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.