CASE NO.: A 61/2011
IN THE HIGH COURT OF
NAMIBIA
In the matter between:
WAL-MART STORES INCORPORATED
…................................................APPLICANT
and
THE CHAIRPERSON OF THE NAMIBIAN
COMPETITION COMMISSION
….....................................................1ST
RESPONDENT
THE NAMIBIAN COMPETITION COMMISSION
…..........................2ND
RESPONDENT
THE MINISTER OF TRADE AND INDUSTRY
….............................3RD
RESPONDENT
MASSMART HOLDINGS LIMITED
…..............................................4TH
RESPONDENT
CORAM: MULLER, J et SMUTS,
J
Heard on: 6 April 2011
Delivered on: 28 April 2011
JUDGMENT
Smuts, J [1] This
application concerns the validity of four conditions imposed by the
Competition Commission (“the Commission”), the second
respondent in this application, upon the intended merger between the
applicant and the fourth respondent.
[2] The applicant is a United States
company and has approached this court on an urgent basis to declare
those four conditions and Government Notice 75 of 2010, made under
the Foreign Investments Act, 27 of 1990 (“FIA”) to be
invalid.
[3] This application arises in the
following way. On 26 November 2010 the applicant and the fourth
respondent notified the Commission of a proposed merger. This was
done in terms of s 44(1) of the Competition Act, 2 of 2003 (“the
Act”). The applicant and fourth respondent supplemented their
merger notification with subsequent correspondence directed to the
Commission by its legal practitioners of record. The features of the
merger are not in issue. I thus only need to refer to them in brief
outline.
[4] The applicant operates retail
stores in various countries globally. Its operations are organised in
three divisions. These are Wal-Mart Stores US, Sam’s Club and
Wal-Mart International. The applicant does not currently conduct any
business in Namibia. Nor does it sell any merchandise to or from
Namibia.
[5] The fourth respondent is a South
African entity. It is a retailer and wholesaler of grocery products,
liquor and general merchandise. It controls five entities in Namibia.
Two of these are dormant. The active subsidiaries are Game Discount
World (Namibia (Pty) Ltd, Windhoek Cash and Carry (Pty) Ltd and CCW
Namibia Properties (Pty) Ltd. The dormant entities are Macro Namibia
(Pty) Ltd and Shield Buying and Distribution (Pty) Ltd (formerly
Masstrade Namibia (Pty) Ltd). The applicant and fourth respondent
propose to effect their merger by way of a scheme of arrangement
under s 311 of the South African Companies Act, 61 of 1973. The
proposed merger comprises a firm intention by the applicant to offer
to acquire 51% of the ordinary share capital in the fourth respondent
by way of a scheme of arrangement. It would follow that the change of
ownership and control pursuant to the proposed merger would occur at
the ultimate holding company level in South Africa. The ownership
structure of the fourth respondent’s Namibian entities would
not immediately change – except for the substitution of the
applicant for the fourth respondent as an ultimate (and indirect)
holding company of the Namibian entities.
[6] It is not disputed that there
would be no competitive overlap between the activities of the two
merging parties within Namibia and thus no accretion in market shares
and no increased concentration in any market in Namibia as a
consequence of the merger. The applicant accordingly contended in its
founding affidavit that there would be no public interest concerns
and that the applicant foresees that it would be able to create
“significant incremental value” in the fourth
respondent’s business operations in Namibia. The terms of the
merger and the subsequent documentation provided to the Commission
are voluminous. The Court was not however called upon to consider the
documentation for the reasons which become clear in this judgment.
[7] After informal engagements in
December 2010 and the supplying of additional information to the
Commission, it indicated that it considered that the FIA and Notice
75 issued under it would apply to the proposed merger. As a
consequence of this indication, the applicant’s legal
practitioners addressed a letter on 15 December 2010 to the Minister
of Trade and Industry (the third respondent) regarding the possible
application of s 3(4) of the FIA. It was contended in the letter that
s 3(4) did not apply by reason of the fact that the proposed merger
entailed the direct acquisition by a foreign firm (the applicant) of
another foreign firm and did not contemplate setting up any business
in Namibia.
