An Analysis of the "National Security Interest" Provision in terms of Section 18A of the Competition Act 89 of 1998

  • Simbarashe Tavuyanago University of the Free State
Keywords: Competition Law, National security interests, Merger, Investment screening, Foreign acquiring firm, Competition authorities, Competition Act, Protection of Investment Act

Abstract

This contribution examines the implications of the "national security provision" in terms of section 18A of the Competition Act 89 of 1998 as inserted by section 14 of the Competition Amendment Act 18 of 2018. The effect of section 18A is that it confers upon the President of the Republic of South Africa power to appoint a national security committee whose mandate is to investigate mergers involving a foreign acquiring firm and determine whether such a merger would pose a threat to the "national security interests". The contribution highlights the possible challenges that the insertion of section 18A may precipitate. It argues that while the protection of national security interests is imperative, it is however not the goal of competition policy to regulate broader national security policy. In making the argument, cognisance is taken of the fact that where a gap exists in policy, legislative amendments may be used as stopgap mechanisms. The paper investigates the treatment of national security interests in foreign jurisdictions in a bid to establish whether the provision is in line with international best practice and whether any lessons may be drawn therefrom.

GS84.png

References

Bibliography
Literature

Alves S, Capiau J and Sinclair A "Principles for the Independence of Competition Authorities" 2006 CLI 13-27

Brassey M et al Competition Law (Juta Cape Town 2002)

Cameron E "Judicial Independence – A Substantive Component?" 2010 The Advocate 24-29

Cawthra G "National Security and the Right to Information: The Case of South Africa" Unpublished contribution delivered at the Southern African Consultative Conference on National Security and Right to Information Principles (26 February 2013 Johannesburg)

Chen SFS and Hennart JFH "A Hostage Theory of Joint Ventures: Why Do Japanese Investors Choose Partial over Full Acquisitions to Enter the United States?" 2004 J Bus Res 1126-1134

Elman P "The Need for Certainty and Predictability in the Application of the Merger Law" 1965 NYU L Rev 613-627

Georgiev S "The Reformed CFIUS Regulatory Framework: Mediating between Continued Openness to Foreign Investment and National Security" 2008 Yale J on Reg 125-134

Hartzenberg T "Competition Policy and Practice in South Africa: Promoting Competition for Development" 2006 NWJILB 667-686

Hartzenberg T "Competition Policy and Enterprise Development: The Role of Public Interest Objectives in South Africa's Competition Policy" in Cook P, Fabella RV and Lee C (eds) Competitive Advantage and Competition Policy in Developing Countries (Edward Elgar Cheltenham 2007) ch 8

Heinemann A "Government Control of Cross-Border M&A: Legitimate Regulation or Protectionism?" 2012 JIEL 843-870

Hodge J, Goga S and Moahloli T "Public Interest Provisions in the South African Competition Act – A Critical Review" Unpublished contribution delivered at the Competition Policy, Law and Economics Conference (2009) 3-10

Jordaan L and Munyai PS "The Constitutional Implications of the New Section 73A of the Competition Act 89 of 1998" 2011 SA Merc LJ 197-213

Lenihan AT Balancing Power without Weapons: State Intervention into Cross-border Mergers and Acquisitions (Cambridge University Press Cambridge 2018)

Lewis D "The Role of Public Interest in Merger Evaluation" Unpublished contribution delivered at the International Competition Network Merger Working Group Conference (28-29 September 2002 Naples) 1-4

Maxeiner JR "Legal Indeterminacy Made in America: US Legal Methods and the Rule of Law" 2006 Val U L Rev 517-589

Munyai PS A Critical Review of Dominant Firms in Competition Law: A Comparative Study (LLD-thesis University of South Africa 2016)

Munyai PS "Claims for Damages Arising from Conduct Prohibited under the Competition Act 1998" 2017 De Jure 18-35

Nyali X and Woods S "South Africa" in Gotts IK (ed) The Merger Control Review 11th ed (Law Business Research Ltd London 2020) 309-319

Oxenham J "Balancing Public Interest Merger Considerations before Sub-Saharan African Competition Jurisdictions with the Quest for Multi-jurisdictional Merger Control Certainty" 2012 US-China L Rev 211-227

Pillay S "Corruption – The Challenge to Good Governance: A South African Perspective" 2004 IJPSM 586-605

Reader DM "Extending National Security in Merger Control and Investment: A Good Deal for the UK?" 2018 CLI 35-52

Sawyer KR and Johnson J "Does the National Interest Matter? A Case Study of a Cross-border Merger" 2007 Corporate Ownership and Control 345-356

