Hosken Consolidated Investments Ltd and Another v Competition Commission

• Jurisdiction: South Africa
• Judge: Davis JP, Victor AJA and Mnguni AJA
• Judgment Date: 30 October 2017
• Citation: 2018 (4) SA 248 (CAC)
• Docket Number: 154/CAC
• Hearing Date: 30 October 2017
• Counsel: D Unterhalter SC (with J Wilson SC, S Pudifin-Jones and N Luthuli) for the appellants. B Majenge (with K Ayayee and L Phaladi) for the respondent (instructed by the Competition Commission).
• Court: Competition Appeal Court

Hosken Consolidated Investments Ltd and Another v Competition Commission
2018 (4) SA 248 (CAC)

2018 (4) SA p248

Citation	2018 (4) SA 248 (CAC)
Case No	154/CAC
Court	Competition Appeal Court
Judge	Davis JP, Victor AJA and Mnguni AJA
Heard	October 30, 2017
Judgment	October 30, 2017
Counsel	D Unterhalter SC (with J Wilson SC, S Pudifin-Jones and N Luthuli) for the appellants.; B Majenge (with K Ayayee and L Phaladi) for the respondent (instructed by the Competition Commission).

Flynote : Sleutelwoorde

Competition — Competition Tribunal — Jurisdiction — To make declaratory orders — Competition Tribunal having jurisdiction to make declaratory orders — Declaratory order made that proposed transaction not constituting C notifiable merger — Competition Act 89 of 1998, s 27(1).

Competition — Promotion of competition — Merger control — Merger — What constitutes — Whether, after obtaining unconditional merger approval, subsequent transaction to increase controlling company's shareholding in controlled company constituting notifiable merger — Not where, as in present case, transaction not giving rise to change in post-transaction D qualitative control — Determination of such change must be made when merger is approved, and could not be revisited later — Competition Act 89 of 1998, s 12.

Headnote : Kopnota

Hosken Consolidated Investments Ltd (HCI) and Tsogo Sun Holdings Ltd E (Tsogo) obtained unconditional merger approval from the Competition Tribunal (the Tribunal) in 2014. The approval was granted on the basis that HCI would obtain sole control of Tsogo's gaming interests. Pursuant to the approval, HCI increased its shareholding in Tsogo to approximately 47,5%. Subsequently, HCI decided to consolidate most of their gaming interests held in other subsidiary companies, under Tsogo. Since that F transaction would result in an increase of HCI's shareholding in Tsogo to over 50%, HCI approached the Competition Commission (the Commission) for an advisory opinion as to whether they were obliged to notify the proposed transaction to the competition authorities for approval. The Commission's opinion, issued in August 2017, was that the decision was notifiable prior to implementation (see [11]).

HCI G and Tsogo then approached the Competition Tribunal (the Tribunal) on an urgent basis for a declaratory order that the proposed transaction was not notifiable. The Commission, they contended, erred: the proposed transaction constituted the further implementation of a merger approval previously granted to HCI to acquire sole control of Tsogo, and even if the proposed transaction involved an acquisition of an additional instance of control H within the meaning of s 12(1) of the Competition Act 89 of 1998 (the Act), [*] approval for such acquisition of control had already been obtained in the form of the 2014 merger approval. The Tribunal however dismissed their application on the bases that it did not have the power to grant declaratory relief, and that absent notification of a transaction to the I Commission in terms of s 13 of the Act, its jurisdiction was not triggered. In this case, HCI and Tsogo's appeal to the Competition Appeal Court against the Tribunal's decision —

2018 (4) SA p249

Held A

As to the Tribunal's jurisdiction to grant declaratory orders

In terms of s 62 of the Act, the Tribunal and this court had exclusive jurisdiction to hear any matter that the Act defined. It followed that a party seeking declaratory relief regarding the notifiability of a transaction under the Act would not be able to approach the High Court for such relief but only the Tribunal, and on appeal, this court. Therefore, if the Tribunal's finding that B it did not have the power to grant declaratory relief were to be endorsed, a party seeking such relief in respect of the notifiability of transactions under the Act would be deprived of the right to seek such relief from any forum and would be left without a remedy — depriving such party of their right to access to court enshrined in s 34 of the Constitution. The jurisdictional basis was therefore established that the Tribunal's powers included making C orders for declaratory relief. (See [22] and [25] – [26].)

