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Competition law amendments to be far reaching

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Competition law amendments to be far reaching

6th December 2017

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South Africa's Competition Amendment Bill (2017) has been published in the country's Government Gazette and interested parties have until end January 2018 to comment on the Bill.

South African Economic Development Minister Ebrahim Patel said the amendments would address “persistently high levels of economic concentration” in the country and noted that the proposed changes would mean that the South African competition authorities would have extended powers to investigate market concentration and impose structural remedies.

The Bill identifies five priorities in terms of competition law amendments, with the first priority being the strengthening of provisions of the current Competition Act that relate to prohibited practices and mergers. Secondly, the impact of anti-competitive conduct on small businesses and businesses owned by historically disadvantaged persons is given more attention. Thirdly, the Bill addresses market inquiries, strengthening the actions that can be taken to address features and conduct that prevent, restrict or distort competition. Further, the Bill highlights the necessity to promote the alignment of competition-related processes with other public policies in South Africa. Lastly, alongside their increased powers, the administrative efficacy of the competition regulatory authorities is also addressed by the Bill.

The Competition Act, in its current form, sets out a list of conduct that could be regarded as abuses of dominance, giving content to the meaning of dominance.  This provision is the statutory mechanism through which anticompetitive conduct in concentrated markets is addressed. In order to address concerns regarding concentration and ownership, the proposed amendments expand the list of specific exclusionary acts, most of which have been adjudicated upon and considered in the jurisprudence of the competition authorities and courts.  Notably, requiring a supplier to sell at "excessively low" prices is prohibited for dominant firms.

In order to intensify the risk associated with an infringement, the proposed amendments change the so-called "yellow card" offences (which previously did not attract a fine for first-time offenders) to "red card" offences. In other words, any infringement of the Competition Act, whether for the first time or otherwise, attracts an administrative penalty.

In relation to merger control, the proposed amendments seek to prevent "creeping concentrations" and the "erection and maintenance of strategic barriers to entry and the regulation of conditions under which a merger was approved".  The amendments require that cross-shareholdings and cross-directorships must be explicitly considered in all mergers and parties are required to disclose all merger activity engaged in in the preceding three years to identify potential merger creep theories of harm.

The Commission will also be given more power to launch market inquiries into sectors it considers to be highly concentrated, with increased authority to impose structural remedies on businesses in these sectors if they are found to create barriers to entry for new participants.  Moreover, the Commission's findings following a market enquiry will be binding unless they are challenged in the Competition Tribunal.  Presumably, this gives rise to potential reconsideration proceedings and increased recourse to the Competition Tribunal.
 
The amendments are extensive and far reaching and businesses operating in highly concentrated sectors, especially those identified by the competition authorities, should now prepare to be under a more intense spotlight.

The communications, technology, energy, financial services and food processing sectors have been identified as concentrated industries and are therefore susceptible to intensified antitrust investigation and prosecution.

The Bill can be viewed here https://www.gov.za/sites/default/files/41294_gon1345.pdf.

Written By Lerisha Naidu, Partner, and Angelo Tzarevski, Senior Associate, Antitrust and Competition Practice, Baker McKenzie,Johannesburg

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