Passive Investments' Attempt to Find a Home in South African Competition Law

Abstract

The issue of passive investments in competitors remains a challenge in both the fields of economics and law. Economists have long theorised the potential anti-competitive effects of passive investments. Some have gone so far as to claim that without a controlling interest, such investments cannot be anti-competitive. In the recent efforts to consolidate these risks with competition law, particularly the concept of merger control, the EU, through Ryanair's acquisition of a minority interest in Aer Lingus, and South Africa with its comic to-and-fro in the Primedia case, have found the two to be unhappy bedfellows. The reasons for the difficulty in accepting the analysis of passive investments are due to the evidentiary requirements that must be met when attempting to prohibit a merger, and the characteristics of passive investments themselves. The result is that passive investments are better suited to some other part of the Competition Act. However, given the wording in the Competition Act, it may prove to be impossible to find a home in South African competition law for a form of analysis which will be adequate enough to quell the fear of passive investments.