Tag: SACC

SA’s New Rule 39: Has the Balance of Power Shifted in the Enforcement of Merger Conditions?

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Why the revised enforcement framework demands the attention of corporate counsel

By Stephany Torres

For companies that have obtained conditional merger approval in South Africa, the regulatory consequences of a transaction do not necessarily end when the deal closes. Employment undertakings, capital investment commitments, local procurement obligations and other public-interest conditions can continue to bind merging parties for several years.

A significant amendment to South Africa’s merger enforcement framework now places renewed emphasis on how these obligations are monitored, investigated and enforced.

On 13 October 2026, the Minister of Trade, Industry and Competition published Government Notice 8005 in Government Gazette No. 55541, replacing Rule 39 of the Rules for the Conduct of Proceedings in the Competition Commission and introducing a revised Form CC19.

The amendment restructures the process for addressing alleged breaches of merger approval conditions.

Although the revised framework provides greater procedural structure, it also raises important questions about the respective evidentiary obligations of the Competition Commission and merging parties, particularly in light of the Constitutional Court’s decision in Coca-Cola Beverages Africa (Pty) Ltd v Competition Commission and Another [2024] ZACC 3.

For corporate counsel, the implications extend beyond competition law. They concern transaction governance, regulatory risk management, internal reporting and the preservation of evidence long after a merger has been implemented.

A new approach to enforcing merger conditions

Under the previous Rule 39, the Commission could issue a Notice of Apparent Breach where it appeared that a firm had failed to comply with a condition attached to merger approval.

The affected firm could submit a remedial plan or approach the Competition Tribunal to review the notice on the basis that it had substantially complied with its obligations.

The revised Rule 39 introduces a different sequence.

The Commission may investigate a suspected breach at any time. Where its investigation results in a finding of non-compliance, it may issue a Notice Requesting Compliance.

The firm must then be afforded a reasonable period of at least ten business days to comply with the relevant condition or submit a remedial plan.

Where the matter remains unresolved, the Commission may approach the Competition Tribunal for an order confirming the breach and compelling compliance. The firm is expressly entitled to oppose that application.

Importantly, the revised procedure requires a further step before the Commission may pursue the specified statutory mechanisms relating to revocation, administrative penalties or other enforcement consequences. The firm must first fail to comply with the Tribunal’s order compelling compliance.

This provides an opportunity to remedy non-compliance before those more serious consequences arise.

The amendment therefore does not simply strengthen enforcement powers. It also formalises the process through which alleged breaches must be established and addressed.

The significance of the Constitutional Court’s Coca-Cola judgment

The revised Rule 39 is particularly noteworthy when considered against the Constitutional Court’s April 2024 judgment in Coca-Cola Beverages Africa.

That dispute arose from allegations that retrenchments undertaken following a merger breached employment-related conditions imposed as part of the merger approval.

The Commission issued a Notice of Apparent Breach, which Coca-Cola challenged before the Competition Tribunal.

The Constitutional Court subsequently considered the nature of the review available under the former Rule 39.

The Court confirmed that the Tribunal’s task was to determine objectively whether the firm had substantially complied with its merger conditions. The inquiry was not confined to whether the Commission had acted reasonably in suspecting a breach.

The Court also considered the causal connection required between the merger and the retrenchments, rejecting an approach that treated an insufficiently direct connection as adequate to establish a breach.

The judgment was important because it clarified both the substantive interpretation of merger conditions and the procedural protections available to merging parties.

The revised Rule 39 removes the express substantial-compliance review mechanism considered by the Constitutional Court.

That does not necessarily mean that substantial compliance has ceased to be relevant to the interpretation or enforcement of merger conditions.

However, the procedural route through which a firm may contest an allegation of non-compliance has changed.

The significance of this distinction should not be underestimated.

Does the revised rule shift the burden of proof?

One of the most important provisions is Rule 39(6), which requires a firm alleging compliance to place evidence demonstrating that compliance before the Tribunal.

At first glance, this appears to strengthen the Commission’s position.

However, the legal position requires careful consideration.

Under the former Rule 39, the Constitutional Court recognised that a firm invoking the special statutory review procedure bore the onus of establishing substantial compliance.

The revised rule therefore does not introduce an evidentiary obligation where none previously existed.

The more significant question is how that obligation operates within the new procedural framework.

Under the revised rule, it is the Commission that approaches the Tribunal seeking an order compelling compliance. The firm may oppose the application and must place evidence of compliance before the Tribunal if it relies on that contention.

Whether Rule 39(6) merely imposes an evidentiary obligation on the firm or goes further by affecting the ultimate legal burden of proof, is an important question of interpretation.

There is a distinction between requiring a company to produce evidence within its possession and requiring it to disprove an allegation of non-compliance.

That distinction may become particularly important where the alleged breach depends on disputed facts, complex economic circumstances or the interpretation of broadly framed public-interest conditions.

The interaction between Rule 39(6), the Competition Act and established principles of procedural fairness may therefore become an area of future litigation.

Why corporate counsel should be paying attention

The practical significance of the amendment lies in the increasing importance of post-merger compliance.

South African merger approvals frequently contain obligations that extend beyond conventional competition concerns.

These may include commitments to preserve employment, maintain production capacity, invest in domestic operations, support historically disadvantaged suppliers, establish employee ownership arrangements or meet specified transformation objectives.

Such conditions may remain operative for several years.

During that period, businesses may experience substantial changes in market conditions, operational requirements, corporate structures or financial circumstances.

