Sunday, July 27, 2008

South Africa - Vodacom and the Competition Tribunal

South Africa: Watchdog Acts on Vodacom 'Lies'

A FORMER Vodacom executive is facing charges of perjury after allegedly lying to the Competition Commission.

The commission has laid a complaint under the Competition Act for knowingly providing false information. This carries a maximum punishment of up to six months in jail, a R2000 fine, or both. The case concerns failure to provide documents the commission requested when Vodacom sought approval for its R206m acquisition of Global Telematics and Glocell Service Provider Company.

Neither Vodacom nor the commission named the person facing the charges.

It was clearly a Vodacom strategy to withhold the documents, commission head of mergers and acquisitions Tembinkosi Bonakele said yesterday.

"It was discussed at board level so Vodacom is responsible for this, but we went for the individual who signed on behalf of the company saying that the information was true and correct. So technically she becomes the fall guy," he said.

"We have looked carefully, and this is the only person we think we have the grounds to go after."

The commission asked Vodacom to submit all documents relevant to the deal, including minutes of a board meeting, but it was led to believe those documents did not exist. When the Competition Tribunal ordered Vodacom to provide the documents, they were submitted.

The tribunal said an affidavit by Vodacom legal affairs executive Eleni Christodoulou said the company had not submitted a report to the Securities Regulation Panel about the deal so it could not provide such a document to the commission.

What she did not explain was why she had not provided other relevant documents, including minutes prepared for the directors.

"While her affidavit may be technically true insofar as no document submitted to the Securities Regulation Panel has been omitted, Vodacom has not complied with the act in submitting all the other relevant documentation required," the tribunal said. Christodoulou left Vodacom late last year.

The commission believes the minutes were hidden because they showed the real reasons why Vodacom wanted to buy out the resellers, rather than a dressed-up version that Vodacom presented at the hearings.

After reading the minutes, the commission saw that it wanted to eliminate competition and improve its own profit margins. Yet in the documents it voluntarily submitted to win approval it claimed the move was designed to consolidate its delivery channel to provide a better service to customers.

"It is clear from Vodacom's documents that the transaction was intended to take out a company that was providing competition and threatening its margins.

"Accordingly, the commission believes that grounds existed for referring this matter to the criminal prosecution authorities for charges," the commission said yesterday.

Vodacom chief communications officer Dot Field said: "We've referred this matter to our attorneys for their immediate attention. Due to the seriousness of this matter, Vodacom cannot comment further."

When the tribunal approved the deal in March, its chairman, David Lewis, blasted Vodacom for lying and deliberately withholding information. He also took "an exceedingly dim view of the contempt Vodacom's conduct reveals for the regulatory process," which was a "flagrant contempt for the law".

At the time, Vodacom SA MD Shameel Joosub said: "We unequivocally deny we deliberately withheld information from either the commission or the tribunal, or made any attempt to mislead them. Whilst we must accept responsibility for submitting a document late, the document was nevertheless voluntarily submitted after Vodacom itself had discovered it."

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