South African court sets ‘clear limits’ on competition watchdog’s divestiture powers

The judgment (8-page / 231KB PDF), published on 31 March, confirmed that only the country’s Competition Tribunal – and not the regulator, the Competition Commission – has the power to order divestiture following a market inquiry.

The case arose from the Fresh Produce Market Inquiry (FPMI), which was launched by the Competition Commission in 2023 to examine whether certain practices within the fresh produce market were impeding, distorting or restricting competition.

The Commission published its final report linked to the inquiry (2-page / 144KB PDF) in January 2025, which identified “significant barriers to competition” facing small-scale farmers and highlighted their limited access to formal retail channels and national markets.

The competition watchdog also made a recommendation, which was confirmed in its final report, to address these competition concerns, namely that the investment company that held a substantial shareholding in two dominant market players should divest its entire shareholding in one of the two firms.

Under section 43D (2) read with s60(2)(c) of South Africa’s Competition Act, the Commission has the power to make a recommendation to the Competition Tribunal for a divestiture order linked to the adverse effects on competition identified by a market inquiry. The power to actually order divestiture rests exclusively with the Competition Tribunal, not the Commission.

In its final report, the Commission issued two distinct remedial instruments simultaneously. The first, styled as a "Remedial Action", directed the investment company to divest its entire shareholding in one of the two dominant market players within six months of the report's effective date, with implementation suspended during that period to allow the company to "voluntarily" comply.

The second, styled as a "Competition Tribunal Recommendation", separately recommended to the Tribunal under s60(2)(c) that the same divestiture be ordered. This prompted the investment company to launch an urgent review application before the CAC on 4 April 2025, arguing that the Commission had overstepped its powers by issuing a directive requiring divestiture, when only the Tribunal has the power to make such an order.

The CAC’s recent judgment confirms its view that the Commission had overreached and “failed to fulfil its statutory duty” to make a divestiture recommendation to the Tribunal. The court said that by failing to do this, the Commission “sought to bypass this statutory framework and therefore breached the fundamental principle of legality.”

The judgment draws a clear jurisdictional line between the Commission’s investigative and recommendatory role and the Tribunal’s exclusive remedial powers. It also limits the competition watchdog’s ability to exert coercive pressure through “directives” framed as voluntary, restoring procedural safeguards for firms affected by market inquiries.

Anthony Crane, an expert in competition law at Pinsent Masons, said the judgment critically restored certainty for businesses impacted by market inquiries. “Divestiture is a Tribunal remedy, not a Commission tool,” he said. “That distinction matters commercially. Divestiture is intrusive, value-sensitive and often irreversible. Firms are entitled to full procedural protection before such outcomes are imposed.”

The judgment will be particularly illustrative for firms currently subject to market inquiries, particularly those facing structural remedies, as well as private equity, asset managers, and large corporates with concentrated shareholdings assessing regulatory risk.

Practically speaking, Crane said the ruling may also embolden companies to challenge remedial ‘recommendations’ that operate as de facto orders. “It also places pressure on the Commission to move promptly and transparently if it believes structural remedies are justified,” he added.

Businesses are being urged to review the judgment carefully and reassess their exposure to market inquiry remedies, including, if necessary, pushing back against informal or coercive “directives” and ensuring divestiture is only pursued via proper Tribunal proceedings.

From a governance perspective, Caroline Bergmann of Pinsent Masons said boards and investors should also revisit regulatory risk assessments linked to market inquiries. “While the Commission remains a powerful investigative authority, this case confirms there are clear limits to how far that power extends without Tribunal oversight,” she said.