[8] The merger transaction straddles
fourteen different countries. It has entailed applications to five
national competition regulators and has been approved in Tanzania,
Malawi, Swaziland and Zambia. It is currently the subject matter of a
pending procedure before the South African Competition Tribunal. The
Commission by way of a letter dated 9 February 2011 through its
Chairperson informed the merging parties that it had approved the
proposed merger subject to four conditions. This was in the form of a
notice of determination contemplated by Form 41 of the Act. In the
notice of determination, the Commission not only set out its
conditions in paragraph 3, but also in paragraph 4 provided the
reasons for the imposition of the conditions, as it is required by
the Act to do so. The full text of the notice, including the
conditions and reasons, is as follows:
“PROPOSED
MERGER NOTICE-MASSMART HOLDINGS LIMITED // WAL-MART INCORPORATED CASE
NO: 2010OCT0052MER
The
Commission has received notification of the abovementioned proposed
merger on the 26th November 2010.
Please
note that the Commission has approved the proposed merger with
conditions.
The
conditional approval of the proposed merger is subject to the
conditions listed below:
the
merger should allow for local participation in accordance with
section 2(f) of the Competition Act, 2003, in order to promote a
greater spread of ownership, in particular to increase ownership
stakes of historically disadvantaged persons.
there
should not be employment loses (sic) as a result of the merger.
the
merger should not create harmful effects on competition that may
give rise to risk of market becoming foreclosed to competitors,
especially SMEs (sic).
that
this being a retail business transaction, the approval of the
Minister of Trade and Industry is required in terms of Section 3(4)
of the Foreign Investment Act, 1990 (Act No. 27 of 1990).
The
reasons for the conditional approval of the proposed merger are as
follows:
Commission
has regards to the purpose of the Competition Act, 2003, and would
like to encourage for the attainment of the objectives of the Act,
especially, to give effect to section 2(f) of the Act (sic).
in
most instances, mergers results in some workers losing their jobs.
Commission encourages that retrenchments relating to this
transaction be minimized so as not exacerbate the already
unacceptable unemployment situation in the country.
the
merger should not affect negatively the ability of small
undertakings in Namibia to compete in the local market, nor should
it lead to foreclosure of these undertakings.
The
Commission has the authority in terms of section 48(1) of the Act
revoke a decision approving the implementation of a proposed merger
if:
the
decision was based on materially incorrect or misleading information
for which a party to the merger is responsible; or
any
condition attached to the approval of the merger that is material to
the implementation is not complied with”.
[9] The applicant contends that all
four conditions are unauthorised by law and are invalid and also
contends that Notice 75 under which the fourth bulleted condition was
made, is likewise unauthorised and invalid.
[10] Following the receipt of the
determination, the applicant on 8 March 2011 submitted a request in
terms of s 49 of the Act to the Minister asking him to review the
Commission’s decision to approve the merger subject to the
conditions on an urgent basis and to determine that the conditions
are unenforceable and should be deleted. The applicant requested the
Minister to proceed with the review on an urgent basis and to deal
with the matter within 10 (ten) days and by 18 March 2011. The
urgency was requested because approval was expected by the South
African Competition Tribunal on or around 8 April 2011. Once that
approval had been obtained, then the merging parties would be
entitled to implement the merger at the holding company level. This
would indirectly affect the control of the fourth respondent’s
Namibian subsidiaries. It would accordingly be necessary to avoid any
breach of Namibian laws by having the review resolved in advance of
the merger. In response, the Minister considered himself unable to
accede to this request by 18 March 2011, as is confirmed in his
answering affidavit.
[11] The applicant then approached
this Court on an urgent basis for an order declaring Notice 75 to be
unauthorised by law and invalid and declaring the four conditions
imposed by the Commission to be invalid.
[12] The Chairperson of the Commission
(first respondent) does not oppose these proceedings but has deposed
to an affidavit on behalf of the Commission which does. The Minister
likewise opposes the relief sought.
[13] In its opposition, the Commission
merely raises two preliminary points. These are to dispute the
urgency of the application and to contend that the matter is not ripe
for hearing by reason of the failure on the part of the applicant to
exhaust the internal remedy of the statutory review which it had
directed to the Minister.
