Competition authorities vs Vodacom

Johannesburg, 10 Apr 2008

Vodacom SA MD Shameel Joosub is vehemently denying that the operator deliberately withheld documentation which the Competition Tribunal says provided the real reasons for its acquisition of Global Telematics.

This follows yesterday's release by the tribunal of its reasons for approving the acquisition unconditionally.

In the 13-page document, the tribunal explains it approved the transaction because "on its own" the acquisition will not result in a "substantial lessening of competition". Nevertheless the authority severely chastised Vodacom for attempting to deliberately mislead the Competition Commission and itself.

Keeping secrets

The tribunal ruling reveals Vodacom claimed to have "found" a key document only after the tribunal requested documentation from the parties.

"While we have no reason to doubt the word of the acquiring party's attorneys, it is our firm belief that the documentation in question was intentionally withheld from the commission by Vodacom. After all, the key document provided to us (and withheld from the commission) is entitled 'Proposed Acquisition of the subscriber base of Global Telematics SA ("GTSA") from the Thales Group'."

The tribunal adds: "The title alone would reveal to a child - let alone the legal officers of a major corporation - the relevance of the document. But more than this, the content of the document exposes the falsehood - or, at best, the half-truth - contained in the Competitiveness Report."

Joosub, however, denies this was a deliberate strategy on the part of Vodacom.

"While we must accept responsibility for submitting a document late, the document in question was nevertheless voluntarily submitted by Vodacom after Vodacom itself had discovered it. We unequivocally deny that we deliberately withheld information from either the Competition Commission or the Competition Tribunal, or made any attempt to mislead them," he argues.

Of greatest interest to the tribunal is the document's revelation that the acquisition will enhance future profit growth "by reducing discount rates".

"A key strategic rationale for the transaction is, as the document indicates, to eliminate the competition generated by GTSA's aggressive discounting strategy. This is the proper basis for deciding this transaction," it says.

Joosub again disagrees with the tribunal's findings: "GTSA was a willing seller and Vodacom was a willing buyer. GTSA were not compelled by Vodacom to sell to Vodacom, they chose to sell their customer base to Vodacom. Their customer base was controlled by two tiers of dealers. The discounts referred to were discounts between their dealers, and not discounts to their customers. Vodacom agreed to maintain these discounts for a period of up to two years so as not to compromise either the dealers or their existing customers."

Take action

Although the tribunal has upheld its decision to allow the acquisition to go ahead, it is encouraging the Competition Commission to take action against those who flout SA's competition regulations.

"We take an exceedingly dim view of the contempt that Vodacom's conduct reveals for the regulatory process and recommend that the commission takes the same view. It has come to our attention that merger filings are increasingly accompanied by similarly carefully constructed, deceitful affidavits. They should be rejected by the commission. And where the ccommission discovers the half-truth - and, consequently the non-compliance - that these affidavits seek to camouflage it should not hesitated/or ask the Tribunal to impose an administrative penalty if it discovers a merger has been approved on the basis of misleading information.

"In our view the only way of putting an end to this flagrant contempt for the law - a contempt which seriously undermines the ability of the authorities to effectively administer the [competition act] - is to prosecute offenders," the Tribunal comments.

However, Joosub indicates that this action should not be necessary for Vodacom: "We have a high regard for both the Competition Commission and The Competition Tribunal, and have always dealt with these bodies with the utmost respect."

The Competition Commission was not available for comment this morning.

However, commissioner Shan Rambaruth last month told ITWeb the commission was looking into taking Vodacom to task for allegedly lying at the hearings.

"We will consider the broader question of how to prevent this from happening again," said Rambaruth. "Criminal charges are one option that we need to explore, but no decision has been taken yet."