1 August 2009 by

Interventions by competitors in merger proceedings - a call for balance

While some competition agencies tend to be skeptical of competitor intervention with a rival's merger project, our competition authorities have in many instances adopted an open door policy giving the competitor every chance to be heard because this is considered to be an effective way of ventilating all relevant issues.

However, the Tribunal has increasingly indicated that interventions should be exercised within the bounds of good faith and public interest. In AC Whitcher (Proprietary) Limited and the Competition Commission and Others, the applicant, who had been a rival bidder to acquire the assets of the target firms, brought a review application to the Tribunal 75 days after the Commission's order. It became apparent that the motive was to frustrate the implementation process that was already underway. In dismissing the application, the Tribunal held that the conduct of AC Whitcher was nothing more than a ploy to extract some form of commercial advantage rather than the pursuit of the public interest, thus the application was dismissed with costs.

The award of costs to an unsuccessful intervener is becoming less unusual. An intervener has to offer input which is of added value to the investigation and not use the competition authorities to further its own commercial agendas. Filing vexatious applications is an abuse of the process and competitors need to be aware that it may result in censure.

The attitude of the competition authorities towards competitor interventions is to give the competitor a platform to raise legitimate competitive concerns; however, its motive will be closely examined.

Just like AC Whitcher, some competitors intervene in order to further their own agenda, for instance in order to acquire what their rivals have to divest in order to obtain clearance for their merger. Sometimes interventions are mere attempts by a competitor to protect its profits. For example a competitor may object to a merger if it expects the merger to lead to a decrease in sales prices, but not if it expects prices to rise after the merger, since that might be beneficial for the competitor itself.

The Tribunal is therefore aware that its role requires an equilibrium to be struck between giving a fair hearing to competitors and protecting the legitimate commercial interests of merging parties as well as consumers. An intervention may sometimes keep an otherwise pro-competitive merger at limbo for months thus delaying benefits flowing down to the consumer. The Tribunal wants to avoid cumbersome and chaotic hearings1 and has found that it is unfair on merger parties to allow complainants to adopt a laissez-faire approach to their intervention2, hence the Tribunal will not hesitate in making cost orders in instances were intervention is in bad faith.

In the most recent illustration of this principle, Altech withdrew its intervention in the merger between MTN and Verizon the day before the hearing. As a result Altech was ordered to pay the costs incurred as a result of its intervention. The Tribunal expressed regret that the Act does not permit it to award punitive costs.

It is thus important for competitors to note that in as much as the Tribunal is still keen to give them a fair chance to be heard, they must act reasonably, in good faith and in the public interest.

Chris Charter, Director and
Scarlate Nkiwane,
Associate, Competition

Footnote:
1. Caxton and CTP Publishers v Naspers Limited 72/CAC/Aug07
2. Barnes Fencing Industries (Proprietary) Limited v Iscor Limited (Mittal SA) 08/CR/Jan07

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