[14] The Minister’s opposition
is also based upon preliminary points. Firstly a point of non-joinder
was taken in respect of the fourth respondent’s subsidiaries in
Namibia. This point fell away after letters were produced in reply
from each of the subsidiaries confirming that they did not want to be
joined. It is accordingly not necessary to deal with this issue
although this point would not appear to be any basis to it. It is not
at all clear to me quite how it can be contended that subsidiaries of
a merging party would have a direct and substantial interest in the
validity of conditions imposed on a merger of this nature and need to
be joined.
[15] The Minister also took the point
of urgency. This point is based upon two premises. It was firstly
contended that there was an absence of any urgency at all at the
outset and secondly that, in any event, any initial urgency was
subsequently lost by virtue of the developments before the South
African Competition Tribunal. The Minister attached media reports to
his affidavit which stated that the proceedings before the Tribunal
were postponed to mid
May 2011.
[16] A third procedural defence of
lack of authority was taken in the answering affidavit. But this
point was also addressed in reply and was no longer persisted with in
argument.
[17] The fourth procedural defence
raised by the Minister was initially broader but subsequently became
confined to the application being premature by reason of the failure
to exhaust internal remedies. It was initially contended by the
Minister that this Court did not have jurisdiction by virtue of the
domestic remedy provided by s 49 of the Act. This point was also not
rightly persisted with in argument. The Minister did however contend
that the applicant is required to exhaust its domestic remedy in s 49
and that this application was premature for that reason.
[18] Neither opposing respondent has
pleaded over on the merits. The Minister indicated that Notice 75 was
not invalid for reasons which were to be advanced in legal argument
on his behalf. But shortly before the matter was called, written
argument on behalf of the Minister was confined to the procedural
points. Counsel for the Minister was however given an opportunity to
provide written argument subsequent to the hearing to address the
validity or otherwise of Notice 75 and the applicant was provided the
opportunity to file argument subsequently to address the further
argument in that regard. The Minister availed himself of that
opportunity and further argument was filed subsequent to the hearing
to which the applicant has responded.
[19] I turn now to the remaining
procedural issues of urgency and exhaustion of the domestic remedy
before turning to the merits of the application.
Urgency
[20] As I have already pointed out,
the Commission was approached in November 2010 under s 44(1) of the
Act. The Competition authorities in Zambia, Swaziland, Tanzania and
Malawi had already and unconditionally approved the transaction by 22
December 2010. The Commission provided its approval, subject to
conditions, on 9 February 2011.
[21] The applicant contended that the
urgency arose from the fact that the primary transaction – the
acquisition of direct control over the fourth respondent by the
applicant – was expected to be approved by the South African
Competition Tribunal by about 8 April 2011. The Minister contended
that this was based upon an assumption which turned out to be
incorrect. He did so with reference to the media reports I have
referred to. But those media reports themselves refer to a “dramatic
last minute move” resulting in the postponement which,
according to those reports, was unexpected. In the replying
affidavit, the applicant’s South Africa attorney explains the
procedures before the South African Competition Tribunal and the
basis for referring to the 8 April 2011 date in the founding
affidavit.
[22] The adjourned hearing before that
Tribunal has been set for 9 to 16 May 2011. The ruling of that
Tribunal is, according to the applicant’s South African
attorney, expected within a week or ten days thereafter. It follows
that this matter would need to be resolved by that time given the
nature of the merger transaction. Even if the compressed deadlines
set by the applicant with reference to a date of hearing on 6 April
2011 turned out to be shorter than required, it would seem that the
matter would still need to be determined by mid May 2011 or shortly
thereafter. This could not be achieved by bringing an application in
the ordinary course. It was accepted by the parties that an
application in the ordinary course would only come to Court towards
the end of the year at the earliest or possibly in the first term of
2012.
[23] The issues raised by the
applicant would need the matter to be resolved well before any set
down, which would be obtained if it were to proceed in the normal
course. The question then arises as to whether that the applicant has
been dilatory or delayed in the bringing of this application and has
justified the abridged time periods in the notice of motion. In my
view the applicant cannot be faulted with regard to the bringing of
this application as one of urgency and with reference to the time
limits used, taking into account the fact that the applicant is a
company in the United States engaging American legal representatives
and attorneys in South Africa, and the scope and ambit of this
application in the context of the merger in different jurisdictions
and the need to properly research the matter before launching this
application.
