COMPETITION ACT AMENDMENTS UNPACKED

This article appeared in CompliNEWS on 19 July 2019

The 2018 Competition Amendment Act – several key sections of which came into force recently – ‘is evidence of government’s continued commitment to drive economic transformation and inclusion’, according to Trade & Industry Minister Ebrahim Patel. In a media statement on the sections concerned, the Minister singled out ‘a number of new definitions’ along with changes to section 8 of the principal statute, dealing with the abuse of dominance; section 10, dealing with exemptions; section 12A, dealing with the ‘public interest consideration during mergers’; sections under Chapter 4A, dealing with market inquiries; and section 59 dealing with penalties for offences. According to the statement, sections of the amendment Act not yet operationalised ‘will be phased in’ – beginning with those providing small businesses with remedies against price discrimination by dominant firms and the abuse of power by dominant buyers. These provisions are expected to be in effect ‘by November’, in anticipation of which the necessary regulations will probably be released in draft form soon for public comment.

In an article published in Mondaq, Fasken’s Johan Coetzee, Neil MacKenzie and Stuart Strachan unpack ‘some of the more notable amendments’ now in force:

  • The public interest ground sees consideration being given to ‘the promotion of a greater spread of ownership … to increase the levels of ownership by historically disadvantaged persons and workers in firms in the market’.
  • ‘The test for excessive pricing has been reformulated …, although it is largely reflective of existing case law. It has been explicitly stipulated that where it can be shown by the (Competition) Commission that the price charged by the dominant firm is prima facie excessive, the onus shifts to the dominant firm to prove that the price is reasonable.’
  • Regarding predatory pricing, ‘the scope of possible cost benchmarks has been amended to include average avoidable cost and average variable cost, in order to allow for a more accurate assessment of exclusionary behaviour’.
  • Margin squeeze … has been included in the list of specific exclusionary acts.
  • All contraventions are now ‘subject to a penalty of 10% of a firm’s annual turnover’, while ‘an administrative penalty of 25% of a firm’s annual turnover’ may now be imposed for a second offence.
  • Market inquiry proceedings will focus on market structure, observed market outcomes and conduct adversely impacting on competition. ‘Critically’, according to the article, the Competition Commission ‘will be able to take any remedial actions … it considers to be reasonable and practicable’ – other than divestiture, which can only be imposed by the Competition Tribunal. The commission’s findings and actions will be binding, unless challenged in the Tribunal.
  • Exemption provisions in the principal statute now include an additional ground: ‘to promote the ability of effective entry into, participation in or expansion within a market by small and medium businesses or firms controlled by historically disadvantaged persons’; ‘for the economic development, growth, transformation or stability of any industry designated by the Minister’; and ‘for competitiveness and efficiency gains that promote employment or industrial expansion’.