Tag: South Africa

The Risk of Price Regulation: A Review of Recent Abuse of Dominance Cases in South Africa

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By: Michael-James Currie, Gina Lodolo and Nicola Taljaard 

As aptly put by Campton P[1] “it is probably safe to say that in the developed world, competition is now accepted as the best available mechanism for maximizing the things that one can demand from an economic system in most circumstances. Economic regulation is increasingly perceived to be at the opposite end of the spectrum – it tends to leave a larger number of people with a reduced real income and a lower standard of living.” 

Introduction 

Regulatory intervention in the competition law arena, which is aimed at ensuring markets function optimally and are competitive, is the essence of most traditional competition law regimes. There is, however, an increasing risk of over regulation and over enforcement which may undermine incentives to invest and innovate, ultimately leading to a dampening effect on pro-competitive conduct.

Competition enforcement should principally be aimed at ensuring features of the market do not distort competition on the merits. It should not be used as a tool for price regulation. In this paper, we explore some of the recent abuse of dominance cases in South Africa – most notably the “price gouging” cases – adjudicated during the height of the Covid-19 pandemic and flag several risks that may materialize if those cases are to be used as blueprints for future enforcement activity.

In this paper we explore the benchmarks set out in what was the leading jurisprudence on excessive pricing in South Africa, namely the Sasol Chemical Industries Limited v Competition Commission[2]  before the Competition Tribunal (“Tribunal”) and Competition Appeal Court  (“CAC”)[3] respectively and how the excessive price test and standards against which excessive pricing cases have recently been adjudicated, has developed – both in terms of the amendments to the legislation as well as recent cases assessed under the “price gouging” rubric. This is particularly topical as we expect to see an increase in the number of excessive pricing cases brought in South Africa.

In the CAC decision of Babelegi,[4] however, Judge Dennis Davis himself noted the challenging nature of the excessive pricing doctrine for competition authorities, as it “requires them, to a considerable extent, to act in the manner of a price regulator”.[5] He further notes in relation to these challenges, that the decision by the CAC in Babelegi was even more complicated in light of the fact that it had to be “determined through the prism of an excessive pricing provision” which was not specifically designed for the complex and novel conditions brought about by the pandemic.[6] 

Against this backdrop, we discuss the Sasol case as well as unpack the price gouging cases and highlight several concerns associated with an overly interventionist approach in prosecuting perceived excessive pricing cases.

Excessive pricing: Unpacking the Sasol Benchmark

Excessive pricing cases have been inherently difficult to sustain by the South African Competition Commission (“SACC”), especially in industries where there are low barriers to entry. This is because, in ordinary circumstances, for an incumbent firm to charge excessive prices, they need to be a quasi-monopolist, otherwise the charging of excessive prices typically encourages entry by third parties as there are pecuniary profits to be made. This new entrant would ordinarily result in the incumbent reducing prices to ultimately reach competitive levels. In simple terms, the market self regulates.

Before discussing the price gouging cases, it is useful to briefly sketch an overview of excessive pricing cases in South Africa and the clear benchmarks set in Sasol. In this regard, the CAC in Sasol noted the complexity associated with excessive pricing cases in that: “[p]ricing power derives from market power. However, the mere possession of market power is not contrary to competition law. Indeed, some important source of market power is innovation and other, pro-competitive conduct. The rents derived from the possession of market power will, in most circumstances, sooner or later attract new entrants, the more so if the dominant incumbent takes ‘excessive’ advantage of its privileged position. And so, the effort to acquire market share and, therefore, pricing power and the attention it attracts from rivals are an important driver of the competitive process.”[7]

Notwithstanding the likelihood that the market will find a way to self-regulate through the threat of new entrants, when considering an excessive pricing case, there are further factors that need to be taken into consideration to determine whether the price is indeed excessive. For example, the Tribunal in Sasol considered the risk versus reward dynamic and the reasons why a dominant firm “is able to charge a price above the economic value of the good or service”.[8] An oft used example is prevalent in the context of patents. A patent holder is conferred a statutory monopoly position and is entitled to charge prices which are substantially above the cost of producing the patented product. This is because, simply put, a manufacturer must be entitled to benefit from the risks of developing a patented product (which has no guarantee of success) as well as the costs associated with failed attempts. If a firm is deprived of the ability to potentially earn substantial profits if they are successful in developing a patented product, why take the risk in trying to develop such a product in the first place. This would clearly deprive consumers of innovation.

The Tribunal’s major gist in the Sasol case was that Sasol, as a previously State-Owned Enterprise (“SOE”) achieved its dominance by virtue of State support as opposed to risk and innovation.[9] Accordingly, the Tribunal found that Sasol had engaged in excessive pricing. Sasol, however, successfully had the Tribunal’s finding overturned on appeal.

In short, the CAC applied a revised costing calculation mechanism which led to the conclusion that Sasol had implemented substantially lower mark-ups in comparison to those calculated by the Tribunal, and in relation to this determination, established that returns that are above economic value are not unreasonable per se.[10] Further, the CAC in Sasol noted that pricing is not excessive merely because it is above economic value, rather, such pricing should be substantially higher than the economic value: “some measure of latitude has to be given to firms with regard to pricing. If not, a court will become a price regulator”.[11]

While the CAC deviated slightly from the Tribunal in imputing significant importance to the question of how Sasol obtained its market position, the CAC and Tribunal still aligned to the extent that innovation and risk-taking “may have a bearing on economic value of its product and the reasonableness of the price” – it is, however, not a “license for patent holders to engage in excessive pricing”.[12]   

Subsequent to Sasol, the Competition Act, 18 of 2018 (“Amendment Act”) came into force to provide that when determining whether a price is “excessive”, the SACC must inter alia, take into account  “the structural characteristics of the relevant market, including the extent of the respondent’s market share, the degree of contestability of the market, barriers to entry and past or current advantage that is not due to the respondent’s own commercial efficiency or investment, such as direct or indirect state support for a firm or firms in the market”.8 (own emphasis) 

Further, the Amendment Act changed the test for excessive pricing from “a price for a good or service which bears no reasonable relation to the economic value of that good or service; and is higher than [a certain value]” to now provide that a price can be excessive where the price is “higher than a competitive price and whether such difference is unreasonable.”  This Amendment makes the position even more opaque. 

While cases such as Sasol remained the guiding precedent, the quantitative benchmarks were relatively clear. However, the outcome of the excessive pricing decisions in Dischem[13] and Babelegi, leaves much to be said about the certainty of excessive pricing cases to follow. In this regard, we argue below that the latter judgments create uncertainty considering their application outside of the ambit of the anti-price gouging regulations (“Regulations”)[14] and their deviation from the notion that excessive pricing may incentivize entry into the market and that the market self-regulates.

