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BUSINESS SUBMISSION ON THE COMPETITION AMENDMENT BILL, 2017

GENERAL COMMENTS

Business acknowledges the impetus to amend the Competition Act, 1998 to strengthen the powers of the Competition Commission. However, certain of the provisions of the Competition Amendment Bill go beyond what business views as adequate and may undermine free market principles, as well as being sub-economic in that a careful and prudent balance should be struck between the operation of the free market and the primary objective of competition law.

In the Background Note preceding the Bill, it is stated that evaluation of concentration requires a skilled and experienced regulator to create an evidence based and considered foundation for interventions, and that the amendments recognise that the competition authorities have these skills and experience. We submit that one of the challenges of competition authorities around the globe is the knowledge and understanding of competition regulators and courts of specific markets, and public interest goals across a wide spectrum of industries. It is therefore submitted that it will be challenging for this to be addressed given the wide ambit of the market inquiry provisions. Further clarity on how this will be given effect is required. Furthermore, huge reliance is placed by the Commission on firms / business to assist the Commission with information on specific markets in mergers and enforcement (complaints), however, a new test is introduced to be applied for adverse effects in market inquiries, where the Commission may make unilateral decisions based on reasonable and practicable actions that will be binding.

o The significant focus on and magnification of arguments on concentration borders on treating concentration as a problem per se, a position which has no sound basis in competition economics, law and policy, as concentrated markets could also be characterised by effective competition and welfare benefits. It is trite in economics and competition law that dominance on its own is not a problem and the Bill itself acknowledges that concentration may also be associated with economic benefits. There is therefore limited economics and policy basis for adopting such an approach. The pointed attempt to target concentration directly and remedying it e.g. through market inquiries may not be appropriate.

o The summary of the study does not, in fact, identify relevant markets but rather "average market shares" across broad sectors or industries. This is not in any way indicative of actual concentration levels in relevant markets as assessed in competition law and economic terms.

o The study relied upon reflects a snapshot at the time each merger was assessed and as such may not reflect trends in concentration levels over time nor current concentration levels. It therefore does not reflect changes in concentration levels prior to and after the mergers. It is these trends that yield useful information regarding whether concentration has remained the same,

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increased or decreased. Where concentration levels are reducing over time, the rationale for the proposed amendments is less compelling.

Regarding the proposed changes to the market inquiries regime, a reasonable and objective jurisdictional threshold should be present before any such inquiry is triggered.

Business welcomes the deletion of the complex monopoly provisions as these were, in business’ view, unworkable as they may outlaw legitimate parallel conduct of market participants who have no ability to prevent falling foul of these provisions.

With regard to the consideration of mergers, the Bill proposes that when deciding whether a merger can be justified on public interest grounds, the Competition Authorities must consider the effects that the merger will have on the ability of small firms controlled or owned by historically disadvantaged individuals (HDIs) to effectively enter into, participate and expand within the market. However, clarity is required on how the Bill will promote broader public interest factors in merger analysis whilst balancing the primary purpose of competition law policy. Clarity is required on the substantive provisions on the public interest goals, considering that they have far-reaching impact, especially in respect of market inquiries.

With respect to the participation of the Minister in competition instruments and procedures, greater clarity and specifics are required to understand precisely how far this participation would apply. In principle however, the scope of the Minister’s involvement should continue to be limited to making representations on public interest grounds. To do otherwise, is to elevate the Minister to a quasi-competition regulator alongside the Commission. Ministerial intervention should be carefully managed to ensure that Public Interest considerations do not exceed the scope of the Competition Authorities mandate.

Detailed comments on the Bill are provided in the below matrix.

Business, through BUSA, is available to discuss any of the above or forthcoming points further with the Economic Development Department (EDD) and would appreciate an opportunity to consult further once the initial comments from stakeholders are considered and / or addressed in further versions of the Bill.

GENERAL EXPLANATORY NOTE:

[ ] Words in bold type in square brackets indicate omissions from existing enactments.

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_______ Words underlined with a solid line indicate insertions in existing enactments.

To amend the Competition Act, 1998, so as to introduce provisions that: clarify and improve the determination of prohibited practices relating to restrictive horizontal practices, abuse of dominance and price discrimination; improve the regulation of mergers; to provide for the promotion of competition and economic transformation through addressing the de-concentration of markets; to protect and to stimulate small businesses and firms owned and controlled by historically disadvantaged persons and their growth; to protect and promote decent employment and employment security; to facilitate the effective participation of the national Executive within proceedings contemplated in the Competition Act, 1998; to empower the Commission to act in accordance with the results of a market inquiry; to amend the process by which the Competition Commission may initiate market inquiries; to empower the Minister to initiate market enquiries; to promote greater efficiency regarding the conduct of market inquiries; to clarify and foster greater efficiency regarding the determination of confidential information and access to confidential information; to promote the administrative efficiency of the Competition Commission and Competition Tribunal; and provide for matters connected therewith.

BE IT ENACTED by the Parliament of the Republic of South Africa, as follows:

Clause / Sub-clause Business’ Position / Input

Amendment of section 1 of Act 89 of 1998, as amended by section 1 of Act No. 39 of 2000

1 The Competition Act, 1998 (Act 89 of 1998) (hereinafter ‘the Principal Act’) is hereby amended by the —

(a) the substitution in section 1 for the definition of “exclusionary act” of thefollowing definition—

“exclusionary act” means an act that impedes or prevents a firm from entering into, participating in or expanding within [,] a market;”

Neither the Background Note on the Competition Amendment Bill, 2017 (the Background Note) nor the Memorandum on the Objects of the Competition Amendment Bill, 2017 (the Memorandum) highlights that the amendment is aimed at expanding the ambit of an exclusionary act beyond barriers to entry and expansion to include participation in the market.What is meant here by this term? For example, if a dominant firm refuses to appoint a particular supplier or contract with a particular third party, could this be regarded as an exclusionary act?

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Moreover, if the dominant firm has a policy of, for example, using empowered firms or firms owned or controlled by historically disadvantaged individuals as suppliers, could firms that the dominant firm does not use allege that an exclusionary act has been perpetrated? For these reasons, clarity should be provided about what this term means – alternatively, it will have to be interpreted by the Commission by way of guidelines, or by the Competition Tribunal (the Tribunal) or Competition Appeal Court. It would be preferable for the Principal Act to contain a clear definition, as the time taken to wait for guidelines or case law on the subject could lead to uncertainty in the economy.

(b) the substitution in section 1 of the definition of “Minister” with the following—“Minister” means the Minister responsible for the administration of this Act;”

(c) the substitution in section 1 of the definition of “small business” with thefollowing—

“small business” [has the meaning] means a small enterprise as set out in the National Small Enterprise Act, 1996 (Act No. 102 of 1996);

Amendment of section 4 in Act 89 of 1998, as amended by section 3 of Act 39 of 2000

2 The Principal Act is hereby amended by the substitution of section 4(1)(b)(ii) for the following section —

“(ii) dividing markets by allocating market shares, customers, suppliers, territories or specific types of goods or services; or”

An issue which has vexed businesses in South Africa since the inception of the Act, is the inclusion of the agreement on purchase prices in section 4(1)(b)(i). On an ordinary interpretation of this section, it means that joint purchasing arrangements or “buyers’ clubs” are per se prohibited under the Act. World-wide, it is recognised that these kinds of

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arrangements are actually pro-competitive and should be encouraged. In Europe, for example, where Article 101 is supplemented by binding guidelines, the guidelines on horizontal arrangements set out an effects-based (or “rule-of-reason”) analysis and specifically recognise that horizontal cooperation agreements, such as joint purchasing arrangements can lead to “substantial economic benefits”1. This gap in our law should be recognised and the reference to purchase prices should be removed from section 4(1)(b). and should be encouraged. In Europe, for example, where Article 101 is supplemented by binding guidelines, the guidelines on horizontal arrangements set out an effects-based (or “rule-of-reason”) analysis and specifically recognise that horizontal cooperation agreements, such as joint purchasing arrangements can lead to “substantial economic benefits”2. This gap in our law should be recognised and the reference to purchase prices should be removed from section 4(1)(b). On this basis, then, joint purchasing arrangements would fall to be judged under section 4(1)(a) which would still allow non-competitive arrangements to be penalised.

In relation to section 4(1)(a) please also see comment relating to the deletion of section 8(c) below.

Furthermore, business suggests that the drafters should look at amending section 4 of the Act to deal with the characterisation test decisively and to also deal with section 4 (2) the Act, which deals with a presumption of collusion. We are of the view that section 4(2) has been ineffective and has not been successfully utilised by the competition authorities.

Business submits that there are pro-competitive gains that are derived, especially by small

1 Paragraph 2 of the Guidelines on the Applicability of Article 101 of the Treaty on the Functioning of the European Union to Horizontal Cooperation Agreements.2 Paragraph 2 of the Guidelines on the Applicability of Article 101 of the Treaty on the Functioning of the European Union to Horizontal Cooperation Agreements.

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business, when it comes to joint procurement when dealing with big entities. It would be beneficial to entities to not be automatically found guilty when it comes to joint purchasing arrangements. As such arrangements, especially when dealing with international markets, can be pro-competitive for the consumers and the South African economy. Business therefore proposes a deletion of section 4 (2), (3), and (4). Business suggests that a new section 4 (2) dealing with characterisation be added. This section should be clear that where an agreement between competitors is found to exist and the intentions and outcomes of such agreement when properly characterised, are to the benefit of consumers, then such conduct, properly construed, does not fall within the ambit of the prohibitions in section 4(1). The onus to prove that the conduct does not fall within the ambit of section 4(1) should be with the respondents.

This proposed amendment can also deal with concerns regarding the prohibition in relation to the fixing of a purchase price.

On 4(1)(b)(ii), Business has no in-principle objection to the introduction of market shares as an addition to the market division provision. However, in practice it is unclear how market share can be allocated as distinctly understood from the allocation of customers, suppliers, etc. This amendment may therefore be considered redundant.