Stapleton C "The Global Colony: A Comparative Analysis of National Security-based foreign Investment Regimes in the Western Hemisphere" 2015 Wash U L Rev 1647-1681

Sutherland P and Kemp K Competition Law of South Africa (LexisNexis Butterworths Durban 2000)

Tavuyanago S "Public Interest Considerations and their Impact on Merger Regulation in South Africa" 2015 GJHSS: E 23-43

Zarzur CS "Brazil" in Gotts IK (ed) The Merger Control Review 7th ed (Law Business Research Ltd London 2016) 131-140
Case law
Harmony Gold Mining Co / Gold Fields Ltd [2005] ZACT 29 (18 May 2005)
Legislation
Australia
Foreign Acquisitions and Takeovers Act of 1975
Brazil
Competition Act 12.529/2011
Constitution of the Federative Republic of Brazil, 1988
South Africa
Competition Act 89 of 1998
Competition Amendment Act 18 of 2018
Constitution of the Republic of South Africa, 1996
Prevention and Combating of Corrupt Activities Act 12 of 2004
Protection of Investment Act 22 of 2015
United States of America
Defence Production Act of 1950 (50 USC App 2170)
Foreign Investment and National Security Act of 2007
Sherman Anti-Trust Act of 1890
Internet sources
BRICS Brasil 2019 http://brics2019.itamaraty.gov.br/en/about-brics/what-is-brics
BRICS Brasil 2019 What is BRICS? http://brics2019.itamaraty.
gov.br/en/about-brics/what-is-brics accessed 21 October 2020
BRICS Information Portal date unknown https://infobrics.org/
BRICS Information Portal date unknown What is the BRICS? https://infobrics.org/ accessed 21 October 2020
Canabrava et al 2020 https://uk.practicallaw.thomsonreuters.com/4-501-1911?__lrTS=20180530214031634&transitionType=Default&contextData=(sc.Default)&firstPage=true
Canabrava et al 2020 Merger Control in Brazil: Overview https://uk.practicallaw.thomsonreuters.com/4-501-1911?__lrTS=20180530214031634&transitionType=Default&contextData=(sc.Default)&firstPage=true accessed 21 October 2020
Chirwa and Ntliziywana 2017 https://www.news.uct.ac.za/article/-2017-09-13-why-the-peoples-parliament-is-failing-the-people
Chirwa D and Ntliziywana P 2017 Why the People's Parliament is Failing the People https://www.news.uct.ac.za/article/-2017-09-13-why-the-peoples-parliament-is-failing-the-people accessed 10 January 2020
CliffeDekkerHofmeyr 2019 https://www.cliffedekkerhofmeyr.com/export/
sites/cdh/en/practice-areas/downloads/A-New-Competition-Act.pdf
CliffeDekkerHofmeyr 2019 A New Competition Act https://www.cliffedekkerhofmeyr.com/export/sites/cdh/en/practice-areas/downloads/A-New-Competition-Act.pdf accessed 30 October 2020
Competition Commission Date Unknown http://www.compcom.co.za/
merger-and-acquisition-activity-update
Competition Commission Date Unknown Merger and Acquisition Activity Update http://www.compcom.co.za/merger-and-acquisition-activity-update accessed 29 January 2020
European Commission 2019 https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX%3A32019R0452&qid=1603891018358
European Commission 2019 Regulation (EU) 2019/452 of the European Parliament and the Council of 19 March 2019 Establishing a Framework for the Screening of Foreign Direct Investments into the Union https://eur-lex.europa.eu/legal-content/EN/TXT/?uri=CELEX
%3A32019R0452&qid=1603891018358 accessed 28 October 2020
Federal Trade Commission Date Unknown https://www.ftc.gov/enforcement
Federal Trade Commission Date Unknown Enforcement https://www.ftc.gov/enforcement accessed 7 February 2019


Foreign Investment Review Board Date Unknown Home Page http://firb.gov.au accessed 7 February 2019


Helen Suzman Foundation 2018 Response to Competition Amendment Bill - Parliamentary Submission: Competition Amendment Bill, 2018 https://hsf.org.za/publications/hsf-briefs/parliamentary-submission-competition-amendment-bill-2018 accessed 9 October 2019


Kagan J 2020 Political Risk Insurance https://www.investopedia.com/terms/p/political-risk-insurance.asp accessed 30 October 2020