For example, a company may undertake a restructuring several years after completing an acquisition. If the merger approval contained employment-related conditions, the Commission may investigate whether the restructuring breached those commitments.

The company may contend that its decisions arose from independent commercial circumstances rather than the merger.

In such a dispute, contemporaneous evidence of the reasons for the restructuring, the company’s decision-making processes and the applicable merger conditions may prove decisive.

Similar difficulties can arise in relation to investment commitments where expenditure is delayed, procurement undertakings where suppliers become unavailable, or ownership conditions affected by subsequent corporate reorganisations.

The central lesson is that compliance must be demonstrable, not merely assumed.

Five practical priorities for in-house legal teams

  1. Review outstanding merger conditions

Corporate counsel should identify all merger approvals containing obligations that remain operative, including those arising from transactions completed several years ago.

Each condition should be reviewed against its precise wording, applicable deadlines, reporting requirements and any permitted exceptions.

  1. Establish clear internal accountability

Responsibility for merger-condition compliance is often distributed across human resources, finance, procurement, operations and corporate affairs.

The legal function should ensure that each obligation has an accountable business owner and that there is a defined process for escalating potential non-compliance.

  1. Preserve contemporaneous evidence

Companies should maintain organised records demonstrating compliance with each condition.

Depending on the nature of the undertaking, these may include employment records, board approvals, capital expenditure reports, procurement data, ownership documentation and correspondence with regulators.

A general assurance from management that the company has complied may be insufficient when a particular obligation is challenged.

  1. Assess the implications of subsequent corporate decisions

Restructurings, retrenchments, changes in suppliers, disposals of assets and revisions to investment programmes should be assessed against outstanding merger conditions before implementation.

Legal teams should be involved early enough to identify regulatory implications and, where necessary, consider engagement with the Commission.

  1. Integrate post-merger compliance into transaction planning

For future transactions, the parties should carefully consider the drafting, monitoring and implementation of proposed merger conditions.

Conditions should, wherever possible, be clear, objectively measurable and capable of being monitored.

Transaction documentation should also allocate responsibility for ongoing compliance, reporting and record retention following closing.

Has the balance shifted in favour of the Commission?

The revised Rule 39 can be viewed as part of a broader emphasis on ensuring that commitments made during merger proceedings translate into measurable outcomes after implementation.

From an enforcement perspective, it creates a structured process through which the Commission may investigate suspected breaches, require remedial action and ultimately seek Tribunal intervention.

At the same time, it introduces procedural safeguards, including the requirement for a finding of breach before a compliance notice is issued and the opportunity to contest allegations before the Tribunal.

The removal of the express substantial-compliance review procedure and the wording of Rule 39(6) nevertheless raise questions about the balance between regulatory enforcement and the rights of merging parties.

The precise consequences will depend on how the Commission applies the revised rule and how the Tribunal interprets its provisions.

For corporate counsel, however, one conclusion is already clear.

Merger approval should no longer be regarded as the conclusion of a transaction’s competition-law risk. It may mark the beginning of a prolonged period of regulatory accountability.

Businesses that incorporate merger-condition compliance into their governance frameworks, maintain reliable supporting evidence and anticipate regulatory scrutiny will be better positioned to manage the risks associated with the revised enforcement regime.

About Primerio International

Primerio International is a competition and regulatory law firm advising businesses on complex merger control matters, public-interest conditions, competition investigations, regulatory compliance and competition litigation.

Our competition law team assists clients in navigating South Africa’s evolving merger control framework, including the negotiation, interpretation and enforcement of merger conditions.

Sources

  1. Competition Act 89 of 1998 — Government Gazette No. 55541, Government Notice 8005, 13 October 2026. 

https://www.gov.za/sites/default/files/gcis_document/202610/55541gon8005.pdf

  1. Coca-Cola Beverages Africa (Pty) Ltd v Competition Commission and Another [2024] ZACC 3, Constitutional Court, 17 April 2024. 
https://www.concourt.org.za/index.php/constitution/the-text/2-%20uncategorised/index.php/judgement/index.php/judgement/552-coca-cola-beverages-africa-pty-ltd-v-competition-commission-and-another-cct19-22

Right to Repair: S.A. Expands Rules to Electronics and Appliances

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By Olivia Höll

The South African Competition Commission (“the Commission”) has published its final Guidelines on Repair, Service and Maintenance Aftermarkets (“the Guidelines”) under section 79 of the Competition Act 89 of 1998 (“the Act”). The Guidelines mark a significant expansion of the Commission’s right to repair programme beyond the automotive sector into consumer electronics, appliances, medical devices, and backup power systems.

The Commission’s core concern is that original equipment manufacturers are using control over spare parts, technical information, diagnostic software, and product design to exclude Independent Service Providers from repair markets after warranties expire.

Background

The Guidelines build on the Commission’s experience in the automotive aftermarket, where similar guidelines were introduced in 2021 and amended in 2024. The Commission observed that the same structural problems affecting vehicle repair were emerging across electronics and appliances.

Industry stakeholders reported that restrictions on access to parts, tools, and information were driving up repair costs, limiting consumer choice, and shutting out small and medium enterprises. The Commission conducted focus groups with independent repairers across multiple markets before publishing draft guidelines in August 2026 for public comment.

What products are covered

Right to Repair in South Africa

The Guidelines apply to repair and maintenance aftermarkets for mobile phones, tablets, gaming consoles, audiovisual equipment, televisions, white goods such as washing machines and tumble dryers, medical equipment, and backup water and electricity systems such as inverters.

Motor vehicles are excluded because they remain governed by the separate automotive aftermarket guidelines.