A Discussion of the Subsequent Price Gouging Cases

Price gouging occurs when sellers of goods and/or services increase their prices for these economic commodities to levels considered unreasonable or unfair, usually during periods of extreme supply or demand changes in the market.[15]

As a result of a short-term change in market conditions, price gouging is a form of excessive pricing which is usually subject to a different standard from the usual excessive pricing tests contemplated by competition laws.  

In order to address price gouging concerns in South Africa during the Covid-19 pandemic, the South African Government declared a State of National Disaster in March 2020, and published the emergency Regulations. These Regulations applied to both the supply and the pricing of certain ‘essential’ goods.[16]

In short, the Regulations prohibited firms from increasing prices unless it was directly proportional to a cost increase. Policy issues aside, the Regulations could not be faulted in so far as they were clear and ensured that all players in the market knew what the rules were – i.e., a key tenet of the principle of legality.

Notably, however, the two precedent-setting price gouging cases adjudicated before the South African Competition Authorities, were based on conduct which preceded the promulgation of the anti-price gouging Regulations. The Regulations were therefore not applicable, and the cases were adjudicated under the excessive pricing prohibition in the Amendment Act. Moreover, it was also the first excessive pricing cases to be adjudicated under the new amended excessive pricing test following the amendments to Competition Act 89 of 1998 (“Act”). As some final contextual background, these cases were brought on an urgent basis and parties only had a matter of a few weeks to prepare economic evidence in these cases.

The Dischem and Babelegi decisions, which both concerned instances where the respondents had increased the prices they charged for face masks during the initial stages of the Covid-19 pandemic, were decided within a month of one another.

Both parties disputed their dominance in the market. In Babelegi, it was not disputed that Babelegi only had less than 5% market share, yet it was held to be “dominant” based on short term market power. In Dischem, the Tribunal found it unnecessary to conduct a market share analysis as Dis-Chem’s market power was directly inferred from its conduct. The Tribunal held that Dis-Chem’s ability to significantly increase the prices of face masks all the while increasing sales volumes was direct evidence of Dis-Chem having market power. 

In Babelegi, the Tribunal held that a firm’s ability to increase prices within a short period of time is indicative of dominance and that market power or dominance must be determined with reference to context. In this regard, the Tribunal states that even small firms may have market power. In emphasis of the point that even small firms may be considered dominant,we note again that Babelegi had less than a 5% market share and was still deemed to have had market power as it had the ability to profitably increase its prices without providing any cost justifications.

Similarly, in Dischem, the Tribunal found that the SACC had established a prima faciecase of excessive pricing based on Dis-Chem’s ability to substantially increase its profit margins and pricing above what is reasonable, which, in relation to essential goods was held to be any increase whatsoever.

Although the CAC upheld the Tribunal’s decision in Babelegi, Judge Dennis Davis made the following noteworthy statement:

“These observations do not detract from the complexity of the task confronting this court, particularly in the present case where at the relevant time, government had not introduced bespoke price gouging regulations. As a result, the present case has to be determined through the prism of an excessive pricing provision [which] was not intended for use in the specific and unique conditions of a Covid 19 pandemic. The present case is mercifully somewhat more confined than might otherwise confront a competition authority in dealing with an excessive pricing case.”[17]

The CAC therefore acknowledged that the “price gouging” case was really a product of extreme market circumstances and an unfortunate lacuna in the regulatory environment. It should therefore not be used as a benchmark against which all future excessive pricing cases are adjudicated. Failure to consider the unique circumstances which both the Tribunal and CAC sought to emphasize throughout their respective decisions, will significantly water down the excessive pricing standards and most notably, create uncertainty for businesses in the pursuit of profit maximizing conduct fearing the risk of being sanctioned for taking advantage of short-term market fluctuations.

Following the Dischem and Babelegi decisions, in Tsutsumani,[18]the Tribunal decided the first case under the Regulations, read with section 8(1)(a) of the Amendment Act, wherein which it also confirmed that the Regulations were not in force during the complaint period of Babelegi.[19]  Tsutsumani emphasised the importance of “context” (as also emphasised in the Babelegi CAC decision) – being the unprecedented Covid-19 pandemic.[20] In this regard, to determine whether the price was “excessive”, the Tribunal in Tsutsumani applied the various benchmarks set out in section 8(1)(a) and 8(3)(a)-(f)[21] of the Amendment Act. In this regard, to determine whether a price that is higher than a competitive price is unreasonable, the Amendment Act, in section 8(3)(b)(f), provides for consideration of “any regulations made by the Minister, in terms of section 78 regarding the calculation and determination of an excessive price.”  It was within this framework that the Tribunal applied the Regulations to ultimately make an adverse finding against Tsutsumani.

To establish dominance, the SACC, however, relied on Dischem to find that, even though Tsutsumani only entered the market during the pandemic, its market power could be inferred by its pricing.[22]  Even though Tsutsumaniargued thatthere were 18 other alterative suppliers who responded to the Request for Quote from the South African Police Service, the SACC went further to place reliance on Babelegi wherein it was found by the CAC that “a store, by merely having PPE products in the context of such excess demand could enjoy market power. Multiple firms – even stores located in the same shopping mall – could conceivably exercise market power in the supply of PPE vis-a-vis their customer”.[23] The Tribunal again, however, in making a finding that Tsutsumani was dominant, emphasized that Tsutsumani was a “lucky monopolist” that capitalized on a crisis and further that even though there were alternative suppliers, “the lucky monopolist might not be a single firm in the relevant market. Given the exogenous factors, multiple firms can be found to be dominant during the crisis”[24] – thereby confining its decision to this crisis context only.[25]  

Interestingly, in Tsutsumani, the Tribunal suggests that the National Disaster Regulations prescribe a 10% benchmark.[26] This appears to be an error as the National Disaster Regulations suggest that “any markup” may be scrutinized. The error arises likely by a reading of the Dischem[27] and Babelegi[28]   decisions where the SACC considered the United States wherein a 10% markup during price gouging situations is usually the benchmark. Accordingly, in conjunction with the uncertainty created regarding the conferring of short-term market power as a benchmark for dominance, there is further uncertainty as to what profit margin may prima facie be viewed as excessive. This results in a lack of clarity in how businesses can ensure that price increases are proportionate to cost increases in circumstances where the increase is usually benign. This places a significant administrative burden on firms and an unjustified increased cost of compliance.  It would be preferable if there was a clear materiality threshold so that competitively benign or cost justified price increases do not get caught in the snare of an overly conservative approach to excessive pricing.