[24] Mr Botes also contended on behalf
of the Minister that the applicant’s urgency was self-created.
He pointed out that it took the applicant 29 days to file its
internal review to the Minister and 10 further days to bring this
application. He questioned the genuineness of the review before the
Minister and submitted that it would appear to be a strategy to
proceed to Court after the Commission’s decision of 9 February
2011 and that mere lip service was paid to the s 49 remedy. He
submitted that the application was thus not urgent and should be
struck from the roll.
[25] Mr Khoza for the Commission also
submitted that the matter was not inherently urgent. He submitted
that the applicant had waited until the last minute to bring the
application. Had it moved promptly, it would have given the Minister
enough time to consider the internal review. He also raised the
issue, foreshadowed in the second respondent’s answering
affidavit, that it had not sufficient time to place the record of its
decision making before Court and contended that it should be entitled
to do so. Mr Gauntlett however countered that the Commission had
almost all the papers by 25 November 2010 already. He also pointed
out that the Minister would have been aware of the main legal issues
by 11 March 2011. He pointed out that the changed circumstances of
the hearing before the South African Competition Tribunal could only
give rise to an amended notice of motion and that the matter in any
event remained urgent by virtue of the fact that the Tribunal would
give a ruling shortly after 15 May 2011 – long before the
matter would be enrolled in the normal course.
[26] As to the changed circumstances
before the Tribunal, I asked Mr Botes when the matter would be heard
if it should not be heard on the date of hearing and asked if he
contended that it should be heard in the ordinary course. He
eventually submitted that it should be struck or indefinitely
postponed and then be heard in the ordinary course. But this would
leave the applicant remediless in the sense that its operations could
be visited with illegality if the conditions remained. It needed
clarity on these issues once the merger would be approved in South
Africa. Implicit in Mr Botes’ argument is that there would not
be urgency in commercial matters of this nature, and that they should
be heard in the ordinary course. This is not correct. This Court has
on numerous occasions held that commercial urgency also justifies the
use of urgent procedures in following well known South African
authority to that effect:
“The
respondent's counsel submitted that there was no urgency in the
absence of some serious threat to life or liberty and that the only
urgency here was of a commercial nature. It was because of this
factor that the applicants' attorney in fact decided to set the
matter down on a Tuesday when the Chamber Court was in any event in
session during the Court recess to dispose of unopposed applications.
In my opinion the urgency of
commercial interests may justify the invocation of Uniform Rule of
Court 6 (12) no less than any other interests. Each case must depend
upon its own circumstances. For the purpose of deciding upon the
urgency of this matter I assumed, as I have to do, that the
applicants' case was a good one and that the respondent was
unlawfully infringing the applicants' copyright in the films in
question.”
This case has been cited with approval
by this Court.
[27] Once it had been established that
the applicant could not be afforded redress in the normal course –
as it certainly has been – the applicant would need to justify
the urgency with which it has proceeded by not creating its own
urgency and affording reasonable time periods for the respondents to
answer and prepare.
[28] In the circumstances, I cannot
find that the applicant has unduly delayed or created its own urgency
in bringing this application. The time taken to file the internal
review and bring the application cannot in all the circumstances be
faulted. The respondents have also not identified specific factual
issues which they would want to place before court relating to the
Legal questions raised by the applications.
[29] In the exercise of my discretion,
I would grant condonation to the applicant for bringing this
application as one of urgency under Rule 6(12).
Premature / exhaustion of
statutory remedy
[30] There would appear to be two
components to the argument raised on behalf of the Minister in
support of the contention that the application is premature. Firstly,
Mr Botes argues that the internal remedy should have been exhausted.
In the second instance, he contends that the application is premature
in the sense that the applicant possesses a mere contingent right as
it would not yet know what would happen before the South African
Tribunal in mid May 2011. He accordingly submitted that the applicant
has not established its right to approach the Court for the relief
set out in the notice of motion for this reason.
[31] Mr Gauntlett on the other
submitted that the application was not based upon the assertion of a
mere speculative contingent right. He pointed out that should the
South African Tribunal approve the merger, then the applicant would
be in conflict with the law of Namibia if it were to proceed with the
merger in the absence of the order sought by it in these proceedings.