The Guidelines apply to repairs outside the scope of warranty protections, whether because the warranty period has expired or because the specific damage is not covered. However, the Commission has clarified that a product remaining within its warranty period does not automatically place all repair activities outside the Guidelines’ scope.

Conduct targeted by the Commission

Spare parts restrictions

The Commission will closely scrutinise exclusive supply arrangements, refusals to supply, discriminatory supply terms, and indirect restrictions that limit the practical usability of spare parts. Excessive pricing of spare parts by dominant manufacturers will also be assessed.

Software locks and parts pairing

Software mechanisms that tie replacement components to a specific device and prevent them from functioning without manufacturer activation will be treated as indirect restrictions on access to spare parts. Warning messages displayed after independent repairs and restrictions on firmware required to complete repairs also fall within this category.

Diagnostic tools and technical information

Requiring proprietary diagnostic tools where commonly available alternatives could perform the same function, or restricting software access unless approved hardware is used, may constitute indirect restrictions.

Warranty terms and consumer incentives

Discounts, rebates, or loyalty incentives conditional on consumers using manufacturer repair services may be investigated. Raising switching costs by restricting access to repair records or creating contractual barriers will also attract scrutiny.

Accreditation requirements

Accreditation and certification requirements imposed on independent repairers will be assessed for whether they are transparent, proportionate, and applied consistently.

Legal framework

The Commission will assess conduct under three provisions of the Act. Section 5 prohibits restrictive vertical practices that substantially prevent or lessen competition. Section 8 prohibits dominant firms from engaging in exclusionary conduct such as tying, refusal to supply scarce goods, and margin squeeze. Section 9 prohibits price discrimination that impedes small and medium businesses or firms owned by historically disadvantaged persons from participating effectively.

Justifications and defences

The Guidelines acknowledge that restrictions may be justified in certain circumstances. Protection of intellectual property, regulatory compliance, consumer safety and security, and technological efficiency gains are recognised as potential defences. However, where conduct is of a type likely to substantially prevent or lessen competition, the Commission will apply a higher evidentiary standard to claimed justifications.

Implications

Manufacturers should review their repair and service practices against the conduct identified in the Guidelines. Key risk areas include spare parts distribution policies, diagnostic tool requirements, software activation systems, warranty terms, and accreditation criteria.

Independent Service Providers now have a clearer framework for assessing whether manufacturer conduct may contravene the Act and for reporting instances where they are frustrated in providing services.

Consumers may benefit from more competitive repair markets, leading to lower repair costs, greater choice of service providers, and extended product lifespans.

Conclusion

The Guidelines represent a significant step in South Africa’s evolving approach to competition in aftermarkets. By extending principles developed in the automotive sector to electronics and appliances, the Commission has signalled that it will scrutinise manufacturer practices that restrict access to spare parts, technical information, and diagnostic tools.

The Guidelines are not binding and do not create new legal obligations. However, they provide a clear statement of the Commission’s enforcement priorities and analytical framework. Whether they achieve their objective of promoting greater consumer choice and access to affordable repair services will depend on the Commission’s willingness to pursue enforcement action.

FUEL AT THE BOILING POINT: Competition Commission Issues Price Gouging Warning

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By Megan Armstrong and Matthew Freer

South African consumers have received warning to expect oil price hikes from 1 April 2026, at a time when households are already price-constrained and cost-conscious. Naturally, as oil prices increase, consumers can reasonably expect these hikes to be passed down through corresponding price increases on the respective goods and services. The question to business is how much of an increase is reasonably permitted within the ambit of competition law, and what should the timing of such an increase be?

The Commission’s Warning

In response to the anticipated price volatility, the Competition Commission of South Africa (the “Commission”) has issued a media statement warning of heightened risks of price gouging across several sectors. The Commission stated the following:

“The risk is prevalent for unregulated fuels such as diesel retail prices and jet fuel; oil-based products such as nitrogen-based fertilisers and plastics; fuel-intensive services such as air, land and sea transport and logistics; and all other products and services that rely on these inputs, particularly food products and delivery services.”

Additionally, the Commission set out clear rules for businesses navigating the looming price increase:

  • “Businesses may not increase prices in anticipation of future fuel cost increases; they may only increase prices once they experience actual fuel cost increases.
  • Businesses that experience fuel cost increases may only increase their prices in proportion to the actual fuel cost increases they experience.
  • In effect, these two conditions mean that product or service margins after the surge in fuel prices should be no higher than the margins prior to the fuel price increase.
  • Furthermore, once fuel costs decline, product or service prices should decline immediately.”

What is Price Gouging?

Price gouging is the act of charging customers unreasonably high prices for goods or services typically in response to a crisis, natural disaster or demand shock where consumers have few alternatives and the product is a necessity. This behaviour sits at the intersection between business ethics and consumer protection in considering exploitation of a demand spike to maximise profits.

South Africa’s legal approach to this issue does not use the term “price gouging” directly in its primary statutes, rather the framework is built upon two distinct pillars. The first pillar is found in the Competition Act 89 of 1998. Section 8(1)(a) of the Act prohibits a dominant firm from charging an “excessive price to the detriment of consumers or customers”, a definition refined by the Amendment Act of 2018 to mean “higher than a competitive price” and where such a difference is “unreasonable”, targeting firms with substantial market power which abuse their dominance. The second pillar is enshrined in the Consumer Protection Act 68 of 2008. Sections 40 and 48 of this Act prohibit suppliers from engaging in unconscionable conduct and from supplying goods or services “at a price that is unfair, unreasonable or unjust”. This provision has a broader application, as it does not require a firm to be dominant. It applies to any supplier who takes unfair advantage of a consumer.