Amendment of section 8 in Act 89 of 1998

3 The Principal Act is hereby amended by the substitution of the section for the following —

“Abuse of dominance prohibited.(1) It is prohibited for a dominant firm to —

(a) charge an excessive price [to the detriment of consumers]; 1. Business notes the amendment to the section, and we suggest that the enquiry should

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be two-fold as follows;

i. whether a price is excessive and if that is found to be so,

ii. whether such price is to the detriment of consumers.

2. It is unclear from the amendment why this distinct step is sought to be removed.

We suggest that the wording "to the detriment of consumers" proposed to be deleted from section 8(1)(a), be retained. For "to the detriment to consumers" to be inserted into the proposed section 8(2) to read as follows; “(2) If there is a prima facie case of abuse of dominance because the dominant firm charged an excessive price to the detriment of consumers, or required a supplier to sell at an excessively low price, the dominant firm must show that the price was reasonable.

3. The prohibition of excessive pricing is contentious and many anti-trust jurisdictions, including the United States, do not prohibit it. The reason advanced for this is that it is difficult to establish exactly when a price is an "excessive price" for the purposes of competition regulation and there is significant lack of legal certainty on how to assess excessive pricing or what remedies to impose in cases where excessive pricing is found.

4. Business submits that there should be limited intervention in pricing behaviour and the extent that excessive pricing is prohibited should be limited to markets with high barriers to entry and where innovation and investment play a minor role and whether there is a detrimental effect to consumers.

5. Business submits that that excessive pricing behaviour is generally self-correcting because it will attract new entry unless new entry is completely impeded by structural obstacles. It is therefore widely accepted that a price is not excessive unless it reduces customer welfare. The wording "to the detriment of consumers” is an important element in the definition of an excessive price and should not be deleted.

6. A high price that does not lead to consumer harm is not "excessive" from an anti-trust

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economic theory perspective. Hypothetically, if a dominant firm increases its prices significantly (from a clearly non-excessive base) but without its customers needing to pass on the increased price to the end consumer (i.e. without the increased pricing leading to consumer harm) this suggests that the dominant's price is still not excessive and is simply the economic value of the product that the market is able to carry. There is simply a shifting of the margin away from the dominant firm's direct customers to the dominant firm. For as long as the dominant firm's customers can absorb the price increases without needing to pass these on to end users, the dominant firm's price cannot be exploitative (and should thus not be prohibited as being "excessive").

(b) refuse to give a competitor access to an essential facility when it is economically feasible to do so;

Neither the Bill nor the Act define “economically feasible”. This term is too vague and could lead to unintended consequences, including ongoing litigation.

[(c) engage in an exclusionary act, other than an act listed in paragraph (d), if the anti-competitive effect of that act outweighs its technological, efficiency or other pro-competitive, gain; or]

A major change proposed by the draft Bill is the removal of the distinction between per se and non per se infringements of the Act. This is given effect to through the proposed amendments to section 59. At present, a per se infringement exposes a firm to a penalty for first a time infringement, whilst a non per se infringement gives a firm a “safe harbour” in that, if it has been found to infringe the Act under sections 4(1)(a), 5(1), 8(c) or 9, it is only a repeat infringement of the Act on the same grounds that will lead to the imposition of a penalty.

In the Gazette, it is suggested that the abolition of this “yellow card” dispensation is aimed at enhancing enforcement of the Act and to ensure greater compliance with it by firms. It is suggested that the “yellow card” dispensation was an appropriate penalty framework at the time of the Act’s commencement but, given the greater certainty that has now been developed, it is appropriate to withdraw the “yellow card” at this time.

In business’ view, this analysis of the “yellow card” situation is not correct. There are very few cases on the proper interpretation of section 4(1)(a), 5(1), 8(c) or 9. These sections were specifically designed to give the Competition Tribunal (Tribunal) and the Competition Appeal Court the opportunity to develop categories of prohibitions over time and through

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the development of the case law. At present, there is no “greater certainty” in the interpretation of these provisions, and it is submitted that the withdrawal of the “yellow card” dispensation is not appropriate.

There are a number of factors in this regard. The world economy and technologies are rapidly changing over time and one cannot prescribe for every situation in legislation. One must allow for flexibility in the introduction of new situations that will allow for fair treatment of parties.

Related to this is the potential chilling effect on innovation. Whilst dominant firms might come with their own sets of problems, in many respects they are highly innovative. The withdrawal of the “yellow card” dispensation and the effective removal of section 8(c) will blunt the innovative qualities of such firms.

The same point applies in relation to section 4(1)(a). The Act, rightly, targets the traditional hard-core cartel offences. At the same time, mutual collaboration between firms is often highly beneficial for the economy, particularly in a developing country such as South Africa, which has limited resources. By withdrawing the “yellow card” dispensation under section 4(1)(a), business is concerned that this will have a serious chilling effect on the establishment of pro-competitive joint venture arrangements and positive collaboration between firms. A focus of the draft Bill is the enhancement of small businesses. It is important that the Act allow for positive and pro-competitive collaboration with and between such small businesses.

Business reiterates that Section 8(c) in its current form provides for a useful “catch all” to capture factual situations which are not specified under the Act. The effect of the deletion is that this “catch all” falls away and is replaced by the introduction of the word “including” in section 8(d). This proposed removal shifts the balance of power entirely in the Commission’s favour, as there is now no exclusionary conduct that the Commission bears the onus of proving. Instead, dominant firms are required always to prove that any potentially exclusionary conduct was reasonable. As the proposed amendment stands,

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the Commission merely has to allege exclusionary conduct, and a dominant firm is required to adduce evidence to justify such conduct. It would be more equitable and in line with the principles of natural justice for section 8(c) to remain in the Principal Act, such that if a dominant firm engaged in conduct not captured in section 8(d), the Commission would bear the onus of proving such conduct.

Given that there is less legal certainty regarding conduct that is not clearly listed as being problematic (or potentially problematic) and it is therefore more difficult for a firm to assess whether it is possibly acting in contravention of section 8 in respect of unlisted conduct, it is more fair and reasonable to keep the onus in this regard on the Competition Commission in respect of conduct which is not clearly listed in section 8. Business accordingly submits that the existing section 8(c) should not be deleted or amended and that the word "including" which it is proposed be inserted at the end of section 8(d) be deleted.

Indeed, the EDD should consider reviewing the entirety of section 8, which is now framed such that all the presumptions that exist are in the Commission’s favour. Presumptions that require dominant firms to justify their conduct perpetually are dangerous, as they could lead to firms refraining from participating efficiently within the economy, through competition-enhancing conduct, for fear of falling foul of the competition legislation.

(d) engage in any [of the following] exclusionary acts, unless the firm concerned can show technological, efficiency or other pro-competitive [,] gains which outweigh the anti-competitive effect of its act, including—

(i) requiring or inducing a supplier or customer to not deal with a competitor;

(ii) refusing to supply scarce goods to a competitor when supplying those goods is economically feasible;

“Economically feasible” should be defined to ensure that no unintended consequences arise from this amendment. See also 3(1)(b).

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(iii) selling goods or services on condition that the buyer purchases separate goods or services unrelated to the object of a contract, or forcing a buyer to accept a condition unrelated to the object ofa contract;

(iv) buying goods or services on condition that the seller accepts an unreasonable condition unrelated to the object of a contract;

A new form of conduct has been introduced that is deemed to be an exclusionary act under section 8(d), namely that of “buying goods or services on condition that the seller accepts an unreasonable condition unrelated to the object of a contract” under new section 8(d)(iv). In addition, section 8(d)(viii) deems “requiring a supplier to sell at an exclusively low price” to be exclusionary. Unlike the existing prohibition against bundling and tying (8(d)(iii)) which is an accepted theory of harm to consumers (end and intermediate) the same cannot be said for conduct on the buying side. The proposed amendment reflect the Bill's apparent concerns with buyer-power, such that the exertion of buyer power is therefore treated as being as detrimental to competition as supplier power. Such an approach could have detrimental effects on the ability and incentive to seek lower input costs.

In business’ view, these new proposed sub-sections illustrate the precise types of conduct that ought to fall within the ambit of section 8(c) of the Act. For instance, what is meant by “unreasonable” under section 8(d)(iv) is unclear and appears to be largely subjective in circumstances where the conduct will be deemed exclusionary, the more stringent onus of establishing that the technological, efficiency and other pro-competitive gains outweigh the anti-competitive effect rests with the respondent firm, and the conduct attracts a penalty for a first time offence. This is particularly problematic in that there is no established case law to guide respondents which goes against the Minister’s statement that section 8(c) is no longer necessary as there is now greater certainty on matters of this nature. The same concerns arise in relation to how it will be determined that the condition is in fact unrelated to the object of the contract and in relation to the introduction of new section 8(d)(viii).

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(v) selling goods or services below their relevant cost benchmark, which may include the [marginal] average avoidable cost, [or]average variable cost or a long run average incremental cost; [or]

It is submitted that the introduction of “below their relevant cost benchmark”, followed by examples of what these may be, is vague and will result in further uncertainty to parties involved in complaints under this section. The door is left open for other tests to be applied. This may detract from one of the key objectives behind the amendment which is to enable market participants to evaluate the likely compliance of their pricing practices with the Act. Such vagueness is particularly undesirable in circumstances where a penalty will be imposed for a first time offence. Presently, such other “tests” would potentially be captured by section 8(c) which, it is submitted, is more appropriate.

In short, any "relevant cost benchmark" will make it impossible for a firm to consider whether its pricing may be below some or other benchmark yet to be alleged (i.e. to self-assess). This uncertainty is also likely to affect incentives to price competitively. If firms are at least afforded a "yellow card" in the case of allegations of pricing below an undefined benchmark then a more appropriate balance would be struck.

(vi) buying-up a scarce supply of intermediate goods or resources required by a competitor;

Business welcomes the inclusion of the qualifier that the prohibition applies where the goods or resources are required by a competitor.

It is proposed that the provision be expanded to include wording to the effect that the firm buying the goods or services must have had actual knowledge of the fact that a competitor required such goods or services. To make provision for an instance where a firm had no knowledge of the requirements of their competitor. It is further proposed that it should also be a requirement for a section 8(1)(d)(vi) contravention that the dominant firm buys-up scare supply of intermediate goods or resources that are not required by the dominant firm. A firm should not be precluded from procuring inputs required for its business simply because it is dominant - only if it procures goods in order to be exclusionary or exploitative should it be restricted from doing so.

