South Africa’s Competition Commission (the “Commission”) has published the finalised Terms of Reference for its Online Intermediation Platforms Market Inquiry (“OIPMI”). The OIPMI follows the Commission’s release of its “Competition in the Digital Economy” paper wherein it notes the benefits of online products and services but expressed concerns about the ‘winner-takes-all’ nature of some of
The recent decision of the Constitutional Court in Competition Commission of South Africa v Pickford Removals SA (Pty) Limited may have a material effect on the future prosecution of prohibited practices – including cartel behavior and abuses of dominance.
The Pickford decision relates to the interpretation of section 67(1) of the South African Competition Act as it stood before it was amended by the Competition Amendment Act, 2018. The section said:
“…a complaint in respect of a prohibited practice may not be initiated more than three years after the practice has ceased”
The main finding of the Constitutional Court was that section 67(1) of the Competition Act does not constitute a prescription provision, but a procedural time-bar provision, which in the event of non-compliance can be condoned. The effect is essentially that a prohibited practice complaint does not necessarily lapse three years after a prohibited practice has ceased.
In its finding, the Constitutional Court set aside an order of the Competition Appeal Court (CAC) and the matter was remitted to the Competition Tribunal (Tribunal) for further hearing.…
Continue Reading Widening the net – the Constitutional Court’s softening of the time-bar defence under South African competition law
So-called “excessive price” prohibitions are premised on a theory of harm that is generally rejected in competition law. Indeed, Canada’s Competition Act does not even contain a prohibition against excessive pricing. Among the many reasons for not prohibiting excessive prices are that to do so would undermine investment incentives (both of firms already in the market and potential entrants). Further, the phenomenon of excessive prices, in the absence of exclusionary conduct, is generally viewed as a temporary phenomenon that will be corrected by the market. Also, the legal uncertainty associated with the vagueness of the ‘excessive’ element in the concept could easily result in regulatory overreach.
In the context of COVID-19, the traditional arguments against prohibiting excessive prices have given way to a more consumer-oriented approach with respect to those supplying consumers directly. In response to concerns that retailers may be incentivized to substantially increase prices for products critical to the COVID-19 response, three Canadian provinces (i.e. British Columbia, Ontario & Nova Scotia) have specifically prohibited selling essential goods at unconscionable prices, or at prices markedly higher than fair market value. Other provinces appear to be more actively seeking to enforce pre-existing price gouging prohibitions in their consumer protection legislation, particularly in regards to necessary goods.
Yet, as already noted, it is unclear what constitutes an ‘excessive’ or ‘unconscionable’ price. Despite the fact that some provinces have had prohibitions on price gouging in their consumer protection legislation for decades, those provisions have been rarely used and scarcely considered by Canadian courts. At the same time, failing to comply with these provisions can have serious consequences, including financial penalties, restitution and reputational harm – and in some cases criminal fines and jail time. There is also the possibility a class action lawsuit could be instituted by a consumer on behalf of a class of consumers. What follows is a description of the price gouging laws of each Canadian province, as well as a description of their enforcement approach, where available, in order to help businesses understand how to avoid liability in respect of this particularly vague area of law.…
Continue Reading Price Gouging Prohibitions across Canada
Earlier this month, the South African Competition Tribunal found a firm guilty of abusing its dominance. The firm was a small trader with a market share of 4.7%. The illegal conduct comprised excessive pricing of face masks for a period of just over one month. The investigation, prosecution and adjudication took less than three months. …
On January 4, 2016, the Competition Tribunal (the “Tribunal”) released its first decision in respect of a refusal to deal case in almost 5 years. Indeed, the Tribunal dismissed Audatex Canada’s (“Audatex”) application for leave to bring a refusal to deal application under section 75 of the Competition Act (the “Act”) against CarProof and Markplaats,…
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 …
Continue Reading The Sasol appeal – developing or dismissing excessive pricing law in South Africa?
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…
On November 25, 2014, the Ontario Securities Commission (“OSC”) and the Competition Bureau (the “Bureau”, together with the OSC, the “Participants”) announced that they have signed a Memorandum of Understanding (the “MOU”), aimed at developing cooperation and effective delivery of each agency’s respective mandates.
The MOU signifies the acknowledgment of the important relationship between the…
On July 3, 2014, the Commissioner of Competition announced that changes to the Competition Bureau’s Corporate Compliance Programs Bulletin are planned. The Bulletin was last amended in 2010 to address the 2009 and 2010 amendments to the Competition Act.
Areas under consideration for updating include:
- the appropriate role of a company’s chief compliance officer;
On June 5, 2014, Lisa Campbell was appointed to the position of Senior Deputy Commissioner of Competition of the Merger Branch of the Competition Bureau (the “Bureau”). Ms. Campbell was mostly recently the Deputy Commissioner of the Fair Business Practices Branch of the Bureau. A week later on June 12, 2014, Ms. Campbell gave a…