Accordingly, the context in which these cases were decided is instructive. The risk, however, of the price gouging decisions finding application in other markets or other market circumstances is not immaterial. The incoming Commissioner of the SACC has expressly stated that the price gouging cases provide a basis for the SACC to implement the amendments to the Act – these include not only excessive pricing but also amendments to the price discrimination (and several other abuse of dominance) prohibitions. In this regard, newly appointed Commissioner, Ms Doris Tshepe, whose role is inter alia to fulfil the mandate embodied in the amendments to the Act, stated that “[w]hat the Commission did, together with the Competition Tribunal and the CAC [Competition Appeal Court], during the COVID crisis, was to show that there is capacity to find and deal with matters as efficiently as possible. We could learn and use those lessons to try and implement the amendments [to the Competition Act].”[29] The Commissioner added further that “[w]e don’t have 10 years to set precedents on the new amendments. There is an urgency, we are in a crisis, our economy is in crisis, and in order to achieve desirable outcomes we are going to have to work a bit faster”.[30] 

Accordingly, while much of this paper has been dedicated to the price gouging cases, the principles underpinning these cases may well be used in pursuing other sectors or instances of market shocks which are unrelated to the Covid pandemic. We suggest that this would pose a significant risk of regulatory intervention and amount to quasi-price regulation.

Market Inquiry Powers: A Power Tool to Price Regulate  

In addition to the lower standards and approaches to market power and excessive pricing, we note that the amendments to market inquiry provisions in the Act provide expansive and far-reaching powers to the SACC to pursue behavioral and structural remedies.

Previously, the SACC’s powers, following the conclusion of the market inquiry, were limited to making recommendations to the Legislature to address any perceived features in the market which hinder effective competition. The SACC now has powers to directly impose any remedy (except penalties), including behavioral and structural remedies (the latter to be confirmed by the Tribunal) directly following the conclusion of a market inquiry. Unlike the sanctions for abuse of dominance findings, which are typically the imposition of an administrative penalty by the Tribunal, the SACC could notionally impose more direct pricing related remedies following a market inquiry.

The test against which the SACC will assess whether any features distort competition is also lower than the “substantial lessening of competition”. While market inquiries typically do have lower standards, the power to make behavioral or structural remedies based on a standard that does not require a showing of substantial lessening of competition poses a significant risk to firms.

To date there have not been any market inquiries which have been concluded (although there are several which have, or will soon, commence) and hence it is too early to make any pronouncements on the manner in which market inquiries are used as an investigative tool to price regulate markets. Suffice to note in this paper that the SACC has an important responsibility not to overstep and utilize its broad powers in pursuing perceived distortions by price regulating markets.

Conclusion 

The price gouging cases in South Africa are somewhat unfortunate. While they protected the public from significant price hikes for critical products during the pandemic, the urgent manner in which they were brought and the fact that they were the first cases assessed under the amended excessive pricing prohibitions, has resulted in an application of the excessive pricing test which may not be fit for purpose. Notwithstanding the CAC’s cautionary remarks that context matters in excessive pricing cases and that Covid-19 posed unique challenges, the principles set out in those cases are likely to be utilized in pursuing cases unrelated to the Covid-19 pandemic. Excessive pricing cases, which are pursued too liberally based on short term market power and without clear benchmarks as to what constitutes “excessive”, amounts to price regulation (or at least an attempt to price regulate). This risk should be guarded against by the competition adjudicative bodies.  Having clear anti-pricing gouging regulations in instances of national disasters published (as they were in South Africa albeit after the conduct in respect of the precedent setting price gouging cases took place) would be preferable to using traditional excessive pricing tests and frameworks to penalize firms who only temporarily possess market power due to a demand or supply shock.

The SACC has, however, indicated in several instances, either directly or indirectly, that the principles set out in the price gouging cases will be utilized going forward. Combined with the SACC’s expanded market inquiry powers, there is a material risk of over regulation in pursuit of price regulation which is not what competition law was designed for.

[1]            Crampton P “Striking the right balance between competition and regulation: The key is learning from our mistakes.” OECD 16-17 October 2002.

[2]            Sasol Chemical Industries Limited v Competition Commission 48/CR/Aug10 (“Sasol Tribunal”).

[3]            Sasol Chemical Industries Limited v Competition Commission 2015 (5) SA 471 (“Sasol CAC”).

[4]            Babelegi Workwear and Industrial Supplies CC v The Competition Commission of South Africa 186 CAC (“Babelegi”).

[5]            Babelegi Para 41.

[6]            Babelegi Para 43.

[7]            Sasol CAC Para 2.

[8]            See Sasol Tribunal Para 101 and Para 94 read with footnote 44 wherein it was stated that “the real distinction to be drawn lays in those advantages which are the product of the dominant firm’s own innovation, risk taking and investment, for example stemming from the patent or an innovation. For example, if a firm invests particular software or innovates and then patents, it will enjoy certain advantages as a result this would be a return for its own efforts and risk taking and innovation and should be rewarded”.

[9]            See Para 76 of Sasol Tribunal where it was stated that “the principal issue thus was whether or not one should take SCI’s feedback cost advantage into account in favour of SCI, given the peculiar circumstances as alleged by the Commission, namely that this advantage is not as a result of SCI’s own risk taking and innovation, but the result of its history of state support”.  

[10]          Sasol Tribunal Para 174.

[11]          Sasol CAC Para 184.

[12]          Sasol CAC Para 173.

[13]          Competition Commission of South Africa v Dis-Chem Pharmacies Limited CR008Apr20 (“Dischem”).

[14]          The Consumer and Customer Protection and National Disaster Management Regulations and Directions GN R350 GG 43116, 19 March 2020.

[15]          W Boshoff “South African Competition Policy on Excessive Pricing and its Relation to Price Gouging during the Covid-19 Disaster Period”(2020) 0 SAJE 1.

[16]          J Oxenham & MJ Currie “Covid-19 Price Gouging Cases in South Africa: Short-term Market Dynamics with Long-term Implications for Excessive Pricing Cases”(2020) 11 JECLAP.

[17]          Babelegi Workwear and Industrial Supplies CC v Competition Commission of South Africa CR003Apr20 para 41.

[18]          The Competition Commission v Tsutsumani Business Enterprises CC COVCR113Sep20 (“Tsutsumani”).

[19]          Tsutumani Para 3.

[20]          Para 13.

