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Webber Wentzel E-Alert: Competition Amendment Bill passed by the National Assembly

- 25 October 2018

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Competition Amendment Bill passed by the National Assembly

The "B" Version of the Competition Amendment Bill 2018 (the Bill) was passed by the National Assembly on 23 October 2018. We answer some key questions on this latest development below.

Does this mean that the Bill has now been enacted into law?

No - the Bill is not yet effective. The Bill will now be sent to the Select Committee of the National Council of Provinces (NCOP) for concurrence.

Will there be another opportunity to comment on the Bill?

Yes - as we understand, once the Bill is at NCOP level there will be a two week period for comments. It is also anticipated that there may be an opportunity to make oral representations.

Have there been any changes to the Bill since the version released in July 2018? (see our detailed E-Alert here setting out the key proposed amendments in the July 2018 version)

Yes - there have been important additional proposed amendments in the "B" version of the Bill, particularly in relation to the sections on abuse of dominance - see a short summary below.

What are the next steps?

After the Bill is approved by the NCOP, the parliamentary process will be complete. The final step is for the President of the Republic of South Africa to assent to the Bill. Once the Bill is signed by the President it becomes an Act of Parliament. We anticipate that the Bill will be passed into law late this year or early next year. Please look out for an invitation from us to a breakfast seminar soon after the Bill is enacted into law. An expert panel will help you understand the significant implications the Bill may have on your business.

 

Key amendments proposed in the "B" version of the Bill

Restrictive horizontal and vertical practices: A new provision which requires the Minister of Economic Development (the Minister) to make regulations on the application of restrictive horizontal and vertical practices. This is a change from the previous version of the Bill which provided that the Competition Commission must publish guidelines on the application of these sections. This change appears to be necessitated by the arguments raised around the legal status of guidelines. It is also important to note that this provision has been added following the removal of the yellow card for first time prohibited practice offences.

Abuse of dominance:
A new provision which requires the Minister to make regulations regarding the calculation and determination of an excessive price. These regulations must be taken into account when determining whether a price is excessive.

Dominant firms in a designated sector

  • Proposed section 8(4)(a) of the "B" version of the Bill provides that it is prohibited for a dominant firm in a sector designated by the Minister to directly or indirectly, require from or impose on a supplier that is a small and medium business or a firm controlled or owned by historically disadvantaged persons (HDPs), unfair prices or other trading conditions. If a dominant firm is alleged to have contravened sections 8(4)(a), it must show that the price or other trading condition is not unfair.
  • Proposed section 8(4)(b) of the "B" version of the Bill provides that it is prohibited for a dominant firm in a sector designated by the Minister to avoid purchasing, or refuse to purchase, goods or services from a supplier that is a small and medium business or a firm controlled or owned by HDPs in order to circumvent the operation of section 8(4)(a). If a dominant firm is alleged to contravened this section, it must show that it has not avoided purchasing, or refused to purchase, goods or services from a supplier in order to circumvent the operation of section 8(4)(a).
  • The Minister is empowered to make regulations designating the sectors, and in respect of firms owned or controlled by HDPs, the benchmarks for determining the firms, to which this section will apply. The regulations will also set out relevant factors and benchmarks in those sectors for determining whether prices and other trading conditions are unfair.

Price discrimination

  • In the previous version of the Bill, it was proposed that the term "substantially" be deleted when determining whether price discrimination is likely to have an effect on competition. The term has been retained in the "B" version of the Bill and a new provision, proposed section 9(1)(a)(ii), has been added. This section provides that an action by a dominant firm is prohibited price discrimination if it is likely to have the effect of impeding the ability of small and medium businesses or firms controlled or owned by HDPs, to participate effectively.
  • If there is a prima facie case in contravention of section 9(1)(a)(ii), the dominant firm must show that its action did not impede the ability of small and medium businesses and firms controlled or owned by HDPs to participate effectively.
  • It is prohibited for a dominant firm to avoid selling, or refuse to sell, goods or services to a purchaser that is a small and medium business or a firm controlled or owned by HDPs in order to circumvent the operation of section 9(1)(a)(ii). If there is a prima facie case of a contravention of this section, the dominant firm must show that it has not avoided selling, or refused to sell, goods or services to a purchaser in order to circumvent the operation of section 9(1)(a)(ii).
  • It is also important to note that if there is a prima facie contravention of 9(1)(a)(ii), a dominant firm cannot argue that the quantities of goods or services supplied to different purchasers, justifies the differential treatment envisaged by 9(1)(a)(ii).
  • The Minister must publish regulations to give effect to this section, including the benchmarks for determining the application of this section to firms owned and controlled by HDPs, and setting out the relevant factors and benchmarks for determining whether a dominant firm’s action is price discrimination that impedes the participation of small and medium businesses and firms controlled or owned by HDPs.

Mergers: Intervention in merger proceedings involving foreign acquiring firm
This section of the Bill proposes an amendment which empowers the President to constitute a Committee 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.

  • The "B" version of the Bill clarifies that a foreign acquiring firm which is required to notify the Commission of an intended merger must, at the time of the notification to the Commission, file a notice with the Committee.
  • The Committee has 60 days to consider and decide on whether the merger involving a foreign acquiring firm may have an adverse effect on the national security interests. A new provision provides that within 30 days of its decision, the Committee must publish a notice in the Gazette of the decision to permit, permit with conditions or prohibit the implementation of a merger, and inform the National Assembly of the decision.
  • The Committee may revoke its approval of the merger or, in respect of a conditional approval, make any appropriate decision regarding any condition relating to the merger for a number of reasons. The Commission’s or Competition Tribunal’s approval or conditional approval of the merger is deemed to be revoked if the Committee revokes its permission or if the foreign acquiring firm failed to notify the Committee.
  • The Commission and the Tribunal may not consider a merger, if the foreign acquiring firm failed to notify the Committee. The Tribunal may impose an administrative penalty on the parties to a merger involving a foreign acquiring firm for failing to notify a merger, implementing a merger contrary to a Commission or Tribunal decision / condition, or without approval.
Ministerial powers: As mentioned above, the Minister may by notice in the Gazette make regulations that are required to give effect to the purposes of the Act. Before making the regulations, the Minister must consult with the Commission and publish a notice in the Gazette stating that draft regulations have been prepared; specifying the place, which may include a website, where a copy of the draft regulations may be obtained; inviting interested parties to submit written comments on the draft regulations within a reasonable period, and consider any comments submitted within the period contemplated.
Market inquiries: Small and medium businesses have been included as participants in market inquiries and it is now a requirement that Commission must take reasonable steps to promote the participation of small and medium businesses, who have a material interest in the inquiry and are, in the opinion of the Commission, not adequately represented.
Administrative penalties: A dominant firm may be liable for an administrative penalty for contravening the new monopsony and price discrimination provisions i.e. proposed sections 8(4), 9(1) or 9(1)(A) discussed above.

 

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