Should consumer benefits guide merger decisions?: Zakhele Mthembu on the Competition Commission

The Competition Tribunal's decision to block the Vodacom-Maziv merger raises important questions about how consumer benefit is prioritized in South African competition law. While public interest and competitive effects often dominate considerations, Zakhele Mthembu argues for consumer welfare—lower prices and better services—to take center stage. Could this shift drive better outcomes for millions of South Africans? The Vodacom-Maziv case invites us to rethink the balance in our regulatory framework..Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here..The seventh BizNews Conference, BNC#7, is to be held in Hermanus from March 11 to 13, 2025. The 2025 BizNews Conference is designed to provide an excellent opportunity for members of the BizNews community to interact directly with the keynote speakers, old (and new) friends from previous BNC events – and to interact with members of the BizNews team. Register for BNC#7 here. .By Zakhele Mthembu*.The Competition Tribunal recently blocked a merger between Maziv – one of the biggest fibre infrastructure providers through Vumatel (Pty) Ltd – and Vodacom, one of the largest wireless telecommunications providers in South Africa. As consumers, are we better off or worse off because of this decision by the Tribunal?.Currently, mergers the size of the one between Maziv and Vodacom are regulated by the Competition Act. Section 12 of the Competition Act sets out what ought to be considered when a merger is to be approved or not..Even though we do not yet know the reasoning of the Tribunal as to why it blocked the merger between these two parties, we can be sure that its reasoning is premised on a failure on the part of the parties to satisfy one of the myriad requirements in section 12 of the Competition Act..For the purposes of our piece, we aim to show how consumers – those who stand to benefit the most in a free and open market – which the Competition Act wants to achieve, are an afterthought in the consideration of mergers. At a prima facie level, this is evident in the mention of consumer benefit as an offsetting mechanism should a certain merger not meet the much more well-fleshed-out requirements in proceeding sections, being mentioned merely once at Section 12A(1)(a)..Since we do not know the reasoning of the Tribunal in this instance, we can use the reasoning of the Tribunal in past rulings on mergers. The most controversial and easy to remember would be the infamous Burger King merger and the bringing to the forefront the public interest considerations of the Act in mergers. .The merger between Grand Parade Investments, which was Burger King, and ECP, the acquiring firm, was approved subject to conditions. These conditions committed ECP to expanding ownership by HDPs in their firm going forward. The public interest aspect is what the case hinged on, yet it must be mentioned that the Tribunal and Commission initially even as it rejected the merger, acknowledged that there were consumer and economic benefits..Read more: Vodacom's fibre partnerships set to transform African broadband landscape.The issuing of conditions for the approval of mergers is something that has been prevalent in South African competition law. This was seen in the Walmart/Massmart merger, which had employment and local supplier conditions, and, in the AB InBev/SABMiller merger, which had local production conditions. Most importantly, though, is the fact that even though there was clear enough benefit to consumers in the above-mentioned cases, the decision of regulators and the Tribunal or Competition Appeal Court did not hinge largely on that, but rather on other factors, be they public interest or a negative competitive effect..A change in the legislation would be too ambitious a task to argue for in this piece. Instead, one posits that the offsetting mechanism of consumer benefit should be the central consideration for whether a particular merger ought to be approved or not. .This solution would be in line with the consumer welfare principle, which was introduced to the United States of America's competition law regime by thinkers such as Robert Bork and Richard Posner. The benefit to consumers through low or lower prices and/or improved quality would be the guiding principle. .With consumer benefit as the guiding principle, you can then consider every other requirement, be it the effect on competitors or the public interest considerations. If the merger leads to the inability of a smaller competitor to survive in a market but prices will be brought down for consumers, then the consumers in their millions should be favoured over a singular competitor and their employees..Instead of a merger case hinging on whether a public interest consideration was met in and of itself, it would be far more beneficial for our economy and its citizens if these cases hinged on whether South Africans in their millions would benefit from lower prices or improved products. .Read more: Vodacom enters private talks with former employee over 'please call me' compensation dispute.The current paradigm, which clearly does consider consumer benefit, but not as a guiding principle explicitly, is far from being horrible, but it is equally not the best..The recent decision by the Tribunal to not approve the Vodacom/Maziv merger shows why we need to centre consumer benefit when mergers are to be approved or turned down. According to Vodacom CEO Shameel Joosub the prohibited merger would have seen the expansion of fibre networks across the country, an investment worth an estimated value of between R12 billion and R17 billion. .This investment, coupled with the benefit of an expanded fibre network to South African consumers, should be enough to have a merger approved; even with the current paradigm, an approval with conditions was well within the ambit of the Tribunal. .As we await to read the reasoning given by the Tribunal in this most recent prohibited merger, I urge you as the reader to consider how different our economic landscape would be if the benefit to you as a consumer was what guided the regulators who are appointed by the politicians you chose to serve you..Read also:.Vodacom leads the charge to private power generation, away from Eskom🔒 US economy rebounds as consumers, businesses show resilienceWill consumers continue to buy the iPhone?.*Zakhele Mthembu BA Law LLB (Wits) is Policy Officer at the Free Market Foundation.

Should consumer benefits guide merger decisions?: Zakhele Mthembu on the Competition Commission

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