(vii) engaging in a margin squeeze; or Margin squeeze is a concept that has been introduced into South African competition law under section 8(c), once again demonstrating the value of the “catch all” provision. Margin squeeze is a complex, factual enquiry, typically requiring an in-depth economic analysis,

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on a case-by-case basis. The reference to “margin squeeze” as an undefined concept will undoubtedly lead to uncertainty and contestation, resulting in the protracted litigation on technical points that the Minister is seeking to avoid. A definition should be provided.

Further, a margin squeeze should be justifiable in more circumstances than when it results in technological, efficiency or pro-competitive gains outweighing its anti-competitive effect:

- What if the input is in temporarily scarce supply due to, for example, a water shortage where water is a key manufacturing ingredient? Does the vertically integrated dominant firm have to reduce supply, including to itself, on an equal basis? Would section 8(1)(d)(ii) of the Principal Act then function as a defence?

- What if the dominant firm produces just enough of the input to supply its own needs?

- Is the vertically integrated dominant firm, on the basis of footnote 6 of the Memorandum required to supply all downstream competitors which request supply of the input?

(viii) requiring a supplier to sell at an excessively low price.

The inclusion of “requiring a supplier to sell at an excessively low price” is likely to be highly problematic, purely for logistical reasons. - First, where must the firm be dominant: in its own market, the procurement market or

both? A dominant firm may not be aware that it is dominant in a procurement market: how can this be determined? The provision could require the dominant firm to prove reasonable conduct in a market into which it may have very little insight, and that may be unrelated to the actual market in which it is dominant;

- Secondly, in normal commercial negotiations firms, as rational profit maximizer (be they dominant or not), seek the best possible deal. By securing lower, competitive

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input prices, businesses are often able to provide customers and the ultimately consumers with the most competitive prices for the products they produce. A fear of prosecution under this section of the Act could potentially create a dampening effect on the competitive negotiating process which may ultimately not benefit consumers and, in this way, not achieve the outcomes the Minister is seeking to achieve through the draft Bill. Again, it is emphasised that such conduct should rather fall within the “catch all” provision of existing section 8(c).;

- Thirdly, without requesting information relating to production costs or cost of supply, it is difficult for a dominant firm to know if a supplier is being made to offer a price at which it cannot afford to sell;

- Lastly, if a dominant firm puts out a tender for the supply of a good or service and indicates that the winner will be chosen based on price, the dominant firm may then later be accused of infringing the provision should relations with the winning supplier or service provider sour or, for that matter, by so called jilted brides.

At the very least, the EDD should consider that a definition be provided for the term excessively low price. While excessive pricing for a dominant firm has been defined in the Principal Act, an excessively low price has not been in the Draft Bill. This is especially because there is a presumption that the dominant firm would now have to prove that the low price is not excessively low. Generally, monopsony power has been addressed in instances of “true” market power and not “deemed” market power i.e. a market share above 45%. This too needs to be considered.In respect of the onus provision, the Commission should bear the onus to show that a procurement price is excessively low. It is unreasonable to require dominant firms to have procurement pricing information when they have no insight into the costs of supply.

(2) If there is a prima facie case of abuse of dominance because the dominant firm

“Reasonable price” is not defined. What is important to note, and adds to the complexity of the concept, is that a reasonable price may not equal the lowest price given the factors

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charged an excessive price or required a supplier to sell at an excessively low price, the dominant firm must show that the price was reasonable.

contributing to best total value, such as availability, delivery time, fitness for purpose, quality, quantity, service, etc. This makes it extremely difficult for market participants to assess their conduct and risk on an ex ante basis. It is also not clear (potentially can never be clear) how a respondent might prove that a price is "reasonable".

It is unclear how a case based on such a mechanism will be run in practice. For instance, at what point in the process will the Tribunal be able to determine that a prima facie case has been met, and that the procedure should change to accommodate a reverse onus? It is submitted that the existing provisions of the Principal Act relating to interim relief are better suited to dealing with "prima facie" arguments in a way that balances the rights of respondents with the need for effective enforcement.

The introduction of the onus shift seems overly harsh in circumstance were all the Commission has to do is establish a prima facie case. What constitutes a prima facie case?

Furthermore, shifting the burden of proof may be subject to a legal challenge as it may not accord with the rights of procedural fairness enshrined in the Promotional of Administrative Justice Act 3 of 2000 and the Constitution. These rights are particularly important where criminal sanctions may be applicable.

(3) The Commission must publish guidelines in terms of section 79 settingout the relevant factors and benchmarks for determining whether a priceis excessive.”

The proposed new subsection 8(3) implies that guidelines might be issued to "fill in the gaps" left by the proposed section 8(2). However, this elevates Commission-derived guidelines to the status of legislation; and it is potentially contrary to the rule of law for the enforcer to devise the terms under which it would benefit from a reverse onus.

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4 The Principal Act is hereby amended by the —

(a) deletion of paragraph (a) in section 9(1); and Please also see comments relating to section 8(c) above and 9(2)(a) below

(b) substitution of subsection (2) for the following—

“(2) Despite subsection (1), conduct involving differential treatment of purchasers in terms of any matter listed in paragraph (c) of that subsection is not prohibited price discrimination if the dominant firm establishes that the differential treatment—

(a) is not likely to have the effect of preventing or lessening competition; and

(b)(i) makes only reasonable allowance for differences in cost or likely cost of manufacture, distribution, sale, promotion or delivery resulting from the differing places to which, methods by which, or quantities in which, goods or services aresupplied to different purchasers;

(ii) is constituted by doing acts in good faith to meet a price or benefit offered by a competitor; or

S9(2)(a): Business proposes the deletion of the word ‘and’, and that it be replaced with the word ‘or’. It is submitted that once a dominant firm has shown that an instance of price discrimination does not prevent or lessen competition, it should be sufficient without having to show, in addition, any of the other elements in the current s2(a) to (d).

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(iii) is in response to changing conditions affecting the market for the goods or services concerned, including—

(aa) any action in response to the actual or imminent deterioration of perishable goods;

(bb) any action in response to the obsolescence of goods;

(cc) a sale pursuant to a liquidation or sequestration procedure; or

(dd) a sale in good faith in discontinuance of business in the goods or services concerned.

Business appreciates and supports the Minister’s objective behind the proposed amendments to this section to address the effects of anti-competitive price discrimination on Small, Medium and Micro Enterprises (SMMEs) and firms controlled by historically disadvantaged individuals (HDIs). However, the drastic shift in onus from the complainant to the respondent firm to show that differential pricing (as contemplated in sections 9(1)(b) and 9(1)(c)) “is not likely to have the effect of preventing or lessening competition” is extremely onerous. It is respectfully submitted that the shift in onus opens the door for potentially unsubstantiated, spurious and vexatious complaints against respondent firms, in circumstances where they do not have the wide-ranging investigative powers afforded to the Commission – including those aimed at gathering confidential market and firm-specific information from third parties. The incidence of price differences in the economy is vast and the proposed amendments are likely to give rise to an abuse of the section 9 process. Business’ concerns are compounded by the move away from the existing test of establishing that the price discrimination is “likely to have the effect of substantially preventing or lessening competition” which is particularly onerous in circumstances where a contravention will now attract a penalty for a first time offence.

(c) the insertion of the following subsections after subsection (2) —

“(3) When determining whether the differential treatment is likely or unlikely to have the effect of preventing or lessening competition referred to in subsection (2)(a), consideration must be given to the effect on small businesses and firms controlled or owned by historically disadvantaged persons.

As per the Background Note and Memorandum, the inclusions under section 9(3) have, as their aim, the goal of assisting small businesses and firms controlled or owned by HDPs. However, holding dominant firms to this requirement may not have the effect of advantaging small businesses or firms owned by HDPs. Rather, it may have the effect of all customers being charged a higher price, such that the dominant firm can ensure that it is not discriminating against smaller firms, i.e. larger customers will be used to cross-subsidise smaller customers and vice versa. The knock-on effect of this could be to the detriment of consumers.Clarity is required as to how the provisions of section 9(3) are to be read, interpreted and weighed in light of the justifications allowed in section 9(2)(b).

Clarity is also required on the following:

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i. How will the test be applied to take into consideration the effect on small businesses and firms controlled or owned by historically disadvantaged persons?

ii. Will there be guidelines or certain factors to be looked at?iii. Is it being contemplated that price differentiation will be considered differently

by the competition authorities if it is applied to small businesses and firms controlled or owned by historically disadvantaged persons?

(4) The provisions of subsections (1) to (3), read with the changes required by the context, apply to a dominant firm as the purchaser of goods or services.”

It is business’ understanding that the price discrimination provisions in the Act apply to sellers as it is they who determine the prices and trading terms applicable to their customers. Unlike sales by a dominant firm, which is "one to many", purchases by such firms are "many to one" and thus far more difficult for a purchaser to self-regulate. As a point of departure, conduct that potentially lowers input pricing should not be treated as the corollary of higher selling prices and the proposed amendment is likely to have unintended consequences for price inflation as it strongly disincentives robust negotiation on price.

The insertion of section 9(4) is confusing and, it is submitted, could once again hamper a healthy and competitive negotiation process, potentially resulting in harm to the very persons the draft Bill is seeking to develop and promote. The intention of this seems to be that the dominant firm must pay more for goods and services across the board and not negotiate volume-based discounts. Again, the potential knock-on effect of this could be to the detriment of consumers. The corollary of this could also well be that the dominant firm negotiates a favourable deal with a larger supplier that is then imposed on smaller suppliers.

It is proposed that sub-section 9(4) be deleted in its entirety as it is pro-competitive for suppliers to compete to provide goods and services.



