COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No.: 81/LM/Jul08
In the matter between:
Altech Technologies Limited Applicant
and
Mobile Telephone Networks
Holdings (Proprietary) Limited First Respondent
Verizon SA (Proprietary) Limited Second Respondent
The Competition Commission Third Respondent
In re the large merger between:
Mobile Telephone Networks
Holdings (Proprietary) Limited Acquiring Firm
and
Verizon SA (Proprietary) Limited Target Firm
___________________________________________________________________
Panel : N Manoim (Presiding Member), U Bhoola (Tribunal Member), and Y
Carrim (Tribunal Member)
Heard on : 07 November 2008 and 8 January 2009
Decided on : 09 January 2009
Reasons Issued : 09 February 2009
INTERVENTION COSTS REASONS
[1] In this decision we deal with our reasons for ordering Altech Technologies Limited
(“Altech”) to pay the costs of the merging parties, in respect of an intervention application
brought by Altech.
1
[2] The merging parties in this matter are; the primary acquiring firm, Mobile Telephone
Networks Holdings (Pty) Ltd (“MTN”), a wholly owned subsidiary of MTN Group Ltd (“MTN
Ltd”) and the primary target firm, Verizon South Africa (Pty) Ltd (“Verizon”).1
[3] We made the cost award on 09 January 2009. Ordinarily, our reasons for this costs
award would have accompanied our reasons for our approval of the merger, which are
presently still being prepared by the panel. However due to the recent appeal and review
brought against our costs award by Altech, we deem it appropriate to give our reasons in
respect of the costs decision now.
[4] The Commission referred the above merger to us on 14 October 2008. On 1
December 2008 Altech applied to intervene in these proceedings and after the filing of
papers the matter was argued before us on 9 December 2008.
[5] Altech applied for leave to intervene seeking to persuade us that the merger should
be opposed. Although it does not state this specifically it states that:
“it opposes the proposed merger because it is of the view that it gives rise to
substantial competition concerns.”
[6] It goes on to deny that there are any efficiency or other pro-competitive grounds to
offset the anti-competitive effects of the merger. The obvious conclusion is that Altech
considered the merger should be prohibited.
[7] A similar sentiment is later contained in the unsigned witness statement of Stephen
Sidley, who was Altech’s deponent in the intervention application, and is their chief
technology officer. 2
[8] In Altech’s notice of motion the grounds for the scope of its intervention were open –
ended. Whilst various theories of harm were contemplated in its papers, it did not purport to
confine itself to these, and sought intervention without limitation. In his founding affidavit
Sidley states:
“in the event that Altech is granted leave to intervene in the merger proceedings, I
“in the event that Altech is granted leave to intervene in the merger proceedings, I
respectfully submit that the scope of its intervention should extend to all of the issues
it wishes to raise.” 3
1 Verizon was previously known as UUNet (SA) (Pty) Ltd. UUNet changed its name on 23 January 2006 to
Verizon South Africa (Pty) Ltd.
2 See paragraphs 6.2 and 7.7 of the witness statement which caution of the harm that would be created by the
approval of the merger.
3 Founding affidavit paragraph 10.1
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[9] The merging parties opposed the intervention and sought that it be dismissed with
costs.4 We decided to allow the intervention, but narrowed the scope of intervention as
follows:
1. Those issues raised in Annexure “E” to the applicant’s founding affidavit being a
copy of a report prepared by RBB Economics dated 22 August 2008.( RBB are
an economics consultancy who had been briefed by Altech to “comment on the
potential competition concerns raised by the vertical components of MTN’s
proposed acquisition of Verizon SA.” Notably RBB remark “Although at this stage
of the proceedings the theories of harm are necessarily somewhat speculative,
we submit that the logic of the arguments is appealing and that a full and
thorough investigation of the vertical aspects of the Proposed Transaction is
merited.”5)
2. Those issues raised in consequence of Annexure “H” to the applicant’s founding
affidavit.6 (Annexure H is a circular sent out by MTN to its service providers in
July 2008 setting out post paid price plans. The portion of this circular which
Altech sought to raise as an issue of concern, appears to be the pricing for a
technology service where the internet is used to transmit voice data, known
technically in the industry as Voice over Internet Protocol or VOIP. The
suggestion was that the circular which contains pricing was a manifestation of
MTN imposing punitive prices for VOIP.7)
[10] The scope of intervention was limited to those theories of harm that we understood
had been articulated in the papers and meant that the merging parties at least had some
appreciation of the boundaries of the Altechs’ concerns so that they would not be faced with
a moving target.
