Judge Dennis Davis joked that it was an abuse of dominance. But a remarkable number of our competition regulators have come from just one law firm.
The new head of SA’s Competition Commission, Doris Tshepe, comes from Cheadle, Haysom & Thompson, where she started as a clerk and ended up as the firm’s managing partner. Her predecessor at the commission, Tembinkosi Bonakele, is also a Cheadles alumnus. So too are the chair of SA’s Competition Tribunal, Mondo Mazwai, and the tribunal’s longest serving panel member, Yasmin Carrim. Former tribunal head Judge Norman Manoim, who drafted SA’s competition legislation in the 1990s, also came from the firm.
Cheadles is best known as the iconic SA labour law firm whose founders pushed the boundaries of apartheid-era legislation to win rights for trade unions organising black workers from the 1970s. It developed a strong human rights practice too. It’s therefore not that surprising that it later expanded into the then new area of competition policy and practice — nor, given the firm’s culture of public service, that some of its people chose to become regulators rather than corporate lawyers.
Antitrust, as it’s known in the US, has long been an area of the law favoured by the left because it’s about curbing the power of big capital to abuse consumers. When Tshepe was asked on a panel at last week’s competition conference why a labour law firm produces so many competition regulators, her answer was simple: “The firm throughout its existence sought to use the law to achieve social justice.” She noted that Cheadles was privy to the drafting of competition law and policy thanks to Manoim’s work, and had seen how it could be another tool to achieve equality and inclusion in SA.
It was her labour law practice that led Tshepe into competition law, when the trade unions started intervening in mergers — notably Walmart’s landmark acquisition of Massmart in 2010. That was the case that became the template for the ministerial intervention and “public interest” criteria — on employment, black empowerment, localisation, even the right to health care — that have become the mark of merger regulation in SA in recent years.
A key question about SA’s competition policy now is just how far it has veered over into the “inclusion” space and away from competition imperatives in the strict sense of promoting consumer welfare. It is the Competition Commission that tends to set the agenda for the competition authorities as a whole, driving the cases that go to the tribunal and the Competition Appeal Court.
However, over the past decade it has increasingly been trade, industry & competition minister Ebrahim Patel who has driven the agenda from above. Not only has he rewritten legislation to broaden the public interest remit of the competition authorities and give himself more influence, he has also personally negotiated the conditions for merger deals to be approved and has directed the work of the commission more broadly.
SA’s competition regulators are among our best and most highly regarded regulators globally. And at a time when much of government is less than effective, Patel is increasingly using them essentially as agents to pursue his industrial policies — or sometimes, it seems, even just to pursue popular (populist?) causes. Certainly his notion of competition regulation has shifted ever further away from the “old Chicago school paradigm”, where consumer welfare was the only criterion for the competition process, as he put it in his keynote address to last week’s conference.
It’s long been clear that any large company, especially a foreign one, wanting to get a merger through the competition authorities must do a deal with Patel first on the public interest conditions to be attached, whether or not there are any competition issues with the merger. The goalposts have progressively shifted, and currently merging parties generally need to deliver three sets of commitments:
On employment, where previously parties usually had to commit to no merger-specific retrenchments for one or three years, now they are having to commit to retaining and even expanding employment.
On black economic empowerment, Patel’s new focus is on employee share ownership (Esop) schemes — and not just ownership but also board seats and a say in management for workers. The Pepsico/Pioneer deal is his current favourite because of the Esop deal Pepsico offered him.
On localisation, with firms crucially often having to commit not just to local production or procurement of their own but to investing in the localisation of supply chains in their sectors.
Davis has called it rent-seeking. Patel says his public interest focus is the global trend. Added to his priorities are a couple more curveballs that have appeared in the merger space as a result of the Constitutional Court ruling in the Mediclinic/Matlosana matter, which added the right to health care as a reason to block a merger that raised no competition concerns.
In theory it is the Competition Commission that proposes that a merger be approved with conditions, which it agrees on with the parties, and the Competition Tribunal that judges whether the merger can go ahead. In practice, lawyers say the merging parties usually go to the minister first and it takes some diplomacy to balance minister and competition commissioner. Lawyers say in most jurisdictions it’s either the law that has the final say on mergers or the government — SA has an uneasy combination of the two.
How Tshepe will deal with this will be interesting. She is known to be independent-minded and she doesn’t need the job — she is a highly regarded lawyer in her own right, sits on the Judicial Services Commission and was a member of the panel that advised Patel on his competition law amendments.
How she will deal with the crucial anticompetitive conduct part of the commission’s work will be interesting too. Here too, cases sometimes seem to play to the peanut gallery. Most recently one has to wonder why Bonakele launched a huge probe into alleged cartel conduct by SA’s leading insurers just days before the end of his term as commissioner. Whether, when and what evidence will be forthcoming is not clear.
But it’s worth remembering that little has been heard of the big probe into alleged collusion by the banks that the commission launched almost a decade ago, coincidentally at a rather convenient time for the Zuma administration.
The market will be keenly watching what kind of commissioner Tshepe will be. Chances are the good folk from Cheadle’s will that the good folk of Cheadles will continue to shape policy and the law, not just practise it.
• Joffe is editor at large.
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