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(a) substitution of subparagraph (ii) in subsection (3)(b) for the following subparagraph—

“(ii) promotion of the [ability of] effective entry into, participation in and expansion within a market by small business, or firms controlled or owned by historically disadvantaged persons [, to become competitive];

(b) substitution of subparagraph (iv) in subsection (3)(b) for the following subparagraph—

“(iv) the economic development or stability of any industry designated by the Minister, after consulting the Minister responsible for that industry.”

Amendment of section 10A in Act 89 of 1998, as amended by section 4 of Act 1 of 20096 The Principal Act is hereby amended by the deletion of Chapter 2A and section 10A.

Amendment of section 12A in Act 89 of 1998, as amended by section 6 of Act 39 of 2009

7 The Principal Act is hereby amended by —

(a) the substitution of subsection (1) for the following —

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“(1) When required to consider a merger, the Competition Commission or Competition Tribunal must initially determine whether or not the merger is likely to substantially prevent or lessen competition, by assessing the factors set out in subsection (2), and—

(a) if it appears that the merger is likely to substantially prevent or lessen competition, then determine—

(i) whether or not the merger is likely to result in any technological, efficiency or other pro- competitive gain which will be greater than, and offset, the effects of any prevention or lessening of competition, that may result or is likely to result from the merger, and would not likely be obtained if the merger is prevented; and

(ii) whether the merger can or cannot be justified on substantial public interest grounds by assessing the factors set out in subsection (3); [or]and

Business recognises that South Africa requires unique competition policy and law in order to address the economic distortions which persist in South Africa. Moreover, business recognises the importance of the Competition Authority being regarded as free of political interference (i.e. independent of the government) which the Act expressly requires.

However, business cautions that government policy such as “public interest” points whilst captured and prominent in the Bill are potentially realised by Ministerial involvement. Business believes that the Competition Authorities should be independent from political influence. The Bill is unclear on how this concern will be dealt with in practice.

(b) the substitution of paragraphs (g) and (h) in subsection (2) for the following and the insertion of the following paragraphs in subsection (2) after paragraph (h) —

Business suggests that the terms “related markets” and “related” be defined clearly, to avoid uncertainty in the application of and compliance with the Act.

Clarity is required on how will the ownership considerations be applied with regards to related markets, firms and other mergers?

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“(g) whether the business or part of the business of a party to the merger or proposed merger has failed or is likely to fail; [and]

(h) whether the merger will result in the removal of an effective competitor[.];

(i) the extent of shareholding by a party to the merger in another firm or other firms in related markets;

(j) the extent of to which a party to the merger is related to another firm or other firms in related markets, including through common members or directors; and(k) any other mergers engaged in by a party to the merger in the preceding three years.”

It is proposed that when considering the extent of shareholding by a party to the merger in another firm or other firms in related markets, it would be useful to have prescribed levels of shareholding, which would indicate at what levels competition authorities are most likely to be concerned.

It is not clear what the difference is between the proposed subsections (i) and (j) is, i.e. the words “shareholding” and “related markets”. As such it is unclear what “related markets” mean, other than via shareholding or common directorships/members in the same market. In respect of “members”, this is tautology and would be captured by “shareholding”. Clarity is required as to the meaning of a “related market”. The term “related market” should also explicitly be defined – at present it is not clear what is meant by this. Typically, interest in other firms is only relevant where the relevant interests are held in competing firms.

As regards subsection (k), this should only – relate to acquisitions and not disposals;

be ideally limited to mergers in related markets (if the term is properly defined), ideally to the same market as the market relating to the merger notification if the purpose is to take into account creeping mergers (however, the purpose of this section is not entirely clear as it stands).

(c) the substitution of paragraphs (c) and (d) in subsection (3) for the following and the insertion of the following paragraph in subsection (2) after paragraph (d)—

“(c) the ability of small businesses, or firms controlled or owned by historically disadvantaged persons, to [become competitive] effectively enter into,

To the extent that the proposal is to have the same provision on small businesses and historically disadvantaged persons as part of the list of factors to be considered under section 12A(2), the same comments around analytical framework, economic tests and evidentiary standards discussed in regard to abuse of dominance apply.

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participate in and expand within the market; [and]

(d) the ability of national industries to compete in international markets; and

(e) the promotion of a greater spread of ownership, in particular to increase the levels of ownership by historically disadvantaged persons in the firms in the market.”

Business questions the use of the word ‘promotion’ in subsection (e) as it runs counter to the approach of the other factors listed in sub-sections 12A(3)(a)-(d). In these sub-sections, the Competition Commission must consider the impact on the transaction relating to given criteria, for example, in section 12A(3)(c), the ability of small businesses to effectively enter markets. These subsections do not require the Competition Commission to consider the impact of the transaction in the promotion of these criteria.

While Business recognises that public interest is an important component of the Act, for the purposes of section 12A(3)(e), we would suggest that transactions should only be evaluated in terms of impact on the greater spread of ownership. It should not be required that transactions are evaluated in terms of the promotion of the greater spread of ownership. The proposed amendment could lead to the following unintended consequences:

the hampering of the freedom of HDIs to contract with parties of their choosing (e.g. non-HDIs such as foreign investors), and to sell their interests in firms as and when they see fit - which would restrict their freedom to trade and invest as they deem appropriate;

encroaching on established B-BBEE laws and charters. In addition, this provision could also compel firms to include a BEE component in mergers even where industry charters do not so require;

the inclusion of the words “to increase” implies that where a merger increases HDI ownership, this will be considered as a positive public interest impact, but where it

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does not, or decreases it, conditions could be imposed on acquiring firms to on-sell portions of acquired firms – perhaps even at a loss. This may well serve to discourage merger activity and investment.

It is our submission that merger control should not be utilised to address ownership issues but that these matters are better dealt with by other policy instruments e.g. the BBBEE Act.

This provision is also subject to significant regulatory overreach in that it permits the imposition of conditions or the prohibition of mergers in circumstances which do not give rise to a substantial prevention or lessening of competition, purely on the basis that they do not meet unspecified ownership thresholds by historically disadvantaged persons. This introduces significant uncertainty and raises the risk of policy inconsistency and decision making in mergers.

It is also unclear what standards will be applied in deciding which transactions go ahead and which ones do not and on what basis, raising the risk of arbitrary approvals and/or prohibitions of some transactions.

Insertion of section 12B in Act 89 of 1998

8 The Principal Act is hereby amended by the insertion of the following section—

“ 12B Mergers by way of a series of transactions.

(1) In this section, a “series of transactions” are two or more transactions during a three-year period that result in a merger.

This section 12B is manifestly unclear. In this regard, the following indicates the lack of clarity:- Does the section only apply to the target firm?- Surely if section 12B(2)(b)(i) occurs, the transaction would be a merger in any event

(unless it is below the thresholds);- What is meant in (iii) – a direct or indirect step to do what? Is it linked back to the

wording in section 12(2)(g) in the Principal Act?- Can the Commission unwind all previous steps towards acquiring control? How would

this work practically in terms of divesting acquired shares or assets below the control threshold? Consideration should be given as to whether this might constitute a

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constitutional deprivation of property.

(2) This subsection applies to—

(a) any transaction by which a person acquires control of a firm in terms of section 12(2)(a) to (f); and

(b) any transaction which—

(i) enables that person to control the firm in terms of section 12(2)(g);

(ii) enables that person to do so to a greater degree; or

(iii) is a direct or indirect step towards enabling that person to do so.

It is in principle unclear what is sought to be safeguarded / regulated through this proposed amendment. There are well-established principles for the meaning of control. Placing non-controlling stakes within the purview of competition authorities’ jurisdiction will create difficulties for investors and could serve to discourage or delay investment. In particular, the competition authorities should be able to clearly show that the acquisition of a minority shareholding – that would not normally be notifiable – poses a significant threat to competition in the relevant market in order to be empowered to scrutinise the acquisition.

1. Subsections (ii) and (iii) are unclear and need to be better defined. How will reporting be undertaken in respect of this section?2. What constitutes a “greater degree of control”?3. Clarity is required on the intended consequences of the provision. 4. Having regard to subsection (3), is the intention of the subsection that the competition authorities would have the power to prohibit the series of transactions that effectively accumulated into a merger? For example, if a firm acquires a non-controlling 15% shareholding in year 1, subsequently increases that shareholding to non-controlling 30% in year 2, and in year 3 to 51% - currently, only the latter would be notifiable as a merger. Currently, if the acquisition of the move from 30% to 51% was prohibited, then the 30% shareholding would continue to be held by the acquiring firm. The proposed amendment implies that if the move from 30% to 51% is prohibited – a firm may have to divest of its entire shareholding in the target firm, including the 30% non-controlling interest, because all three tranches would be seen as one.Any divestment that is required may amount to an unlawful deprivation that does not accord with section 25 of the Constitution of the Republic of South Africa, 1996. Although the “series of transactions” may be regarded as occurring simultaneously for the purposes of a competitive

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assessment, it cannot be correct in law that a prohibition of the final merger in the series amounts to a prohibition of the entire series, and that divestiture may lawfully be ordered. In terms of section 60(1) of the Principal Act, divestiture in the context of mergers may only be ordered by the Tribunal if a merger is “implemented in contravention of Chapter 3”. The possible effect of the proposed amendment is that a firm may be ordered to divest itself of shareholdings acquired lawfully. Wording should be included in the amendment that specifically excludes divestiture as a potential remedy, should the final transaction in the series be prohibited. 5. Business suggests that a merger should be determined in accordance with the market conditions prevailing at the time when the merger is concluded. The competition authorities should prohibit that one transaction that brings the merger into the competition authorities’ scope.

(3) A merger that occurs by way of a series of transactions may, if the Competition Commission considers it appropriate, be treated for the purposes of section 12A as having occurred simultaneously on the date on which the latest of them occurred.

As business understands new Section 12B, the Competition Commission would obtain jurisdiction of separate transactions over a three-year period that culminate in a merger for the Act. Currently, the Competition Commission already has jurisdiction over all mergers whether categorised as small, intermediate or large. Accordingly, as the new Section 12B treats all stake-building acquisitions as one and the same transaction within a three-year period, we understand the Competition Commission’s approval would cover all these separate transactions over a three-year period.

