Expert evidence on SA National Payments System

The South African National Payments System is the backbone of the South African economy. Genesis was asked by the Association of System Operators (ASO) to address a number of key competition issues in terms of the reconsideration of conditions imposed by the Competition Commission in two mergers in the South African National Payment System.

The case involved the merger of Bankserv, the payment system operator, with two downstream system operators, Emid and Nomad. The merger was initially approved with conditions, but subsequently a dispute arose regarding whether the conditions were appropriate. In particular, ASO was concerned that Bankserv’s unique position, as an effective utility provider of interbank clearing and settlement, would provide it with the ability and incentive to engage in anti-competitive behaviour in the downstream markets. In light of their concerns ASO asked Genesis to assess the merger conditions.

In this matter Genesis produced an expert report which highlighted potential concerns relating to the merger based on convincing theories of harm. In this regard, the ultimate concern related to cross-subsidisation and predatory pricing – a relatively uncommon theory of harm, particularly in the case of mergers. The Genesis report also assessed the appropriateness of the conditions proposed by the Competition Commission in light of such risks and suggested enhanced remedies.

The Genesis report was instrumental in securing a settlement between the parties in the form of conditions that were significantly enhanced and provided sufficient safeguards for the theories of harm identified in the Genesis report. These conditions were also accepted by the Tribunal.