Competition Amendment Bill, 2008

Competition Amendment Bill, 2008
DATE: 28 AUGUST 2008
Zodwa Ntuli – DDG: Consumer and Corporate Regulations Division (CCRD)
Fungai Sibanda – CD: Policy & Legislation (CCRD)
Nomfundo Maseti – D: Competition & Consumer Policy & Law (CCRD)
Segoane Monnye – DD: Competition & Consumer Policy and Law (CCRD)
The Bill is not intended to overhaul the current Competition regime but focused on
key areas aimed at –
 Strengthening the existing provisions of the Competition Act to deal
effectively with anti-competitive practices;
 Deal with prevalence of cartels that harm consumers and the
economy through high fixed prices, collusive tendering and market
 Enabling the Competition Commission to play a more proactive role
in investigating markets & take measures to ensure market
Need for a focused review of the existing Competition Law regime
 To respond to the industrial policy objectives such as promotion of competitiveness;
 Observations on the challenges of the competition authorities in dealing with uncompetitive
outcomes resulting in artificially high prices to the detriment of consumers; e.g. competition
problems resulting from complex monopolies or multi-firm conduct such as the bread and
banking sector;
To strengthen efforts on cartel enforcement by introducing personal liability on directors who
cause their firms to engage in cartel activities. This will complement fines imposed on firms
and enforce responsible behavior on part of directors or officers of firms.
Scope of the Bill
The Bill focuses on five broad areas:
Market Inquiry – It is exploratory in nature and intended to inquire on the competition
deficiencies. It serves as a tool to enable the Commission to play a
more proactive role in investigating markets.
Complex Monopolies – It is intended to deal effectively with uncompetitive outcomes
resulting from a multi-firm conduct that restricts or distorts competition
to the detriment of consumers.
Personal Liability – It is intended to provide an effective deterrent on cartel activities by
introducing criminal sanctions against individuals who caused the firms
to engage in illicit cartel activities.
Incorporation of Leniency Policy – It is a tool used to detect cartel activity by encouraging
those involved in cartel activities to come forward and disclose
information to the Competition Commission in return for immunity.
Concurrent jurisdiction – It is intended to deal with inconsistencies arising from the
Competition Act and the EC Act in dealing with competition matters in regulated
industries, in particular, in the telecommunications sector.
Market Inquiry
Market inquiry provisions
Sec 21(2)(b) of the Act already gives the Commission powers to conduct market inquiry
and report findings to the Minister;
However it doesn’t provide for action to be taken to address findings of the inquiry;
Further, the Commission was unable to exercise its powers to summons documents;
Rationale: is to amplify existing provisions of market inquiry to enable the Commission to
undertake more structured, effective and transparent inquiries
Make the initiation process of such inquiry explicit e.g. Inquiry to be initiated by the
Commission on its own or on request of the Minister;
Provided for the Commission to invoke its subpoena powers in terms of Sec 49Aof the Act
e.g. require parties to provide information under oath
Market Inquiry Cont:
As a safeguard, the Bill provides for grounds for initiation of the market inquiry;
That is, reason to believe that there is a distortion of competition within a particular market,
achievement of the purposes of the Act.
Outcome of the Market Inquiry
Allow for appropriate remedies to be taken by the Commission.
Refer matters for enforcement action or further investigation by the Commission.
Provide report to the Minister on issues relating to policy review, changes in laws and
Complex Monopolies
Complex Monopoly provisions
• Chapter 2 of the Act prohibits anti-competitive conduct if two or more firms engage in
the conduct as a concerted practice or pursuant to an agreement between them;
• The requirement of a specific contact or agreement inhibits the Commission’s ability
to investigate, take action or seek a remedy for a multi-firm conduct or complex
• Complex monopoly occurs where two or more firms act in a cooperative manner or
conduct their business affairs in a coordinated way without a specific contact or
agreement e.g. parallel pricing, common trading policies, exploitative pricing to
downstream players/consumers.