According to this reading of section 12B, this would therefore mean that if ever the Competition Commission does not approve a merger following a series of transactions, the Competition Commission could therefore unwind all of the previous acquisitions as well as the prohibiting the final transaction that gave rise to a merger.

Such a scenario would be hugely problematic as this represents an extremely excessive leading to commercial uncertainty. Having to unwind transactions is extremely costly and

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problematic from a jurisdictional perspective. This dramatically opens the Competition Commission’s jurisdiction in terms of the merger control regime not only to the acquisition of minority shareholdings but also by providing for a retrospective application of the merger control regime. Both of these jurisdictional extensions fundamentally change the notion of the merger control regime in South Africa to the significant detriment of legal certainty.

(4) A transaction that takes place after a series of transactions that has alreadyresulted in a person acquiring control of a firm in terms of section 12(2)(a) to (f) must be disregarded for the purposes of subsection (3).”

Amendment of section 15 in Act 89 of 1998, as amended by section 6 of Act 39 of 20009 The Principal Act is hereby amended by the substitution of section (15) for the following section —

“15. Revocation of merger approval and enforcement of merger conditions.

(1) The Competition Commission may —

(a) revoke its own decision to approve or conditionally approve a small or intermediate merger if —

(i) the decision was based on incorrect information for which a party to the merger is

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responsible;

(ii) the approval was obtained by deceit; or (iii) a firm concerned has breached an obligation attached to the decision; or

(b) make any appropriate decision regarding any condition relating to the merger, including the issues referred to in section 12A(3)(b) and (c).

Section 15(1)(b) is highly problematic. The amendment of a condition, or the making of “any decision” relating to a condition should not be permitted without reasonable grounds, being those listed in in section 15(1) or by a request from the parties.

As this amendment stands, the Commission is empowered to unilaterally amend or extend conditions it sees fit for an unlimited period. This cannot be the intended purpose of the proposed amendment, especially without an express right to appeal or challenge the Commission’s decision. The Commission should though be functus unless one of the situations contemplated in section 15(1)(a) has occurred.Further, an amendment (as with a revocation) must be predicated by either: (i) a breach or non-implementation of a condition by one of the parties; or (ii) a request by the parties. The same comment applies to section 16(3)(b) mutatis mutandis. Moreover, no unilateral amendment by the Commission should be permissible and, if it is, without the consent of the Tribunal. At present, it is unclear whether the Commission needs to approach the Tribunal in terms of section 15(1)(b). This would be in the spirit of the principals of procedural fairness enshrined in the Promotion of Administrative Justice Act of 3 of 2000 and in the Constitution.

(2) If the Competition Commission revokes a decision to approve a merger under subsection (1)(a), it may prohibit that merger even though any time limit set out in this Chapter may have elapsed.”

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Amendment of section 16 in Act 89 of 1998, as amended by section 6 of Act 39 of 200010 The Principal Act is hereby amended by the substitution of subsections (3) and (4) for the following subsection —

“(3) Upon application by the Competition Commission, the Competition Tribunal may —

(a) revoke its own decision to approve or conditionally approve a merger, and section 15, read with the changes required by the context, applies to a revocation in terms of this subsection; or

(b) make any appropriate order regarding any condition relating to the merger, including the issues referred to in section 12A(3)(b) and (c).

It is proposed that the order should only be made after all interested parties have been given the opportunity to make representations. Any order made by the Tribunal must be subject to appeal.

(4) The Competition Tribunal must—(a) publish a notice of a decision made in terms of subsection (2) or (3)(a) in the Gazette; and

(b) issue written reasons for any such decision.”

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11 The Principal Act is hereby amended by the substitution of section 17(1) for the following subsection –

“(1) Within 20 business days after notice of a decision by the Competition Tribunal in terms of section 16, an appeal from that decision may be made to the Competition Appeal Court, subject to its rules, by —

(a) any party to the merger; [or]

(b) the Competition Commission;

(c) the Minister ; or

(d) a person who, in terms of section 13A (2), is required to be given notice of the merger, provided the person had been a participant in the proceedings of the Competition Tribunal.”

Business submits that the Minster can only lodge an appeal if he/she was a party to the original proceedings. As he/she would have no locus standi if they were not party to the original proceedings.

Allowing appeals by the Commission and/or the Minister may lead to a lack of commercial certainty for merging parties – i.e. they could be caught up in litigation long after a merger is commercially viable or a long-stop date expires. This may, in essence, result in a constructive prohibition and a disincentive to invest by foreign (and, for that matter, local) buyers – especially in high-profile large mergers which already take significant time to be approved. If the section, as presented in the Draft Bill is maintained, the only feasible discipline could be the inclusion of cost orders for unsuccessful appeals by the Commission and/or the Minister.

Amendment of section 21 in Act 89 of 1998, as amended by Act 39 of 2000

12 The Principal Act is hereby amended by the insertion of the following subsections after section 21(1)(g) —

“(gA) develop a policy regarding the granting of leniency to any firm contemplated in section 50;

(gB) grant or refuse applications for leniency in terms of section 49E;”

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Insertion of section 21A into Act 75 of 1997

13 The Principal Act is hereby amended by the insertion after section 21 of the following section –

“21A Impact Studies

(1) The Competition Commission may study the impact of any decision, ruling or judgment of the Commission, the Competition Tribunal or the Competition Appeal Court.

Business proposes that the decision to carry out an impact study be made subject to the approval by the Competition Tribunal and that the Commission be required to provide an exact scope of the decision and outcomes it seeks to study as well as the duration of the impact study. Clarity is required on whether there will be an opportunity to review the input provided to ensure information shared by a firm/business has been correctly applied/understood. Will there be more clarity on how this information sharing will work?

Requesting information from firms that were not the subject of the initial processes leading to the impact study, and imposing on them the obligation to provide the information unless they successfully object to the request through a Tribunal process which often involves incurring the costs of legal advisors and potentially, economic experts, is inappropriate. These costs could be more significant for small businesses and HDI’s.

This concern is exacerbated by the fact that in terms of the proposed amendments, the findings of such study have no immediate and direct remedy.

It is proposed that the provision, if retained, apply only to firms that would have been found to have contravened the Act.

In fact, this proposed amendment may even be unnecessary as the Competition Commission can use its existing powers to obtain information. For instance, upon settling or prosecuting a case, the Competition Commission could include a reporting requirement

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on the firms concerned for a specified period of time after the conclusion of the case. This already happens in merger review and has been applied in some conduct cases e.g., in the bread cartel case against Pioneer Foods and the Telkom case. It is important that where existing powers suffice, amendments should be avoided especially if there is a risk of possible abuse.

There should also be a limitation on the time period over which any information is requested. Firms incur significant costs associated with gathering extensive information for regulatory inquiries including time spent preparing the information. This diverts attention from commercial enterprise to responding to regulatory inquiries.

Further to this provision, it is proposed that all personal or confidential information utilised in the report be de-identified or anonymised before publication.

(2) The Commission may request information from any firm in order to compile its impact study report.

(3) The Commission must submit its report to the Minister and publish its report in the Gazette 15 business days after submitting it to the Minister .

While it is a welcome development for the Competition Commission to study and publicise the impact of its work, the outcomes of these studies have consequences that extend beyond mere demonstration of impact. For instance, in cartel conduct decisions often the impact of decisions is demonstrated through overcharge estimations. Overcharge estimations are imprecise and vary significantly depending on methodology applied and the accuracy with which the methodology has been applied. These estimates can be used to pursue or argue for damages and can also cause significant reputational harm to firms. For the Competition Commission and the Minister to gazette and submit the report to Parliament without the affected firms being afforded an opportunity to make inputs into the methodology and study is prejudicial.

It is proposed that prior to submitting the report to the Minister, gazetting and presenting the report to Parliament, the Competition Commission be compelled to share its report and

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any supporting relevant information to the affected firms for their inputs.

Given the additional significant powers that the Competition Commission is being provided with, it is also advised that strong safeguards and other appropriate recourse be afforded to the firms to ensure that the Competition Commission exercises the highest duty of care in its studies.

(4) The Minister must table in the National Assembly any impact study report within 10 business days after receiving the report from the Commission and, if Parliament is not sitting, within 10 business days after the commencement of the next sitting.

See comment above.

(5) Sections 44 and 45A, read with the changes required by the context, apply to the Commission’s request for information from a firm and the publication of its report.

(6) A firm that receives a request for information in terms of subsection (2) may lodge an objection with the Competition Tribunal within 20 business days of receiving the request.

(7) The Competition Tribunal must determine the objection referred to in subsection (6) and may make any appropriate order after having considered all relevant information, including

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—

(a) the nature and extent of the information requested;

(b) the purpose and scope of the impact study;

(c) the relevance of the information requested to the impact study.”

Amendment of section 22 of Act 89 of 1998

14 The Principal Act is hereby amended by the insertion after section 22(3) of the following subsections —

“(3A) The Commissioner, after consultation with the Minister , may determine a policy regarding the delegation of authority in the Competition Commission in order to facilitate administrative and operational efficiency.

(3B) The delegations of authority referred to in subsection (3A) may —

(a) provide for the delegation to a deputy commissioner or another staff member of the Commission of —

(i) any of the Commissioner’s powers, functions or duties conferred or imposed upon the Commissioner under this Act ,

To ensure that proper checks and balances are in place, it is proposed that, in terms of the proposed amendment of section 22(3B) (a) the word “appropriate” be inserted before the word “staff”.

In respect of sub delegation, business requests clarity on what checks, and balances exist or will be implemented.

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except those referred to in sections 24 and 25(1)(b); and

(ii) any of the Competition Commission’s powers, functions or duties conferred or imposed upon the Commission under this Act, except those referred to in section 15; and

(b) in appropriate circumstances, include the power to sub-delegate a delegated power.

(3C) The Commissioner may —

(a) delegate only in terms of the policy on delegations of authority;

(b) delegate either to a specific individual or the incumbent of a specific post;

(c) delegate subject to any conditions or restrictions that are deemed fit;

(d) withdraw or amend a delegation made in terms of the policy on delegations of authority;

(e) withdraw or amend any decision made by

The power granted to the commissioner to withdraw or amend any decision made by a duly delegated person, without any qualification as to the grounds on which such withdrawal or amendment may take place, introduces uncertainty regarding the decisions taken by the Commission. This also has major implications for finality and certainty for e.g. in respect of mergers where parties may proceed with commercial steps in a transaction on the basis of an approval which is later set aside.

