A critical analysis of the 'national security veto' in terms of section 18A of the Competition Act 89 of 1998
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Date
2024
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University of the Western Cape
Abstract
In February 2019, the President of the Republic of South Africa signed into law a seminal piece of legislation in the form of the Competition Amendment Act 18 of 2018. Amongst the
various amendments contained in the amendment, an important one is that which inserted section 18A into the principal Act, the Competition Act 89 of 1998. In terms of the section, the President must constitute a committee to consider whether a merger involving a foreign acquiring firm may have an adverse effect on the ‘national security interests’ of the Republic.
Where the committee determines that a merger involving a foreign acquiring firm poses a threat to one or more of the Republic’s national security interests, the committee may prohibit the implementation of such a merger. Further, where the competition authorities approve of a merger involving a foreign acquiring firm which poses a threat to the ‘national security interests’ of the Republic, the committee may revoke such approval. The committee, in this regard, has ‘veto’ powers when it comes to mergers including foreign acquiring firms.
This thesis examines the rationale, justification and cogency of the ‘national security veto’ in terms of section 18A of the Competition Act. The research further investigates the
appropriateness of addressing national security concerns through competition policy. While cognizance is taken of the fact that where a gap exists in policy, legislative amendments may be used as a stopgap mechanism, the question is whether the Competition Act is the most appropriate instrument to address national security concerns.
The thesis further examines the treatment of national security interests in two foreign jurisdictions, Australia and the United States of America, in a bid to establish whether the provision is in line with international best practice and whether any lessons may be drawn therefrom. The thesis highlights challenges that the insertion of section 18A may precipitate, ranging from constitutional to logistical challenges in terms of the enforcement of section 18A. In that vein, the thesis finds among others, the following key challenges: firstly, that competition law is not the most suitable channel for the regulation of national security; secondly, that there is a lack of legal certainty regarding the definition of national security; thirdly, there are shortcomings relating to the procedure of considering national security, including the delineation of roles for the national security committee and the competition
authorities; lastly, there is no review mechanism regarding a decision of the national security committee, thus violating the principle of the rule of law.
The thesis, therefore, inter alia, formulates a proposal for reforming merger regulation where national security interests are a concern. It proffers that the regulation of national security must be done through separate and holistic legislation specifically aimed at addressing national security generally, including national security concerns that may fall outside the domain of merger regulation. As an alternative to the above, the thesis proposes that since mergers involving foreign acquiring firms are considered ‘investments’ under the Protection of Investment Act 22 of 2015, national security regulation in such mergers would be better suited under South Africa’s investment policy and law. To cater for an eventuality where the above proposals are not adopted and to ensure implementation of the section, the thesis further proposes an amendment of section 18A, providing a reworked reading of the section.
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National security veto, Competition Act 89 of 1998, South Africa
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