What is the purpose of competition law in South Africa?
Competition law is a field of law that seeks to maintain competition in all markets by regulating the anti-competitive conduct of companies. Competition Law allows for the investigation, control and evaluation of restrictive practices, abuse of dominant positions, and mergers. Competition Law is not only focused on competition issues – it includes public interest and social issues such as the promotion of small businesses, the interests of employees and black economic empowerment.
Who regulates competition in South Africa?
The Competition Commission is empowered by the Competition Act to investigate, control and evaluate restrictive business practices, abuse of dominant positions and mergers in order to achieve equity and efficiency in the South African economy.Â
In addition, the Commission promotes voluntary compliance with the Act by providing education and advice on the application of the Act. The Commission can negotiate agreements with any regulatory authority to coordinate and harmonise the exercise of jurisdiction over competition matters within the relevant industry or sector, and ensure the consistent application of the principles of the Act. The Commission can also participate in the proceedings of any regulatory authority and advise (or receive advice) therefrom.
Who does competition law aim to protect?
In general, the purpose of competition law is to ensure a fair marketplace for consumers and producers by prohibiting unethical practices designed to garner greater market share than what could be realized through honest competition.
The primary legislation governing competition law in South Africa is the Competition Act of 1998, which is enforced by the Competition Commission and the Competition Tribunal.Â
Here are some key aspects protected by competition law in South Africa:
- Prohibition of anti-competitive practices: The Competition Act prohibits various anti-competitive practices, such as agreements or collusion between competitors that restrict competition, abuse of dominant market positions, and mergers and acquisitions that substantially lessen competition.
- Prohibition of cartels: Cartels are explicitly prohibited under South African competition law. Competitors are not allowed to engage in collusive behavior, including price fixing, bid rigging, market division, or any other concerted practices that substantially prevent, restrict, or distort competition.
- Merger control: The Competition Act requires firms to notify the Competition Commission of mergers and acquisitions that exceed certain thresholds. The Commission assesses whether these transactions are likely to substantially prevent or lessen competition in the relevant market. If concerns are identified, the Commission can impose conditions or prohibit the merger.
- Abuse of dominance: The Competition Act prohibits firms with a dominant market position from abusing their power to restrict competition. Examples of abusive conduct may include excessive pricing, predatory pricing, exclusive dealing, tying or bundling, or unfair trading terms.
- Complaints and investigations: The Competition Act provides for the investigation of anti-competitive behaviour and allows any person or firm to file a complaint with the Competition Commission. The Commission has powers to investigate complaints, gather evidence, and take action against those found in contravention of the Act.
- Penalties and remedies: The Competition Tribunal, which is an independent adjudicative body, adjudicates cases brought by the Competition Commission. It has the power to impose penalties to firms found guilty of anti-competitive behaviour, including fines of up to 10% of the firm’s annual turnover. Remedies may include behavioural or structural remedies to restore competition.
- Promotion of competition advocacy: The Competition Act also promotes competition advocacy by the Competition Commission, aimed at educating the public, businesses, and government entities about the benefits of competition and the importance of complying with competition law.
It’s worth noting that the South African competition law regime is constantly evolving, and it is always advisable to consult the latest legal sources or seek professional advice for the most up-to-date information.
FAQ around Competition Law
In terms of Section 12 of the Competition Act, a merger occurs when one or more firms directly or indirectly acquire or establish direct or indirect control over the whole or part of the business of another firm. A merger may occur through purchase or lease of shares or assets, joint ventures and/or pure amalgamation of firms/businesses.
A merger is notifiable to the Commission if it meets the following three criteria:
- Jurisdiction test – the merger must constitute economic activity within, or having an effect within, South Africa;
- Control test – the merger must constitute a ‘merger’ as defined in section 12 of the Competition Act; andÂ
- Threshold test – the merger must meet the thresholds of assets and turnover values established in the Competition Act.
- Higher threshold: Combined turnover/Asset value R6.6b: Target turnover/Asset Value R190m
- The financial threshold analysis considers the higher of the gross turnovers or gross asset values of:
- the acquiring group (i.e., the immediate acquiring firm and all firms it controls, firms that control it, and all other firms controlled by its controllers) and the target firm and any firms it controls (Combined Value); and
- the target firm (including any firms it controls) (Target Value), as recorded in the firms’ most recent year-end financial statements.
Caveat competition law services
As part of our competition law services, our team advises on merger control and prohibited restrictive practices, as well as legal and regulatory competition law compliance in South Africa and other African jurisdictions. For more information on these and other questions regarding this sector of law, please consult one of our panel experts.