Breaking up is hard to do: Two decades at the helm of the Competition Tribunal

Norman Manoim quotes the famous Neil Sedaka song from the 1970s, Breaking Up is Hard to Do when asked whether he had any success in splitting the power of monopoly industries while he was at the Competition Tribunal for 20 years.

“What can be more successful now… rather than breaking up markets is opening up markets for contestation, so, in other words, try to bring down the barriers to entry and make the contestation greater and have new entrants compete away the monopoly power of the other firm,” the former Competition Tribunal chairperson said in an interview with Business Maverick.

Manoim was involved in trying to open the economy through competition, ever since the democratic government decided to try to loosen concentration. He was among the architects who helped draft the Competition Act in 1998, replacing the Competition Board which only had advisory powers to the minister of trade and industry of the day.

The legislation recognised that apartheid and other discriminatory laws had resulted in “excessive concentration of ownership and control” and the act sought to achieve a more “effective and efficient” economy that would be open to a greater number of South Africans.

His previous work in human rights law dried up almost overnight after democracy and he started working with trade unions and the investment arms they were establishing. He was later asked to join the committee writing the amendments in 1998.

He became a full-time member of the Competition Tribunal in 1999 under David Lewis and was appointed chairperson in 2009 by former president Jacob Zuma, serving two terms until July this year.

Manoim says his two decades at the tribunal were the formative years of the institution and together with the Competition Commission and Competition Appeal Court were all “brand new” and had to forge their way in uncharted territory, which he describes as “challenging and also very exciting”.

The Competition Act No 89 of 1998 established three independent authorities: the Competition Commission, as the investigative and enforcement authority; the Competition Tribunal, which adjudicates on matters referred to it by the commission; and the Competition Appeal Court (CAC), which considers appeals or reviews against tribunal decisions, as a specialised branch of the High Court sitting in Cape Town.

Manoim reflects with some surprise that the monopolies of the apartheid era such as mining behemoth Anglo American and insurer Sanlam did not face a single dominance case before competition authorities. Instead, it was semi-privatised state-owned entities including telecommunications firm Telkom, chemical and energy giant Sasol and Iscor (the forerunner of steel company ArcelorMittal) that received a sanction.

Many of the monopoly companies under apartheid, according to Manoim, were most concerned about efforts to reduce concentration and were involved in policy formation, but were, ironically, “never in the firing line”.

Arguably, the Competition Tribunal has the largest role to play when it comes to mergers and especially the colossal kinds that have the potential to shape an industry forever. The Competition Commission can adjudicate on small and intermediate mergers, but it can only make a recommendation on large mergers to the tribunal. The Competition Tribunal can choose to approve, conditionally approve or prohibit the large merger. The commission’s decisions on small and intermediate mergers can also be taken on review.

Comprising 11 members, five of whom are permanent and six part-time and representing a mix of legal and economic experts, the tribunal also adjudicates on sanctions imposed by the commission for collusion, price-fixing and other prohibited practices.

Manoim recalls some of the high-profile cases the tribunal worked on, such as the US retail giant Walmart’s successful bid in 2011 for a 51% merger with Massmart Holdings, the predatory pricing case involvingMedia24 that was ultimately overturned by the CAC and the abuse of dominance by travel agents linked to South African Airways.

“Some cases are very high profile, but lower-profile cases create important jurisprudence such as merger control definition of collusion and dominance… you can’t choose the ideal case and which complainants walk through the door,” he says of creating a body of jurisprudence from scratch.

Manoim admits his 20 years at the forefront of competition policy were “quite challenging” as some areas of the law were reasonably clear while in others they had to find the middle ground, and trade-offs had to be made in grey areas by taking a chance.

The Walmart/Massmart and AB InBev/Coca-Cola deals were subjected to conditions by the then minister of economic development, Ebrahim Patel, who imposed clauses around local procurement and small business as part of the value chains.

Manoim reflects that critics said there was no legal standard followed, while fans of the approach maintained there was jurisprudence setting the rules around job losses in mergers but no precedent to benefit small business.

His own view is somewhere in between, believing that a clear standard is useful to settle disputes. Despite some concern about Patel’s increased prominence in competition matters, especially with the amendments signed into law, Manoim says he was never once pressured by Patel, or any other ministers he worked alongside.

He notes that competition authorities were first located within the Department of Trade and Industry and in 2009 moved to Economic Development. Following the May 2019 elections, the departments were reintegrated under one minister, Patel, which will take effect in April 2020.

“I think it’s a good thing. Competition lacked a kind of centre when it had two ministries,” Manoim says.

He was never offered money, lunch or even a beer by any of the massive corporations making their way through his door.

“Not because there were any angels, but because of the way the system is designed,” Manoim says, pointing out the referrals from the Competition Commission, which acts as a type of prosecuting authority; the tribunal adjudicates cases with three members; and then a possible appeal to the CAC “makes it very difficult to fix the system”.

The commission has identified several key sectors to reduce concentration and monopolies, including financial services, health, and information and communications technology. Each market requires separate analysis, says Manoim.

“Banking was a very cosy club, because of regulatory authorities,” Manoim says, adding that banking regulators argued for years that prudential concerns overrode competition benefits and only recently has there been competition in the form of several new entrants.

Private healthcare is another highly concentrated sector where entry barriers are high, says Manoim, and the National Health Insurance (NHI) has the potential to drive efficiencies and bring down costs if there is a strong social contract in place between the state and citizens.

The new amendments were signed into law in February and will come into effect incrementally. They create additional considerations to assessing mergers, allow government greater control over the foreign acquisition of a company if it is deemed against the national interest or security and expands the powers of the Competition Commission in market inquiries to make binding findings.

Reflecting on the increased control of the executive, under apartheid, the minister of trade and industry was all-powerful. The 1998 legislation substantially diminished this, while some powers have been “clawed back” under the amendments, says Manoim.

“Previously, the minister had no right of appeal in merger cases, although the minister was given the right to intervene.”

The amendments give the minister a “very powerful bargaining tool” of leverage over companies because mergers are time-sensitive.

He adds that a number of issues will be clarified by the amendments, comparing the legislation to a piece of music: “Difficult to play but if played correctly will be very musical.”

He credits his successor, Mondo Mazwai, as being up to the task of having to interpret and rule on the tricky legislation changes, pointing to her 20-year experience with the commission, the tribunal and the private sector.

The biggest challenge facing competition regulators now, says Manoim, are the powers of digital giants, such as Facebook and Amazon, adding that the remedies to deal with them are limited for developing economies as a “cold commercial reality”.

Another interesting development could be the establishment of a competition body under the African Continental Free Trade Area (AfCFTA) representing about 1.2-billion consumers, an extremely powerful bloc. However, Manoim says this will need political buy-in and logistical support.

Having moved to academia, Manoim is far from the purposeful bustle of the DTI campus in Pretoria, as acting director of the Mandela Institute, based at the School of Law at Wits University, his alma mater. The organisation undertakes the teaching of short courses to students, including competition law and policy research. BM

Tehillah Niselow is a freelance journalist who has worked in radio, online and TV for six years, mostly covering labour, finance and policy. She holds an MA in Development Studies from Wits University and is interested in the impact of the digital economy and urban planning.