Kennedy-Good S, Griffiths M and Cridlan D 2020 South Africa COVID-19 Crisis Inspires Global Tightening of Foreign Investment Screening https://www.nortonrosefulbright.com/-/media/files/nrf/
nrfweb/knowledge-pdfs/global-rules-on-foreign-direct-investment/global-rules-on-foreign-direct-investment---south-africa.pdf accessed 20 October 2020


Koza N 2019 State Capture Inquiry to Look at Parliament's Oversight Role http://www.702.co.za/articles/351362/listen-state-capture-inquiry-to-look-at-parliament-s-oversight-role accessed 30 October 2020


Lester S and Zhu H 2019 Closing Pandora's Box: The Growing Abuse of the National Security Rationale for Restricting Trade https://www.cato.org/publications/policy-analysis/closing-pandoras-box-growing-abuse-national-security-rationale accessed 10 January 2020


Malatji Kanyane Attorneys 2018 Comments on the Competition Amendment Bill B23-2018 http://pmg-assets.s3-website-eu-west-.amazonaws.com/180828MKINC.pdf accessed 10 January 2020


McBride T and Overman T 2018 CFIUS Continues Focus on Information Security, Blocks Chinese Acquisition of MoneyGram https://www.bassberrygovcontrade.com/cfius-continues-focus-on-information-security-blocks-chinese-acquisition-of-moneygram/ accessed 9 November 2018


Meijer J 2018 On the New Competition Amendment Bill: New Competition Amendment Bill Gives Govt the Right to Block Foreign Investments in SA https://www.politicsweb.co.za/politics/on-the-new-competition-amendment-bill accessed 30 January 2020


Mtshali S 2019 State Capture: Parliamentary Committees have a Case to Answer https://www.iol.co.za/news/politics/statecapture-parliamentary-committees-have-a-case-to-answer-says-expert-25913539 accessed 30 October 2020


Norton Rose Fullbright Date Unknown Political Risk Insurance https://www.nortonrosefulbright.com/en-za/services/f42ed1c3/political-risk-insurance accessed 30 October 2020

Parliament Date Unknown https://www.parliament.gov.za/
storage/app/media/oversight-reports/ovac-model.pdf

Parliament's Oversight Role in Enhancing Democracy https://www.parliament.gov.za/storage/
app/media/oversight-reports/ovac-model.pdf accessed 30 October 2020

Phakathi B 2018 Parliament Adopts Controversial Competition Bill https://www.businesslive.co.za/bd/national/2018-10-23-parliament-adopts-controversial-competition-amendment-bill/ accessed 18 January 2019

Parliamentary Monitoring Group 2018 Competition Amendment Bill: Public Hearings Day 1 https://pmg.org.za/committee-meeting/26941/ accessed 9 October 2019

Parliamentary Monitoring Group 2018 Competition Amendment Bill B23-2018: Ministry Response to Submissions https://pmg.org.za/committee-meeting/27045/ accessed 10 January 2020

Stapenhurst R and O'Brien M Date Unknown Accountability in Governance https://siteresources.worldbank.org/PUBLICSECTORANDGOVERNANCE/Resources/AccountabilityGovernance.pdf accessed 18 January 2019

State Security Agency Date Unknown Vision and Mission http://www.ssa.gov.za/ accessed 11 November 2018

Thrush G 2018 Trump's Use of National Security to Impose Tariffs Faces Court Test https://www.nytimes.com/2018/12/19/us/
politics/trump-national-security-tariffs.html accessed 10 January 2020

Treasury Australia Date Unknown Foreign Direct Investment Policy https://treasury.gov.au/publication/making-transparency-transparent-an-australian-assessment/chapter-3-foreign-direct-investment-policy/ accessed 9 November 2018

US Department of Treasury Date Unknown Overview of CFIUS Process https://home.treasury.gov/policy-issues/international/the-committee-on-foreign-investment-in-the-united-states-cfius accessed 16 January 2019

Van Dijk J 2018 SA Poised to Follow Suit in Utilisation of Non-competition Merger Control to Protect State Security in Foreign Mergers https://www.financialinstitutionslegalsnapshot.com/2018/
08/sa-poised-to-follow-suit-in-utilisation-of-non-competition-merger-control-to-protect-state-security-in-foreign-mergers/ accessed 20 October 2020

Wood S 2018 The Competition Amendment Bill, 2018 Introduced in Parliament: National Security Considerations https://www.bowmanslaw.com/insights/competition/the-competition-amendment-bill-2018-introduced-in-parliament-national-security-considerations/ accessed 19 January 2020
Views
  • Abstract 334
  • Pdf 129
  • Xml 137
  • epub 25
Views and downloads are with effect from 11 January 2018
Published
2021-04-09
Section
Articles