An exploration of the public interest factors set out in the Competition Act, in particular the policy approach and regulatory application taken in respect of the promotion of a greater spread of ownership

Abstract

South Africa faces severe problems of unequal economic power and the South African Competition Act No. 89 of 1998, as amended (the “Competition Act”), is currently being used as a tool to facilitate a better solution as the Constitutional Court has emphasised that the Competition Act must align with the Bill of Rights and prioritize socioeconomic transformation. This research report delves into the foundational principles and practical effects of public interest factors in merger assessments, noting the robust approach adopted by competition regulators. It also examines the policy agenda and regulatory application of the public interest factors within South Africa's competition law framework, with a particular focus on the promotion of a greater spread of ownership. Specific regard is had to the efficacy of employee share ownership plans (“ESOPs”) as a tool for fostering broader ownership in South Africa and how competition authorities have interpreted the legislative mandate for promoting greater ownership. The research report explores the evolving role of third-party stakeholders, such as the Minister of the Department of Trade, Industry and Competition and trade unions, in shaping public interest remedies within South African merger proceedings. In addition, it addresses criticisms from legal experts and economists who argue that the Competition Commission's “overambitious’ and “draconian” application of public interest provisions, particularly the latest guidelines on ownership spread, has led to unintended consequences. These include increased transaction costs, difficulties for black private equity firms to unlock value, and a potential disincentive for firms to increase historically disadvantaged persons (“HDPs”)/worker ownership outside of merger activity. Concerns are raised about the lack of proportional application of ESOPs across diverse transactions and the elusive nature of predictability due to a lack of guiding jurisprudence. The report proposes a rethinking of the public interest provisions and advocates for a link between promoting market participation by HDP-controlled firms and fostering a greater spread of ownership. It further suggests that supplier development initiatives could work in tandem with worker ownership to drive broader economic empowerment and highlights the necessity for clearer judicial guidance with a more practical, evidence-based approach to achieving inclusive ownership through supplier development, moving beyond an overreliance on ESOPs.