Interview with Dennis Davis - Antitrust in Emerging and Developing Economies

ANTITRUST IN EMERGING AND DEVELOPING ECONOMIES: AFRICA, BRAZIL, CHINA, INDIA, MEXICO...

Interview with Dennis Davis

This conference will be held in New York University School of Law on October 23, 2015. Dennis Davis (South African Competition Appeal Court) was interviewed by Samir Gandhi (AZB Partners). They will participate in the panel “Mergers: Public Interest, Industrial Policy, and Remedies” together with Francis Kariuki (Competition Authority of Kenya) and George Cary (Cleary Gottlieb Steen & Hamilton). Daniel Rubinfeld (New York University School of Law) will moderate the panel.

Samir Gandhi: In July 2011 the Competition Appeal Court of South Africa approved the Walmart/Massmart transaction after the parties accepted certain behavioral remedies. Typically, competition/antitrust authorities prefer structural remedies over behavioral. Perhaps monitoring the implementation of behavioral remedies is more onerous as compared to overseeing a one time divestment (structural remedy) order. Is there a specific reason why the Competition Appeal Court of South Africa decided to impose behavioral remedies in the Walmart/Massmart transaction?

Dennis Davis: It is correct that structural remedies may be a preferable route but in this case, on the facts, it was clear that Walmart’s merger could not be refused on cognizable competition grounds. The question then arose as to how, if at all, a behavioral remedy could be crafted to modestly promote the public interest grounds that are in the legislation. This was less intrusive than a structural remedy and had the support of the experts on both sides .

Samir Gandhi: Are behavioral remedies better suited to address the twin objective of increasing investment and fostering competition that developing countries such as South Africa, India and Brazil continuously seek to achieve?

Dennis Davis: I would prefer not to answer this question in an all or nothing fashion. It may be, depending on the market under scrutiny, that a structural remedy is the indicated form of relief but in the Walmart case there was no basis to order such a remedy; after all Walmart were entering the market for the first time, they had not South African holdings at that point and on price/output/ standard competition bases there was nothing untoward about the merger. There is a normative principle that appears to me to be central to the posed question: what are the obligations of MNC’s which invest in developing countries and how can an authority formulate and implement these obligations.

Samir Gandhi: South Africa has been one of the few jurisdictions that considers larger public policy related objectives, such as increased employment and labour rights while implementing competition rules. Often, large mergers and acquisitions are motivated by harnessing the economies of scale arising out of a combination of two or more independent firms. This process may at times lead to job cuts and plant shut downs. How successful has been your attempt at addressing public policy related concerns through competition rules, particularly merger control rules?

Dennis Davis: We have had very few merger cases where this problem has been central to the enquiry so it is, at this stage, not possible to answer the question on the basis of significant precedent.