Tuesday, July 16, 2013

As with most new competition agencies, the Botswana Competition Authority (the “Authority”) has focused on merger review to date. In this regard, public interest considerations are clearly playing a significant role in the Authority’s assessment of mergers and are possibly informing the outcome of merger review to unwarranted extent.

Botswana Competition Authorities
The Act establishes the Authority as the primary enforcement agency for competition law and policy, responsible for monitoring, controlling and prohibiting anti-competitive trade or business practices in Botswana. The Authority is a parastatal, which falls under the Ministry of Trade and Industry.
The Act also establishes the Competition Commission (the “Commission”) as the governing body of the Authority. The Commission is the agency to which the Authority’s merger decisions may be taken on appeal.

Public interest considerations in mergers
In terms of section 59(1) of the Act, “[i]n assessing a  proposed merger, the Authority shall first determine whether the merger (a) would be likely to prevent or substantially lessen competition or to restrict trade or the provision of any service or to endanger the continuity of supplies or services; or (b) would be likely to result in any enterprise, including an enterprise which is not involved as a party in the proposed merger, acquiring a dominant position in a market” (my emphasis).
In addition to considering the effect of a merger on competition, in terms of section 59(2) of the Act, the Authority may consider any factor which it considers bears upon the broader public interest, including the extent to which “(a) the proposed merger would be likely to result in a benefit to the public which would outweigh any detriment attributable to a substantial lessening of competition or to the acquisition or strengthening of a dominant position in a market; (b) the merger may improve, or prevent a decline in the production or distribution of goods or the provision of services; (c) the merger may promote technical or economic progress, having regard to Botswana’s development needs; (d) the proposed merger would be likely to affect a particular industrial sector or region; (e) the proposed merger would maintain or promote exports or employment; (f) the merger may advance citizen empowerment initiatives or enhance the competitiveness of citizen-owned small and medium sized enterprises; or (g) the merger may affect the ability of national industries to compete in international markets”.
Despite public interest considerations appearing secondary to the effect on competition in merger control assessment, the Authority’s decisions to date afford public interest considerations a prominent role in merger review, possibly losing focus of the objective of the Act as competition legislation, first and foremost. In several merger decisions it is evident that the Authority is emphasising local priorities, particularly increasing levels of unemployment in Botswana, and public interest considerations have been a key part of the Authority’s decisions even where no competition concerns are raised.
In 2012, 10 of the Authority’s 17 publically available merger decisions, either (i) imposed a condition that no job losses would occur as a result of the transaction or (ii) include a commitment by the parties that no retrenchments or redundancies would occur as a result of the merger.
In January 2013 the Authority prohibited the proposed merger between Medical Rescue International Botswana Limited (MRIB) and Botswana Medical Aid (BOMAID), which already held a majority share in MRIB. The Authority found that the transaction would not lead to the substantial lessening of competition in health care administration, emergency medical, call centre services and on-site medical clinics in Botswana, but rejected the merger on public interest grounds, holding that instead of selling more shares to BOMAID, MRIB should divest these shares to “other citizens”. The decision seeks to ensure that more local citizens are economically empowered and that wealth is distributed amongst the country’s citizens.
Following a request from BOMAID, the Commission determined that it has the power to hear appeals against merger decisions of the Authority and agreed to hear an appeal against the prohibition, the first merger appeal in Botswana. As at the time of writing, the Commission has not heard the appeal.
The Authority has set strategic objectives to ensure that it does not become a talking-shop, but rather a result-oriented business facilitator that contributes to the country’s overall development objectives. Its efforts are fast gaining momentum. In developing  countries, development objectives and the right to consider public interest considerations frequently vests in the competition authorities. However, the Authority has placed significant emphasis on public interest considerations (particularly employment and empowerment of local citizens), possibly to the detriment of the objectives of merger control under the Act.
The BOMAID/MRIB merger appeal is likely to be a positive development for competition jurisprudence in Botswana as it will likely clarify the role of public interest considerations in merger decisions. The Act requires an assessment of whether or not a merger will substantially prevent competition and a consideration of other relevant factors. It would be helpful for the Commission to balance the consideration of public interest factors with the determination of the effect of a merger on competition to ensure that the Act is applied with the objective of improving competition in the country’s economy.