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[2013] ZACT 49
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Competition Commission v Old Mutual Life Assurance Company (SA) Ltd (016808) [2013] ZACT 49 (12 June 2013)
COMPETITION
TRIBUNAL
REPUBLIC
OF SOUTH AFRICA
Case
No: 016808
In
the matter between:
The
Competition Commission
........................................................................................
Applicant
and
Old
Mutual Life Assurance Company (SA) Ltd
..................................................First Respondent
Panel:
N
Manoim (Presiding Member), T Madima
(Tribunal
Member) and A Ndoni (Tribunal
Member)
Heard
on:
12
June 2013
Decided
on:
12
June 2013
Order
Momentum
Group Ltd (as it was then) Second Respondent
The
Tribunal hereby confirms the order as agreed to and proposed by the
Competition Commission and the respondents, annexed hereto
marked
“A”.
Presiding
Member
N
Manoim
Concurring:
T
Madima and N Ndoni
BEFORE
THE COMPETITION TRIBUNAL OF SOUTH AFRICA
(HELD
IN PRETORIA)
CT
CASE NO:
CC
CASE NO: 2011Apr0030
In
the matter between:
COMPETITION
COMMISSION
.....................................................................................
Applicant
and
OLD
MUTUAL LIFE ASSURANCE COMPANY
(SOUTH
AFRICA) LIMITED
.............................................................................
First
Respondent
MOMENTUM
GROUP LIMITED (as it was then)
......................................
Second
Respondent
FILING
SHEET
CONSENT
AGREEMENT BETWEEN THE COMPETITION COMMISSION AND OLD MUTUAL LIFE
ASSURANCE COMPANY (SOUTH AFRICA) LIMITED AND MOMENTUM GROUP
LIMITED
IN RESPECT OF AN ALLEGED CONTRAVENTION OF SECTION 13A(3) OF THE
COMPETITION ACT NO. 89 OF 1998, (AS AMENDED).
IN
THE COMPETITION TRIBUNAL OF SOUTH AFRICA
CT
Case No:
CC
CASE NO: 2011Apr0030
In
the matter between:
THE
COMPETITION COMMISSION
.............................................................................
Applicant
and
OLD
MUTUAL LIFE ASSURANCE COMPANY
(SOUTH
AFRICA) LIMITED
.............................................................................
First
Respondent
MOMENTUM
GROUP LIMITED (as it was then)
......................................
Second
Respondent
CONSENT
AGREEMENT BETWEEN THE COMPETITION COMMISSION AND THE RESPONDENTS IN
REGARD TO A CONTRAVENTION OF SECTION 13A OF THE COMPETITION
ACT 89 OF
1998 (AS AMENDED)
The
Competition Commission and the Respondents hereby agree that
application be made to the Competition Tribunal for thisagreement
to
be confirmed as a consent order of the Competition Tribunal in terms
of section 49D as read with section 58(1 )(b) and section
59(1
)(d)(i) of the
Competition Act 89 of 1998
, as amended.
1.
DEFINITIONS
For
the purpose of this agreement, the following definitions apply -
1.1.
"Act"
means
the Competition Act, 89 of 1998 (as amended);
1.2.
"Commission"
means
the Competition Commission of South Africa, a statutory body,
established in terms of section 19 of the Act,with its principal
place of business at Building C, Mulayo Building, dti Campus,
cornerMeintjies and Esselen Streets, Sunnyside, Pretoria, Gauteng;
1.3.
"Consent
Agreement"
means
this agreement signed by the Parties;
1.4.
"Futuregrowth"
means
the wholly owned subsidiary of OMIGSA, with its principal business
address at third floor, Great Westerford Building, 240
Main Road,
Rondebosch,a registered financial services provider and a specialised
asset manager with notable expertise in fixed
income and social
responsibility assets;
1.5.
"Futuregrowth
Merger"
means
the mergerin terms of which OMIGSA acquired the entire shareholding
and business of Futuregrowth so that it became a subsidiary
of
OMIGSA,which transaction was unconditionally approved by the Tribunal
on 28 August 2008 under case number 71/LM/Jun08;
1.6.