[21]          Section 8(1)(a) of the Amendment Act provides that “it is prohibited for a dominant firm to— (a) charge an excessive price to the detriment of consumers or customers”. Further section 8(3)(a)-(f) of the Amendment Act provides that “any person determining whether a price is an excessive price must determine if that price is higher than a competitive price and whether such difference is unreasonable, determined by taking into account all relevant factors, which may include— (a) the respondent’s price-cost margin, internal rate of return, return on capital invested or profit history; (b) the respondent’s prices for the goods or services— (i) in markets in which there are competing products; (ii) to customers in other geographic markets; (iii) for similar products in other markets; and (iv) historically; (c) relevant comparator firm’s prices and level of profits for the goods or services in a competitive market for those goods or services; (d) the length of time the prices have been charged at that level; (e) the structural characteristics of the relevant market, including the extent of the respondent’s market share, the degree of contestability of the market, barriers to entry and past or current advantage that is not due to the respondent’s own commercial efficiency or investment, such as direct or indirect state support for a firm or firms in the market; and (f) any regulations made by the Minister, in terms of section 78 regarding the calculation and determination of an excessive price.”

[22]          Tsutsumani Para 61.

[23]          Para 62.

[24]          Para 71.

[25]          Para 70. In this regard even though there were alternative suppliers, the South African Police Service lacked sufficient information on the status and available volumes from other suppliers and feared that they would be able to obtain the stock required.

[26]          Tsutsumani Para 90.

[27]          Dischem Tribunal Footnote 66.

[28]          Babelegi Tribunal Para 98-103.

[29]          Media Statement: New Competition Commissioner Doris Tshepe says she is Ready to Push Boundaries and be Innovative (2022) (Available at https://www.compcom.co.za/wp-content/uploads/2022/09/Media-Statement-on-the-final-day-of-the-competition-conference-1-September-2022_.pdf) 1.

[30]          Media Statement: New Competition Commissioner Doris Tshepe says she is Ready to Push Boundaries and be Innovative (2022)(Available at https://www.compcom.co.za/wp-content/uploads/2022/09/Media-Statement-on-the-final-day-of-the-competition-conference-1-September-2022_.pdf) 1.

Competition Commission Releases Online Intermediation Platform Market Inquiry Provisional Summary Report

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By Nicola Taljaard

On 13 July 2022, the South African Competition Commission (“Commission”) released a Provisional Summary Report (“Report”) on the Online Intermediation Platforms Market Inquiry (“OIPMI” or “Inquiry”) which was initiated on 19 May 2021. The Commission initiated the Inquiry following reason to believe that certain features of the online intermediation platforms market could be impeding, distorting or restricting competition.

The Commission placed specific emphasis on getting small and medium enterprises (“SMEs”) and historically disadvantaged persons (“HDPs”) to participate in the relevant markets, and premised the Inquiry on the following competition and public interest considerations in relation to market features:

  • Hampering competition between the actual platforms;
  • Hindering competition between business users or undermining consumer choice;
  • Giving rise to abusive treatment of business users; and
  • Which may have disadvantageous impacts on the ability of SMEs and/or HDPs to participate in the market.

The Commission further noted a lack of participation by HDPs as a common thread which prevails in the online intermediation platforms market, which seems to languish in an untransformed state relative to the broader South African economy.

The remedial action proposed in the Inquiry ranges in severity based on the impacts which the market features have on competition, particularly in relation to SMEs or HDPs. The leading platforms on which the remedial actions are proposed are the Apple App and Google Play stores, Takealot, Property 24 and Private Property, Autotrader and Cars.co.za, Booking.com and Airbnb, Mr. Delivery and UberEats, and Google. Although the Commission did not consider it necessary to enter a dominance inquiry, it did remark that these platforms show features of dominance when considering their positions in the respective markets.

In addition to the more general constructive proposals, the Commission also suggests provisional remedies which are more robust, including against Google, stating that it plays an integral role in how consumers interact with relevant platforms. In this regard the Commission intends to further its inquiry into the viability of keeping Google Search as the default search on mobile devices in South Africa.

The OIPMI came to the provisional conclusion that the digital economy is deficient in relation the country’s transformation goals and deviates significantly from the transformation trends of other traditional industries. The lack of transformation in most of the industries investigated as part of the intermediation platforms continues to display major barriers to entry for HDP entrepreneurs. This conclusion is particularly pertinent in light of the ever-widening digital divide.  

The Commission has made all of the documents and public submissions in relation to the Inquiry, as well as the Summary Report (which can be accessed here) available on its website. The public has six weeks within which to submit comments to the Summary Report, after which the Inquiry body has committed to consider the views and incorporate changes, where appropriate, to the final report and findings which will be released in November 2022.

South African Competition Commission Prosecutes Facebook for Abuse of Dominance

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By: Gina Lodolo

On 14 March 2022, the South African Competition Commission (“Commission”) referred a complaint against Meta Platforms Inc is the parent company of WhatsApp Inc (“WhatsApp”) and Facebook South Africa (hereafter jointly “Meta”), to the Competition Tribunal (“Tribunal”) for allegedly engaging in abuse of dominance.

The referral follows WhatsApp (as part of the  Meta group) attempting to off-board GovChat from the WhatsApp platform. GovChat is a chatbot service connecting government to millions of citizens on issues of public concern (e.g. information on COVID-19 vaccinations and social grants). GovChat is reliant on the WhatsApp platform to function and connect users, without which its entire existence will be prejudiced.

GovChat utilizes WhatsApp for their services due to WhatsApp’s scale and consumer reach, however, Meta has attempted to off-board GovChat by placing reliance on WhatsApp’s terms and conditions to enforce a restriction against monetisation of confidential information through the use of consumer data obtained on the platform.

In this regard, the Commissions media release notes that “Facebook has imposed and/or selectively enforced exclusionary terms and conditions regulating access to the WhatsApp Business API, mainly restrictions on the use of data”.

The selective enforcement by Meta and attempts to off-board GovChat from the WhatsApp platform, according to the Commission, potentially violates Section 8(d)(ii) of the Competition Act 89 of 1998 (as amended) (“Act”) which prohibits a dominant firm from abusing its dominance by “refusing to supply scarce goods or services to a competitor or customer when supplying those goods or services is economically feasible”. In the alternative, the Commission alleges that Meta has engaged in an exclusionary act or refused to give a competitor access to an essential facility when it is economically feasible to do so (under section 8(1)(b) or 8(1)(c) of the Act).

The Commission has requested the Tribunal to:

  1. Impose the maximum penalty permitted under the Act, being 10% of Meta’s turnover;
  2. Interdict Meta from off-boarding GovChat; and
  3. Declare void exclusionary terms and conditions that are selectively applied in a manner that prevents potential competition by restricting access to the WhatsApp platform for potential competitors.

