- The Competition Act, 89 of 1998, as amended, (hereinafter referred to as “the CA”) provides for the establishment of a Competition Commission in South Africa, which is responsible for the investigation, control and evaluation of restrictive practices, abuse of dominant position, and mergers, and for the establishment of a Competition Tribunal responsible to adjudicate such matters, as well as a Competition Appeal Court.
- A knowledge of competition law is essential for any successful business operating in South Africa, especially when creating a business strategy, launching a new product or challenging competitors.
- The CA applies to all economic activity within, or having an effect within South Africa.
- The CA regulates both horizontal relationships (relationships between competitors) and vertical relationships (relationships in the supply chain). Agreements or practices by parties in either type of relationship are prohibited if they have the effect of substantially preventing or lessening competition in a market (subject to certain defences).
Restrictive practices and anti-competitive conduct
- Examples of “restrictive practices” and “anti-competitive conduct” are price fixing, predatory pricing and collusive tendering, all of which are prohibited.
- The CA also prohibits “abuses” by “dominant” firms (firms with a market share of 35% or more).
Control of mergers and acquisitions
- Mergers and acquisitions are controlled, in that the CA requires a notification and prior approval procedure for certain mergers and acquisitions, carries significant penalties for contraventions – and reaches beyond South Africa, applying to economic activity both in and having an effect in the country.
Cartel conduct applies to parties in a “horizontal relationship” (relationships between competitors), where three categories of conduct are per se prohibited. These are:
- Directly or indirectly fixing a purchase or selling price or any other trading condition;
- Dividing markets by allocating customers, suppliers, territories or specific types of goods or services;
- Collusive tendering.
Remedies and enforcement
- The Competition Tribunal may impose administrative penalties for certain prohibited practices, or a contravention of or failure to comply with an interim or final order of the Tribunal or Competition Appeal Court. Such an administrative penalty may not exceed 10% of the firm’s annual turnover in South Africa and its exports from South Africa, during the firm’s preceding financial year.
- The CA also provides for criminal sanctions including breach of confidence, hindering the administration of the Act, failure to attend, failure to answer truthfully or fully, and failure to comply with the Act.
- Any person convicted of an offence in terms of the CA, is liable – (a) in the case of a contravention of section 73(1) [contravention or failing to comply with an interim or final order of the Competition Tribunal or Competition Appeal Court] to a fine not exceeding R 500,000.00 or to imprisonment for a period not exceeding 10 years, or to both a fine and imprisonment, or (b) in any other case, to a fine not exceeding R 2,000.00 or to imprisonment for a period not exceeding six months, or to both a fine and imprisonment.
Purposes and Policy of the Competition Act
In general, the CA seeks to maintain and promote competition in the South African market to:
- Provide all South Africans equal opportunity to participate fairly in the national economy;
- Achieve a more effective and efficient economy in South Africa;
- Provide for markets in which consumers have access to, and can freely select, the quality and variety of goods and services they desire;
- Create greater capability and an environment for South Africans to compete effectively in international markets;
- Restrain particular trade practices which undermine competitive economy;
- Regulate the transfer of economic ownership in keeping with the public interest;
- Establish independent institutions to monitor economic competition;
- Give effect to the international law obligations of South Africa;
- Promote employment and general socio-economic welfare;
- Promote a greater spread of ownership within the economy, in particular by increasing the ownership of historically disadvantaged individuals;
- Ensure that small business have an equitable opportunity to participate in the economy;
- Expand opportunities for South African participation in world markets, while recognising the role of foreign competition within South Africa.
The Competition Commission
- Responsible for investigating and evaluating mergers and prohibited practices;
- Makes recommendations on larger mergers to the Competition Tribunal;
- It’s decisions may be appealed against to the Competition Tribunal and/or the Competition Appeal Court;
- Competition authorities may weigh aspects of competitiveness vs. general public interest when arriving at their decisions or judgments.