By AAT Editor, John Oxenham and Senior Contributor, Michael-James Currie.
During November 2015, the Constitutional Court of South Africa dismissed an application by the South African Competition Commission to appeal the competition Appeal Court’s (CAC) decision that Sasol Chemical Industries (SCI) had not charged excessive prices in contravention of the Competition Act’s abuse of dominance provisions. The CAC reaffirmed its decision in Mittal, which has been the leading authority on excessive pricing in South Africa.
In doing so the CAC confirmed that the first step in an excessive pricing case is to determine the economic value of the product. This is an objective test and must be determined in consideration of a notionally long run competitive environment.
Once the economic value has been determined, it is then necessary to establish whether the price was reasonably related to the economic value.
While this is a subjective test, the CAC confirmed the origin of a firm’s dominance and ‘degree of dominance’ is not particularly relevant. The CAC went even further and held that it is unlikely that a price will be deemed “unreasonably related” to the economic value if the price is not greater than 20% of the economic value.
For a comprehensive examination of the SCI case and what it means for excessive pricing cases in South Africa, please see the authors’ paper on Excessive Pricing.
In light of the Constitutional Court’s dismissal of the leave to appeal and coupled with Minister of Economic Development Ebrahim Patel’s recently stated desire to use the Competition Act to promote industrial policies goals, South Africa’s antitrust legislation may be amended in order to assist the Competition Commission in prosecuting abuse of dominance cases, in particular, excessive pricing.