The approach of the applicant was thus routed in the doctrine of
legality and its entitlement under Article 18 to have conditions
which it contends to be invalid, removed. He referred to the
authorities dealing with declaratory orders to the effect that these
can be sought in respect of contingent rights. He did so with
reference to the specific wording of s 16 of the High Court Act
which refers to this court’s
jurisdiction to determine “any
existing, future or contingent right” and
the interpretation placed upon this phrase used in the same context
in earlier legislation in Ex
parte Nell .
These submissions are well founded. It is clear that the issues
raised in this application are not hypothetical or academic. They are
real in the sense that the applicant would be in conflict with
Namibian legislation if the conditions were not to be set aside and
the approval granted for the merger in South Africa. The declaratory
order sought would also be binding upon the parties. Clearly the
applicant is in the circumstances entitled to have its potential
liability determined.
[32] As to the point taken by the
Commission and the Minister that the internal remedy provided by s 49
would need to be exhausted prior to the applicant approaching the
Court, Mr Gauntlett referred to the recent decision of this Court in
National Union of Namibian
Workers v Naholo.
In that judgment, the Court, with
respect, correctly set out and applied the authorities on the
exhaustion of domestic remedies. Tötemeyer AJ held that the real
enquiry was to give a proper interpretation to the provisions in the
statute providing for the domestic remedy in order to establish
whether a party was first required to exhaust the internal procedure
before approaching this Court. He held that the mere fact that the
legislature had provided an extra judicial right of review or appeal
is not sufficient to imply an intention that recourse to a Court of
law should be barred until the aggrieved person has exhausted his
statutory remedies. He concluded that only where the statutory
provision, properly construed, requires the exhaustion of an internal
remedy first, it would defer the jurisdiction of the High Court until
the internal appeal remedy is exhausted.
[33] In that matter, Tötemeyer AJ
found that a construction requiring the exhaustion of internal
remedies before approaching the Court could not be arrived at. He did
so for essentially two reasons. He firstly found that the wording of
the statutory provision did not support such a construction. He found
that the language did not expressly state that the appeal would defer
access to this Court. Secondly, he held because of the time duration
involved in exercising the internal appeal process that the applicant
would then be rendered practically remediless if he were to pursue
it. This approach is not only consistent with authorities but is,
with respect, sound and is also in accordance with the approach
adopted in English public law, as was pointed out by Mr Gauntlett. He
did so with reference to Leech
v Deputy Governor of Parkhurst Prison .
[34] At the hearing Mr Botes indicated
that the Minister no longer contended that s 49 ousted the
jurisdiction of the Court, but rather contended that the remedy in s
49 was a true remedy and should be exhausted. He pointed out that it
could involve a rehearing and was of a wider ambit than a hearing
before Court. He also referred to the know-how of the Minister who
would be in a better position than the Court to impose other
conditions, if need be. Mr Gauntlett however submitted that the
remedy was not effective.
[35] It would seem to me that both of
the factors referred to by Tötemeyer AJ would apply in this
matter. In the first instance, s 49 provides that an applicant “may”
approach the Minister for a
reconsideration of the Commission’s decision. The mandatory
verb which would otherwise be used in the form of “must”
or “shall”
would be indicative of the requirement
of exhausting a process. But the legislature chose not to provide for
that. This would also accord with the presumption against ousting the
jurisdiction of the Courts. It also cannot be contended that the
exhaustion of the internal remedy is by necessary implication. This
would not accord with the test for implying words in a statute as
enunciated in Rennie NO v
Gordon NO .
But Mr Gauntlett furthermore submitted
that the remedy itself is not effective as he would not be able to
provide the applicant with an effective redress.
He referred to the Minister’s
acceptance of the correct test being whether the statutory remedy is
a “true remedy under
the circumstances” as
was also submitted by Mr Botes. Mr Botes submitted that the remedy in
s 49 was a true remedy in the circumstances. That is in fact the test
– the remedy must be an effective and real remedy. The
Minister’s approach however demonstrates that the domestic
remedy in s 49 is not a true remedy in the circumstances. Although he
was alerted to the issues which gave rise to the exercise of the
remedy on 15 December 2010, it would seem from his answering
affidavit that nothing further has been done by the Minister to
advance the remedy. He has not referred to any steps taken by him,
contemplated by s 49. Nor is it indicated that he is about to do so.