Considering the existing legislative framework on price gouging behaviour in South Africa, price gouging is then defined as the practice of increasing prices on essential goods or services during a declared disaster or crisis to a level that:

1.         Does not correspond to increased costs of providing the good or service; or

2.         Exceeds pre-crisis profit margins without justification; and

3.         Takes unfair advantage of those consumers with limited alternatives as a result of the emergency situation.

Lessons from COVID-19

The most significant development in South Africa with regards to price gouging came in response to the COVID-19 pandemic. On 19 March 2020, the Minister of Trade and Industry, Ebrahim Patel, published the Consumer and Customer Protection and National Disaster Management Regulations and Directions (the “Regulations“). They were designed to prevent an escalation of the disaster and to protect consumers from exploitative commercial practices during this period of vulnerability.

The Regulations formalised a cost-based test for determining excessive or unfair pricing, that a material price increase of an identified good or service will be considered indicative of excessive pricing if:

  • it “does not correspond to or is not equivalent to the increase in the cost of providing that good or service“; or
  • it “increases the net margin or mark-up on that good or service above the average margin or mark-up for that good or service in the three month period prior to 1 March 2020“.

Furthermore, the Commission’s 2021 Guide for Business Compliance with Price Gouging Regulations, emphasised that during a disaster, price increases must be strictly proportionate to cost increases, and businesses must not exploit temporary demand surges to inflate profit margins.

The Commission’s willingness to act was demonstrated early in the pandemic in the Babelegi case, where a firm was found liable for excessive pricing after increasing mask prices by over 1 000% while its own supply costs remained unchanged.

In essence, South Africa’s legal framework defines price gouging not by the final price itself but by seller behaviour, where an unjustified cost increase representing abuse of a temporary situation in which consumers are a captive market and desperate for essential goods and services. A framework established during COVID-19 now guides current pricing conduct and sheds some light on how the Commission would evaluate seller behaviour in relation to demand shocks arising from emergencies, natural disasters, or market disruptions.

What Businesses Should Do

Business should be mindful of not increasing prices in anticipation of the impact of the oil price increase and engage in corresponding price increases once these price increases have a clear and quantifiable impact on internal pricing mechanisms.

The wider public does have recourse available to contact the Commission, should it appear that a business is engaging in price gouging behaviour, or has responded too erratically to the market disruptions caused by the sudden spike in the oil price. The Commission has stated the following: “Given the heightened risk of price gouging during this period of oil price volatility, the Commission calls on the public and businesses to report instances where they believe price gouging is occurring so that the Commission can investigate.”

Ultimately, the lesson from COVID-19 remains unchanged in that price increases have to be justified by evident supply cost increases and not by opportunity. As the Commission has made clear, anticipation pricing and margin expansion will not be tolerated.

Sweeping Inquiry Sheds Light on Online Intermediation Platforms: Competition, Opportunity, and the Road Ahead

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By Tyla Lee Coertzen and Nicola Taljaard

On 31 July 2023, the South African Competition Commission (“SACC”) released its Final Report and Decision on the Online Intermediation Platforms Market Inquiry (“OIPMI”). The OIPMI was initially launched on 19 May 2021 and after a number of requests for information, public hearings, expert reports as well as comments and engagements with stakeholders, the SACC’s findings and recommendations have finally been concluded.

The SACC is empowered to conduct market inquiries according to section 43B(1)(a) of the Competition Act 89 of 1998 (as amended) where it has reason to believe that there are market features that may impede, distort or restrict competition in a particular market; or to achieve the objects and purposes of the Act (including participation of small and medium enterprises (“SMEs”) and historically disadvantaged persons (“HDPs”).

The Inquiry: A Timeline of Discovery and Discernment

  • May 2021: The kick-off. Release of the Statement of Issues (SOI), first round of Requests for Information (RFIs), and business user survey.
  • August 2021: Heating up with the release of the Further Statement of Issues (FSOI), second round of RFIs, and a refined business user survey.
  • November 2021: The public had their say with hearings and follow-up RFIs.
  • February 2022: Expert reports and in-camera hearings added a new dimension.
  • July 2022: Provisional Inquiry Report was published, provisional findings, and recommendations were made public.
  • August to December 2022: A flurry of submissions, stakeholder engagements, and follow-up RFIs.
  • January to July 2023: Engaging stakeholders on final findings and remedial actions, sealing the deal.

What Does It All Mean?

These findings focus on the various platform categories, including the mammoth influence of Google Search. The full extent of these actions requires deep exploration, but one thing is clear: the landscape of online intermediation platforms is about to shift.

During the launch of the OIPMI, the Minister Patel of the Department of Trade, Industry and Competition (“DTIC”) commended the SACC for its great effort and the high-quality product produced in the form of the OIPMI. He further noted that the government should consider taking an inclusive response to the findings and recommendations in the OIPMI.

The findings concluded, inter alia, that Google Search is vital as a means for consumers to access all platforms, and that its paid search alongside free results business model is disproportionately advantageous to larger and more established platforms. It also found that Booking.com’s practice of restricting hotel prices on certain online networks results in a restriction of competition and allows it to make more commission by making users reliant on it. eCommerce giant, Takealot, was found to have a conflict of interest due to its retail department competing with its marketplace sellers and causing detriment to the latter. Google Play and the Apple App stores were found to charge exorbitant fees to developers and on a global level, the platforms hampered the visibility of SA-paid apps. Food delivery platforms Uber Eats and Mr D Food were found to cause difficulty to their competitors because of the lack of openness regarding the surcharges charged on menus across their platforms, as well as the limitations put on national chain franchisees. Property advertisement platforms Property 24 and Private Property were further found to have hindered their competitors by providing low interoperability to competitors in respect of listings. Property 24, together with AutoTrader and Cars.co.za were also found to have hampered small estate agents and car dealers due to the discriminatory pricing implemented by these platforms.

