New Competition Amendment Bill aims to overcome previous structural challenges

“We’re a BEE consortium that has been exploring opportunities to venture into the telecommunications industry. What is immediately apparent is that this sector is dominated by a number of larger players, which makes entry quite difficult. To what extent will the proposed amendments to the Competition Act create more scope for newer players like us?”

A Competition Amendment Bill, 2017 (“draft Bill”) was published for comment on 01 December 2017 with the proposed amendments being described as “extensive” and “far reaching”. Primarily, the draft Bill seeks to address two structural challenges to the business environment, namely market concentration, and secondly, racially-skewed ownership profiles in the South African economy. Additionally, the draft Bill aims to enhance the policy and institutional framework as well as procedural mechanisms for the administration of the Competition Act 89 of 1998 (“the Act”).

In essence, the draft Bill seeks to create a more level playing field and ensure fair market participation by all persons as well as the increased scrutiny of certain industries. Sectors such as the financial services, communications, technology and food processing sectors have been identified as ‘concentrated industries’, ‘concentration’ in this sense typically referring to circumstances where a small number of businesses make up the majority or bulk sales in a particular market sector and which then tends to create and maintain barriers to entry for new and emerging businesses. 

The draft Bill aims to critically consider the root causes giving rise to concentration in a given market, considering the conduct of businesses as well as the ownership profiles and structural framework of the market. The draft Bill also aims to grant competition law authorities increased power to launch market inquiries into ‘concentrated’ sectors.

Although, the Act already contains provisions relating to the abuse of dominance or collusion and which may be employed to address anti-competitive conduct, the structural components and features that gave rise to such dominance are not adequately addressed under the existing provisions of the Act. Accordingly, the draft Bill now requires that competition authorities consider both the ownership profile, as well as structural impediments to market entry when assessing mergers or complaints of anti-competitive conduct (including high levels of concentration and hampered economic transformation). 

The proposed amendments further empower the competition authorities to impose tailored structural remedies in concentrated sectors and address features which prevent or restrict competition in a given market. Moreover, proposed amendments determine that the Competition Commission’s findings (including remedial actions) following a market enquiry will be binding unless they are challenged in the Competition Tribunal, a material departure from the current situation, where the Competition Commission merely makes recommendations.

Whilst tackling economic concentration, the draft Bill seeks to question and alter the racially-skewed spread of ownership in the South African economy in relation to historically disadvantaged groups and/or individuals. 

The above-mentioned primary objections of the draft Bill are accompanied by the following five priority areas: 

1.  Strengthening provisions of the Act relating to merger regulation and prohibited practices, particularly relating to abuse of dominance and price discrimination. 
2.  Requiring that special attention be given to the impact of anti-competitive conduct on small businesses and firms owned by historically disadvantaged persons.  
3.  Strengthening the provisions relating to market inquiries in order to ensure that their remedial actions effectively address market features and conduct that will or may prevent, restrict or distort competition in relevant markets. 
4.  Promoting the alignment of competition-related processes and decisions with other public policies, programmes and interests. 
5.  Enhancing the administrative efficacy of the competition regulatory authorities and their processes. 

From an economic point of view, the shift of focus from behaviour to structure could go a long way to assist new market participants like your consortium to enter concentrated sectors, boosting economic innovation and increasing consumer choice. The draft Bill also appears to affirm the transformative vision of economic empowerment in South Africa and aims to increase greater participation by historically disadvantaged South Africans in the economy.

February 7, 2017
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