generic   manner.     At   the  
hearing Mr Norton explained that the application for intervention had been  
filed before his client or its client’s legal representatives had had sight of the  
Commission’s record.   In the circumstances, he said, Netcare was unable  
at   the   relevant   time   to   provide   more   details   in   relation   to   the   areas   of  
concerns identified in its founding affidavit.  
19. In   our   view,   Netcare,   in   its   founding   papers   has   sufficiently   outlined   a  
material   and   direct   interest   as   a   large   competitor   of   Medi­Clinic   at   the  
national and the regional level and will be able to assist the Tribunal in its  
truth­seeking functions.
20. In   relation   to   Supreme   Health,   the   Tribunal   is   of   the   view   that   both   Mr  
Wotshela   and   Dr   Mini   would   be   able   to   assist   it   in   understanding   the  
Protector Group’s operations and its decline into liquidation.   They would  
also   be   able   to   assist   the   Tribunal   in   understanding   the   competitive  
landscape of the industry from the perspective of a smaller competitor.  The  
interests of Dr Mini and Mr Wotshela are not identical to those of Netcare or  
CMS.  The Tribunal is of the view that Dr Mini’s and Mr Wotshela’s interests  
would   be   better   represented   and   relevant   issues   would   be   more   fully  
ventilated   in   the   proceedings   if   they   participated   under   the   banner   of  
Supreme Health rather than being summoned as witnesses by either of the

Supreme Health rather than being summoned as witnesses by either of the  
other parties or this Tribunal.     However it is acknowledged that Supreme  
Health may not have any direct interest in the proceedings beyond those of  
Dr Mini and Mr Wotshela.     Hence the Tribunal grants the application of  
Supreme Health to participate in the proceedings for as long as Dr Mini and  
Mr Wotshela remain directors and/or shareholders of Supreme Health. 15 
Scope of the intervention
21. The respondents contended that the intervention should be limited to the  
issues expressly stated in the papers of the applicants. The applicants, in  
their papers, were especially concerned about the possible anticompetitive  
effects of the transaction, in the Vaal Triangle region.   A similar argument  
was advanced in the  Anglo/Kumba case. In that case the appellants wanted  
the   intervention   of   the   respondents   to   be   limited   because,   allegedly,   the  
respondents   had   shown   no   interest   in   other   markets,   which   had   been  
referred to in the draft order. 16  The Competition Appeal Court stated that: 
15  See paragraph 7 of the order, a copy of which is attached to these reasons as Annexure A.
16  See page 27 of the Anglo/Kumba case.
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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. 17
22. It is certainly problematic to limit in advance the participation of applicants,  
in  a  matter  when  it  is  unclear  what  evidence  will   be  led  by  the merging  
parties in relation to any number of issues.   In this particular transaction,  
CMS   has   indicated   that   it   intends   opposing   the   merger   on   a   number   of  
grounds.   The Tribunal, in its truth­seeking function, can only benefit from  
hearing the view of the competitors of the merging parties, large and small,  
on a number of aspects such as the relevant market, impact of the merger  
on the industry in general and in the Vaal Triangle specifically, and on more  
competitive alternatives.  Moreover, setting limits on the extent of a party’s  
participation   could   lead   to   further   delays   if   parties   in   the   proceedings  
differed in their interpretation of the limits set by the Tribunal.  To limit the  
participation of the applicants is not appropriate in the circumstances of this  
matter. At the hearing of the merger, there is no doubt that the parties will  
concentrate   on   issues   that   are   of   primary   concern   to   them   and   are   not  
common   to   the   industry.     In   addition,   the   Tribunal   will   ensure,   as   it   has  
always   done,   that   unnecessary   duplication   is   avoided   by   requiring   the  
participants   to   co­ordinate   their   evidence   and   the   cross­examination   of  
witnesses as far as this is possible.  
Confidentiality
23. The intervening parties have asked to be provided with a non­confidential

Confidentiality
23. The intervening parties have asked to be provided with a non­confidential  
version of the Commission’s recommendation. They have further asked for  
their   legal   counsel   to   be   provided   with   the   confidential   version   of   the  
Commission’s recommendation. The Tribunal is guided by the decision of  
the   Competition   Appeal   Court   in  the   case   of   Competition  Commission  v  
Unilever   plc   &   others   (the  “Unilever”   case).18    In   the   light   the   principle  
established   in   the   Unilever   case,   we   grant   the   interveners’   legal   experts  
access to the confidential version of the Commission’s recommendations  
subject to the provision of the appropriate confidentiality undertakings. 19 
17  Page 28 of the Anglo Kumba case.
18  CAC 13/CAC/Jan02,14.2.2.2002.
19  In the  Unilever case the Competition Appeal Court held that the applicants’ legal experts should  
be given access to the confidential information, subject to adequate confidentiality undertakings, to  
enable them to advise their clients fully and protect their rights.
8