To combat the effects of the findings, the SACC recommended the imposition of a number of remedial actions including consumer-aiding search filters, marketing incentives to purchase local goods, the removal of restrictive pricing clauses, the segregation of internal (competing) divisions, the removal of automatically directing mechanisms to larger players, disclosure clauses to consumers and other benefits to SMEs, HDPs and consumers.

All platforms will be provided a period within which to affect the remedial actions.

A New Chapter: Where Do We Go From Here?

This OIPMI hasn’t just been about pointing fingers and exposing flaws. It’s about shaping the future of a wide range of the economy. The implications are broad, affecting everyone from big tech to the small business owner striving to make a mark in a competitive world.

Michael-James Currie, Partner at Primerio, noted “The recommendations of the OIPMI are far reaching for online platforms. Regulators need to ensure that we do not undermine those who are growing and providing significant investment the digital market in a highly competitive market where firms are competing not only with established traditional retailers but also large international players. Likewise, South Africa cannot afford to signal to international players that their business models will be substantively undermined once they establish themselves in South Africa. This is particularly so if the Commission’s remedies are not informed by objective competition concerns.”

Media PAIA request reveals evidence underlying South African Competition Commission dawn raid

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By Tyla-Lee Coertzen

Following the South African Competition Commission’s (“SACC”) dawn raids conducted on eight major South African insurance firms in August of 2022, a popular South African news resource, News24, was successful in a Promotion of Access to Information (“PAIA”) request to gain access to the court documents which granted the SACC permission to conduct the dawn raid.

In our previous update on the matter, we recorded that the SACC conducted a dawn raid on the following insurance firms: Discovery Limited; Hollard Insurance Group (Pty) Ltd; Momentum, a division of MNI Limited; Old Mutual Limited; BrightRock Life Limited; FMI, a division of Bidvest Life Limited; Professional Provident Society Limited, and South African National Life Assurance Company (Pty) Ltd. The dawn raids were conducted as part of the SACC’s ongoing investigation into potential collusion between insurance firms.

Collusion is described as a per se prohibition in the South African Competition Act, 89 of 1998 (as amended) (“the Act”). This means that competitors who are found to have colluded with each other may not raise efficiency defences. Mere participation in a restrictive horizontal practice will attract administrative penalties and imprisonment.

The PAIA request provided News24 with access to certain evidence including emails circulated between insurers which the SACC believes to have taken place since 1989. According to News24, the SACC alleges that historically, the insurers formulated a ‘rate book’ in which information regarding information regarding prices of certain products were recorded. This rate book was allegedly exchanged between insurers. Thereafter, it is alleged that the insurers exchanged floppy disks with sensitive pricing information. In more recent times, it is alleged that pricing information was uploaded onto password protected online platforms, and the passwords were shared between insurers. The SACC also alleges that technical information regarding the design of products were shared, thereby allowing insurers to decrease competition amongst themselves. To see the full News24 article on the matter, click here.

Primerio director, John Oxenham, who notably acted for the leniency applicant in the infamous bread cartel says: “After a lengthy hiatus, it is apparent that the SACC is using significant investigative tools in an effort to uncover and prosecute potential cartel conduct. In the past, this mechanism of investigation, namely dawn raids, has been of significant effect in assisting the agencies to fulfil its mandate of preventing corrupt activity.”

Fellow Primerio director. Michael-James Currie said “one of the key challenges, for all parties involved, in cases where the alleged conduct was often historic, there is a lack of credible witnesses to contextualize certain evidence. It very often happens that evidence, when considered in isolation, presents a very different picture than what truly transpired”.

Concentration and Participation in the South African Economy: Levels and Trends – SACC Publishes Report

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By Michael-James Currie & Gina Lodolo

On 7 December 2021, the Minister of Trade, Industry and Competition, Ebrahim Patel released a report titled “Measuring concentration and participation in the South African Economy: Levels and Trends”, accessible here (“Concentration Report”). This Concentration Report is the first of many as the Minster undertook to update the report bi-annually from hereon out.

The theme of the Concentration Report is centered on identifying and remedying:

  • Economic levels and trends that are skewed and don’t reflect South Africa’s population demographic; and
  • Entrenched leaders in certain sectors, which creates “inefficient concentration” by setting high barriers to entry thereby reducing competition, which, according to the Concentration Report, can lead to higher prices and lower investment in South Africa.

The Concentration Report highlights that concentrated markets are of a rising concern internationally, however, specifically in the South African context, the apartheid era created dominant firms that persist and prevent historically excluded persons from participating and gaining market share.

The Competition Commission (“SACC”) does however note that concentration does not automatically mean there is a lack of competition and there may be many instances where concentration will be for the benefit of the consumer and pro-competitive. In this regard pro-competitive concentration can be seen when innovation creates increased market size and economies of scale reduce prices for consumers. Further, the SACC notes that there are still gaps in the data, which will be addressed in the subsequent reports.