In its media release, the Commission stated that “access to digital markets is dependent on access to digital platforms including as in this case, access to an important digital communication platform”.

Primerio Director, Michael-James Currie notes that this complaint referral follows an interim relief application whcih GovChat successfully obtained against Facebook and WhatsApp in the beginning of 2021 in terms of which WhatsApp was prohibited from off-boarding GovChat.

This case, says Currie also coincides with a very proactive drive by the Competition Commission to consider competitive effects in digital markets in South Africa.

The case also suggests that the Competition Commission considers the existing rules regarding abuse of dominance as being adequate to address competition concerns in the market.

For more background information click here

To access the Competition Commission media release, click here

SOUTH AFRICA: EXEMPTIONS TO AID CONSUMERS DURING AND AFTER RIOTS

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By Charl van der Merwe and Gina Lodolo

On 15 July 2021, Ebrahim Patel, the Minister of Trade Industry and Competition, published a block exemption for the supply of essential goods (“Exemption”), which came into effect on the day of publication and is granted until 15 August 2021, unless extended or withdrawn.

The Exemption is aimed at allowing conduct that would usually fall foul of Section 4 and 5 of the Competition Act 89 of 1998, as amended (“Act”) due to the conduct being a restricted horizontal (conduct between competitors) or vertical (conduct between suppliers and customers) practice.

The authority to grant exemptions is derived from section 10(10) read with section 78(1) of the Act. Section 10(10) of the Act states that the “Minister may, after consultation with the Competition Commission, and in order to give effect to the purposes of this Act as set out in section 2, issue regulations in terms of section 78 exempting a category of agreements or practices from the application of this Chapter”.

These specific Exemptions were granted in light of the recent riots in South Africa, which have caused massive losses at retail level as well as supply chain shortages and disruptions.  The purpose of the Exemption is to prevent a shortage of essential goods within South Africa, especially to poorer households and small businesses. These Exemptions apply to suppliers of essential goods. Essential goods are defined to mean: “basic food and consumer items, emergency products, medical and hygiene supplies (including pharmaceutical products), refined petroleum products and emergency clean-up products. Essential goods include the final good itself as well as all inputs in the supply chain required for the production, distribution and retail of the essential goods” (“Essential Goods Suppliers”).

The Exemption provides that Essential Goods Suppliers may communicate and coordinate with each other to ascertain the loss of stock, the gravity of shortages and their location as well as availability of stock in particular areas to gauge the ability of different Essential Goods Suppliers to supply to areas that are experiencing shortages and have a higher demand, including supply to smaller businesses.

Essential Goods Suppliers may also coordinate on inputs, stock expansion or capacity and equitable distribution between Essential Goods Suppliers. Coordinated distribution of essential goods to different geographical areas within South Africa will be allowed if connected to anticipated shortages of a type of essential good or an anticipated shortage of essential goods in a specific area.

The Exemption contains express provisions to monitor all conduct in terms of the Exemption. Essential Goods Suppliers must keep minutes of all meetings and communication and such minutes, as well as written records of agreements must submitted to the Competition Commission.

The Exemption will provide welcomed relief but is not without risk. Communications between competitors as well as customers/suppliers pose various difficulties not only from a competition law perspective, but also from a commercial perspective. Conduct and exchanges of information in terms of the Exemption may have lasting consequences. It is imperative that firms are fully aware of the perils of so engaging in terms of the Exemption, particularly regarding meeting minutes and the positive duty, in terms of case precedent, to distance yourself from potentially anti-competitive conduct.

Finally, the Exemptions do not allow price-fixing and collusive tendering, nor do they authorize discussions on pricing of essential goods. Firms should be aware that price-gauging is still prohibited in terms of the Consumer and Customer Protection and National Disaster Management Regulations and Directions issued on 19 March 2020.

Primerio Director, Michael-James Currie, says that the Commission published a report following the exemptions granted during the Covid-19 State of Disaster confirming the positive effects that collaboration between competitors can have in certain instances. This calls into question whether the “characterization” test ought to be recognized as a substantive defence to hardcore cartel conduct cases in South Africa.

These Exemptions can be accessed at: https://www.gov.za/sites/default/files/gcis_document/202107/44854gon616.pdf

SOUTH AFRICA: SMALL MERGER NOTIFICATIONS: THE SACC JOINS THE EUROPEAN COMMISSION IN EXPANDING THE APPLICATION OF SMALL MERGER NOTIFICATIONS TO ‘DIGITAL MARKETS’

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Charl van der Merwe (Primerio, South Africa) Laura Roßmann (Gleiss Lutz, Germany)

Introduction

The South African Competition Commission (“SACC”) recently published amended draft guidelines for notification of small mergers in “digital markets” (“Digital Merger Guidelines”).

The Digital Merger Guidelines seek to amend the SACC’s existing guidelines on small merger notification and marks a significant change to the assessment of mergers in South Africa.  Judging from past experiences, the Digital Merger Guidelines are unlikely to be changed significantly, before being made final.

Background to Digital Merger Guidelines

Competition discourse in recent years have been largely centered around the regulation of digital markets. Various agencies internationally have considered and introduced different mechanisms of dealing with the perceived dangers of digital markets.

Similarly so, the SACC also recently shifted focus to the regulation of digital markets, starting with its informal study and report, titled “Competition in the Digital Economy” (“Report”). 

The Report, although informal and non-binding, now effectively serves as the SACC’s framework for the future regulation of digital markets. In this regard, the Report identified various market characteristics which, the SACC believes, warrant deviation from the traditional approach to competition regulation in South Africa. For current purposes, this includes most notably:

  • concentration arising from first-mover advantage, data accumulation and network effects (so called “tipping markets”), which necessitates pro-active intervention; and
  • merger notification thresholds which, currently, allow most mergers in digital markets to be implemented, without competition scrutiny, as they are primarily turnover or asset based, meaning that the acquisition of various small startups who, individually, are insignificant and do not trigger the thresholds, are collectively important (“creeping mergers”).

This is also a stated objective in the Digital Merger Guidelines, which state that: “There are concerns that these potentially anti-competitive acquisitions are escaping regulatory scrutiny due the acquisitions taking place at an early stage in the life of the target before they have generated sufficient turnover that would trigger merger notification as set by the turnover thresholds”.

The potentially harmful effects of ‘creeping mergers’ and ‘killer acquisitions’ are well documented. The SACC has, however, gone one step further to include, in its definition (informally), transactions which are significant internationally (such as Facebook’s acquisition of WhatsApp), but which do not meet the thresholds in South Africa. In this regard, the SACC also cites the Google/Fitbit merger, which was not notifiable in South Africa, but which the SACC insisted must be notified.