Complex Monopolies Cont:
The Bill introduces a new provision which empowers the Commission to
investigate the existence of complex monopoly conduct i.e. coordinated
conduct or parallel conscious conduct in highly concentrated markets;
The intention is to deal with uncompetitive outcomes manifested through high
entry barriers, exclusion of other firms, excessive pricing and refusal to supply
goods and services;
The Bill provides for firms to advance efficiencies or other pro-competitive gains
as a defense for their conduct.
Commission may apply to the Tribunal for a declaratory order against the firms
engaged in a complex monopoly conduct;
Declaratory order serves as a yellow card (No admin penalty for first
Contravention of this order constitutes a prohibited practices which may result
in admin penalty being imposed
Personal Liability
Personal Liability Provisions
• The Act does not provide for remedies against directors or officers of firms that
cause firms to engage in cartel activities;
• In many competition jurisdictions, cartel activity is subject to criminal sanctions
including the possible imprisonment of individuals found guilty of cartel conduct;
This weakens the ability of the competition authorities to fight and deter cartel
• Introduce financial sanctions against individuals but cap the fine, that is, liable
for a fine not exceeding R500 000 or 10 years imprisonment or both (incorporated
section 74 of the Act).
• As a further disincentive – disbarring of directors convicted of cartel conduct will
be dealt with in the Companies Bill.
Leniency clauses
• The Act does not expressly provide for leniency or excusal of respondents
from a complaint if they disclose information on their involvement in cartel
• Currently the Commission excuse respondents through its Leniency Policy;
• However there exists legal uncertainty regarding the Commission’s Leniency
leniency for firms
• Provide express authority for the Commission to grant leniency to firms;
• This will not preclude any person that suffered damages from pursuing civil
claims against that particular respondent.
Leniency clause cont.
Leniency for individuals
• The Bill provides for individuals to be certified as
deserving leniency
Consequences of certification
• Commission may not seek or request criminal
prosecution of such person;
• Commission may make submission to National
Prosecuting Authority in support of leniency;
Payment of fines
• Firms are prohibited for paying criminal fines on behalf
of its directors
Concurrent jurisdiction
Concurrent jurisdiction provisions
•Sec 3 of the Act provide for concurrent jurisdiction in respect of competition
matters in regulated industries;
•Such concurrency has to be managed through agreement between the
Commission and the regulatory authority for the relevant industry;
•There exist inconsistencies in the Electronic Communications Act (EC Act) and
the Competition Act in the exercise of authority on competition matters in the
telecommunications sector;
•Section 67(9) of the EC Act removes concurrency by stating that the Act is
subject to EC Act; This raises legal uncertainty on the jurisdiction of the
Competition Authorities in dealing with anti-competitive behavior in the telecoms
•This effectively changed the general policy stance on concurrent exercise of
authority over competition matters in regulated industries;
•In addition, the Act is silent as to which institution has final authority on
competition considerations.
Concurrent jurisdiction
• As a general policy, the Bill proposes that the Competition Act should be the
central governing statement of competition policy in SA but recognize other
industry specific legislation through concurrent jurisdiction;
• Sector regulatory authority to exercise primary authority necessary to establish
conditions within the industry (ex ante regulation);
• Commission has authority to detect and investigate prohibited practices within any
sector and power to review mergers (ex post regulation)
• MOA to provide framework for cooperation between sector regulator and
competition commission on competition matters in regulated industries;
• The Bill also proposes consequential amendment to sec 67(9) of the EC Act to
reinstate the concurrency and provide certainty e.g. by merely replacing the word
“subject to” with “ despite”.
Consultation Process
The dti commenced with the consultation of key stakeholders in April 2007 on the
policy framework. The following stakeholders were consulted on both policy and
Amendment Bill:
Competition Commission & Competition Tribunal
Business Unity of South Africa (BUSA)
Economic Cluster / Forum Of South Africa’s Directors-General
National Treasury
Dept of Communication
South African Property Owners Association (SAPOA)
Labor Constituency of Nedlac (Food and Allied Workers Union, Congress of South African
Trade Unions and National Union of Metal Workers of South Africa)
Dept of Transport
Dept of Minerals and Energy
National Energy Regulator of South Africa (NERSA)
Independent Communications Authority of South Africa (ICASA)
Competition Law Committee of the Law Society of Northern Province
Dept of Justice and Constitutional Development