The Concentration Report highlights that the SACC will hereinafter be concentrating its efforts on markets that have been identified to contain a role player that is presumed dominant. In this regard, the sectors that have been identified as requiring increased scrutiny are:

  • Farming inputs;
  • Agro-processing;
  • Sin (alcohol and tobacco) industries;
  • Healthcare;
  • Communications;
  • Upstream steel value; and
  • Financial services

This increased scrutiny will be seen particularly in industries that require licenses to operate. This is of concern to the SACC because licensing can be used as a mechanism to spread out ownership, which may be curtailed by a merger, and the SACC has seen increased merger activity particularly in industries characterized by licensing requirements.

To conclude, it is vital to take cognizance of this Concentration Report because the SACC has highlighted that it will form the basis of strategic enforcement of the Competition Act 18 of 2018 (“Act”) and will lay the path for policy centered on a concentrated economy.  In this regard, we foresee closer scrutiny of role players with large market shares in the years to come, especially those players that are presumed to be dominant or expressly mentioned in the Concentration Report.

A further challenge that the Commission faces in tackling perceived high-levels of concentration, is balancing the clear socio-economic objectives with competition law goals and consumer welfare enhancing conduct. Although the Report acknowledges that high concentration does not mean the market is anti-competitive, the general policy of the Report is clearly aimed as protecting or promoting a designated group of competitors as opposed to the competitive process itself. This creates an inherent policy tension and requires very clear, transparent and quantifiable trade-offs.

As the Constitutional Court recently affirmed in the Mediclinic case, higher prices to consumers is not in the public interest. The converse is of course also true. Intervention in markets which may lead to adverse effects on consumer welfare would need to be weighed against the objective of “opening up” the market. Where healthy and efficient entry is permissible, that may well be consumer welfare enhancing but if remedial actions are deigned to simply protect inefficient market participants then interventionist measures are likely to amount to nothing more than a tax on large players which either ultimately gets passed on to consumers or discourages investment. It is absolutely critical to South Africa’s economy and to the integrity of the competition law regime that the latter consequences do not materialize.

You can access the summary report here: https://www.compcom.co.za/wp-content/uploads/2021/12/Concentration-Tracker-Summary-Report.pdf

Healthy foods & price-gouging during Pandemic?

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High ginger, garlic and lemon prices have left a sour taste in mouths of South Africans

By Gina Lodolo and Jemma Muller

The exorbitant and rapid increase in prices of ginger, garlic and lemon, that which spans up to 300%, has been the source of much public outcry and regulatory concern over the past few months. The question remains whether the price increases by massive retailers can be justified or whether they should be considered as excessive?

The Consumer and Customer Protection and the National Disaster Regulations and Directions (the “Regulations”), which came into effect in March 2020, were put in place to consider inter alia when a price is excessive.  They empower the South African Competition Commission (“SACC”) and National Consumer Commission (“NCC”) to investigate and prosecute cases of price-gouging.  Contraventions may result in penalties of up to ZAR 1 million or 10% of annual turnover. According to the NCC, price gouging is defined as “an unfair or unreasonable price increase that does not correspond to or is not equivalent to the increase in the cost of providing that good or service.”

The NCC has launched an investigation under the Consumer Protection Act into potential contraventions of the COVID-19 Regulations against major retailers such as Woolworths, Pick ‘n Pay, Shoprite, Spar, Food Lovers market, Cambridge Foods and Boxers Superstores. According to the Regulations, and in terms of section 120(1)(d) of the Consumer Protection Act, a price increase of a goods, including inter alia “basic food and consumer items”, which does not correspond to the increase in cost of supplying such goods, or increases in the net margin or mark-up on the good(s) which exceeds the average margin or mark-up on the said good in the three month period before 1 March 2020 is “unconscionable, unfair, unreasonable and unjust and a supplier is prohibited from effecting such a price increase”.

The preferred tools of the COVID-19 Regulations relating to excessive pricing seem to be predominantly similar to competition policy and its associated institutions. Upon assessing an increase in pricing to determine whether the increase is excessive, the test would be whether the prices were increased due to cost-based increases (such as reduced supply due to an increase in import costs as the domestic currency get weaker) as opposed to price increases only due to a demand increase (such as more consumers buying ginger as an immune booster during the COVID-19 pandemic). When assessing exploitative conduct, it is more likely to establish that there has been an abuse of dominance when a firm is dominant or enjoys great market power.

It has appeared that the trend in the increase of ginger and garlic retail prices is that the allegedly exploitative conduct no longer originates from only one dominant player as such (eg. only Spar) but rather affects shops in the whole of South Africa. The price increases have sparked outrage with consumers who are driving shop-to-shop in an attempt to purchase ginger or garlic at a lower, or somewhat ‘standard’ pre-COVID-19, price.

As stated above, increasing prices will be seen as excessive when the increase is due only to an increase in demand. Retailers have claimed that the increase is not only because of rising demand but also due to an actual decrease in the product supply.  It is therefore pertinent to determine the extent to which the supply has been reduced in relation to the increased demand. This would require a proportionality balance, as shops would have to prove to the competition authorities that the increase of pricing is only due to the decrease in supply. Extortionary pricing above and beyond that would demonstrate an increase of pricing due to the increase of demand, and as such would fall foul of the  Competition Act and the Regulations cited above.

The rising prices in garlic and ginger have been on the SACC’s radar since July 2020, when it concluded a consent agreement with Food Lovers Holdings whereby the retailer agreed to immediately halt excessively pricing its ginger products at one of its stores. Notwithstanding this fact, the subsequent regulation and enforcement of ginger and garlic prices by the SACC under Regulations has become somewhat tricky due to the fact that the products are not considered to be essential products under the COVID-19 Regulations.