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a person who exercises a power or performs a function or duty delegated in terms of the policy on delegations of authority.

(3D) A delegation in terms of the delegations of authority policy —

(a) must be in writing, unless it is impracticable in the circumstances;

(b) does not limit or restrict the competence of the Commissioner to exercise or perform any power, function or duty that has been delegated;

(c) does not divest the Commissioner of the responsibility concerning the exercise of the power or performance of the delegated duty; and

(d) is subject to the limitations, conditions and directions that the policy on delegations of authority imposes.”

Amendment of section 25 of Act 89 of 1998

15 The Principal Act is hereby amended by the substitution of subsection 25 for the following —

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“(1) The Commissioner may —

(a) appoint staff, or contract with other persons, to assist the Competition Commission in carrying out its functions; and

(b) in consultation with the Minister and the Minister of Finance, determine the remuneration, allowances, benefits, and other terms and conditions of [appointment] employment of each member of the staff.

(2) Subject to the provisions of this Act , the Commissioner may designate a staff member of the Competition Commission who has suitable qualifications or experience to appear on behalf of the Commission in any court of law.

Substitution of section 26(2) in Act 89 of 1998

16 The Principal Act is hereby amended by the substitution for section 26(2) for the following subsection –

“26(2)(a) The Competition Tribunal consists of a Chairperson and not less than three, but not more than fourteen, other women or men appointed by the President, on a full or part-time basis, on the recommendation of the

The explanatory Memorandum accompanying the draft Bill states that the number of acting members is limited, to prevent the overuse of acting members, however this is not evidenced in the proposed amendment.

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Minister, from among persons nominated by the Minister either on the Minister’s initiative or in response to a public call for nominations, and any other person appointed in an acting capacity in terms of paragraph (b).

(b) The Minister , after consultation with the Chairperson of the Competition Tribunal, may appoint one or more persons who meet the requirements of section 28 as acting part-time members of the Competition Tribunal for such a period as the Minister in each case may determine.

(c) The Minister may re-appoint an acting member at the expiry of that member’s term of office.

(d) Sections 30 to 34 and 54 to 55, read with the changes required by the context, apply to acting members of the Competition Tribunal.”



(a) the substitution of section 31(2) for the following subsection —

“(2) When assigning a matter in terms of

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subsection (1), the Chairperson must —

(a) ensure that at least one member of the panel is a person who has legal training and experience; [and]

(b) ensure that no more than one member of the panel is an acting member appointed in terms of section 23(2)(b); and

(c) designate a member of the panel to preside over the panel’s proceedings.”

(b) the substitution for section 31(5) for the following subsection —“(5) [If the Competition Tribunal may extend or reduce a prescribed period in terms of this Act, t] The Chairperson of the Competition Tribunal, or another member of the Tribunal assigned by the Chairperson, sitting alone, may make an order of an interlocutory nature that in the opinion of the Chairperson does not warrant being heard by a panel comprised of three members, including—

(a) extending or reducing [that period] a prescribed period in terms of this Act ; [or]

(b) condoning late performance of an act that is subject to [that period] a prescribed period

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in terms of this Act ; [.]

(c) granting access to information contemplated in sections 44 to 45A and any conditions that should be attached to the access order; and

(d) compelling discovery of documents.

Amendment of section 43A in Act 89 of 1998, as amended by section 6 of Act 1 of 2009

18 The Principal Act is hereby amended by the substitution of section 43A for the following section —

“43A. Interpretation and Application of this Chapter.

In this Chapter [,]—

(1) “[m] Market inquiry” means a formal inquiry in respect of the general state of competition in a market for particular goods or services, without necessarily referring to the conduct or activities of any particular named firm.

(2) An adverse effect on competition is established if any feature, or combination of features, of a market for goods or services prevents, restricts or distorts competition in that market.

Business notes that in terms of section 43A "an adverse effect" on competition is established if any feature, or combination of features, of a market for goods or services prevents, restricts or distorts competition in that market. We submit that this is a much lower threshold than the "substantial prevention or lessening of competition" that is required in terms of the Principal Act for establishing that a merger raises competition concerns (or that conduct should be prohibited on a rule of reason basis in terms of section 5, 8 or 9).

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It is unlikely that any market will not have a feature that prevents, restricts or distorts competition to some extent, but this does not mean that the markets should be deemed problematic from a competition perspective. It is submitted that the relevant test in terms of the market inquiry provisions should also be that features of the market result in a substantial preventing or lessening of competition that is not outweighed by pro-competitive effects. This is particularly necessary given that section 43C requires, if there are structural features that have "an adverse effect on competition" (which in light of section43A(2) will almost always be the case), that the Commission consider whether it can impose a remedy, and then creates an obligation to do so, or whether another regulator is responsible for further action.Also, section 43D 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. As noted above, a remedy may not be required or justified unless the features result in a substantial lessening of competition as a minor distortion or restriction of competition is not necessarily any reason for concern and the low threshold, read with sections 43C and D will create an enormous administrative burden in the Commission. The proposed higher threshold of substantial prevention or lessening of competition is also more appropriate given that the Commission's decisions (or divestiture orders) are not subject to approval by the Tribunal unless appealed. It is further submitted that this provision is worded rather broadly and creates legal uncertainty by referring to “action [that the Commission] considers to be reasonable and practicable”. The Principal Act already contains provisions which allow the Commission to address any market inquiry findings through the Tribunal, including as outlined in s43C (as currently numbered in the Principal Act).

In particular, the concern arises that market inquiries could be used as a tool to circumvent the established investigative and referral process to be followed in complaint proceedings, to address the conduct of particular firms rather than the state of competition in a market. At the very least, rights of participation should be required to justify such far-reaching powers. In addition, firms should be afforded access to, and the opportunity to respond to, submissions made by participants in the enquiry in order to ensure that they are afforded a

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fair hearing.(3) Any reference to a feature of a market for goods or services includes —

(a) the structure of that market or any aspect of that structure, including;

(i) the level and trends of concentration and ownership in the market;

(ii) the barriers to entry in the market;

(iii) the regulation of the market, including the instruments in place to foster to transformation in the market;

(iv) past or current advantage arising from state support or other privileges of firms in the market;

The inclusion of section 43A(3)(a)(iv) relating to state support is of concern:- Previous state support should not prejudice a firm going forward. This is especially

true when the firm is no longer supported by the state, has not been supported by the state for a number of years, or has paid back that support. Moreover, what constitutes state support is not clear: does the firm concerned have to have been a parastatal or state-owned entity?

- This provision allows for market inquiries to become firm-specific when they should be market structure-specific, and may allow the Commission to circumvent using the provisions in Chapter 2 to investigate firms.

- Should the Commission wish to address concentration within a particular market, then the concentration itself should be the relevant feature of that market, rather than state support.

- The term “other privileges” requires clarity: at present it is vague and open to misinterpretation.

(b) the outcomes observed in the market, including—

(i) prices;

(ii) concentration;

(iii) customer choice;

(iv) quality of goods and services ;

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(v) innovation;

(vi) employment;

(vii) entry into the market; or

(viii) exit from the market;

(c) conduct , whether in or outside the market which is the subject of the inquiry, by a firm or firms that supply or acquire goods or services in the market concerned;

It is important to have safeguards that ensure that wide-ranging powers given to the Competition Commission are not abused e.g., by conducting inquiries into markets which have not been identified as the subject of the inquiry. These back-door inquiries ought to be prevented as they may undermine the ability of firms to appropriately protect their rights and interests.

(d) conscious parallel or co-ordinated conduct by two or more firms in a concentrated market without the firms having an agreement between or among themselves; or

Section 43A(3)(d), seems constructively to prohibit the legitimate use of market intelligence which may, even when done in the course of lawful and normal commercial practice, lead to the conduct of firms appearing co-ordinated when it is not. The unintended consequence of this may be the hampering of genuine competition. Market intelligence is a lawful and legitimate resource used by firms to compete effectively within the market, which is ultimately to the benefit of consumers. The provision implies that firms cannot actively respond to market actions taken by rivals. It is unclear what is meant by “conscious parallel conduct”.

It is proposed that the term “concerted practice’ as defined in the Principal Act, be inserted, as opposed to usage of the terms ‘conscious parallel’ and ‘co-ordinated conduct’.

(e) conduct relating to the market which is the subject of the inquiry of any customers of firms who supply or acquire good or services.

In section 43A(3)(c) and (e), it is not clear how conduct of suppliers or customers is relevant as drafted. The market inquiry should focus on the market under investigation, and not adjacent supplier or procurement markets, unless the scope of the market inquiry is so broadly formulated as to include these.

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Amendment of section 43B in Act 89 of 1998, as amended by section 6 of Act 1 of 2009


(a) the substitution of subsection (1) for the following subsection—

“(1)(a) The Competition Commission, acting within its functions set outin section 21 (1), [on its own initiative, or in response to a request from the Minister], may conduct a market inquiry at any time, subject to subsections (2) to (4)—

(i) if it has reason to believe that any feature or combination of features of a market for any goods or services prevents, distorts or restricts competition within that market; or

(ii) to achieve the purposes of this Act.

(b) The Minister , after consultation with the Competition Commission and after consideration of the factors in subparagraphs (i) and (ii), may require the Competition Commission to conduct a market inquiry contemplated in paragraph (a) during a specified period.”

ii) “to achieve the purposes of this Act” is too vague and greater detail is required.

Although the new section 43B(1) waters down the Minister’s powers to instruct the Competition Commission to institute a market enquiry, it is business’ view that the powers vested with the Minister to require the Competition Commission, after consulting it, to institute a market inquiry are an unnecessary overreach. It is our view that the Competition Commission should have the final say on whether to institute a market inquiry or not. The Competition Commission is better placed to determine its capacity to undertake market inquiries at any given time. Whilst business is cognisant that industrial policy might dictate that the Commission ought to focus on certain priority sectors at different stages of our developing economy, we do not believe that it is ideal to have the Minister instruct the Commission in respect of the institution of any market inquiry.

