The Competition Commission has suspended its advisory opinion services pending the finalisation of the case against Hosken Consolidated Investments (HCI).

This follows a Competition Appeal Court (CAC) judgment ruling against the regulator on the matter.

In August last year, HCI request the commission to issue an advisory opinion in which it advised the company to file a proposed transaction.

In terms of the transaction, HCI intended to increase its shareholding in Tsogo Sun Holdings to more than 50% and consolidate all its gaming interests (under Tsogo, by transferring such gaming interests owned indirectly by one of its subsidiary companies, Niveus Investments, to Tsogo.

Although the commission and Competition Tribunal unconditionally approved HCI's acquisition of a majority shareholding in Tsogo in 2014, HCI was unable to attain the majority interest in Tsogo and only became the largest minority shareholder.

In the 2014 transaction, HCI indicated that the two gaming businesses held under Tsogo and Niveus would not be integrated and as a result there would be no retrenchments.

However, the proposed 2017 transaction envisaged a transfer of the gaming interests held under Niveus to Tsogo, which constituted a form of integration. It was, therefore, necessary for the commission to assess whether or not the proposed 2017 transaction should be approved subject to any employment conditions.

HCI did not agree with the commission's nonbinding advisory opinion and approached the tribunal for a declaratory order that it should not file its proposed transaction with the commission.

The tribunal dismissed HCI and Tsogo's application and found, among others, that it did not have jurisdiction to hear the matter because there was no "live dispute" between the parties and that if HCI wished to challenge the commission's views about whether or not the transaction must be filed with it, HCI should have used the dispute resolution procedures set out in the Competition Act for resolving disputes relating to notifiability of mergers.

These procedures envisaged that if a party wished to contest whether a transaction was a merger falling within the Competition Act, it needed to first file that transaction with the commission, and if the commission formally made a decision that the transaction was a merger, that party had a right to appeal to the tribunal against the commission's decision.

In this case, there was no formal decision by the commission whether the 2017 proposed transaction constituted a merger, the commission merely provided HCI, at its request, with a nonbinding advisory opinion.

HCI and Tsogo then filed an appeal with the CAC against the tribunal's decision. The CAC set aside the tribunal decision and found, among others, that the tribunal had jurisdiction to hear the matter and that there was a "live dispute" between the parties.

In addition, the CAC found that the proposed 2017 transaction did not require notification to the competition authorities, as it did not change the quality of control that HCI enjoyed in Tsogo as HCI was able, at two annual shareholder meetings, which took place in 2015 and 2016 respectively, to secure a majority of votes cast in those meetings.

The commission subsequently applied for leave to appeal to the Constitutional Court against the CAC's decision. At the heart of the commission's application was that nonbinding advisory opinions should not be the subject of litigation and could not be used to side-step investigative processes set out in the Competition Act.

The commission's application for leave to appeal was to safeguard the interests of employees who may possibly be retrenched as a result of the integration of the businesses of Niveus and Tsogo.

"The CAC decision creates a precedent which can be used by parties to challenge a nonbinding advisory opinion issued by the commission if they do not agree with it. A final decision on the advisory opinion service will be made after the outcome of the commission's application for leave to appeal (and appeal if leave is granted) to the Constitutional Court," the commission said in a statement.

Advisory opinions form part of the commission's advocacy functions to facilitate compliance with the Competition Act. They does not constitute commission decisions and are not binding on the commission and parties requesting such advice.

These opinions cover various topics including whether or not a proposed transaction constitutes a merger and whether or not competition authorities must be notified of the proposed transaction.