"FSB"
means
the Financial Services Board responsible for the regulation of,
amongst others, long-term insurance business under the Long-Term
Insurance Act;
1.7.
"Long-Term
Insurance Act"
means
the Long-Term Insurance Act of 1998 as amended;
1.8.
"Momentum"
means
Momentum Group Limited (now known as MMI Group Limited), with its
principal business address at 268 West Avenue, Centurion,
Pretoria,
aregistered long-term insurer under the Long-Term Insurance Act;
1.9.
"OMIGSA"
means
Old Mutual Investment Group (South Africa) Limited,with its principal
business address at Mutual Park, Jan Smuts Drive, Pinelands,
Western
Cape. OMIGSA is a registered financial services provider providing
asset management services to the investment market and
mandated to
perform certain functions on behalf of OMLACSA and other companies
forming part of the Old Mutual group of companies;
1.10.
"OMLACSA"
means
Old Mutual Life Assurance Company (South Africa) Limited, with
principal business address at Mutual Park, Jan Smuts Drive,
Pinelands, Western Cape. OMLACSA isa registered under the long-term
insurer under the Long-Term Insurance Act;
1.11.
"Parties"
means
the Commission and the Respondents;
1.12.
"Policyholders"
means
the policyholders of the TransferPolicies;
1.13.
"Respondents"
means
OMLACSA and Momentum collectively;
1.14.
"Section
37(2) Transfer"
means
the transfer of the Transfer Assets and Transfer Policies from
Momentum to OMLACSApursuant to the Transfer Agreement;
1.15.
"Transfer
Agreement"
means
the agreement entered into between the Respondents on 1 April
2009under section 37(2) of the Long-Term Insurance Act, in terms
of
which OMLACSA would assume Momentum's rights and obligations to the
Policyholders in respect of the Transfer Policies and accept
delivery
of the Transfer Assets;
1.16.
"Transfer
Assets"
means
the assets held to meet the obligations of the relevant
Respondent/long-term insurer towards the Policyholders in terms of
the Transfer Policies and managed by Futuregrowth;
1.17.
"Transfer
Policies"
means
the linked long-term insurance policies which are the subject of the
Transfer Agreement; and
1.18.
"Tribunal"
means
the Competition Tribunal of South, a statutory body established in
terms of section 26 of the Act, with its principal place
of business
at Building C, Mulayo Building, DTI Campus, cornerMeintjies and
Esselen Streets, Sunnyside, Pretoria, Gauteng.
2.
BACKGROUND
2.1.
The
circumstances and context under which the merger was implemented
prior
to its approval
2.1.1.
At all relevant times Futuregrowth was the portfolio manager
appointed to manage the Transfer Assets in accordance with
the
investment mandate relating to the Transfer Policies.
2.1.2.
The Futuregrowth Merger allowed OMIGSA to extend its asset
management skills in fixed income capability and certain specialised
products (i.e. by acquiring Futuregrowth's business), and
facilitated Futuregrowth's access to the Old Mutual group of
companies’
retail distribution channels and a long-term
insurance licence with linked policy capacity.
2.1.3.
In the Futuregrowth Merger, the Commission and the Tribunal
understood the relevance of the linked policy capability of
Old
Mutual and the prospect that an Old Mutual long-term insurance
licence would be used to underwrite the Transfer Policies
per the
rationale for and as recorded in the Tribunal’s reasons for
its approval of the Futuregrowth Merger.
2.1.4.
Competition in the market involving linked long-term insurance
policies occurs mainly at the asset management / investment
level.
Investors generally prioritise the identity and capabilities of the
asset manager, who will manage their investment via
a linked policy
issued by an established long-term insurer, when making investment
choices. In contrast, competition in the non-linked
long-term
insurance market is driven almost entirely by an assessment of the
insurers' ability.
2.1.5.
At all relevant times, OMIGSA, Futuregrowth and Momentum considered
the Policyholders’ investments represented by
the Transfer
Policies and the Transfer Assets as managed by Futuregrowth to form
part of the business of Futuregrowth, and that
the Section 37(2)
Transfer was an implementation of the Futuregrowth Merger.