1. Business is of the view that the subsection must be amended to read as follows:(b) The Minister , after consultation with the Competition Commission and after consideration of the factors in subparagraphs (i) and (ii), may request [require] the Competition Commission to conduct a market inquiry contemplated in paragraph (a) during a specified period.” The Competition Commission shall make a final determination on whether to constitute the market inquiry or not.

The meaning of specified period should be clarified and stipulated. Is this a period in which the Minister must launch the market inquiry? Alternatively, is it a period that will be the focus of the market inquiry? Either way the period needs to be set in the Draft Bill. It is important for business and the Commission to reach some level of certainty as soon as possible after a market inquiry is instituted. It is also important to take into cognisance the fact that market dynamics might change from the time the market inquiry is instituted to the time that it is completed, and therefore the longer a market inquiry takes the more

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likely that some of the recommendations/findings of the Commission might no longer be applicable at the time that the market inquiry is finished.

(b) the substitution of subsection (2) for the following—

“The Competition Commission must, at least 20 business days before the commencement of a market inquiry, publish a notice in the Gazetteannouncing the establishment of the market inquiry, setting out the terms of reference for the market inquiry and inviting members of the public to provide written representations to the market inquiry.”

Market inquiries are wide in scope with huge decision-making impact. How will the test for an adverse effect be applied, what factors will be considered? The mechanism of divestiture is radical to apply to this lower threshold, and should only apply to anti-competitive provisions.

(c) the insertion of subsection (3A) after subsection (3) —

“(3A) For purposes of this Chapter—

(a) The Competition Commission may, within 20 business days of receipt of information claimed as confidential in terms of section 44(1), determine whether or not the information isconfidential information;

(b) If the Competition Commission determines that the information is confidential, it may, within five business days, make an appropriate determination

The power of the Commission to determine who may access confidential information pursuant to a market inquiry is far reaching. The default position should be that confidential information may only be handed to the Commission on the basis that such information shall not be accessed by any third party without consent of the person/firm providing such information. Should any third party require access, the appropriate application must be made to the Tribunal (as is the position with the section 45 of the Act). The Commission should attract the onus of establishing when, how and why the confidential information should be accessed by a third party, should it wish to disclose confidential information.

There is also some confusion introduced by these insertions in light of the fact that section 43B(3) has not been deleted. There are therefore two regimes in place to deal with confidential information when conducting market inquiries.

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concerning access to that information by any person;

(c) Before making the decisions in subsections (1) and (2), the Competition Commission must give the party claiming the information to be confidential, notice of its intention to make its determination and consider the representations, if any, made to it by that person.

(d) Any person aggrieved by the determination of the Competition Commission in terms of subsections (1) or (2) may within 10 business days of the determination, appeal against the determination to the Competition Tribunal.”

(d) the substitution of subsection (4) for the following—

“(4)(a) The terms of reference required in terms of subsection (2) mustinclude, at a minimum, a statement of the scope of the inquiry, and the time within which it is expected to be completed, which period may not exceed 18 months.

(b) The Competition Commission may apply to the Minister to extend for a reasonable period, the completion of a

Clarity is required with regard to what would be regarded as a “reasonable period”.

The Commission should not be empowered to extend market inquiries indefinitely, as this creates uncertainty for market participants. Rather, the Commission should be confined to a maximum number of extensions (e.g. totalling no longer than 6 months), after which it is required to furnish the participants with a list of its concerns, which the participants should be entitled to address at the Tribunal.

Further, the Commission should not apply to the Minister for the extension. The Minister may well be a participant in the market inquiry, and it would not be consistent with the law of separation of powers or natural justice for an interested party to also adjudicate the matter. Rather, the Commission should apply for the extension to the Tribunal.

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market inquiry beyond the period referred to in paragraph (a).”

(e) the substitution of subsection (6) for the following —

“Subject to subsections (4) and (5), the [The] Competition Commission must complete a market inquiry by publishing a report contemplated in [section 43C] sections 43D and 43E, within the time set out in the terms of reference referred to[contemplated] in subsection (2).”

Insertion of a new section 43C in Act 89 of 1998 and the renumbering of old section 43C as 43E20 The Principal Act is hereby amended by the insertion after section 43B in Chapter 4A of the following section and the renumbering of section 43C as 43E—“43C. Matters to be decided at a market inquiry.

(1) In a market inquiry, the Competition Commission must decide whether any feature, or combination of features, of each relevant market for any goods or services prevents, restricts or distorts competition within that market.

As highlighted above, this test is a lower threshold than that for a substantial prevention or lessening of competition, potentially introduces different statutory tests and seemingly makes no provision for consideration of efficiencies. This is tantamount to per se approach to competition assessment. Market inquiries should be based on a full rule of reason assessment which is consistent with contemporary in both competition law and economics.

(2) In making its decision in terms of subsection (1), the Competition Commission must have regard to the impact of the adverse effect on competition on small

Business proposes that the term “adverse effect on competition” be defined as it is imperative that certainty be provided to firms.

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businesses , or firms controlled or owned by historically disadvantaged persons.

(3) If the Competition Commission decides that there is an adverse effect on competition, it must determine—

(a) the action that must be taken in terms of section 43D;

(b) whether it must make recommendations to any Minister, regulatory authority or affected firm to take action to remedy, mitigate or prevent the adverse effect on competition;

(c) if any action must be taken in terms of paragraph (b), the action that must be taken in respect of what must be remedied, mitigated or prevented.

This section is vague and open ended as it is currently drafted, and may be open to a legal challenge. As the Commission is a creation of statute, the Bill must clearly set out exactly what actions the Commission is empowered to take. It cannot be purely within the discretion of the Commission to determine what actions are reasonable.

(4) In determining the matters in subsection (3), the Competition Commission must have regard to the need to achieve as comprehensive a solution as is reasonable and practicable.”

The wording in section 4(3)(4) is vague and wide. What test would be applied? In whose view would the action need to be reasonable and practicable? Would this be- the Commission’s view, the view of the firms involved, or some combination of these? What level of consultation with the firms involved would be required to reach this conclusion of reasonableness and practicality? Would the Commission need to consult industry / market experts? An opportunity should also be provided to firms/business to make representations, and not only have redress through appeal to the Tribunal.

Insertion of section 43D in Act 89 of 199821 The Principal Act is hereby amended by the insertion after section 43C in Chapter 4A of the following section—

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“43D. Duty to remedy adverse effects on competition.

“(1) Subject to the provisions of any law or government policy, the Competition Commission must, in relation to each adverse effect on competition, take the action that it considers to be reasonable and practicable in order to remedy, mitigate or prevent the adverse effect on competition.

This section purports to confer a very wide-ranging power to the Competition Commission to remedy an adverse effect on competition. The scope of such power is not defined, the only limitation being that it must be “reasonable and practicable” in order to remedy, mitigate or prevent the identified adverse effect. These are extremely broad powers which must be balanced with the requirement for the Competition Commission to meet a high evidentiary threshold both in terms of the identified harm to competition as well as how the remedy will rectify such harm.

Further, the Commission must be required to demonstrate that the remedies will not result in unintended consequences that outweigh the benefits anticipated to arise from the remedy. The remedies must also represent the least onerous means of achieving the identified benefits. This is consistent with the approach in the UK regime, the closest to the one proposed in the amendments.

(2) The action taken in terms of subsection (1) may include a recommendation by the Competition Commission to the Competition Tribunal in terms of section 60(2)(c).

Section 43D(2) allows the Commission, by cross-referring to section 60(2), to enforce a remedy of divestiture without the burden of proving either an abuse of dominance or a prohibited practice. If the Commission wishes for a market participant to divest itself of an asset due to its position in the market, it should charge the firm with either abuse of dominance or a prohibited practice and prove one of these before the Tribunal. This proposed amendment could have dire unintended consequences, and we wish to request that the EDD consider revising this proposed amendment, which may amount to an unconstitutional deprivation of property.

(3) The decision of the Competition Commission in terms of subsection (1) must be consistent with the decisions of its report unless there has been a material change in circumstances since the preparation of the report or the Competition Commission has a

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justifiable reason for deciding differently.”

Amendment of section 43C in Act 89 of 1998, as amended by section 6 of Act 1 of 200922 The Principal Act is hereby amended by the renumbering of section 43C to section 43E and the substitution of subsection (1) for the following —

“(1) Upon completing a market inquiry, the Competition Commission must publish a report of the inquiry in the Gazette, and must submit the report to the Minister with [or without] recommendations, which may include, but are not limited to—

(a) recommendations for new or amended policy, legislation or regulations; and

(b) recommendations to other regulatory authorities in respect of competition matters.

Clarity is required regarding the Commission’s obligations to publish its findings regarding: (i) the features of the market; (ii) its suggested remedies; and (iii) its reasoning process to reach the conclusion that the suggested remedies are “reasonable and practicable”. As the provision stands, the Commission bears no obligation to communicate with the firms involved or other stakeholders with regard to its determinations stemming from the market inquiry process.

Lastly, although the Commission should not be obliged to initiate a Chapter 2 process after every market inquiry, this process should be required if the Commission wishes to impose binding remedies on particular firms. The purpose of the market inquiry is not to investigate the actions of individual firms, but rather to assess the operation of the market as a whole. For this reason, a Chapter 2 process must be invoked in order for the Commission or the Tribunal to be competent to impose firm-specific remedies.

(2) Section 21 (3), read with the changes required by the context, applies to a report to the Minister in terms of subsection (1).

(3) On the basis of information obtained during a market inquiry, the Competition Commission may—

(a) initiate a complaint and enter into a consent order with any respondent, in accordance with section 49D, with or without

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conducting any further investigation;

(b) initiate a complaint against any firm for further investigation, in accordance with Part C of Chapter 5;

(c) initiate and refer a complaint directly to the Competition Tribunal without further investigation;

(d) take any other action within its powers in terms of this Act recommended in the report of the market inquiry; or

(e) take no further action.

