Companies are constantly competing with their rivals, as this is the norm among the market place. It is important for companies to maintain a healthy competitive environment in order to provide their consumers with the best quality products at affordable prices. Competition encourages companies to become more inventive and resourceful as they attempt to outwit one another. Inevitably the company with the highest standard of products and services will attract the most consumers.
It is these consumers who have really been feeling the pinch in their pockets over the last few months. With the introduction of e-tolling, petrol prices peaking at an all-time high and an increase in food and household expenses, consumer spending on necessities has become a significant burden. That is why it is crucial that anti-competitive conduct be restricted and governed correctly as the outcome of such behaviour is detrimental to consumers.
Competition law is governed by the Competition Act, 1998 (“the Act”) which consists of an independent competition authority, namely the Competition Commission (“Commission”), Competition Tribunal (“Tribunal”) and Competition Appeal Court (“Appeal Court”). The Act also confers on the competition authority extensive powers designed to prevent anti-competitive conduct. Such conduct includes:
· Restrictive horizontal and vertical practices;
· abuse of a dominant position; and
· horizontal and vertical mergers.
A restrictive horizontal practice is any agreement, co-operative or concerted conduct between competing companies which prevents or lessens competition in a market. The specific prohibitions include:
· directly or indirectly fixing of prices or other trading conditions;
· division of markets by allocating customers, suppliers, territories or specific types of
goods or services; and
· collusive tendering.
A restrictive vertical practice is any agreement between a company and its suppliers, its customers or both which prevents or lessens competition in a market. The practice of minimum resale price maintenance is considered as a specific prohibition. It is defined as any agreement or practice which has the effect of compelling or inducing a reseller of goods or services to charge a particular minimum resale price. A supplier or producer is permitted to recommend a minimum resale price to a reseller provided that the recommendation is not binding and the words “recommended price” appear next to the stated price.
A dominant company is a company that has market power, such power that includes the power to control prices, exclude competition or to behave to an extent independently of its competitors, customers or suppliers. A company that has a market share of at least 45% is deemed to be a dominant company. The Act prohibits the abuse of a dominant position as it is not the existence of a dominant position as such that is prohibited but the abuse thereof.
There are a number of practices that are prohibited including charging an excessive price to consumers, inducing a supplier or consumer to refrain from dealing with a competitor or selling goods or services below their marginal or average cost.
The Act has introduced a mechanism for the approval, evaluation and control of mergers. There are three main types of mergers:
- horizontal mergers which takes place between companies with an identical or similar activity in regard to the same or similar product, i.e. between companies operating in the same industry;
- vertical mergers which take place between companies involved in the successive stages of the supply or production of a product, i.e. between companies having a seller-buyer relationship in regard to the same or a similar product; and
- Conglomerate mergers which take place between companies with unrelated activities or products.
The Commission plays a vital role in ensuring that consumer welfare and interests are always protected. The Commission is given extensive powers to investigate and refer any anti-competitive conduct to the Tribunal or the Appeal Court for prosecution. Consumers too can approach the Commission and lodge a formal or non-formal complaint concerning any alleged prohibited practices.
According to the World Economic Forum (“WEF”) Competitiveness Report 2013-2014, South Africa has been ranked 8 out of 148 countries for the effectiveness of our competition law. The report is published yearly by the WEF and ranks countries based on the Global Competitiveness Index. The report evaluates the productivity and prosperity of the economy of a country. It is commendable that our country has been recognised for its competitive economy.