The recent case of Pepkor Holdings v Lewis Stores before the Competition Appeal Court provides crucial clarity on the proper test for intervention in merger proceedings.
For anyone contemplating this strategic move, the judgment offers a useful guide on the hurdles to clear. Intervention is granted at the discretion of the Competition Tribunal, and understanding the principles from this case is essential for a successful intervention application.
So, what must a prospective intervenor do? The appeal court’s reasoning outlines a clear, multi-faceted test that moves beyond mere assertion to a demonstrable evidential burden.
The starting point is section 53 of the Competition Act and rule 46 of the tribunal rules, which requires an applicant to show a “material interest” in the merger. However, the Pepkor judgment draws a critical distinction. A general commercial interest, particularly for a competitor, is often viewed with caution, as it may connote a vested interest in subverting the merger for anti-competitive reasons.
It is not sufficient to simply allege that you have a material interest — you must provide proper evidence justifying this allegation. The tribunal must be satisfied that the interest is substantial and relevant to the statutory inquiry, not merely a reflection of a competitor’s desire to eliminate rivalry.
The tribunal will not grant intervention simply upon request — it must be satisfied that the party will meaningfully assist in its section 12A inquiry. As emphasised in Pepkor, an applicant’s entire argument often rests on its ability to contribute unique insights and evidence.
To succeed, you must demonstrate to the tribunal’s satisfaction that you possess specific evidence and knowledge which you can bring to bear on the proceedings. This evidence must provide clear assistance to the tribunal in its disposition of the case. Crucially, the applicant must demonstrate an evidential basis for admission as opposed to speculation, for it is only the former that may assist the tribunal in carrying out its statutory mandate. Vague promises of future contributions are insufficient.
A fundamental principle reiterated in Pepkor is that a merger hearing is not a trial but an inquisitorial process. It is an inquiry that seeks to examine the nature of the market should the merger proceed, contrasted with the relevant counterfactual of the market absent the merger. By its nature, this process must be conducted expeditiously to provide certainty and to ensure that pro-competitive mergers are not unduly delayed.
This creates a critical balancing act for the tribunal. The court stated that the approach must “entail taking into account the likelihood of assistance promised by the prospective intervenor, balanced against the consequences of the intervention in terms of the expedition and resolution of proceedings.”
If the promised assistance is doubtful, but the impact on the proceedings’ timeline is significant, the tribunal should decline the intervention or strictly curtail its extent. So-called Stalingrad legal tactics, designed to delay and obstruct, have no place in a merger enquiry.
Even if a party successfully shows a material and substantial interest, the ultimate decision rests on the tribunal’s exercise of judicial discretion. This means the tribunal must weigh all the factors in a balanced manner and adequately assess to what extent the intervenor was likely to assist with information that “could not have been obtained elsewhere.” Furthermore, a proper balance must be struck between the merging parties’ interest in an expeditious resolution and the purported value of the intervenor’s contribution.
The jurisprudence emerging from Pepkor v Lewis sets a clear bar. A successful application for intervention requires a compelling, evidence-based case that you hold unique information critical to the tribunal’s inquiry. This must be convincingly presented, with a clear understanding that your participation will be measured against the imperative for a speedy resolution.
⋅ Tlhong is director of corporate commercial at TGR Attorneys Inc.
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