It is necessary to note that the recent amendment to the Competition Act already introduced the concept of ‘creeping mergers’ into South African merger control. In this regard, the Competition Act, as amended, require the SACC to assess:

  • the extent of ownership by a party to a merger in other firms in a related market;
  • the extent to which a party to the merger is related to other firms in related markets, including through common members or directors; and
  • any other mergers engaged in by a party to a merger for a period to be stipulated by the Commission.

While these provisions have not yet been fully put to the test, it seems evident that these provisions aid only in ensuring a ‘holistic consideration’ of the potential effects of a notifiable merger, they fall short in dealing with the identified concerns in the digital economy – being non-notifiable mergers.

Small Merger Notifications South Africa

Small merger notifications are not novel. Competition agencies, including the SACC, have in various forms, reserved the powers to assess transactions which do not meet the statutory merger thresholds. In South Africa, this was done through the publication of the SACC’s Guidelines on the notification of small mergers (“Guidelines”). The Guidelines required that small mergers be notified, voluntarily, where a party to the proposed transaction was under investigation by the SACC or a respondent to complaint proceedings before the Competition Tribunal.

The intention and rationale were clear, where a party was under investigation (or prosecution) for having engaged in anti-competitive conduct, the proposed transaction had to be assessed to consider whether the proposed transaction may harm competition (or the pending case under investigation/prosecution). Put differently, there was a clear and pre-defined potential harm.

The Digital Merger Guidelines seek to extend the application of the Guidelines to require the notification of small mergers where a party to the transaction “operate in one or more digital markets(s)” and any of the following thresholds are met:

  • the purchase consideration exceeds R190 million, provided the target has activities in South Africa;
  • the purchase consideration is less than R190 million (e.g. the acquisition of 25% shareholding), but the target value (100% shareholding) exceeds R190 million, provided the target has activities in South Africa and the acquisition amounts to a merger (change of control);
  • at least one of the parties to the transaction has a market share of 35% or more in at least one digital market; or
  • the merger results in the merged entity being ‘dominant’ in the market (as defined in the Competition Act).

Small mergers are to be notified by way of a “letter” (as opposed to the statutory merger filing forms).  Further in terms of the Digital Merger Guidelines, the letter must contain, “sufficient details” regarding: the parties; the proposed transaction; and the markets in which the parties operate.

Most notably, the transaction is not limited to the ‘relevant market’ for purposes of the competition assessment but may include related markets.

Small Mergers in the EU and Germany

The European Commission (EC) has also recently published guidance on the application of Article 22 of the European Merger Regulation (ECMR) in order to, inter alia, tackle mergers concerning digital markets, which fall short of the merger filing thresholds at both EU and Member States level. Article 22 of the ECMR allows for the referral of a transaction, which “threatens to significantly affect competition”. In such cases, the EC may ‘invite’ Member States to request a referral of the merger from national level to the EC, resulting in a notification at EU level, even if the transaction does not fulfil neither the EU nor the respective national turnover thresholds. This may further result in an uncertainty for the undertakings concerned as to whether their proposed transaction is to be notified and assessed by the EC.

Interestingly, the guidance on the Application of Article 22 ECMR only includes a “reappraisal of the application”, as the European Commission puts it, as the current wording of Article 22 ECMR already includes a referral mechanism for transactions not fulfilling the merger control thresholds in the respective Member State. This, however, did not play any role in the EC’s referral practice up to date.

The EC’s guidance now seeks to change its practice, particularly to aim at the prevention of so-called killer acquisitions in the digital economy – where potentially problematic transactions are not notified due to target thresholds not being met. The continued role and effectiveness of merger thresholds, particularly in relation to the digital economy, has long been debated in the EU. This is especially true, as the already mentioned Facebook/WhatsApp merger (used as a case in point by the SACC in its Report) was only notified with the EC after referral requests of some Member States based on Article 22 ECMR, as the merger fell short of the EU turnover thresholds, and most national thresholds.

To address this, some Member States, especially Germany and Austria introduced a “transaction value”-merger threshold, to ensure the notification of transactions involving a start-up ‘unicorn’ not (yet) achieving a substantial turnover. This threshold, inter alia, requires a filing based on the “consideration of the transaction”, usually being the purchase price, exceeding a certain threshold. However, this novella in 2017 did not result in any significant increase in merger filings. In Germany, less than 10 (of roughly 2000) mergers per year were notified based on this new provision. Further, it remains unclear whether a threshold based on the target’s purchase price is, indeed, better placed to evaluate the parties’ market position. This is especially true when considering that none of the mergers notified under this provision entered the so-called 2nd phase, meaning that all such mergers were cleared (or withdrawn by the parties).

In light of the above, the EC guidance highlights a few important considerations relevant to the South Africa Digital Merger Guidelines:

  1. the EC guidance notes that the ‘transaction value’ thresholds, which had been introduced in Germany and Austria, as said, do not appear to be effective; and
  2. with the increased number of merger filings likely to follow under the new guidelines, it is necessary to ensure a balanced approach, through the implementation of measures to ensure the “simplification of merger procedures”.

Conclusion

Small mergers are not mandatorily notifiable. The Competition Act does, however, provide that the SACC may, within six months after the transaction has been implemented, require the transaction to be notified.

This SACC’s powers in terms of section 13(3) of the Act is discretionary. In this regard, the SACC may call for a merger to be notified where, in the view of the SACC, the merger may substantially prevent or lessen competition or cannot be justified on public interest grounds.

The inclusion of specific provisions in the Digital Merger Guidelines suggest, by necessary implication, that mergers in the digital market may substantially prevent or lessen competition or importantly, negatively impact public interest.

Defining the relevant competitive theory of harm in the digital economy is notoriously difficult. It is notably, however, that in terms of the Competition Act, as amended, public interest considerations (and by implication ‘national interest’) have been elevated to a separate and self-standing assessment. Public interest, in this context, includes most notably the “ability of small and medium businesses or firms controlled by historically disadvantaged persons to effectively enter into, participate in or expand”.

Accordingly, the South African merger control framework, as amended, provide the SACC with a unique ability to assess mergers in the digital market on grounds other than pure competition grounds.

In a separate but related issue, the SACC have initiated a market inquiry into the market dynamics in online intermediation platform – which is seen to be an ‘emergent market’ in South Africa and the SACC considers effective competition between these platforms to be key to digital expansion. In doing so, the SACC already signaled a clear intent to focus its assessment of digital markets on the less complex assessment of creating a space for small business to enter and operate. Furthermore, the insights which the SACC can gather through the less adversarial market inquiry, is likely to provide it with the valuable insights, which it may then apply to its merger assessments.