[11] In our intervention order we reserved costs. The reason for doing so was whilst the
intervenor had been successful in applying to intervene, it was premature then to award
intervenor had been successful in applying to intervene, it was premature then to award
costs because until the hearing of the merger, its promise of its utility to the proceedings
could not be tested, and hindsight might prove that the merging parties contention that
Altechs’ intervention was based on “vague and unsubstantiated theories of harm” was
correct.8 We have previously warned in Naspers/Caxton that in future costs may be awarded
4 Affidavit of John Oxenham record page 301.
5 Record page 226.
6 See our intervention application order dated 10 December 2008
7 Replying affidavit of Sidley paragraph 4.8.1 Record page 334
8 Answering affidavit of John Oxenham paragraph 23.2 record page 301.
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against intervenors in certain circumstances in respect of the merger proceedings
themselves let alone the costs of the intervention procedure.9
“The panel has engaged in lengthy debate on the question of awarding the merging
party the costs entailed in defending the foreclosure allegation. Although we have
ultimately decided not to award costs on this occasion, we take this opportunity to
signal our willingness, in principle, to make such awards in future. ” 10
[12] Various pre-hearing procedures followed, including discovery applications and the
setting of dates for the production of witness statements prior to the hearing.
[13] In accordance with our direction the merging parties and Altech were required to file
their witness statements on the 29 th December 2008. This was done. However we also
required that non-expert witnesses file their witness statements in the form of affidavits. The
reason for this is that where we have not put such strictures on witness statements in
advance, witnesses have in the hearing departed from their proposed statements, thus
inconveniencing not only ourselves but also opposing parties.
[14] On the 29 th December, although the merging parties filed witness statements in
affidavit form, Altech did not. Despite a request from the merging parties that it comply,
Altech did not. We were advised by counsel for the merging parties at the hearing that up
that date no Altech witness statement had yet been filed in affidavit form. Our registry has
also not received them in this form.
[15] On 7 January 2009, the day prior to the date set for the hearing, (note 5 days had
been set aside to hear the matter on the grounds that the merger was being opposed by
Altech) we received a notice of withdrawal from Altech. The notice of withdrawal contained
no tender to pay the merging party’s costs in respect of the intervention application or the
merger itself.
merger itself.
[16] At the hearing we were advised by the merging parties that the withdrawal had come
about as a result of a letter written by MTN to Altech. Having received this letter, so we were
advised by the merging parties counsel, Altech was prepared to withdraw as an intervenor.
[17] There was no appearance for Altech at the hearing. We concluded our hearing into
the merger on the same day and gave our order approving the merger on 8 January 2009
9 In this case, although we inquired, the merging parties did not seek the costs occasioned by the intervention in
respect of the merger proceedings themselves and hence we did not consider marking such an award.
10 See Naspers Limited and Media Network Limited and SuperSport International Holdings Limited with Caxton
and CTP Publishers and Printers Ltd intervening Case No: 23/LM/Feb07 at paragraph 97.
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[18] The merging parties argued that they should be entitled to the costs of the
intervention which had been reserved in our previous application as Altech had withdrawn
and the intervention had been unsuccessful. We agreed and awarded costs.
[19] We were advised by the merging parties that there had not been any agreement
reached with Altech either about costs or whether the issues of costs should be argued at
some later date.
[20] Altech therefore knew that the issue of costs for the intervention application had been
reserved, and that it had no agreement with the merging parties on the issue of costs. It
ought to have known that the issue of costs would as in the normal course, be disposed of at
the hearing of the merger and that if it wanted to be heard on the issue it would need to
appear at the hearing. It chose not to do so. Nor did its attorneys at the time of filing the
notice of withdrawal request to be heard on this issue.
[21] The merging parties were thus fully entitled to ask for their costs at the time that they
did, and would only have been prejudiced and incurred further costs, had we postponed this
issue to another date on the possibility that Altech might (it had given no indication up till
then that it did) want to address us on the issue of costs for the intervention.
[22] On the merits of the costs award there can be little doubt that the merging parties
were entitled to their costs. Altechs’ withdrawal the day prior to the commencement would,
absent anything else, justify the award of costs to the merging parties on that ground alone.