2.1.6.
It was not discussed nor contemplated by any of the persons involved
in the Futuregrowth Merger that the Section 37(2)
Transfer could be
a merger under the Act.
2.1.7.
The only part of the business of Momentum over which OMLACSA
acquired control under the Section 37(2) Transfer was the
Transfer
Assets and the Transfer Policies.
The
Respondents' failure to comply with section 13A of the Act was a
bona fide
and reasonable mistake, taking into account the c^tfurftstance that
the Section 37(2) Transfer occurred in the context of compliance
with the Long-Term insurance Act in relation to the Futuregrowth
Merger and with the consent of the FSB and Policyholders.
3.
COMMISSION’S INVESTIGATION AND FINDINGS
The
Commission's investigation established the following -
3.1.
An implemented merger
3.1.1.
The Section 37(2) Transfer resulted in the acquisition of control,
within the meaning of section 12(1) of the Act, by OMLACSA
over part
of the business of Momentum comprising the Transfer Assets and
Transfer Policies. This merger also met the thresholds
of a large
merger and was therefore notifiable.
3.1.2.
The Respondents implemented the merger prior to its notification to
the Commission and approval by the Tribunal in terms
of section 13A
of the Act.
4.
ADMISSION
The
Respondents admit that -
4.1.
The Section 37(2) Transfer constituted a notifiable large merger
under section 12(1)(c) of the Act read together with the
schedule
for determining thresholds.
4.2.
The merger was implemented prior to its notification to the
Commission and approval by the Tribunal as prescribed by section
13A
of the Act.
4.3.
They were responsible for notifying the merger under the Act.
5.
AGREEMENT CONCERNING FUTURE CONDUCT
5.1.
The Respondents agree and undertake -
5.1.1.
To not implement any transaction, which constitute mergers as
defined in the Act and meet the threshold for notification
without
obtaining the prior approval from the competition authorities;
5.1.2.
Develop and implement a compliance programme designed to ensure that
its employees, management and directors do not engage
in any conduct
which constitutes a contravention of the Act, a copy of which shall
be submitted to the Commission within 60 days
of the date of
confirmation of this consent agreement as an order of the Tribunal.
6.
ADMINISTRATIVE PENALTY
6.1.
Having regard to the provisions of section 58(1)(a)(iii), read with
sections 59(1 )(d), 59(2) and (3) of the Act, the Respondents
accept
that they are liable to pay an administrative penalty for the
contravention of section 13A(3) of the Act.
6.2.
The Parties agree that an administrative penalty of R175,000 (one
hundred and seventy five thousand Rand) shall be imposed
on each of
the Respondents.
6.3.
The amount of each administrative penalty is less than 10% of the
annual turnover of each Respondent as stipulated in section
59(2) of
the Act.
6.4.
Each Respondent shall pay the penalty amount to the Commission
within 7 (seven) days of the confirmation of this Consent
Agreement
as an order of the Tribunal,
6.5.
The said amount shall be paid into thefolfowing Commission’s
bank account-
Bank
ABSA
Bank
Account
Name
Competition
Commission
Account
Number
4050778576
Branch
Code
323345
6.6.
The Commission will pay the administrative penalties into the
National Revenue Fundas stipulated in section 59(4) of the
Act.
7.
FULL AND FINAL SETTLEMENT
Upon
confirmation of the Consent Agreement as a consent order by the
Tribunal, all proceedings between the Commission and the
Respondents
in
relation to their failure to comply
with section 13A(3) of the Act investigated under the Commission's
case number 2011 Apr0030,
shall be concluded.
Date
and signed at PINELANDS on this the 5th day of MAY 2013
MR
ABRAHAM PAUL NAUDE
OLD
MUTUAL LIFE ASSURANCECOMPANY (SOUTH AFRICA) LIMITED
Date
and signed at CENTURION on this the 10th day of APRIL 2013
MR
FRANCOIS JOOSTE
GROUP
COMPANY SECRETARY
MOMENTUM
GROUP LIMITED
Date
and signed at PRETORIA on this the 21th day of MAY 2013
Shan
Ramburuth
The
Commissioner, Competition Commission