The SACC’s unique ability to consider expanded ‘public interest’ consideration in merger control, coupled with the SACC’s clear intention to require the notification of all mergers in the digital market, including small mergers, pose a significant risk to firms operating in the digital market.

Concerns regarding the SACC’s Digital Merger Guidelines are exacerbated by the fact that these guidelines have failed to account for important issues, highlighted in the EC guidance (or addressed some of the perceived failures of the EC guidance). In this regard, it has failed to provide sufficient clarity regarding a simplified process to be followed in respect of such small mergers. Moreover, the Digital Merger Guidelines may add uncertainty to transacting parties, internationally, without any appreciable benefit to competition.

This risk in relation to the Digital Merger Guidelines is not unique to South Africa. Similar ambiguity already exists in the EU with the application of the “new” Article 22 ECMR.  It may be safe to assume that any transaction filed in the EU on a ‘cautionary basis’, which may have a jurisdictional nexus to South Africa, ought similarly to be notified in South Africa, in terms of the Digital Merger Guidelines (once finalized).

South Africa’s Price Discrimination Provisions: Interpretational Guidance to Section 9

Posted on by Editor

African focused competition lawyer and regular contributor to Africanantitrust, Michael-James Currie, has kindly made available to all Africanantitrust readers his dissertation titled “SOUTH AFRICA’S AMENDED PRICE DISCRIMINATION PROVISION: AN ANALYTICAL FRAMEWORK IN RELATION TO THE GROCERY RETAIL MARKET”.

In his thesis, Currie explores various economic and legal principles which are of particular relevance to ensuring that section 9 of South Africa’s Competition Act is interpreted in a manner which is sensible and does not lead to unintended consequences which might harm consumers or dampen pro-competitive conduct.

Currie utilises the grocery retail market as a basis to explore the applicability (and suitability) of the price discrimination provisions in so far as the objective to protect a specific class of competitors is concerned (rather than protecting competition).

By drawing on economic principles and European and US precedent, Currie provides a well articulated and reasoned analytical approach to section 9 coupled with practical interpretational guidance in what is likely to become a very useful resource.

To access Currie’s dissertation (for free), please follow the link below:

https://media-exp1.licdn.com/dms/document/C4D1FAQFztkxNwS0ysA/feedshare-document-pdf-analyzed/0/1607424309920?e=1607511600&v=beta&t=zOJYOsbdgM2c3D94KDCKEw2lOgRDcSXtVtUHwS4ldHY

Shipping Cartel: Recent approach to fining in SA

Posted on by Editor

By Michael Currie

AAT previously reported (here and here) that the SACC had been investigating cartel behaviour which allegedly took place between multiple shipping liners who transported vehicles for various Original Equipment Manufacturers (“OEMs”).

The investigation resulted in two consent agreements being concluded between the SACC and Nippon Yusen Kaisha Shipping Company (“NYK”) and Wallenius Wilhelmsen Logistics (“WWL”) respectively (the “Respondents”).

On 12 August 2015, the Competition Tribunal (“Tribunal”) was requested to make the consent agreements, orders of the Tribunal.

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In terms of the consent agreements, the Respondents had admitted that they had contravened Section 4(1)(b) of the Competition Act, 89 of 1998 (the “Competition Act”) on multiple occasions (between 11 and 14 instances), and accordingly agreed to pay administrative penalties of approximately R95 million ($ 8million) and R103 million (R8.5 million) respectively.

We had noted in our previous article on this matter, that in light of the SACC’s recently adopted Guidelines for the Determination of Administrative Penalties for Prohibited Practices (the “Guidelines”), it would be interesting to see how the SACC and the Tribunal go about calculating and quantifying an administrative penalty, when dealing with factual circumstances similar to this matter.

We had been concerned that in cases which involve cartel conduct relating to tenders (i.e. bid-rigging), the Guidelines will have limited application.  Andreas Stargard, an attorney with the Africa consultancy Pr1merio, notes:

There are two main reasons why there we view only a narrowly circumscribed application of the Guidelines in these particular circumstances:

  • Firstly, the Guidelines require in the case of bid-rigging that the affected turnover to be used for purposes of calculating an administrative penalty must be the higher of: the value of the bid, the value of the contract ultimately concluded, or the amount of money ultimately paid to the successful bidder. While this approach to calculating affected turnover when dealing with tenders such as those in the construction industry may be useful, the Guidelines present an anomaly when one is dealing with a tender, the value of which is subject to one or more variable and the tender contract has not been completed yet at the time of the calculation or imposition of an administrative penalty.

  • Secondly, and perhaps even more problematic, is that the Guidelines envisage that a party involved in cartel conduct should be fined for the tenders that the party successfully ‘won’, as well as being held liable for tenders that the party ‘lost’. In terms of the Guidelines, a party who was involved in ensuring that another company was awarded the tender (due to collusion), the ‘unsuccessful’ party will be subjected to an administrative penalty for such a tender as well. In this regard, the affected turnover that will be utilised to calculate the administrative penalty for the ‘unsuccessful’ party, the SACC would also choose the greater of the actual value of the bid submitted by the ‘unsuccessful party’, or the value of the contract or the amount ultimately paid to the successful bidder.

This in itself creates two further issues. The first is from a policy perspective; in terms of penalising the unsuccessful bidder, the unsuccessful bidder’s affected turnover would in most instances be either than the affected turnover of the successful bidder higher (because when a firm deliberately ‘loses’ a bid, they usually submit a cover bid which is higher than the ‘winning’ bid), or at a minimum the same value as the affected turnover attributed to the successful bidder. Thus it is conceivable that the ‘unsuccessful’ bidder while not having derived any benefit from the bid in question, would be subjected to a similar or greater administrative penalty than the successful bidder.

Furthermore, for purposes of reaching a settlement quantum, it is often not possible for the ‘unsuccessful bidder’ to know or calculate the value of the contract or the amount paid to the successful bidder. The only way to obtain such information would require information sharing between competitors, which raise a host of further competition law concerns.

Accordingly, while the adoption of Guidelines for purposes of ensuring greater certainty and transparency is created for parties who are potentially subjected to administrative penalties, the Guidelines have respectfully fallen short of doing that, when dealing with instances of bid-rigging.

The difficulty of applying the Guidelines to cases of bid-rigging was acknowledged by the SACC during the shipping cartel hearings before the Tribunal, a consequence of which saw the SACC adopt a novel and individualised strategy to calculating the administrative penalties which the Respondents ultimately agree to.

