Competition Commission suspends advisory opinion service

The Competition Commission (Commission) announced that it has taken a decision to suspend its advisory opinion service, pending the finalisation of a matter between the Commission and Hosken Consolidated Investments Limited (HCI). This pronouncement follows the recent decision by the Competition Appeal Court (CAC) in Hosken Consolidated Investments Limited v The Competition Commission (154/CAC/Sept17). 

7 Feb 2018 2 min read Competition Alert Article

The Commission, as part of its advocacy function, had provided a (non-binding) advisory opinion service, at the request of parties, to offer guidance on the interpretation of the Competition Act, No 89 of 1998 (Act), and the approach the Commission would likely take in respect of certain agreements, transactions or practices.

The Commission decided to suspend the service after HCI challenged the conclusion of an advisory opinion at the Competition Tribunal (Tribunal) and then the CAC. By way of background, HCI previously jointly controlled gaming entity, Tsogo Sun Holdings Limited with SABMiller plc. When SABMiller chose to exit, HCI notified the Commission on the basis that it would acquire sole control of Tsogo and it anticipated holding more than 50% of Tsogo. Such merger approval was granted.  

HCI did increase its shareholdings to only 47.5%, but it proceeded to exercise sole control over Tsogo. HCI then decided it wished to consolidate and restructure its gaming interests, which would result in increasing its shareholding in Tsogo to more than 50 percent. Having already secured approval for sole control of Tsogo, it approached the Commission for an advisory opinion on whether it was required to notify the restructuring which would move it above a 50% shareholding, but would not alter the nature of its control over Tsogo. 

The Commission issued an advisory opinion stating that the proposed transaction was notifiable. Disagreeing with this outcome, HCI then approached the Tribunal for an order declaring that the proposed transaction was not notifiable. 

In opposing HCI’s application, the Commission argued that advisory opinions should not be the subject of litigation. It considered HCI to be short-circuiting the investigative process by getting a finding that a matter was not notifiable without the Commission having had an opportunity to investigate the transaction. The Tribunal held that it did not have jurisdiction to consider the matter because, as the advisory opinion was non-binding, there was no “live dispute” between the parties that required intervention.

On appeal, the CAC held in favour of HCI and declared that the proposed transaction did not require approval by the competition authorities, as it did not change HCI’s existing quality of control. 

The Commission has applied for leave to appeal the CAC’s decision to the Constitutional Court on the basis that the CAC’s decision creates a precedent which can be used by parties to challenge a non-binding advisory opinion issued by the Commission if they do not agree with it. 

Considering that the advisory opinion service now puts the Commission at risk by allowing parties to challenge such an opinion, the Commission announced it would suspend the service. The Commission has said that a final decision on the provision of advisory opinion services will be made after the Hosken case has been finalised. 

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