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This article considers the potential for changes in the treatment of vertical agreements under South African competition law as a result of recent amendments to the Competition Act, as well as current policy views within the law-makers and regulators.

Section 5(1) of the South African Competition Act prohibits vertical agreements that substantially prevent or lessen

One might think that competition law would applaud a firm that submits an independent and competitive bid, in response to a tender aimed at lowering prices.  Recent experience in South Africa suggests that this is not always the case, and that such a firm may face investigation by the competition authorities precisely because it won the competitive tender.

In October 2017, the South African Competition Commission announced that it has initiated, and is investigating, a complaint of abuse of dominance by Vodacom, the country’s largest cellular network services provider.

The subject of the complaint is a four year exclusive contract, in terms of which Vodacom will supply mobile telecommunications services to 20 government departments.

Although Vodacom bid for the contract in a competitive tender process, the Commission “is of the view” that the contract will (1) further entrench Vodacom’s dominant position in the relevant market; (2) raise barriers to entry and expansion in the relevant market; (3) distort competition in the market; and (4) result in a loss of market share for other network operators.

Leaving aside the merits of the complaint, the announcement is interesting and controversial for a number of reasons.  In particular, it raises important questions about the Commission’s advocacy strategy, and about the obligations on business when participating in significant tenders.


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(The full version of this bulletin was originally published on Fasken.com – “The Competition Commission’s Market Inquiry into Data Services” – September 12th, 2017.)

On 18 September 2017, the Competition Commission is expected to commence a market inquiry into data services in South Africa. This is the sixth market inquiry to

pexels-photo-136721On 7 June 2017 the Competition Commission South Africa will commence a market inquiry into the public passenger transport sector. This is the fifth market inquiry to be initiated by the Commission, following inquiries into the LPG, healthcare, grocery retail and banking sectors.

What does the Commission intend to investigate?

In terms of the Terms

On 17 June 2015, the Competition Appeal Court of South Africa (CAC) overturned the Competition Tribunal’s decision which found Sasol Chemical Industries Limited (Sasol) guilty of excessive pricing.

The CAC’s judgment is thorough and the factual, legal, accounting and economic issues covered are complicated. Although redeeming for Sasol, the judgment may give rise to a number of significant implications for future enforcement action against excessive pricing South Africa.

We set out below a review of the questions raised in the decision as well as the potential implications of the CAC’s answers.

The feedstock debate – Actual costs or notional costs?1

The first and potentially most important question addressed by the CAC related to what the CAC referred to as the ‘feedstock debate’. According to the Competition Act2 , a price charged by a dominant firm is excessive and illegal if it has no reasonable relation to the economic value of the product in question.

In conditions of competition, prices will normally be driven down towards a firm’s costs of production (plus a reasonable return). A firm’s costs (including a reasonable return) therefore usually provide an insightful proxy for the price that would prevail under conditions of competition, and therefore a product’s ‘economic value’.

In the only previous excessive pricing case in South Africa, the Mittal case, the CAC held:

economic value is a notional objective market standard, not one derived from circumstances peculiar to the particular firm… The criterion of economic value…recognizes only the costs that would be recovered in long run competitive equilibrium3.

Sasol has a peculiar cost advantage because it procures its feedstock propylene from its sister company – Sasol Synfuels – at a low internal transfer price. Feedstock propylene is a critical input in the production of purified propylene, which is then converted into polypropylene.

One of the key questions in the Sasol case was how
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The year of 2014 marked the 15 year anniversary of the South African Competition Authorities. The year’s highlights included some important merger decisions, implementation of the Competition Commission’s powers in relation to market inquiries, development of the law prohibiting excessive pricing, the appointment of a new Commissioner and important clarification of regional merger control laws

This note summarizes the recent decision of the South African Competition Tribunal, which found Sasol Chemical Industries guilty of excessive pricing.

South Africa is one of the few competition law jurisdictions that actively pursues cases of ‘excessive pricing’ by dominant firms.  The Competition Commission had alleged that Sasol had charged domestic customers excessive prices

The South African Competition Commission has recently concluded its investigation into the potential effects on competition of exclusive lease agreements between supermarkets and their landlords. This note explains the implications of the Commission’s decision for firms that rely on exclusive lease agreements. 

Arguments for and against exclusive lease agreements

Supermarkets often play the role of

The year of 2013 provided further opportunity for development of South Africa’s competition policy, law and practice. The year’s highlights included the conclusion of the Competition Commission’s Fast Track Settlement  process involving bid rigging in the construction sector; some important merger decisions; developments in the law on pursuit of private damages; and clarity on numerous procedural matters in enforcement actions. These are elaborated upon further below.

Mergers

Merger Regulation Trends

324 mergers were notified to the Competition Commission in the period April 2012 to March 2013.  This represents an increase of around 10% to the 291 mergers notified in the previous year. Most of these transactions were in the manufacturing 23%, property 27% and mining sectors.

In this most recent period, 85% of mergers were approved unconditionally. 11% were approved subject to conditions (28 behavioural remedies aimed at public interest issues and seven structural remedies); and 4% were withdrawn or dismissed for lack of jurisdiction.  No mergers were prohibited.

The Commission continued with a trend we identified last year in protecting and advancing public policy considerations (most notably protection of employment) in its merger analysis. The case of Stefanutti/Enorgotec gave rise to the fastest decision yet by the authorities (reportedly made within four hours of filing of the Commission’s recommendation to the Tribunal) was based largely on the need to protect employment in a firm under severe financial distress.

In Glencore / Xstrata, the Competition Tribunal confirmed an agreement between the merging parties and the National Union of Mineworkers that the number of skilled employees retrenched as a result of the merger would be limited to 80, and the number of semi-skilled and unskilled employees retrenched would be limited to 100.  Greater protection was provided for semi-skilled and unskilled workers, who may only be retrenched after two years following a 90 day review period, during which the necessity of the potential retrenchments had to be considered in consultation with the trade union.


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