First, the competition authorities ruled that public interest could trump competition issues in scrutinising mergers. Now it seems even public interest commitments aren’t enough. One can’t help wondering at this point whether the competition authorities want companies, especially large companies, to do deals at all.
The Competition Tribunal last week finally published its reasons for prohibiting the Vodacom-Maziv merger. Late last year it had upheld the Competition Commission’s recommendation to prohibit it, but hadn’t provided reasons. Now, in a nutshell, its explanation is that even though the merging parties undertook to invest billions over the next five years on expanding access to fibre, particularly in low income areas, all that would happen without the merger.
This is not the end of the road. The parties can still appeal to the Competition Appeal Court and surely will. Trade, industry & competition minister Parks Tau had already indicated he intended to appeal. Whatever he thinks about the competition issues that might or might not be involved, he and his government colleagues have made digital infrastructure for poor South Africans a priority. This merger promised to deliver some of that. It would bring Vodacom’s Wi-Fi networks together with Remgro’s fibre businesses, which are the largest in the SA market.
But first, it has to be said that competition authorities’ timing is simply scandalous. As George Washington University postdoctoral fellow Liat Davis pointed out recently in these pages, Vodacom first announced its plan to acquire 30% of Maziv in November 2021. In other words it has so far taken more than three years for the parties to get a clear answer out of the competition authorities, albeit a refusal. An appeal will take yet more time.
The world moves fast, especially in areas such as digital technology. How anyone is supposed to do deals in an environment as uncertain as this one is not clear. As Davis put it: “SA’s competition law should be a tool for economic transformation, not a casualty of bureaucratic inefficiency. Delays like these do more than undermine the credibility of competition authorities — they harm economic growth and democratisation, and deter foreign investment.”
Then there is the issue of the competition authorities’ approach itself. SA’s competition law always insisted that public interest issues such as employment and development must be factored into merger decisions. And former minister Ebrahim Patel had intervened extensively to extract public interest commitments from merging parties in areas such as supplier development and localisation as well as BEE. But it was the 2018 amendments to the legislation that opened the way for the public interest to be treated on a par with competition issues — so even a merger that raised no competition concerns could be barred on public interest grounds and in theory even a merger that raised competition concerns could be allowed to go ahead if the public interest countered this.
Vodacom and Maziv committed to invest at least R10bn, primarily in low income areas, expanding fibre access to a million homes and creating up to 10,000 new jobs as well as establishing a R300m development fund and providing free high speed internet access to schools and police stations. In its reasons for the decision, the Competition Tribunal found that the merger would be anticompetitive. And it found that the claimed benefits were illusory, because the companies would expand their networks anyway. If they don’t in coming years, we can blame the tribunal. Meanwhile we wait for the next round.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.