Instead, he has indicated that, because s 49 requires that the review
is to be completed within four months, that it would take that long
for the review to be finalised. Mr Gauntlett also submitted that the
Minister had disqualified himself to determine the review by
expressing his contempt for the applicant’s position. (When
dismissing an approach of the applicant “with
the contempt it deserves” in
his answering affidavit.) He submitted that, by doing so, he had
evidenced that he does not keep an open mind which would not render
the domestic remedy in law as a viable one.
[36] There are yet further reasons why
the remedy would not be real, as was also advanced by Mr Gauntlett.
Most importantly, the Minister could not be a judge in his own cause.
One of the conditions relates to the legality of Notice 75. The
Minister had himself issued Notice 75 and would not be competent to
consider its validity. Once he cannot consider the validity of one of
the conditions – as is plainly the case with reference to the
fourth condition based upon Notice 75 – then it cannot be
contended that some of the issues should be determined by him and
that the Court should determine the others.
[37] A further important factor also
stressed by Mr Gauntlett, and with which I agree, is that the issues
raised by the challenge to the conditions all essentially involve
questions of law. They concern the facial validity of the Government
Notice and whether it is authorised by s 3(3) of the FIA. They also
concern the facial validity of the conditions with reference to the
Act and whether they are rationally connected to the reasons which
are provided for them.
[38] It follows that s 49 does not in
my view constitute an internal remedy which requires exhaustion. Even
if it were to do so, it is clear to me that the current circumstances
justify a departure from that principle.
[39] It accordingly follows that this
point of exhaustion of internal remedies raised by both the
Commission and the Minister must fail. I turn now to the merits.
Merits
[40] I have already pointed out that
neither the Commission nor the Minister has pleaded over on the
merits. The Minister did however contend that the validity of Notice
75 would be addressed in argument. As I have said, his counsel was
provided with the opportunity of making submissions as to its
validity and did so. That issue will be first dealt with as it
concerns the separate declaratory relief directed at setting aside
the notice as well as the fourth condition imposed by the Commission.
Notice 75
[41] This notice provides:
“SPECIFICATIONS
OF BUSINESSES AND CATEGORIES OF BUSINESSES PROVIDING SERVICES OR
GOODS WHICH CAN BE PROVIDED ADEQUATELY BY NAMIBIANS: FOREIGN
INVESTMENT ACT, 1990
Under section 3(4) of the Foreign
Investment Act, 1990 (Act No. 27 of 1990), I specify the following
businesses and categories of businesses as businesses and categories
of businesses which, in my opinion, are engaged primarily in the
provision of services or goods which can be provided adequately by
Namibians –
(a) retail businesses, unless a
foreign national who intends setting up any form of retailing
business of any size in Namibia, has first sought and obtained the
permission of the Minister of Trade and Industry;
(b) public transport services (taxi
and shuttle services within and between towns); and
(c) hair salon, hair dressing, and
beauty treatment services.
With effect from the date of
publication of this notice in the Gazette, no foreign national shall,
subject to section 7(3) of that Act, through the investment of
foreign assets, become engaged in or be permitted to become engaged
in any business so specified or falling within the category of
business so specified.”
[42] The legislative authority for the
invocation of this notice is 3(4) of the FIA. This sub-section
provides:
“3(4) The
Minister may, by notice in the Gazette, specify any business or
category of business which, in the Minister's opinion, is engaged
primarily in the provision of services or the production of goods
which can be provided or produced adequately by Namibians, and, with
effect from the date of such notice, no foreign national shall,
subject to the provisions of section 7(3), through the investment of
foreign assets, become engaged in or be permitted to become engaged
in any business so specified or falling within any category of
business so specified.”
[43] The applicant challenges Notice
75 on the basis that it is not authorised by s 3(4) in a number
different respects. The first is that the Minister has sought to
confer upon himself a dispensing power – to depart from the
prohibition which is to be created under s 3(4) in his own
discretion. It is correctly pointed out that s 3(4) does not confer
such a power upon the Minister to do so. On the contrary, it rather
prohibits foreign nationals from becoming engaged in a specified
“business or category of business”. In the absence
of such power, the Minister would not be authorised to confer upon
himself the dispensing power he has sought to do in the notice. For
this reason alone, the prohibition embodied in paragraph (a) of the
Notice is unauthorised and invalid. Significantly, the Minister has
not sought to do so in respect of the categories referred to
paragraphs (b) and (c) of the notice.
