After two years of political bickering over competition legislation, a quick settlement from Nedlac appears unlikely, reports Mungo Soggot
A clash between old- and new-guard lawyers is set to hang over the latest round of the anti-trust legislation debate, which will soon be taken on by the National Economic Development and Labour Council (Nedlac) — and it appears the old guard has the upper hand.
Although it is almost two years since the government signalled its intention to tighten South Africa’s flaccid competition legislation, the combination of putting the discussion before Nedlac and the divergent stances of the men charged with drawing up new legislation should rule out a quick settlement.
Pierre Brooks, long-time chairman of the Competition Board, is still involved in shaping new legislation, despite coming up against former trade and industry minister Trevor Manuel, who spiked Brooks’s first draft of the Competition Bill earlier this year.
Manuel reportedly almost fired Brooks for taking an overly lenient approach that was at odds with government thinking. But until now the details of what Brooks suggested have never been disclosed as the Bill itself was kept secret.
In an accompanying memorandum to the Bill, Brooks says: “The draft Bill does not provide for the coercive dissolution of conglomerates. [This process] is fraught with pitfalls and should preferably be done on a voluntary basis.”
He adds: “One of the intended consequences of this approach is to enhance competition between the conglomerates.”
One lawyer described this statement as “naive”; another said it appeared Brooks felt the only players in the South African economy were conglomerates.
When trade and industry minister Alec Erwin took over he kept Brooks on after the Cabinet shake-up in April — a move that has puzzled some in progressive legal circles.
Both Brooks and Willem Pretorius, a Cape Town advocate who helped pen the first draft, were then charged with taking the debate back to square one by compiling a discussion document on all the options open to the government — including more severe measures, such as provisions for actively splitting up conglomerates, which were absent from the ditched first draft. It is this discussion document that will go to Nedlac in September.
Although Brooks has repeatedly called for more powers — the board has had few successful prosecutions — some believe it is inappropriate for him to be involved in the wholesale revamp of legislation that is required as he has nailed his colours so firmly to the mast.
Meanwhile, Erwin appointed Professor Dennis Davis to help out, in an apparent bid to bring new blood into the debate. However, it is understood Davis has had nothing to do with compiling the Nedlac document, although he has seen it. While it is only a discussion document, some observers suspect Davis has been sidelined.
It is noteworthy that Erwin wants the issue to be taken up at Nedlac, where business will have a chance to shoot down ideas it does not like. Questions have been asked as to why the government’s macro-economic framework policy document should leapfrog Nedlac — to avoid a showdown with the unions — whereas the framework for competition legislation will now be exposed to Anglo American (and other big business) firepower in the tripartite chamber.
Brooks’s heavy role under Erwin is understood to have brought Erwin into conflict with some in the government alliance who are keen for swift implementation of tightened anti-trust legislation.
The Nedlac discussion document examines the approach taken in the United States, which bars executives from Anglo American and De Beers from its shores because of the De Beers diamond cartel. The US legislation includes measures to break up conglomerates. Although US companies face criminal liability and attacks from the state and other companies if they fall foul of the legislation, there are only a couple of cases of conglomerates actually being split up. Some local lawyers argue that merely having stringent legislation on the statute books sends out the right signal.
Most European jurisdictions do not allow for the active break-up of conglomerates. Instead they examine abuses of dominant positions and then impose fines or set aside agreements.
In Europe, therefore, South African Breweries would not be torpedoed simply because it is a monopoly — – or “temporary sole supplier” as it once called itself. Instead, its behaviour in the market would be examined before any action was taken.
Many European countries’ competition laws are, however, focused on forging a common market, underpinning the need for South Africa to concoct a hybrid model by borrowing from a variety of jurisdictions. South Africa is one of the most concentrated economies in the world — conglomerates control more than 70% of the Johannesburg Stock Exchange.
Whichever route the legislature takes, most local lawyers in the field feel it is crucial that it tap a wide range of legal minds and not rely exclusively on the lawyers who penned the spiked, lenient draft bill. Two years of political bickering, several committees, and one draft later the only winners are the conglomerates who could come under fire from a real Competition Act.