The Competition Appeal Court decision could upend 20 years of competition law precedence.

The Competition Appeal Court has given Johnny Copelyn’s Hosken Consolidated Investments (HCI) the all clear to restructure the gaming interests held by its listed subsidiaries Tsogo Sun and Niveus.

On Monday afternoon, just hours before HCI’s self-imposed deadline of October 31, the court released a decision that could upend 20 years of competition law precedence. It creates an opportunity for merging parties to bypass the Competition Commission and seek a favourable ruling from the Competition Appeal Court.

The court ruled the proposed transaction, which involves three listed firms, was not a notifiable merger in terms of the Competition Act. The court said the commission could not require a transaction to be notified “based on a reason that it wishes to assess the implications of such transaction”. It said HCI’s proposed restructuring did not give rise to a situation of a change in qualitative control.

The commission and Competition Tribunal conducted an assessment of HCI’s acquisition of control of Tsogo Sun in 2014, when it acquired SABMiller’s Tsogo Sun shares.

The Competition Appeal Court said that in 2014, the commission “was aware that in time, HCI would exert sole control over the gaming interests of both Tsogo and Niveus. “At the same time, HCI also enjoyed sole control of Niveus’s gaming interests”.

HCI initially announced the transaction in December 2016. In July, it approached the commission for an advisory opinion. When the commission advised it was a notifiable transaction, HCI approached the Competition Tribunal to overturn the advisory opinion. But the tribunal ruled it could not decide the matter as it had no jurisdiction over an opinion and no transaction had been notified.

The commission had argued that the 2014 approval related to a distinctly different transaction from the one contemplated.

“The current transaction relates to the transfer of gaming operations, it is a new transaction that has never been considered by the commission,” the commission’s head of legal, Bukhosibakhe Majenge, told the Competition Appeal Court in early October.

The commission is keen to interrogate possible public interest issues that could be affected by the transaction.

The deal will take HCI’s holding in Tsogo Sun from 47.6% to over 50%.

Source: Business Day – Ann Crotty