[44] Paragraph (a) would also be
liable to be struck as being ultra vires and unauthorised by
virtue of the fact that retail businesses do not entail “the
provision of services or the production of goods” in any
proper sense. In the supplementary written argument provided, the
Minister presses for an extensive meaning to these terms. But that
would not be in keeping with the context in which the terms are used
and when considering that the provision is for a restriction upon the
common law and now constitutionally protected right to carry on a
business, occupation or trade. Paragraph (a) is unlike the other two
categories referred to in paragraphs (b) and (c) which plainly entail
the provision of services.
[45] It is not necessary to dealt with
the third basis for impugning Notice 75 raised by the applicant,
namely that s 67 of the Act requires that any regulatory authority
must first negotiate an agreement with the Commission to exercise
jurisdiction in respect of any public regulation of conduct regulated
in terms of Chapters 3 or 4 of the Act. It would follow that
paragraph (a) in the Government Notice is declared invalid and of no
force and effect. It would not be necessary to set aside the entire
notice by reason of the fact that paragraph (a) is severable from the
rest of the notice.
[46] It would also follow that the
fourth condition imposed by the Commission is invalid. There is
however a further reason for the invalidity of the imposition of that
condition – in addition to the invalidity of paragraph (a) of
the notice. The FIA and Notice 75 in any event do not apply. By
buying shares in Massmart, the applicant does not become engaged
in businesses” which are already conducted by the entities
in Namibia already listed. The merging parties would not be involved
in “setting up” a retailing business. The
Commission would appear to have overlooked the true nature of the
transaction and that a foreign company (“Massmart) is already
doing business through its subsidiaries in Namibia. The imposition of
this condition, already fatally flawed, is beset by yet a further
problem and that relates to the failure to give a reason for its
imposition.
First condition: compulsory
involvement of non-parties to the merger
[47] This is the first condition
listed by the Commission. It is impugned in the founding affidavit on
a number of grounds. In the first instance, it is challenged because
it is in direct conflict with s 3(3) of the FIA. This sub-section
provides:
“(3) No
foreign national engaged in a business activity or intending to
commence a business activity in Namibia shall be required to provide
for the participation of the Government or any Namibian as
shareholder or as partner in such business, or for the transfer of
such business to the Government or any Namibian: Provided that it may
be a condition of any licence or other authorisation to or any
agreement with a foreign national for the grant of rights over
natural resources that the Government shall be entitled to or may
acquire an interest in any enterprise to be formed for the
exploitation of such rights.”
[48] Given the conflict with this
section, the imposition of the condition is invalid for this reason
alone. But it is likewise beset with other difficulties which would
also lead to its invalidity. It would in the context of this merger
be arbitrary and irrational. The Commission has stated no basis to
apprehend that the merging parties who would not be committed to
benefiting Namibians who were previously disadvantaged. The founding
affidavit with reference to the merger documentation and
correspondence refers to the commitment of the parties to
empowerment.
[49] There is however further
difficulty in this regard and that relates to the failure on the part
of the Commission to notify the merging parties of the intention to
impose such a condition. By failing to do so, the fairness of the
procedure followed by the Commission is flawed.
[50] This condition was also rightly
challenged because of the vague and uncertain terms in which it has
been cast. It does not specify when and how the conditions should be
met. It was also correctly pointed out by the applicant that the
purposes clause of the Act – s 2(f) – relied upon by the
Commission for the imposition of this condition does not in fact
confer upon the Commission the power to impose such a condition. The
power to do so would need to be included in the powers of the
Commission in s 47. No such power has been conferred. There is yet a
further difficulty for this condition. Mr Gauntlett correctly
submitted that the introductory portion of s 47(2) requires that
conditions imposed would need to relate to the competitive outcome of
the proposed merger.
[51] This condition is clearly
unauthorised and is invalid.
