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An interesting year

11 October 2004 Angelo Coppola

The key achievements of the Competition Commission include the finalization and resolution of major, precedent-setting cases.

Adv Menzi Simelane, Commissioner of the Competition Commission, said that through public and visible settlement of such high profile cases, the legitimacy of the law is established and punishment in the form of substantial fines becomes a real deterrent to would-be transgressors.

Key successes were the settlement agreements reached in December 2003 with Boehringer Ingelheim (BI) and GlaxoSmithKline (GSK) pertaining to anti-retrovirals (ARVs). 

From the investigation into the complaint filed by Ms Hazel Tau and others, the Commission concluded that GSK and BI had abused their dominant positions in their respective ARV markets.

This resulted in GSK and BI agreeing to issue a total of seven voluntary licences to generic manufacturers. “We are already seeing the spin-offs since more licences have been issued, including the one to Thembalami, an empowerment pharmaceutical company’, remarked Simelane.

Another settlement agreement was reached with International Health Distributors (IHD) and certain pharmaceutical drug manufacturers, in terms of which the parties agreed to pay a settlement fee of R20m, the highest yet in South Africa.

The Commission furthermore concluded consent orders with the South African Medical Association (SAMA) and the Hospital Association of South Africa (HASA).

In terms of the consent orders, HASA agreed to pay an administrative penalty of R4, 5 million, while SAMA agreed to pay R900, 000.

The Commission has again seen an increase in the mergers filed, and has received 284 merger notifications. The number of intermediate mergers increased by approximately 54% from 138 the previous year, to 213 during 2003/04. Of the total number of mergers finalised, 37 were viewed favourably on public interest grounds. 

That is, they had a positive effect on previously disadvantaged individuals and/or small and medium enterprises, enabling BEE firms to become more competitive.

This represents a 61% increase when compared to the 23 cases lodged in the previous financial year. This could be attributed to the introduction of industry charters in various industries.

The Commission received 94 complaints relating to alleged anticompetitive practices and initiated one investigation.

Therefore 141 cases were under investigation for this year, with other cases carried over from the previous financial year. The highest number of complaints has arisen in the healthcare sector, which resulted in settlement agreements reached with BI, GSK, IHD and the consent orders concluded with HASA and SAMA.

Eighty-nine (89) cases were non-referred on the basis that they were not competition issues, but largely contractual disputes that can be addressed through other mechanisms.

The Commission issues advisory opinions on request to assist firms in complying fully with the requirements of the Act.

This year the Commission received a total of 61 requests for advisory opinions, most of which related to transactions in the financial services (18) sectors, ICT (12) and the mining (6). 48 of the advisory opinions were on mergers and acquisitions and 12 in regard to prohibited practices.

The high number of opinions requested on mergers may be indicative that merger activity in the country is not likely to decrease.

The Commission also noted from the opinions requested, that while merger activity over the past two years highlights prevalence of BEE deals, there is little use of law firms / or advisory firms controlled or owned by the previously disadvantaged individuals in requests for advisory opinions or merger filings.

Only 2 out of 61 opinions were requested by HDI controlled or BEE law firms this year.

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