THE COMPETITION AMENDMENT BILL, 2018 INTRODUCED IN PARLIAMENT
“The first of a series of perspectives of the main proposals contained in the Bill.”
The Competition Amendment Bill, 2018 (Bill) was presented to Parliament by the Minister of Economic Development (Minister) on Wednesday last week
(11 July 2018).
The Bill reflects significant changes to the Competition Act, 1998 (Act) which, when enacted, will likely impact business in South Africa materially. The Bill has been presented as an instrument of economic policy that aims to address policy imperatives of Government related to the South African economy and its history - in particular with respect to questions of inequality, skewed ownership and the perceived concentrated nature of the economy.
The Bill is the outcome of a consultation process on the part of the Minister, including within the framework of the National Economic Development and Labour Council and pursuant to submissions made by a number of stakeholders. The Bill reflects the perspectives of a number of stakeholders within South Africa.
Significant revisions have been made to the second iteration of the Bill, which can be considered an improvement when compared to the earlier version thereof (released in December 2017). Despite this, the Bill is already being criticised in certain quarters on the basis that it may increase business uncertainty and undermine both foreign and local investment within South Africa. These criticisms are generally unjustified - other than arguably with respect to the provisions relating to acquisitions by foreign firms and the outcomes of market inquiries. That said, those provisions have been included together with a number of procedural requirements that may lessen the apparent far-reaching nature of those interventions.
Key provisions of the Bill relate to restrictive horizontal (between actual or potential competitors) and vertical (between parties at different levels of the supply chain) practices, the abuse of a dominant position, increasing the scope for exemptions, merger proceedings involving foreign acquiring firms, bolstering the public interest provisions relating to mergers, impact studies, ministerial powers, administrative penalties and market inquiries.
As regards restrictive practices, the Bill specifically records that allocating market shares constitutes a form of market division. In addition, and as a potentially significant development, the Bill also states that the Competition Commission (Commission) must publish guidelines related to the application of the horizontal provisions of the Act to forms of horizontal conduct.
The hope is that these guidelines will recognise that certain collaborations between competitors may be pro-competitive and not of the nature of “cartel” conduct. A major concern in South Africa has been that the approach of the Commission and the limited and narrow interpretation by the Competition Tribunal and the Competition Appeal Court of the relevant section of the Act have inhibited legitimate joint ventures and other collaborations that may well be competition and welfare enhancing.
Whilst it may have been preferable for the Bill to recognise such outcomes under the statute, the hope is that the Commission will constructively engage on the topic of legitimate horizontal conduct in order to increase the scope for legitimate collaborations between competitors that enhance competition, welfare, development and innovation in South Africa.
Optimistically, it is hoped that such sentiments will also apply to guidelines applicable to vertical practices in order to bolster the competition law principle that exclusive arrangements between vertically related parties are not in and of themselves problematic, and any consideration of anticompetitive outcomes requires an effects assessment (consistent with established competition law principles in South Africa and internationally).
This note is the first of a series of articles which Bowmans intends to issue over the next few days unpacking the various sections of the Bill in more detail, and providing a number of perspectives of the main proposals contained therein. The objective of these articles will be to encourage debate and understanding of the policy outcomes reflected in the Bill and to allow business to consider the impact thereof.
A noted central theme is that the Bill focuses strongly on the importance of fostering small and medium businesses and advancing transformation. While the Bill endeavours to balance various imperatives, legitimate concerns may be directed at the provisions relating to acquisitions by foreign firms and the market inquiry provisions (as being ill-advised at a stage in South Africa’s development when it is endeavouring to attract foreign investment and foster economic recovery). The Minister should be encouraged to afford comfort in this regard and to ensure, at a minimum, that such far-reaching interventions are not seen as potentially arbitrary in nature, nor that merger proceedings continue to be seen as potentially extractive and resulting in delays by virtue of the Minister’s involvement in such proceedings.
Although the Bill seems somewhat predicated on a misdirected approach to economic outcomes and incentives (especially insofar as assumptions about economic concentration are concerned), it should nevertheless be recognised as a genuine endeavour on the part of Government to balance the central policy imperatives in South Africa and the political environment within our country - wherein the consequences of Apartheid remain unresolved.
Bowmans will be holding a conference later in the year with the aim of debating the Bill and its consequences in more detail.
Should you have any questions relating to the above, please contact your usual contact in our Competition Practice.
Authors: Derek Lotter and Sian Gaffney