The SACC previously found that the increases in prices were largely attributed to the rise in costs experienced by retailers and they found no evidence of price gouging targeted at taking advantage of the constrained mobility of consumers or shortages during the pandemic. What the SACC found to be concerning, however, were the high pre-disaster margins on products such as ginger and garlic, which have largely been maintained throughout the pandemic by retailers raising their prices for the goods as the costs were increasing. Accordingly, as mentioned above, although the SACC did not find evidence of price gouging, it did find possible contraventions of the Consumer Protection Act and as such, referred the potential contraventions to the NCC to investigate further.

A spokesperson for the SACC, Siyabulela Makunga has stated the following:

“We also appreciate the changes in demand for garlic and ginger, but it is our view the price of ginger and garlic have [sic] increased astronomically at retailers. We don’t think that the increased demand in ginger justified the price of up to R400 a kilogram…”

John Oxenham, an R.S.A. competition lawyer with Primerio Ltd., notes that “the prosecution of the matter demonstrates the respective authorities’ commitment to priority sectors and an unbridled effort to root out any form of price-gouging.”

To conclude, market power of the implicated retailors has likely been increased due to the reduced availability of substitutes for customers as a majority of retailers have introduced a dramatic price increase. The investigation launched by the NCC is, however, a step in the right direction to protect consumers who have been left with very limited choices in the widespread steep increase in price of ginger and garlic.

“Emerging Antitrust”: One size doesn’t fit all?

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Pro rem publicam

At the Concurrences “Antitrust & Developing and Emerging Economies” conference held at NYU Law last Friday — and aptly sub-titled “Coping with nationalism, building inclusive growth” — the audience was treated to a (rather iconoclastic, yet fascinating) keynote speech by Nobel laureate economics professor Joe Stiglitz, which highlighted what would become a theme woven throughout the four panels of the day: One size does not fit all when it comes to competition-law regimes, according to a majority of the speakers; imposing a pure U.S. or EU-derived methodology without regard to local economic and/or political differences is doomed to fail.  However, as we outline further below, there were also countervailing voices…

Nobel Laureate Joseph Stiglitz: “Revisit all of antitrust!”

In the words of Professor Stiglitz, his advice to developing nations was (perhaps to the chagrin of U.S. government representatives, such as the FTC’s international director, Randy Tritell): “don’t copy the US antitrust laws and presumptions!”  Smaller markets in developing countries are even more susceptible to market power by few large firms.  Competition law can be used in developing countries to advance the public interest, as there are fewer “tools in the toolkit” in those nations, and in his view, all available tools should thus be used.  He referred to the WalMart/Massmart transaction in South Africa in this regard, noting the public-interest conditions imposed there.

On the day’s Mega Mergers panel, SACC Commissioner Tembinkosi Bonakele noted how the outcomes of truly global “mega mergers” all having been positive, “there has been no outright prohibition, there really is no problem that’s too big which could not be remedied by the authorities and the parties.”

Andreas Stargard and Commissioner Tembinkosi Bonakele (South Africa)

Observes Andreas Stargard: “Commissioner Bonakele also pointed to the importance of international merger enforcers cooperating on remedies, in order to allow these positive outcomes to be maintained.  Taking up Professor Harry First’s hypothetical of a joint or ‘merged’ antitrust enforcement agency, Mr. Bonakele considered a combined merger authority for the African continent a possibility, especially in light of the many small jurisdictions which individually lack resources to police cross-border M&A activity.”  Mr. Bonakele expressed the concern that “the smaller, national enforcers certainly feel as if they cannot block a mega deal on their own, so they largely defer” to the established agencies, such as the EC and DOJ / FTC.

In response to Frederic Jenny’s critical introduction of the South African Competition Amendment Act, Commissioner Bonakele commented that the current legal regime lacked the ability to tackle concentration as a market feature in itself, whilst the SACC had a comparatively positive track record on unilateral enforcement issues.  Overall, he disagreed with the moderator that most of the Bill’s changes were drastic, stating simply that it would in fact bring South Africa more in line with other international regimes.

As to the ministerial intervention powers, he identified two concerns, namely the use of the agency’s resources as well as the possible risk of abuse by a minister who could employ the new law to pursue ulterior motives against a firm or a sector.

Counterpoint: public interest or politicization?

Prof. Ioannis Lianos characterized the “slightly fuzzy public interest test” as largely a scheme to enhance the bargaining power of the competition agencies that do apply such a test.

Canadian attorney and former enforcer Lawson Hunter pointed out that the trend of growing political interference in the merger approval process has spread globally, not only in developing nations but also in well-established regimes — often under the guise of national security reviews, which are “obscure, opaque in process, fundamentally political, and without any ‘there there’.”  Merger review has “simply become very broad and less doctrinal.”  “I found it interesting that Mr. Hunter recommended that other antitrust agencies should give more frank input into their sister agencies, if and when those stray from the right path,” said Stargard, who focuses his practice on competition matters across the continent.  “Hunter also pointed to the tendency in emerging antitrust jurisdictions to abuse the remedy process in merger control to address economic issues that lie well outside the actual competition concerns that may have been found — an issue we have also come across, sadly.”

Commissioner Bonakele closed the final panel of the day by addressing the recently ratified South African Competition Amendment Bill: he admitted that there were some “radical” provisions in the law, such as the power to break up companies, as well as the existence of a risk of government using the law’s new national security provision in a protectionist manner. He concluded by stating his personal worry that the law had possibly too much ambition, which could be difficult to implement in reality by the SACC.

