Explainer: Here’s what the Competition Amendment Bill means for SA’s economy

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JOHANNESBURG, February 14 – Cape Town-based intellectual property law Adams and Adams Attorneys on Thursday welcomed the signing of the Competition Amendment Bill into law by President Cyril Ramaphosa.

Ramaphosa on Wednesday signed the Competition Amendment Bill into law which he said will be a boost for SMEs and economic inclusion, and would open up the economy to fresh investment and innovation.

Ramaphosa said the Bill also provides a clear mandate to the competition authorities to address economic concentration in a balanced manner and to promote economic transformation, and provides clarity to firms and investors on prohibited practices and what constitutes abuse of dominance.

Misha van Niekerk, senior associate at Adams and Adams, said while controversial on certain aspects, the Amendment Act recognises that the economy must be open to greater ownership by a greater number of South Africans.

Van Niekerk said the Act aims to address structural constraints in the economy through these seven key focus areas, including strengthening the Competition Commission’s powers in relation to market inquiries and impact studies.

“As recently seen with the Health Market Enquiry, the Competition Commission has no explicit power to act on its recommendations. The Amendment Act will empower the Commission to act to remedy, mitigate or prevent the adverse effect on competition by making recommendations to the Competition Tribunal,” she said.

Van Niekerk also said the Amendment Act will increase the role of public interest grounds in the consideration of mergers.

“Therefore, the promotion of a greater spread of ownership for historically disadvantaged persons and workers in the market, as well as their ability to enter into, participate and expand within a market will be central in merger analysis on public interest grounds,” she said.

“This will further lead to the promotion of competition and economic transformation through addressing the structural constraints, for example a greater spread of ownership, within a market.”

Van Niekerk said the Act will enforce a reverse onus on dominant firms to show that the price of its goods and services is reasonable, as the list of prohibited conduct has been expanded and previous ‘yellow card’ offences will now result in an administrative penalty.

Penalties for contraventions of the Act have been increased from 10 percent to 25 percent of a firm’s annual turnover if conduct constitutes a repeat offence. The group or controlling firm may be held liable jointly and severally for an administrative penalty.

Van Niekerk also explained that the minister o trade and industry will be empowered to participate in merger proceedings and applications for exemptions, specifically in relation to public interest grounds.

“In terms of the Amendment Act, the minister has the right of appeal against a merger decision of competition authorities if it has substantial public interest implications for a particular industrial sector,” she said.

In terms of national security, the Act empowers the President may constitute a national security committee which will be responsible for considering whether the implementation of a merger involving a foreign acquiring firm may have an adverse effect on the national security interests of South Africa.

“The Amendment Act further clarifies provisions of the Act relating to prohibited practices, restricted horizontal and vertical practices, abuse of dominance and price discrimination through the addition of various definitions,” van Niekerk said.

“The definitions added in the Amendment Act include margin squeeze, average avoidable and voidable cost, predatory prices, etc. These additions will assist firms, as well as the competition authorities with the interpretation and assessment of various prohibited practices.” (ANA)