South Africa: Competition Tribunal

Competition Commission v Old Mutual Life Assurance Company (SA) Ltd (016808) [2013] ZACT 49 (12 June 2013)

2.1.1. At all relevant times Futuregrowth was the portfolio manager appointed to manage the Transfer Assets in accordance with the investment mandate relating to the Transfer Policies.

2.1.2. The Futuregrowth Merger allowed OMIGSA to extend its asset management skills in fixed income capability and certain specialised products (i.e. by acquiring Futuregrowth's business), and facilitated Futuregrowth's access to the Old Mutual group of companies’ retail distribution channels and a long-term insurance licence with linked policy capacity.

2.1.3. In the Futuregrowth Merger, the Commission and the Tribunal understood the relevance of the linked policy capability of Old Mutual and the prospect that an Old Mutual long-term insurance licence would be used to underwrite the Transfer Policies per the rationale for and as recorded in the Tribunal’s reasons for its approval of the Futuregrowth Merger.

2.1.4. Competition in the market involving linked long-term insurance policies occurs mainly at the asset management / investment level. Investors generally prioritise the identity and capabilities of the asset manager, who will manage their investment via a linked policy issued by an established long-term insurer, when making investment choices. In contrast, competition in the non-linked long-term insurance market is driven almost entirely by an assessment of the insurers' ability.

2.1.5. At all relevant times, OMIGSA, Futuregrowth and Momentum considered the Policyholders’ investments represented by the Transfer Policies and the Transfer Assets as managed by Futuregrowth to form part of the business of Futuregrowth, and that the Section 37(2) Transfer was an implementation of the Futuregrowth Merger.

2.1.6. It was not discussed nor contemplated by any of the persons involved in the Futuregrowth Merger that the Section 37(2) Transfer could be a merger under the Act.

2.1.7. The only part of the business of Momentum over which OMLACSA acquired control under the Section 37(2) Transfer was the Transfer Assets and the Transfer Policies.

The Respondents' failure to comply with section 13A of the Act was a bona fide and reasonable mistake, taking into account the c^tfurftstance that the Section 37(2) Transfer occurred in the context of compliance with the Long-Term insurance Act in relation to the Futuregrowth Merger and with the consent of the FSB and Policyholders.

3. COMMISSION’S INVESTIGATION AND FINDINGS

The Commission's investigation established the following -

3.1. An implemented merger

3.1.1. The Section 37(2) Transfer resulted in the acquisition of control, within the meaning of section 12(1) of the Act, by OMLACSA over part of the business of Momentum comprising the Transfer Assets and Transfer Policies. This merger also met the thresholds of a large merger and was therefore notifiable.

3.1.2. The Respondents implemented the merger prior to its notification to the Commission and approval by the Tribunal in terms of section 13A of the Act.

4. ADMISSION

The Respondents admit that -

4.1. The Section 37(2) Transfer constituted a notifiable large merger under section 12(1)(c) of the Act read together with the schedule for determining thresholds.

4.2. The merger was implemented prior to its notification to the Commission and approval by the Tribunal as prescribed by section 13A of the Act.

4.3. They were responsible for notifying the merger under the Act.

5. AGREEMENT CONCERNING FUTURE CONDUCT

5.1. The Respondents agree and undertake -

5.1.1. To not implement any transaction, which constitute mergers as defined in the Act and meet the threshold for notification without obtaining the prior approval from the competition authorities;

5.1.2. Develop and implement a compliance programme designed to ensure that its employees, management and directors do not engage in any conduct which constitutes a contravention of the Act, a copy of which shall be submitted to the Commission within 60 days of the date of confirmation of this consent agreement as an order of the Tribunal.

6. ADMINISTRATIVE PENALTY

6.1. Having regard to the provisions of section 58(1)(a)(iii), read with sections 59(1 )(d), 59(2) and (3) of the Act, the Respondents accept that they are liable to pay an administrative penalty for the contravention of section 13A(3) of the Act.

6.2. The Parties agree that an administrative penalty of R175,000 (one hundred and seventy five thousand Rand) shall be imposed on each of the Respondents.

6.3. The amount of each administrative penalty is less than 10% of the annual turnover of each Respondent as stipulated in section 59(2) of the Act.

6.4. Each Respondent shall pay the penalty amount to the Commission within 7 (seven) days of the confirmation of this Consent Agreement as an order of the Tribunal,

6.5. The said amount shall be paid into thefolfowing Commission’s bank account-

6.6. The Commission will pay the administrative penalties into the National Revenue Fundas stipulated in section 59(4) of the Act.

7. FULL AND FINAL SETTLEMENT

Upon confirmation of the Consent Agreement as a consent order by the Tribunal, all proceedings between the Commission and the Respondents in relation to their failure to comply with section 13A(3) of the Act investigated under the Commission's case number 2011 Apr0030, shall be concluded.

Date and signed at PINELANDS on this the 5th day of MAY 2013

MR ABRAHAM PAUL NAUDE

OLD MUTUAL LIFE ASSURANCECOMPANY (SOUTH AFRICA) LIMITED

Date and signed at CENTURION on this the 10th day of APRIL 2013

MR FRANCOIS JOOSTE

GROUP COMPANY SECRETARY

MOMENTUM GROUP LIMITED

Date and signed at PRETORIA on this the 21th day of MAY 2013

Shan Ramburuth

The Commissioner, Competition Commission