SA Competition Act officially amended – serious consequences for businesses

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South Africa has amended its antitrust laws, first introduced to the country in 1998 via its Competition Act.  Parliament ratified the amendments (which still have to be rubber-stamped by the National Council of Provinces, a mere formality) yesterday over the serious objections of the opposition parties.  The new law will give significant interventionist powers to the Minister for Economic Development, Ebrahim Patel, as well as introduce lower (or even reversed) burdens of proof for the Competition Commission (SACC) to make its case, after a long-running string of court losses and appellate defeats has seen the SACC’s track record weakened, observers say.

As reported on AAT Monday, a panel of Africa-focussed competition specialists had just recently convened in Johannesburg, warning the South African business community about the high probability of the Bill’s passage, as well as addressing the adverse effects the Bill will have on doing business in South Africa as a medium to large size market player (measured in market share, not merely revenue) or simply as a foreign-owned corporate.

Minister Patel speaks
Minister Patel

Interviewed yesterday in Cape Town, where the Amendment Act was ratified by South Africa’s Parliament, Primerio competition practitioner Andreas Stargard commented: “As we foreshadowed at our conference less than a week ago, the likelihood of the Bill passing was high.  Political, populist pressure was simply too strong for this amendment — which had been introduced as a so-called ‘prioritised bill’ that could be fast-tracked — not to pass.  We view the likely effects of it as a serious departure from commonly accepted best practices in the international world of antitrust law, as we outlined to our clients at the Johannesburg conference.  I will be curious to hear what Commissioner Bonakele’s comments on these critiques will be at Friday’s conference at New York University“, referring to an event sponsored by NYU and Concurrences, at which the SACC Commissioner is expected to deliver a panel speech later this week.

Commenting on the purported social transformational goals, South African competition partner John Oxenham adds: “There is a relentless push from government (not only Mr. Patel) to use the Competition Act as a tool to speed up its broader social and transformation goals.  The underlying reasons for this Amendment are rather straightforwardly conceded by the current, and arguably presently fluctuating, administration: the Bill was ostensibly designed not to enhance competitiveness in the traditional antitrust sense, but rather to address so-called market concentration and perceived unequal ownership patterns in the SA economy.”

Competition Appeal Court’s Ruling in Standard Bank Case: A Changing of the Tides?

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Threat of Referral no Longer an Arrow in the Commission’s Quiver?

By AAT Senior Contributor Michael-James Currie

In the first week of June 2018, the South African Competition Appeal Court (CAC) upheld Standard Bank’s appeal and ordered that the Competition Commission (Commission) make available its investigation record to Standard Bank. Standard Bank is a respondent in the Commission’s ForEx investigation.

Standard Bank had requested that the Commission make available its record in terms of Rule 15 of the Competition Commission Rules. Rule 15 permits any member of the public to request access to the Commission’s non-confidential record. Standard Bank therefore brought its application in terms of Rule 15 not on the basis of it being a respondent to the Commission’s investigation but as an ordinary member of the public.

Although the CAC had in an earlier case, Group 5, set out the correct interpretation and application of Rule 15 and stated that:

  1. the Commission is obliged in terms of Rule 15 to make available its record of investigation;
  2. that the Commission must do so within a “reasonable time”; and
  3. that the Commission must disregard the applicants status as a litigant when determining what a reasonable time is.

The Tribunal in the Standard Bank case, however, deviated from the CAC’s binding decision in Group 5 and held that the Commission would only need to make its record available to Standard Bank at the time of discovery.

Accordingly, the CAC in the Standard Bank case found that the Tribunal took Standard Bank’s status as a litigant into account when assessing what a reasonable time would be by which the Commission was obliged to make available its record to Standard Bank. The CAC in Standard Bank confirmed that although the Tribunal is not bound by the stare decisis principle in relation to its own decisions, the Tribunal is bound by the CAC’s decisions. The Tribunal’s decision in Standard Bank was inconsistent with the CAC’s earlier decision in the Group 5 case – where the CAC expressly stated that there is no rational basis for linking the production of the Commission’s record with discovery proceedings. The Tribunal’s departure from the CAC’s earlier precedent was noted with concern by the CAC in Standard Bank.

The Commission argued – as justification for not producing its record – that Standard Bank was abusing its position as a litigant. In this regard, the CAC expressly rejected this argument and held that simply because a plaintiff would be better placed to plead its case after receiving the Commission’s record that, in of itself, does not amount to an abuse of process. The CAC held that it would only amount to an abuse of process if an applicant sought to rely on Rule 15 in order to avoid or delay having to plead within the prescribed time periods.

Furthermore, the CAC reaffirmed that a member of the public’s right to access the Commission’s record should not be prejudiced by the fact that such a member is also a litigant.

The Court’s Standard Bank decision is important as respondents will invariably be inclined to seek access to the Commission’s record prior to pleading their case. This may have a material impact on the Commission’s settlement strategy as respondents in settlement negotiations with the Commission are likely to request the Commission’s record in order to assess the strength of the Commission’s case against it before deciding whether to settle the case or not – thereby compelling the Commission to ensure that a robust investigation is conducted prior to entering into settlement negotiations with respondents.

Says John Oxenham, ‘the “threat of a referral” is unlikely to present the Commission with the same negotiating leverage as it may otherwise have enjoyed when respondents were kept in the dark as to the evidence which the Commission may have against them.’

Whether this all plays out in practice remains to be seen although any decision which promotes transparency and legal certainty can only be positive. It is for this reason that the CAC’s express criticism of the Tribunal’s decision to depart from established case precedent is particularly noteworthy as it is a stark reminder to all adjudicative bodies of the importance of adhering to the rule of law.