NOWHERE TO HIDE FROM COMPETITION AUTHORITIES

By Gomolemo Kekesi Monday, June 28, 2010
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Certain legislation authorises companies to engage in certain conduct. However, not even authorisation of a particular conduct by regulation places a firm beyond the competition authorities’ reach. If such conduct is potentially anti-competitive, the competition authorities have the power to scrutinise it. Consider, for example, the case of a firm empowered by a particular piece of legislation to charge tariffs to its customers in relation to a certain product. The manner in which it does so arguably falls foul of the price discrimination provision in the Competition Act[i] in that it results in purchasers paying different prices for the same product. Yet the charging of tariffs is arguably in accordance with enabling legislation.
In such a case, would the competition authorities have power to scrutinise the impact of the tariffs on competition in the relevant market in terms of the Competition Act or would any concern arising from the tariffs (including their impact on competition) fall within the exclusive jurisdiction of the relevant industry regulator by virtue of there being a piece of legislation that arguably authorised the setting of the tariffs?
If the competition authorities have jurisdiction, to what extent will their assessment of the tariffs in question be affected by legislation governing the manner in which tariffs are set? In days gone by,  activities subject to or authorised by public regulation were excluded from the application of the Competition Act, despite aspects of their anti-competitive nature not having been regulated by other regulatory authorities.
An amendment to the effect that the Competition Act applies to all economic activity within or having an effect within South Africa extended the operation of the Competition Act to those authorised by or subject to public regulation.[ii] 
Public regulators no longer have exclusive jurisdiction in competition matters. Where another regulator has jurisdiction over any activity covered by the Competition Act, such a regulator’s jurisdiction is concurrent with that of the competition authorities.
In the Telkom case[iii] it was held that the only way to exclude or limit the competition authorities’ jurisdiction is by legislation. In other words, their jurisdiction may be excluded entirely from a particular industry by legislation.
However, where operation of the Competition Act has been expressly retained, or is not excluded by legislation in terms of which a particular industry is regulated, any authorisation by such legislation of particular conduct will not exclude the jurisdiction of the competition authorities.
An example is the Telecommunications Act[iv], which, prior to the enactment of the Electronics Communications Act[v], regulated Telkom’s activities. The SCA[vi] rejected an argument by Telkom that “conduct in question was authorised by the Telecommunications Act and its licence and that, consequently, the legislature could not have intended the [C]ompetition [A]uthorities to have the power or competence to adjudicate on conduct that is authorised by the Telecommunications Act, by regulations made under it or by Telkom’s licence or that might have been authorised by ICASA[vii] under its empowering provisions”.
The SCA concluded that the authorising legislation and other provisions relied on by Telkom “did not oust the jurisdiction of the [C]ompetition [A]uthorities but could well give rise to defences to complaints” lodged before the competition authorities. Accordingly, firms currently engaging in activities which are authorised by a particular piece of legislation or by public regulation can be investigated by the competition authorities.
However, once brought before the competition authorities, the firms may argue that their conduct was authorised by legislation and was therefore lawful. Whether or not such an argument will succeed hinges on the competition authorities’ interpretation of the authorising provisions – specifically, whether or not the conduct in question falls within the ambit of what is authorised by the relevant legislation. Presumably if the conduct was indeed authorised, the competition authorities will not declare it a prohibited conduct in terms of the Competition Act. But if said conduct was not in fact authorised or exceeded the bounds of what was indeed authorised, the competition authorities may then prohibit it.
In short, the Telkom case has confirmed what the much anticipated Competition Amendment Act seeks to reaffirm: the competition authorities have primary authority over all competition matters. Only in exceptional circumstances will their jurisdictional authority be subjugated in favour of an industry regulator.
Gomolemo Kekesi is a senior associate in the competition law department of commercial law firm Bowman Gilfillan 
 

[i] Competition Act 89 of 1998
[ii] Section 3(1) of the Competition Act; The Competition Commission of South Africa v Telkom SA Limited / The Competition Tribunal (SCA Case Number 623/2008)
[iii] The Competition Commission of South Africa v Telkom SA Limited / The Competition Tribunal (SCA Case Number 623/2008)
[iv] Telecommunications Act 103 of 1996
[v] 36 of 2005
[vi] Supreme Court of Appeal of South Africa
[vii] The Independent Communications Authority of South Africa