On Friday, 1 December 2017, the Minister of Economic Development, Ebrahim Patel (the Minister), published the Competition Amendment Bill 2017 (the draft Bill) for public comment. A copy is available here. The draft Bill is accompanied by two other documents - the Background Note on the draft Bill (Background Note) and an Explanatory Memorandum on the Objects of the Bill. The publication of the draft Bill marks an era of change for competition law in South Africa and is one of the most significant developments in this area of law since the Competition Act 89 of 1998 (the Act) came into force.
In essence, the draft Bill, inter alia, proposes changes to sections of the Act dealing with prohibited practices, expands the factors that the competition authorities will consider when assessing mergers, allows the competition authorities to conduct impact studies, broadens the scope and effect of market inquiries, and introduces a number procedural changes aimed at enhancing the administration of the Act. More detail on the proposed amendments is set out below.
Members of the public are invited to submit written comments by Thursday,1 February, 2018.
What you need to know about the draft Bill
The Background Note states that the draft Bill:
- focuses on creating and enhancing the substantive provisions of the Act aimed at addressing two key structural challenges in the South African economy - concentration and the racially-skewed spread of ownership of firms in the economy; and
- proposes amendments to the Act aimed at enhancing the policy and institutional framework, and procedural mechanisms for the administration of the Act.
The amendments in the draft Bill address five identified priorities:
- strengthening the provisions of the Act relating to prohibited practices and mergers;
- paying special attention to the impact of anti-competitive conduct on small business and firms owned by historically disadvantaged persons;
- promoting the alignment of competition-related processes and decisions with other public policies, programmes and interests; and
- enhancing the administrative efficacy of the competition regulatory authorities and their processes.
At a high-level, some of the key proposed amendments are set out below:
|Section 4 Restrictive horizontal practice
||The addition of the allocation of market shares as a collusive activity under section 4(1)(b)(ii) of the Act.
|Section 8 Abuse of dominance
||The removal of the 'catch-all' section 8(c) provision of the Act to transform section 8(d) into an open list of the known, predictable exclusionary acts developed in competition jurisprudence as abuses of dominance. The introduction of additional exclusionary acts prohibiting a dominant firm from:
- buying goods or services on condition that the seller accepts an unreasonable condition unrelated to the object of a contract;
- engaging in a margin squeeze; or
- requiring a supplier to sell at an excessively low price.
|Section 12 Merger control
||The introduction of additional factors for the competition authorities to consider when assessing a merger such as:
A new provision which enables the Competition Commission (Commission) to consider transactions occurring within a three-year period that result in a change of control to be scrutinised as if they occurred simultaneously. A proposed amendment which empowers the Commission to make any appropriate decision regarding any condition relating to a merger.
- the extent of shareholding in another firm in related markets;
- the extent to which a party is related to another firm in related markets (ie through common members or directors); and
- any mergers engaged in by a party in the preceding 3 years.
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.
|Section 21A Impact studies
||The introduction of impact studies - this proposed amendment creates a new power for the Commission to study the impact of earlier decisions by the Commission, Competition Tribunal (Tribunal) or Competition Appeal Court.
|Section 26 Establishment and constitution of the Competition Tribunal
||This amendment empowers the Minister, after consultation with the Chairperson of the Tribunal, to appoint one or more persons who meet the requirements as acting part-time members of the Tribunal for such a period as the Minister in each case may determine.
|Sections 43A to 43G Market inquiries
||These proposed amendments will enhance the market inquiry process and will ensure that its outcomes include measures to address concentration and the transformation of ownership. 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.
|Section 59 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. Penalties for non-specified exclusionary acts are left to the discretion of the Tribunal. The amendments also provide that an administrative penalty imposed upon a firm may be extended to other firms that form a single economic entity with the contravening firm.
Please look out for more updates from us on all further developments, as well as an invitation to a breakfast seminar early next year, as we continue to comprehensively unpack these proposed amendments.