As to whether the Tribunal ought to have granted the declaratory order sought

In this case no conditions were imposed relating to mode or timing of the acquisition or exercise of control. HCI had acquired sole control over Tsogo by virtue of its shareholding, when, following the 2014 merger approval, it D increased its shareholding in Tsogo to 47,5%. HCI currently exercised sole control of Tsogo. The 2014 merger approval was for the acquisition of sole control by HCI over Tsogo: it was expressly recognised in the Tribunal's decision that HCI would acquire control of Tsogo by ultimately increasing its shareholding in Tsogo to over 50%. There was no further acquisition of establishment of control that was brought about by its acquisition of over E 50% of the shares in Tsogo. This was a further implementation of an existing sole control structure which was approved by the Tribunal in 2014, and which permitted HCI to conduct the operations of Tsogo as it saw fit. The effects of an acquisition of control were to be considered and determined when the approval of the merger was sought and obtained — a forward-looking assessment of the likelihood of competition harm and the public F interest — and could not be revisited once it had been determined. The important factor in assessing whether a transaction constituted a merger, was prior- and post-transaction control. The present restructuring by HCI of its assets did not give rise to a change of qualitative control. In the particular facts of this case, the proposed transaction did therefore not amount to a notifiable merger under the Act. (See [27], [37], [42], [52] – [53] and [57] – [59].) G

Cases cited

African Media Entertainment Ltd v David Lewis NO [2008] ZACAC 4: applied

Bulmer SA (Pty) Ltd v Distillers Corporation (SA) Ltd CAC 94: referred to H

Cape Empowerment Trust Ltd v Sanlam Life Insurance Ltd and Another [2006] 1 CPLR 410 (CT): referred to

Caxton and CTP Publishers and Printers Ltd v Multichoice (Pty) Ltd [2016] ZACAC 3: referred to

Caxton and CTP Publishers and Printers v Media 24 (Pty) Ltd [2015] ZACAC 5: considered I

Caxton CTP Publishers and Printers Ltd v Naspers Ltd [2004] ZACT 25: referred to

Cordiant Trading CC v Daimler Chrysler Financial Services (Pty) Ltd 2005 (6) SA 205 (SCA) ([2006] 1 All SA 103): applied

Distillers Corporation (SA) Ltd v Bulmer (SA) (Pty) Ltd [2001] ZACAC 4: applied

Ethos Private Equity Fund IV and Tsebo Outsourcing Group (Pty) Ltd [2003] ZACT 51: referred to J

2018 (4) SA p250

Ex A parte Nell 1963 (1) SA 754 (A): applied

Gold Fields Ltd v Harmony Gold Mining Company Ltd [2004] ZACAC 5: applied

Johnnic Holdings Ltd v Hosken Consolidated Investments Ltd [2005] ZACT 69: referred to

Minister of Finance v Oakbay Investments (Pty) Ltd and Others 2018 (3) SA 515 (GP): B dictum in para [59] applied

Rail Commuters Action Group and Others v Transnet Ltd t/a Metrorail and Others 2005 (2) SA 359 (CC) (2005 (4) BCLR 301; [2004] ZACC 20): applied

Seagram Africa (Pty) Ltd v Distillers Corporation (SA) Ltd CPD 7759: referred to

Seagram C Africa (Pty) Ltd v Stellenbosch Farmers' Winery Group Ltd and Others 2001 (2) SA 1129 (C): applied

Shell's Annandale Farm (Pty) Ltd v Commissioner, South African Revenue Service 2000 (3) SA 564 (C) (2000 (7) JTLR 231): applied.

Legislation cited

Statutes

The D Competition Act 89 of 1998, ss 12 and 27: see Juta's Statutes of South Africa 2016/17 vol 2 at 2-445 and 2-449.

Case Information

D Unterhalter SC (with J Wilson SC, S Pudifin-Jones and N Luthuli) for the appellants.

B Majenge (with K Ayayee and L Phaladi) for the respondent E (instructed by the Competition Commission).

An appeal against a decision of the Competition Tribunal.

Order

1.

The appeal is upheld.

2.

It is declared that the proposed transaction in terms of which Hosken F Consolidated Investments Ltd will increase its shareholding in Tsogo to more than 50% and will consolidate all of its gaming interests (other than its sports-betting and lottery interests) under Tsogo Sun Holdings Ltd, an entity over which it exerts sole control pursuant to a decision of the Tribunal in 2014 (case No 019372), by transferring G such gaming interests owned indirectly by one of its subsidiary companies, Niveus Investments Ltd, to Tsogo Sun Holdings Ltd, does not require approval by the competition authorities in terms of the merger control provisions of the Competition Act 89 of 1998.

Judgment

Victor AJA H and Mnguni AJA (Davis JP concurring):

[1] Two issues require determination in this appeal. The first concerns the question whether the Competition Tribunal (the Tribunal) has jurisdiction to entertain a matter in circumstances where a party has not notified a transaction in terms of s 13 of the Competition Act 89 of 1998 (the Act). The second concerns whether an acquiring company, I having obtained an unconditional prior approval from the Competition Commission (the Commission) to acquire sole control of an entity over which it exerts control, must still obtain merger approval before entering into a subsequent transaction with that entity.

[2] These issues arose in this appeal under the following circumstances: J Prior to 2014, Tsogo Sun Holdings Ltd (Tsogo) was subject to the joint

2018 (4) SA p251

Victor AJA and Mnguni AJA (Davis JP concurring)

control of Hosken Consolidated Investments Ltd (HCI) and SABMiller plc A (SABMiller). In 2014 SABMiller announced that it was divesting itself of its shareholding in Tsogo, which would have the effect of leaving HCI as the sole controller of Tsogo. In the same year HCI...