Towards a fair and efficient economy for all Annual Report Presentation to Parliament Shan Ramburuth Commissioner, Competition Commission 07 October 2009

Outline Overview Priority sectors Division reports and expenditure Competition Amendment Act Strategic priorities Towards a fair and efficient economy for all

Overview Focus on enforcement Highlights Construction – 10 investigations initiated; 2 mergers prohibited Food – 5 investigations initiated Finance – banking enquiry completed Ansac case finalised Merger activity decline (from 513 to 414) Appointment of Deputy Commissioner (1 Nov 2008) Best Company to Work For Expect a continued focus on enforcement Towards a fair and efficient economy for all

Infrastructure and construction The concrete pipes cartel – Initiated in December 2007, referred in February 2009 – Uncovered collusion in concrete pipes, manholes and culverts – Aveng paid R 46 million for its Infraset division The plastic pipes cartel –Referred in February 2009 –Merger assessment uncovered the cartel –Uncovered cartel in plastic pipes dating back to the 1980’s –Commission is talking settlement with some respondents Towards a fair and efficient economy for all

Infrastructure and Construction Prohibited wire products merger – Aveng intended to buy steel reinforcing companies – Would result in high market shares and enhance existing collusion – Commission prohibited the merger Prohibited asphalt merger –Much Asphalt would have merged with Gauteng Asphalt and others –Commission prohibited the merger because (1) high market shares; (2) Gauteng was a viable competitor; (3) high barriers to entry Towards a fair and efficient economy for all

Food, agro-processing and forestry Bread – Settled with Foodcorp in bread: paid R45 million – Pioneer case heard in Tribunal Milling – Better understanding of cartel in the value chain – Possible cartels in flour and in maize meal – Possible regional arrangements to cement national arrangement Towards a fair and efficient economy for all

Food, agro-processing and forestry Milk –Referred to the Tribunal in December 2006 –Collusion and abuse of dominance by processors: (Clover, Parmalat, Lancewood, Woodlands, Nestle, Milkwood, Ladismith) –Settled with Lancewood, Clover got leniency in part –Technical points raised on summons and initiation procedures: –Clover and Ladismith (to the Tribunal, CAC and SCA) –Milkwood and Woodlands (to the Tribunal and CAC) Towards a fair and efficient economy for all

Intermediate industrial products Sasol –Initiation in piped gas (Egoli, Spring Lights, Coal, Energy and Power Resources) –Initiation in petroleum products (SAPIA, SABITA) Mittal –Harmony and Mittal case settled –Commission investigations into tin plate pricing, steel cartels –Challenges in excessive pricing Towards a fair and efficient economy for all

Financial services Banking report finalised in June 2008 Report made 28 recommendations, some requiring regulatory changes Established a steering committee and 4 working groups Steering committee consists of Treasury (chair), the DTI, Reserve Bank and Commission Committee will review and oversee the implementation of the recommendations Towards a fair and efficient economy for all

Number of cases initiated in 2008/09, by sector Towards a fair and efficient economy for all

Number of cases in 2007/08 and 2008/09 Towards a fair and efficient economy for all 11 complaints referred to the Tribunal 118 complaints not referred to the Tribunal

Corporate Leniency Policy Towards a fair and efficient economy for all Corporate Leniency Policy (CLP) amended in May 2008 Consulted with stakeholders and international best practice Amendment provides: – Legal certainty : process is more certain – Marker procedure: potential applicants can request a marker – Role in the cartel: does not exclude instigators – Oral submissions: applicants can give oral statements – Responsibility: E&E is now the responsible division

Leniency applications Jan 04 – Jul 09 Towards a fair and efficient economy for all

Merger decisions by sector Towards a fair and efficient economy for all

Thresholds and fees Thresholds were increased with effect from 01 April 2009 Filing fee for intermediate and large mergers increased Commission introduced a merger calculator and issued a guideline for small merger notification Expect decrease in merger filings Towards a fair and efficient economy for all ThresholdCombined turnover/asset value Target firm turnover / asset value Lower thresholdR560, 000, 000R80, 000, 000 Higher thresholdR6, 600, 000, 000R190, 000, 000 Intermediate mergerLarge merger R100, R350,

Administrative penalties from 06/07 – 08/09 Towards a fair and efficient economy for all

Expenditure on litigation from 02/03 – 08/09 (R’000) Towards a fair and efficient economy for all

Policy and Research Towards a fair and efficient economy for all Worked on 109 cases in the year Activities included: – Submissions on regulatory matters (5) – Presentations and seminars (32) – Internal briefing papers (9) – Conference papers (7) – Submissions to international for a (5)

Stakeholder relations Towards a fair and efficient economy for all Compliance renamed Strategy and Stakeholder Relations Working closely with the Commissioner’s Office Engaged with: – Government – public sector forum (1), bid rigging workshops (2) – Business – Amendment Bill (2), workshops for SME’s (13) – Consumers – workshops and presentations (11) – Practitioners – meetings and presentations (3) – Trade Unions – workshops and training (5) – International organisations – interactions with OECD, ICN, SADC, UNCTAD, Lesotho and Sudan Govt – Academics – workshops at Universities (2)

Staff allocation to divisions at 31 March 09 Towards a fair and efficient economy for all Category Mergers & Acquisitions Enforcement & Exemptions Legal Services Strategy and Stakeholder Relations Policy & Research Corporate Services Commissioner’s Office Total Technical staff (lawyers & economics) Admin & management Consultants Graduate trainees Total staff

Expenditure on human resources Towards a fair and efficient economy for all Total expenditure: R 110, 638m 49.6% of total expenditure spent on HR (R54,938m) 75.7% of HR cost spent on salaries for staff 5.7% of salaries spent on training of staff

Competition Amendment Act Towards a fair and efficient economy for all Implications of the Amendment Act – Concurrent jurisdiction – Incorporation of the leniency policy – Complex monopoly conduct – Market inquiries – Personal criminal liability

Strategic priorities Achieve demonstrable competitive outcomes in the economy –Deepening prioritisation in sectors and cases to achieve meaningful impact on specific industry sectors An improved competitive environment for economic activity –Engaging with and influencing stakeholders for competitive outcomes in the economy Realise a high performance competition regulatory agency –Strengthening and building leadership and management capability Towards a fair and efficient economy for all

THANK YOU Shan Ramburuth Tel: Towards a fair and efficient economy for all