The Competition Commission’s “reckless behaviour” in seeking to block the transaction between Vodacom and fibre operator Maziv shows the regulator “misunderstands the process of market competition”.

That’s according to the Free Market Foundation, which was responding to the commission’s decision last week to recommend that Vodacom’s acquisition of a 30-40% co-controlling stake in fibre broadband Maziv be blocked by the Competition Tribunal.

“The Free Market Foundation is alarmed that the commission is continuing its interference in the market to the detriment of economic dynamism and competitiveness,” it said, adding that the viability of growing enterprises is threatened by this.

“The commission is continuing its war on free enterprise,” legal researcher at the Foundation Zakhele Mthembu said. “It is more concerned with cutting down the tallest trees than encouraging the growth of smaller ones,” he said in response to the regulator’s rejection of the Maziv deal.

Its opposition to the deal – after taking more than a year and a half to make a decision – is premised on a misunderstanding of the market competition process, Mthembu said. The commission has long sought to submit that the acquisition of one company by another in the same or similar market necessarily results in less competition.

“The Free Marketing Foundation understands that despite both enterprises going beyond what one could expect any business to do, with various non-economic concessions on empowerment – including a moratorium on retrenchments, the establishment of a supplier development fund, an employee benefit scheme, new employment opportunities, and maintaining the use of suppliers controlled by previously disadvantaged persons – the commission still saw fit to deny the merger.

‘Entirely contestable’

“The market will remain entirely contestable after the merger. Opposing it on grounds that competition will be harmed is misguided,” said Mthembu. The Competition Commission has a restrictive interpretation of its own merger requirements. Its main concern is that after the acquisition of Maziv, Vodacom will ‘self-preference’ by inhibiting rival internet service providers that use the Vumatel network.”

Vumatel is a subsidiary of Maziv and its biggest asset.

Rather than prohibiting the merger based on a flawed presumption, the commission could instead have recommended a condition be imposed that the merged entity may not exclude or inhibit other ISPs from continuing to use Maziv infrastructure. Vodacom agreed, as part of the deal, to make its all Maziv fibre – including fibre Vodacom will provide as part of the deal – on an open-access basis, meaning neither Vodacom nor Maziv would likely be able to discriminate against competing ISPs.

Read: Shock as regulator says no to Vodacom, Maziv deal

“The Free Market Foundation regards the exercise of private property rights as a fundamental freedom that should not be inhibited simply because a company would (understandably) engage in self-preferencing. The ability of ISPs to switch to another fibre infrastructure provider, like Openserve, or to invest in building new infrastructure, like Vumatel did, will remain even after the merger.

Read: The plan to get the R10-billion Maziv deal done

“The parties involved should oppose the recommendations of the commission when brought for confirmation at the Competition Tribunal. The concessions made by Vodacom and Maziv should have been more than sufficient to address the concerns of the commission. The fact that they were not shows beyond any doubt the anti-free enterprise attitude prevailing at the competition regulator,” Mthembu said. – © 2023 NewsCentral Media