Conclusion
24. We allow the intervention by Supreme Health, Netcare and the Council for  
Medical   Schemes   in   the   merger   proceedings   before   the   Tribunal.   The  
intervention   is   allowed   without   any   limitation   to   the   scope   of   the  
intervention. The relevant orders are attached hereto as appendix A and  
appendix B. 
26 May 2006
Y. Carrim    Date
Concurring:  M Mokuena and L Reyburn
APPENDIX A: ORDER ISSUED ON 24 APRIL 2006
Order in relation to Supreme Health and Netcare’s Application
ORDER
Further   to   the   Applicants’   submissions   to   intervene,   the   Tribunal   makes   the   following  
order:
1. The Applicants are granted leave to intervene in the merger proceedings before  
the Tribunal in relation to the acquisition of control by Phodiclinics (Pty) Ltd and  
DJH Defty (Pty) Ltd of the Protector Group of companies under Case No: 122/LM/
Dec05, in terms of section 53(c)(v) of the Competition Act, 1998;
2. The   Applicants   are   permitted   to   participate   in   the   hearing   in   relation   to   the  
following matters:
9

2.1 the factors that the Tribunal must take into account in respect of section 12A(2)  
of the Act read with section 12A(1)(a)(i); and 
2.2 the   factors   that   the   Tribunal   must   take   into   account   in   respect   of   section  
12A(3).
3. The Applicants are permitted to adduce oral and documentary evidence and cross­
examine   witnesses   in   relation   to   these   matters   in   the   course   of   making   their  
representations to the Tribunal.
4. The Applicants’ legal representatives are permitted access to the Commission’s  
record   which   has   been   referred   to   the   Tribunal   within   5   (five)   business   days  
hereof, subject to providing appropriate confidentiality undertakings.
5. The Respondents are to provide the Applicants with a non­confidential version of  
the Commission’s record within 10 (ten) business days of date hereof.
6. A further pre­hearing is to be arranged with the Registrar on a date suitable to all  
parties after the Applicants have had sufficient opportunity to consider the record.
7. Furthermore,   the   intervention   of   Supreme   Health   Administrators   (Pty)   Ltd   is  
subject to the following conditions:
7.1  That Supreme Health Administrators will participate in the merger proceedings  
before the Tribunal in terms of orders 1­6 above only as long as Dr Clarence  
Mini   and   Mr   Kevin   Wotshela   continue   to   serve   as   directors   and/or   remain  
shareholders of that company; and
7.2 That   Dr   Clarence   Mini   and   Mr   Kevin   Wotshela   testify   as   witnesses   at   the  
instance of Supreme Health Administrators (Pty) Ltd in the merger proceedings  
before the Tribunal. 
8. No order is made as to costs.
10

APPENDIX B: ORDER ISSUED ON 24 APRIL 2006
Order in relation to the CMS application
ORDER
Further   to   the   Applicant’s   submissions   to   intervene,   the   Tribunal   makes   the   following  
order:
9. The Applicant is granted leave to intervene, in terms of section 53(1)(c)(v) of the  
Competition Act, 1998, in the merger proceedings before the Tribunal in relation to  
the acquisition of control by Phodiclinics (Pty) Ltd and DJH Defty (Pty) Ltd of the  
Protector Group of companies under Case No: 122/LM/Dec05.
11

10. The Applicant is permitted to participate in the hearing in relation to the following  
matters:
10.1 the factors that the Tribunal must take into account in respect of section 12A(2)  
of the Act read with section 12A(1)(a)(i);  
10.2 the   factors   that   the   Tribunal   must   take   into   account   in   respect   of   section  
12A(3); and
10.3 the   factors   that   the   Tribunal   should   consider   in   either   the   prohibition   of   the  
merger or its approval with or without conditions. 
11. The   scope   of   the   Applicant’s   participation   in   the   hearing   shall   include,   without  
limitation, the right: 
11.1 to attend pre­hearing conferences;
11.2 to adduce oral and documentary evidence;
11.3 to present argument;
11.4 to request the Tribunal to direct, summon and/or order any person to appear at  
the hearing;
11.5 to cross­examine any of the witnesses led by any of the other participants in  
the hearing;
11.6 to   inspect   any   books,   documents   and   other   items   filed   by   any   of   the   other  
participants   in   the   merger   proceedings,   including   inspection   by   Applicant’s  
legal representatives, subject to appropriate confidentiality undertakings, of 
any information filed by any participants subject to a claim of confidentiality;
12

11.7 to   have   access   to   the   Commission’s   record   that   has   been   referred   to   the  
Tribunal   in   this   matter,   including   access   by   the   Applicant’s   legal  
representatives,   subject   to   appropriate   confidentiality   undertakings,   to   any  
information contained in the record which is subject to a claim of confidentiality;  
and
11.8 to participate in any interlocutory proceedings related to the issues referred to  
in paragraph 2 above.
12. The Applicant’s legal representatives are permitted access to the Commission’s  
record that has been referred to the Tribunal within 10 (ten) business days hereof,  
subject to appropriate confidentiality undertakings.
13. The Respondents must provide the Applicant with a non­confidential version of the  
Commission’s record within 10 (ten) business days of date hereof.
14. A further pre­hearing is to be arranged with the Registrar on a date suitable to all  
parties after the Applicant has had sufficient opportunity to consider the record.
15. No order is made as to costs.
13