Second condition: no employment
losses
[52] The second condition listed by
the Commission is that there can be no employment losses as a
consequence of a merger. The reason provided by the Commission for
this condition is very poorly formulated. It is quoted above. Quite
apart from the grammatical errors, it simply does not support the
absolute terms of the condition. It merely refers to “mergers
results (sic)
in workers losing jobs and
that the Commission encourages retrenchments being minimized so as
not (sic)
exacerbate the high employment
levels in Namibia.
[53] There is manifestly no rational
connection between the reason and the absolute term provided by the
condition of no employment losses whatsoever. The reason thus does
not remotely rationally relate to the absolute prohibition provided
in the condition. It is hopelessly unsustainable and it is
unsurprising that the Commission has not placed any argument or
material before the Court to support this (and the other conditions).
The fact that the Chairperson of the Commission indirectly seems to
distance himself from the reasons provided by stating that they
represent an attempt by “the
Secretariat to simply
capture the determination and summarise to the best of their ability
the reasons for the decisions we took”,
cannot avail the Commission or its Chairperson. The Act in s 47
requires the Commission to provide written reasons. The reasons
themselves were provided under the hand of the Chairperson himself
who stated that he was “authorised
to sign on behalf of the Commission” in
providing those reasons. The Commission is plainly bound by those
reasons which in the case of this condition are entirely ineffective.
Significantly, and despite the statement of the Chairperson, no
further matter was placed before the Court in opposition to this
application with reference to this condition – or the other
conditions.
Third condition: no harmful
effects in competition
[54] This condition, set out earlier,
is that the merger should not create harmful effects on competition
that may give rise to the risk of the market becoming foreclosed to
competitors, especially small and medium enterprises (“SME’s).
This condition was likewise challenged on the ground that the reason
given for it is not rationally connected to the condition actually
imposed. The reason provided for this condition, is that the merger
should not “affect
negatively the ability of small undertakings in Namibia to compete in
the local market, nor should it lead to foreclosure of these
undertakings.” I
agree with the applicant’s approach that the reason given is
not rationally connected to the condition which was then imposed.
[55] A second ground for invalidity
raised by the applicant is that what would constitute the “risk”
referred to in the condition and when
it would “arise”
would fail the test for impermissible
vagueness indicated in Affordable
Medicines Trust v Minister of Health .
I agree with the submission that the condition is impermissibly
vague.
[56] The applicant also challenges the
vagueness of the term “harmful
effects on competition” as
it is stated without any reference to the specified anti-competitive
conduct defined in the Act itself. There would also appear to be
merit in this complaint as a merging party would need to be informed
as to the anti-competitive conduct defined in the Act which could
amount to the harmful effects upon competition. Given the other two
sound reasons for the invalidity of this condition, I do not propose
to further deal with this aspect.
Conclusion
[57] In the result, I am satisfied
that the applicant has made out a case for this application to be
heard as one of urgency and I grant condonation to do so in the
exercise of my discretion.
[58] I am further satisfied that
paragraph (a) of Notice 75 is unauthorised and invalid and is to be
struck.
[59] It further follows that the
declaratory order sought in paragraph 3 of the notice of motion
should be granted. This is to the effect that the conditions imposed
by the Competition Commission in its approval of the proposed merger
between the applicant and fourth respondent are declared to be
invalid.
[60] I further direct that the second
and third respondents pay the applicant’s costs jointly and
severally, the one paying the other to be absolved. These costs are
to include the costs occasioned by the employment of two instructed
counsel and one instructing counsel.
________________________
SMUTS, J
I Agree
________________________
MULLER , J
ON BEHALF OF THE APPLICANT: ADV JJ
GAUNTLETT SC, and with him,
MR F PELSER
INSTRUCTED BY: LORENTZANGULA INC
ON BEHALF OF THE FIRST AND
SECOND RESPONDENTS: ADV M KHOZA SC
INSTRUCTED BY: CONRADIE &
DAMASEB
ON BEHALF OF THE THIRD
RESPONDENT: ADV LC BOTES
INSTRUCTED BY: THE GOVERNMENT
ATTORNEY
Wal-Mart Stores Inc v Chairperson of Namibian Competition Commission and Others (A 61/2011) [2011] NAHC 126 (28 April 2011);