Certain provisions of the Competition Amendment Act 18 of 2018 came into effect on 12 July 2019. The amendments have a strong public interest focus and are expected to have a significant impact on market participants and the regulation of competition in South Africa.
Various provisions of the Amendment Act have not yet commenced but are expected to come into effect towards the end of this year. These include those relating to (i) the proposed dual notification process for mergers involving foreign acquiring firms; (ii) buyer power; (iii) price discrimination; (iv) the powers of the Minister to make regulations regarding restrictive horizontal and vertical practices; and (v) the protection and disclosure of confidential information.
Some of the most notable amendments that have come into force relate to merger control, abuse of dominance, market inquiries, administrative penalties and exemptions.
New grounds, including (i) the promotion of market participation, entry or expansion by small and medium businesses, or firms controlled or owned by historically disadvantaged persons; (ii) changes in productive capacity; (iii) economic development, growth, transformation or stability of designated industries; and (iv) competitiveness and efficiency gains that promote employment or industrial expansion are introduced on which a firm may apply to the Commission to be exempt from the application of the prohibited practices provisions of the Competition Act.
Additional grounds are introduced for the Commission and Tribunal to consider when analysing mergers, namely:
- the extent of ownership of merger parties in, or the extent to which merger parties are related to other firms in related markets, including through common members or directors;
- other merger engaged in by merger parties for a period to be situated by the Commission;
- the ability of small and medium businesses, or firms controlled or owned by historically disadvantaged persons, to effectively enter into, participate in or expand within the market;
- the ability of national industries to compete in international markets; and
- the promotion of a greater spread of ownership, in particular to increase levels of ownership by historically disadvantaged persons and workers in firms in the market.
Abuse of Dominance
The amendments to the abuse of dominance provisions include changing the test for predatory pricing, introducing margin squeeze as a specific exclusionary act and significant changes to the excessive pricing provisions.
Market inquiries in respect of the general state of competition, levels of concentration and structure of a market, without referring to any specific conduct by market participants may now be initiated by the Commission or the Minister responsible for the administration of the Competition Act. The Commission must decide, having regard to the impact on competition on small and medium businesses, or firms controlled or owned by historically disadvantaged persons, whether any feature of a market impedes, restricts or distorts competition within that market. If so, an adverse effect on competition is deemed to exist which empowers the Commission to take any remedial actions that it considers to be reasonable and practicable, with the exception of divestiture, which can only be imposed by the Tribunal.
Previously, certain contraventions of the Competition Act did not attract a penalty for a first time offence. Now all contraventions carry a potential first offence penalty of up to 10% of turnover and a penalty of up to 25% is introduced for repeat offences. These penalties may now also be increased to include the turnover of firms that control a contravening firm, if the controlling firms knew, or should reasonably have known that the contravening firm was engaging in prohibited conduct.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.