The Tribunal decision uphold the review and therefore not allow a merger between Paarl Media and Primedia@home is a blow to the Competition Commission – but the fall-out is likely to felt in the longer investigatory period and greater fear on the part of the Commission to bring its own intuition and experience to bear when interpreting evidence. This is according to Chris Charter, Director in the Competition and Regulatory Practice at Cliffe Dekker Hofmeyr business law firm.
“The Tribunal’s decision to uphold the review is in my view largely due to flaws in the paperwork of the Commission and not necessarily evidence of a failure to robustly investigate,” says Charter.
Charter notes that the Commission is certainly under a lot of pressure to investigate mergers in a timely fashion and it does not always have the luxury of time in ensuring that all its work is then reduced to a perfectly rendered report. The fact that the record does not necessarily reflect all the thinking and investigation that has gone on does not necessarily mean that the investigation did not take place or that the decision was lightly taken.
“Also something to bear in mind,” he says, “is that while the Commission is criticised in the judgement for not taking certain evidence from the market participants at face value, this loses sight of the fact that the Commission is faced with a myriad of views from all parts of the industry – some are conflicting, some are off-the-cuff and some may be driven by clear agendas.
“Very often, commentary received from customers, competitors and suppliers is not altogether objective, (note that Caxton, the review applicant and a disgruntled suitor for the target business submitted evidence that the Tribunal felt should have been heeded, despite the fact that Caxton has a clear incentive to undermine the merger) and at the end of a long day, the Commission has to weigh all of this up, together with evidence it collects independently, to make a decision,” Charter explains.
“I think it’s important to bear in mind that notwithstanding the Tribunal’s order that the matter be reinvestigated, this is not tantamount to saying the decision was wrong. Arguably, the conclusion may be correct but the Commission failed to provide a cohesive and clear explanation of how it got to that conclusion.
“Unfortunately, poor case management (which may be the result of inexperienced investigators lacking the requisite drafting skills) has left the impression that the Commission did not properly consider all aspects. It may be that the report and record just do not adequately reflect what may have been a thorough and considered investigation (indeed, there seems to have been a great deal of investigatory work done). However, the rule of law requires decisions to have a clear rationale and basis so as to be subject to scrutiny and if the record and report does not reflect this, the Tribunal is probably correct to require the Commission to have another look,” he says.
Charter notes that it is clear that the Commission will need to spend a lot more time and energy, and be a lot more methodical, in drafting and collating its reports. Like many regulators the world over, a lack of resources and a skew towards less experienced staff at “foot soldier” level means that getting the investigation to Exco level (the Commission’s decision making body) and the Tribunal is likely to take far longer as the Commission tries to cover all bases in its report. This will surely delay merger investigations, which, from a timing perspective, are already a considerable hurdle to deal flow.
“At some level, the Commission must be wondering what it can do right under the current climate of procedural scrutiny. One worry is that “paralysis by analysis” may set in, leading to a major log-jam in merger control,” he adds.