The SACC decided firstly that whichever strategy they adopt for purposes of calculating the Respondents financial liability, must be one that can be consistently and fairly applied to all respondents in the investigation.

Accordingly, the SACC decided to impose a administrative penalty of 3.5% of the Respondents’ turnover derived within or from South Africa, in respect of bids which the Respondents were awarded, and a lesser percentage of turnover was used in respect of bid’s which were not awarded to the Respondents.

The SACC thus acknowledge that it would not be fair to impose the same penalty quantum on the successful bidder on the unsuccessful bidder as well.

The M/V Thalatta, a WWL High Efficiency RoRo vessel

The M/V Thalatta, a WWL High Efficiency RoRo vessel (image (c) WWL)

When pressed on how the SACC reached a value of 3.5%, the SACC indicated that the Respondents’ willingness to engage the SACC and their commitment to settling the process was a weighty factor taken into account.

Importantly, the SACC decided to penalise each of the respondents cumulatively. In other words, for each instance of a contravention, the SACC imposed a penalty equal to 3.5% of the firm’s annual turnover (or a slightly lesser amount if the firm was the unsuccessful bidder’).

Section 59 of the Competition Act limits the amount of affirms administrative penalty to 10% of the firm’s annual turnover derived within or from South Africa in its preceding financial year.

Due to the fact, however, that the SACC ultimately imposed a cumulative penalty, the administrative penalty imposed on the Respondents exceeded 10% of the Respondents annual turnover.

On a side note, the SACC did use the annual turnover of the proceeding financial year as the based upon which to penalise the respondents, but rather opted to use the year 2012 which was the most recent year during which there was evidence of collusion.

Accordingly, the Commission has exercised a considerable degree of discretion when choosing a strategy for purposes of imposing an administrative penalty and while the SACC considered the sic-step approach to calculating an administrative penalty, opted rather to impose a turnover based percentage figure, and thus, we are left none the wiser as to how the Guidelines are actually going to be interpreted and implemented.

Patel commends his competition team

Posted on by Editor

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Minister finds praise for competition agencies, having increased fines “1000%”

The official South African news agency reports that Economic Development Minister Ebrahim Patel has lauded the country’s competition authorities as “remarkably effective over the past 15 years.”

“The competition authorities have done solid investigations as they have stepped up actions against cartels and promoted public interest consideration when conducting investigations,” he is quoted as saying at the 8th Annual Competition, Law, Economics and Policy Conference in Johannesburg. “The remedies and fines imposed by the competition authorities climbed ten fold compared to the previous five years, call it 1000 percent, reaching over R6 billion.”

Minister Patel said the competition authority had come into their own with solid pipelines of anti-cartel investigation, the systematic consideration of public interest and issues in merger acquisition.

Setting aside the unorthodox phraseology (“merger acquisition”) in the quoted paragraph, the Minister’s remarks indeed echo what we at AAT have observed for well over a year now, namely the renewed and increased focus of the competition agencies on so-called “public-interest” factors, in lieu of (or in addition to) traditional, classic antitrust considerations, such as market power, concentration/HHIs, and prediction of unilateral/coordinated effects of proposed mergers.

Details of $2.9 billion bid-rigging come to light in South African parliament

Posted on by andreasstargard

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As SAcommercialPropNews reports, the South African Parliament heard testimony from the chairman of the Construction Industry Development Board (CIDB), Mr. Bafana Ndendwa, on the developments and results of the South African Competition Commission’s investigation into the building industry at large.

The investigation into the potential 26 billion Rand collusion had begun when building budgets related to the 2010 FIFA soccer world cup in South Africa were plagued with cost overruns.  Since then, it appears that well over 40 construction companies have been investigated by the Commission.  We had previously reported on antitrust settlements in the S.A. building industry here.

Even with some settlements underway, the building-industry antitrust saga appears far from over, though.  Creating a spectre of double jeopardy, Mr. Ndendwa stated that leniency from the Commission may not yield similar treatment by other investigating bodies.  The cited article also quotes members of the ‘Portfolio Committee’ of the Parliament as pressing for criminal charges to be filed.  This is an interesting development, as the South African competition law (as it is currently in effect) does not [yet] provide for criminal sanctions against individuals.  While the law had been amended to include such a provision, the amendments have not yet been ratified and put into effect.

Family feud: Which S.A. agency gets the first bite at the apple?

Posted on by andreasstargard

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Why is the South African government flexing its anti-fraud and corruption laws in the long-running investigation of potential bid-rigging in the construction sector, when it could perhaps more straightforwardly apply its competition law — and only that — to the alleged offences?  In its role as the antitrust watchdog, the SA Competition Commission has been attempting to induce guilty co-conspirators to seek leniency or corporate immunity from prosecution for cartel offences under the country’s Competition Act in exchange for information on rigged bids for construction projects.

Corporate leniency is one thing — personal liability for fraud or other racketeering charges is quite another…  Individual employees or directors of the leniency applicants should beware the double jeopardy they are exposed to, personally, when their employers ink settlements with the CC: The National Prosecuting Authority is not using the country’s civil-offence based competition law to pursue the alleged wrongdoing, even though the accusations raised by them would fall rather neatly within the category of prohibited horizontal agreements among competitors (i.e., cartel conduct).  Rather, the prosecution is applying the Prevention and Combating of Corrupt Activities Act, which — unlike the Competition Act — criminalises the illicit behaviour that allegedly took place.

On the policy side, had the as-of-yet dormant Competition Amendment Act 2009 come into force and the competition law therefore criminalisation “teeth”, we here at AfricanAntitrust.com are wondering whether we’d be seeing parallel, ongoing dual-agency investigations on a scale such as this — or rather an initial battle for jurisdiction between the CC and the NPA’s Hawks?  The S.A. family feud between the twin siblings, fraud laws and antitrust? The purely legal question of “double jeopardy”, raised above, would doubtless also figure in the debate who gets to enforce which law(s).  One of the CC’s public-relations managers, Trudi Makhaya, recently hinted at the potential for greater enforcement powers of the Competition Commission, mentioning the “pending amendments to the Competition Act”. For now, the so-called “Construction Fast Track Settlement Project“ will have to keep churning out non-criminal settlements with offenders.

This specific post will serve as a lead-up into the broader arena of criminalisation of antitrust law, which we will cover soon in its own category.  It brings with it fascinating questions beyond those raised here (including, for instance, the potential for dis-incentives to corporate executives to seek leniency).

As always, we welcome your opinion — this is a question that will sooner or later have to be answered.