[23] It could of course be argued that Altech having received the letter from MTN had
achieved from the merging parties, all that it had originally sought or substantially what it had
sought from them, and thus with the prize clutched in its hands, withdrew, since the
proceedings served no further purpose to vindicate its interest.
proceedings served no further purpose to vindicate its interest.
[24] Nothing could be further from the truth. The original intervention application, as we
noted, was open ended about its concerns and concluded with the pessimistic assumption
that the merger would result in incurable harm. There was no inkling until the MTN letter that
Altechs’ chief concern was that it would face unfair discrimination and that a letter of comfort
from MTN, let alone even a Tribunal imposed condition to the same effect, would suffice.
[25] Nor did a fear of discrimination figure amongst Altech’s original concerns –nor did it
rear its face when Altech in the course of filing its witness statements narrowed the scope of
its concerns to a single issue - an issue that had not figured up till then, in that form, in its
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intervention application.11 In short what Altech has done is to seek intervention on an open
ended basis to have the merger prohibited by establishing that it was, at the least,
concerned about the following issues: removal of a potential entrant; foreclosure of access
to a customer base; input foreclosure of rival ISPs and the VOIP issue that we referred to
earlier. For the sake of simplicity let us refer to these as issues A, B and C. 12
[26] Having got the right to intervene on those grounds, and putting the merging parties to
the burden of dealing with those issues, it filed unsigned witness statements, dealing with
the potential for MTN to use its post-merger control of Verizon’s international gateway for
data transmission into South Africa to impede the development of VoIP/LCR. Let us refer to
this as issue D. The merging parties never dealt with issue D in their witness statements
because they said the issue was not one raised in the intervention application. Thus
although they addressed the VOIP problem as articulated by Altech in its founding papers,
the VOIP theory of harm addressed by Altech in its witness statements on 29 December was
an entirely novel one, so much so that the merging parties economists had to file a
supplementary report to deal with this issue.
[27] Altech then withdrew on the day prior to the hearing, 13 having, we were advised by
the merging parties, withdrawn because it had obtained a letter of comfort the material terms
of which are encapsulated in the following paragraph in the letter:
“… MTN undertakes to Allied Technologies Limited and its subsidiaries (“Altech”)
that it will treat MTN NS and Verizon SA on an equivalent basis to any other firm of a
similar nature and will not provide the above entities with preferential pricing or
preferential incentives, whether directly or indirectly, in respect of products or
services offered by MTN.” 14
services offered by MTN.” 14
[28] Let us refer to this concern above, as issue E. The concern over issue E is one that
the merging parties would no doubt have furnished Altech with an undertaking on the same
terms, ab initio, had this really been what it sought. It is transparent that Altech had
intervened with far greater ambition than issue E – but at the 11 th hour not having been able
to secure anything more from the threat of intervention, withdrew, accepting the merest
crumbs.
11 When we say not figured, we mean given no prominence. Arguably every anticompetitive issue under the sun
can be read into paragraph 9.3 of the founding affidavit where Altech lists thirteen areas that it can give evidence
on. Record 29-30.
12 Please see G:enesis Supplementary Report dated 29 December 2008.
13 We received a notice of withdrawal from their attorneys on 7 January 2009 at 12h34 in the afternoon.
14 See letter from MTN handed at the hearing on 8 January 2009 as Exhibit “A”.
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[29] The intervention neither offered the Tribunal what it promised, nor achieved what
Altech originally sought. It had intervened on the basis of issues A, B and C, later filed
witness statements confined to issue D and then settled, ostensibly having received
satisfaction from the merging parties, on issue E. Instead the intervention has burdened the
merging parties with costs, delay and inconvenience. Altech must pay the merging parties
costs on a party and party scale, and such costs are to include costs of one counsel.
[30] We understand our jurisdiction to award costs to be limited to party and party costs. 15
Had we not suffered from this limitation we would have considered this an appropriate case
to award punitive costs against Altech.
_____________________ 09 February 2009
N Manoim Date
Presiding Member
Concurring: U Bhoola and Y Carrim
Tribunal Researcher : J Ngobeni
For the merging parties : Adv Mike Van Der Nest SC and Adv Anthony Gotz instructed
by Edward Nathan Sonnenburgs and Webber Wentzel
For the Commission : Rizia Buckas (Legal Services)
15 See rule 58 of the Tribunal rules.
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