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Webber Wentzel E-Alert: Key amendments proposed by the Competition Amendment Bill 2018

- 16 July 2018
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Key amendments proposed by the Competition Amendment Bill 2018

A revised Competition Amendment Bill 23 of 2018 (the Bill) was introduced to Parliament on 11 July 2018. This follows the publication of an earlier version of the Bill in December 2017 and the submission of extensive comments by stakeholders.

The revised Bill is clearly focused on the impact of anti-competitive conduct on small and medium businesses, employment, market inquiries, government involvement in competition proceedings and enhanced enforcement of the Competition Act 89 of 1998 (the Act).

Overall, it is positive to note that the revised Bill has taken into account some of the concerns raised by stakeholders. In contrast to the earlier version of the Bill, the contentious provision relating to creeping mergers has been removed, and the "catch-all" abuse of dominance provision remains intact.

However, the revised version of the Bill still encompasses complexities. The Bill now introduces a provision that allows for the President's intervention in respect of a merger which may adversely affect the country’s national security interests. Provisions relating to ministerial participation in competition proceedings remain a concern, and significantly, the Bill now proposes a maximum administrative penalty of 25% for repeat contraventions of the Act.

Some of the key proposed amendments are summarised below:

Restrictive horizontal and vertical practices

  • The addition of the allocation of market shares as a collusive activity.
  • A new provision which requires the Competition Commission (Commission) to publish guidelines on the application of restrictive horizontal and vertical practices. It appears that the requirement for guidelines has been added following the removal of the yellow card for first time prohibited practice offences. Presumably, the guidelines will attempt to clarify the application of these sections.

Abuse of dominance

  • Contrary to the earlier version of the Bill, the "catch-all" section 8(c) provision of the Act has not been deleted.
  • The introduction of margin squeeze as an additional exclusionary act, as well as a provision aimed at allowing small suppliers (particularly small and medium business or firms controlled or owned by a historically disadvantaged person) to sell their products to dominant firm at prices which do not impede their ability to participate effectively.
  • The inclusion of a list of relevant factors to take into account when determining whether a price is excessive and provision for the Commission to issue guidelines on how to determine excessive prices.
  • The proposed deletion of the term "substantially" when determining whether price discrimination is likely to have an effect on competition. This is to address the contention that small and medium businesses are often unable to show prohibited price discrimination because the effect on small businesses is not considered to be a ‘‘substantial’’ prevention or lessening of competition.

Exemptions

  • Additional grounds for the Commission to grant an exemption, including competitiveness and efficiency gains that promote employment or industrial expansion.
  • A new provision which empowers the Minister to issue regulations exempting an agreement or practice or category of agreements or practices from the application of the Act.

Mergers

  • A proposed amendment which seeks to highlight that even when the Commission and Competition Tribunal (Tribunal) conclude that a merger will not substantially prevent or lessen competition, they must still consider the public interest issues relating to the merger.
  • The introduction of additional factors for the competition authorities to consider when assessing a merger such as:
    • the extent of shareholding in another firm in related markets;
    • the extent to which a party is related to another firm in related markets (i.e. through common members or directors); and
    • any mergers engaged in by a party for such period as may be stipulated by the Commission.
These provisions are aimed at targeting the concerns around creeping concentration, and the erection and maintenance of strategic barriers to entry.
  • The introduction of additional public interest considerations such as:
    • the ability of small businesses to effectively enter into, participate in and expand within the market; and
    • the promotion of a greater spread of ownership.
  • A proposed amendment which empowers the Commission or Tribunal to make any appropriate decision regarding any condition relating to a merger.
  • A proposed amendment which provides the President with the powers to constitute a Committee comprised of Ministers and officials, with powers to intervene in respect of a merger where the acquiring firm is foreign, and the merger may adversely affect the country’s national security interests. Although contentious, this provision is common in a number of other countries.

Impact Studies

In terms of this proposed amendment, the Commission may study the impact of earlier decisions by the Commission, Tribunal or Competition Appeal Court. These impact study reports will then be published in the Government Gazette and tabled by the Minister in the National Assembly.

Ministerial Powers

  • As noted above, the Minister may now issue regulations exempting an agreement or practice or category of agreements or practices from the application of the Act, and appeal against merger decisions.
  • The Minister may appoint two or more Deputy Commissioners to the Commission, and one or more persons as acting part-time members of the Tribunal.
  • The Minister may require that the Commission conduct a market inquiry and may now appoint one or more full-time or part-time Deputy Commissioners who are responsible for conducting market inquiries.
  • The Minister is also provided with the right of access to confidential information. In addition, any other relevant Minister and any relevant regulatory authority may have access to a firm’s confidential information unless the Tribunal determines otherwise.

Market Inquiries

  • These proposed amendments are aimed at enhancing the market inquiry process and ensuring that its outcomes include measures to address concentration and the transformation of ownership.
  • Market inquiries are required to be completed in 18 months.
  • It is particularly important to note that the Commission’s potential findings and actions following a market inquiry will be binding, unless challenged in the Tribunal.
  • The expanded market inquiry section also places a duty on the Commission to remedy structural features identified as having an adverse effect on competition in a market, including the use of divestiture orders.
  • The Bill provides that a divesture may only be competently imposed by the Tribunal on the recommendation of the Commission, given the far-reaching nature of this remedy.

Administrative penalties

  • The amendments provide for the imposition of administrative penalties for all contraventions of the Act, even offences in respect of non-specific contraventions - for example, in terms of the proposed amendments, an administrative penalty may be imposed for all prohibited practice offences. Previously, only cartel conduct, resale price maintenance and certain abuse of dominance conduct resulted in an administrative penalty for a first time offence.
  • Significantly, a new provision proposes to increases the maximum administrative penalty to 25% of a firm’s annual turnover, if a firm's anti-competitive conduct is substantially a repeat by the same firm of conduct previously found to be a prohibited practice.
  • In addition, the administrative penalty may be increased by the turnover of any firm that controls the firm that is found to have engaged in a prohibited practice and to make the controlling firm jointly and severally liable for the penalty.

The Bill will now be considered and debated by the relevant committees within the National Assembly and National Council of Provinces. It is likely that there will also be further opportunities for public participation. It is evident however, that the intention is for the Bill to be passed before the 2019 national elections.

We will continue to keep you updated on all further developments.

CONTACT US


For further information, please contact your usual Webber Wentzel adviser or one of the people listed below:

 

Daryl Dingley | Partner
daryl.dingley@webberwentzel.com | T: +27 11 530 5285

Mmadika Moloi | Partner
mmadika.moloi@webberwentzel.com | T: +27 11 530 5359

Desmond Rudman | Partner
desmond.rudman@webberwentzel.com | T: +27 11 530 5272

Werner Rysbergen | Partner
werner.rysbergen@webberwentzel.com | T: +27 11 530 5468

Shawn van der Meulen | Partner
shawn.vandermeulen@webberwentzel.com | T: +27 11 530 5859

Martin Versfeld | Partner
martin.versfeld@webberwentzel.com | T: +27 11 530 5322

Robert Wilson | Partner
robert.wilson@webberwentzel.com | T: +27 11 530 5756