Insertion of section 43F in Act 89 of 199823 The Principal Act is hereby amended by the insertion after section 43E in Chapter 4A of the following section—

“43F. Appeals against decisions made under this Chapter.

(1) Any person referred to in section 43G (1) who is aggrieved by the determination of the Competition Commission in terms of section 43D may, within the prescribed period, appeal against that determination to the Competition Tribunal in accordance with the

The term “determination” in this section requires clarification. More specifically, the proposed amendments refer to “recommendations” in earlier sections. Is a “determination” the same thing? If so, consistent wording be used throughout. If not, clarity is required.

This section should also be amended to allow for a reconsideration rather than an appeal.

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Rules of the Competition Tribunal.

The reason for this distinction is that an appeal is bound by the record, whereas parties are entitled to bring new evidence into a reconsideration. Given the drastic nature of potential remedies, should a market participant be aggrieved by a recommendation of the Commission stemming from a market inquiry, it should be entitled to bring evidence before the Tribunal. This is opposed to being bound by the potentially limited questions asked by the Commission during the market inquiry, as such questions may not have allowed the market participant scope to explain the workings of the market adequately.

(2) In determining an appeal in terms of subsection (1), the Competition Tribunal may—

(a) confirm the determination of the Competition Commission;

(b) amend or set aside the determination, in whole or in part; or

(c) make any determination or order that is appropriate in the circumstances.

(3) If the Competition Tribunal sets aside the decision of the Competition Commission, in whole or in part, it may remit the matter, or part of the matter, to the Competition Commission for further inquiry in terms of this Chapter.

(4) Any remittal to the Competition Commission in terms of subsection (3) must be completed within six months from the date of the order of the Competition Tribunal.

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(5) Any person aggrieved by a determination or order of the Competition Tribunal in terms of subsection (2) may appeal against that determination or order to the Competition Appeal Court.”

Consideration should be given for specifying the period for lodging an appeal.

Insertion of section 43G in Act 89 of 1998

24 The Principal Act is hereby amended by the insertion after section 43F in Chapter 4A of the following section —

“43G. Participation in and representations to a market inquiry.

(1) In accordance with the procedures adopted by the inquiry, the following persons may participate in a market inquiry —

(a) the Competition Commission;

(b) the Minister ;

(c) at the request of the Minister , any Minister responsible for the sector that includes or is materially affected by the market that is the subject of the inquiry;

(d) firms in the market that is the subject of the inquiry;

(e) any registered trade union that represents a substantial number of employees or the

The right to participate in a market inquiry should not only be in terms of the Commission’s procedures for that inquiry, but should be with due regard to the parties’ rights.

Clarity as to the rights of participation of the firms in the market is required. Would such firms simply be required to answer questions put to them, or could they interrogate the Commission, its views and questions? Is the market inquiry process intended to simply be a “one-way” investigative process by the Commission, or will market participants be entitled to lead their own evidence and ask questions over and above the questions asked by the Commission?

Clarity regarding the difference between “participating” in section 43G(1) and making representations in section 43G(2) is also required.

It should be specified that, in addition to their participation rights, firms should be afforded access to, and the opportunity to respond to, submissions made by all participants in the enquiry in order to ensure that they are afforded a fair hearing.

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employees or representatives of the employees if there are no registered trade unions at the firms referred to in paragraph (d); and

(f) any other person—

(i) who has a material interest in the market inquiry;

(ii) whose interest is, in the opinion of the presiding member of the inquiry, not adequately represented by another participant; and

(iii) who would, in the opinion of chairperson of the inquiry, substantially assist with the work of the inquiry.

(2) Subject to the procedures and time periods adopted by the inquiry, any person may make representations to the market inquiry on any issue related to the terms of reference published in terms of section 43B (2).”


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25 The Principal Act is hereby amended by—

(a) the substitution of subsection (2) for the following —

“From the time information comes into the possession of the Competition Commission, Competition Tribunal or Minister until a final determination has been made concerning it, the Commission, Tribunal and Minister must treat as confidential, any information that is the subject of a claim in terms of this section.”

(b) the substitution of subsection (3) for the following —

“In respect of information submitted to the Competition Commission, the Competition Commission may —

(a) determine whether the information is confidential information ; and

(b) if it finds that the information is confidential, make any appropriate determination concerning access to that information.”

Business proposes that guidelines be published to indicate how confidential information will be determined and applied for the purposes of this chapter.

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(c) the insertion of the following subsections after subsection (3) —

“(4) The Competition Commission may not make a determination in terms of subsection (3) before it has given the claimant the prescribed notice of its intention to make this determination and considered the claimant’s representations, if any.”

(5) A person contemplated in subsection (1) who is aggrieved by the determination of the Competition Commission in terms of subsection (3) may, within the prescribed period of the Commission’s decision, refer the decision to the Competition Tribunal.

(6) The Competition Tribunal may confirm or substitute the Competition Commission’s determination or substitute it with another appropriate ruling.

(7) In respect of confidential information submitted to the CompetitionTribunal, the Tribunal may —

(a) determine whether the information is confidential information; and

(b) if it finds that the information is confidential, make any appropriate

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determination concerning access to that information.

(8) A person aggrieved by the ruling of the Competition Tribunal in terms of subsections (6) or (7) may, within the prescribed period and in accordance with the Competition Appeal Court’s rules—

(a) refer the Tribunal’s ruling to the Competition Appeal Court, if the Tribunal grants leave to appeal; and

(b) petition the President of the Competition Appeal Court for leave to refer the Tribunal’s ruling to the Competition Appeal Court, if the Tribunal refuses leave to appeal.

(9) Unless the Competition Commission, Competition Tribunal or Competition Appeal Court holds otherwise, an appropriate determination concerning access to confidential information includes the disclosure of the information to the legal representatives and economic advisors of the person seeking access —

(a) in a manner determined by the

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circumstances; and

(b) subject to the provision of appropriate confidentiality undertakings.”


26 The Principal Act is hereby amended by the substitution of section 45 for the following —

“45. Disclosure of information.

(1) A person who seeks access to information that is subject to a claim or determination that it is confidential information may apply to the Competition Tribunal in the prescribed manner and form, and the Competition Tribunalmay—

(a) determine whether or not the information is confidential information; and

(b) if it finds that the information is confidential, make any appropriate order concerning access to that confidential information.

(2) [Within 10 business days after an order of the Competition Tribunal is made in terms of section 44 (3), a party concerned may appeal against that

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decision to the Competition Appeal Court, subject to its rules.]

The provisions of section 44(8), read with the changes required by the context, apply to the application referred to in subsection (1).

(3) [From the time information comes into the possession of the Competition Commission or Competition Tribunal until a final determination has been made concerning it, the Commission and Tribunal must treat as confidential, any information that—

(a) the Competition Tribunal has determined is confidentialinformation; or

(b) is the subject of a claim in terms of this section.]

Subject to section 44(2) and for the purposes of their participation in proceedings contemplated in this Act , including merger proceedings —

(a) the Minister may have access to a firm’s confidential information ; and

(b) any other relevant Minister and any

Business is concerned about the possibility of “any other relevant Minister” having access to the confidential information of a firm. The terms “any other relevant Minister” and “any relevant regulatory authority” is vague and needs to be defined. Uncertainty could cause unintended adverse consequences.

Furthermore, the obligation to keep this information confidential in section 44(2) does not extend to the other relevant ministers and the other relevant regulatory authorities. Section 44(2) should be amended to cater for this. Should there be justifiable legal reasons for any relevant Minister to have access to such information, then such disclosure of information must be done under a legally binding confidentiality undertaking.

In addition, the confidential information must be restricted to use only for the purpose for which it was provided i.e. either in a merger or defending a prohibited practice or at the very most for competition matters only.

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relevant regulatory authority may have access to a firm’s confidential information unless the Tribunal determines otherwise.

(4) Once a final determination has been made concerning any information, it is confidential only to the extent that it has been accepted to be confidential information by the Competition Tribunal or the Competition Appeal Court.”

Amendment of section 49D in Act 89 of 1998, as inserted by section 15 of Act 39 of 2000

27 The Principal Act is hereby amended by the substitution of subsection (1) for the following—

“(1) If, during, on or after the completion of the investigation of a complaint or a market inquiry, the Competition Commission and the respondent, or any person that is the subject of action by the Competition Commission in terms of section 43E, agree on the terms of an appropriate order, the Competition Tribunal, without hearing any evidence, may confirm that agreement as a consent order in terms of section 58 (1) (b).”

Insertion of section 49E in Act 89 of 199828 The following section is hereby inserted in the Principal Act after section 49D —

“49E. Leniency.

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(1) The Competition Commission must develop, and publish in the Gazette , a policy on leniency, including the types of leniency that may be granted, criteria for granting leniency, the procedures to apply for leniency and the possible conditions that may be attached to a decision to grant leniency.

(2) The Competition Commission may grant leniency, with or without conditions, in terms of its leniency policy.”

Business proposes that the Commission invites third parties to comment on the leniency policy once it has been drafted.


29 The Principal Act is hereby amended by the insertion after subsection (c) of the following—

“(dA) amend or withdraw any direction or summons referred to in subsections (a), (c) or (d).”

Amendment of section 58 in Act 89 of 1998, as amended by section 15 in Act 39 of 2000

30 The Principal Act is hereby amended by—

(a) the substitution of paragraph (a) in subsection (1) for the following —

“(a) make an appropriate order in relation to a prohibited practice or an appeal referred to in section 43F, including—

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(i) interdicting any prohibited practice;

(ii) ordering a party to supply or distribute goods or services to another party on terms reasonably required to end a prohibited practice;

(iii) imposing an administrative penalty, in terms of section 59, with or without the addition of any other order in terms of this section;

(iv) ordering divestiture, subject to section 60;

(v) declaring conduct of a firm to be a prohibited practice in terms of this Act, for purposes of section 65;

(vi) declaring the whole or any part of an agreement to be void;

(vii) ordering access to an essential facility on terms reasonably required;”

(b) the substitution of paragraph (c) in subsection (1) for the following—

“(c) subject to sections 13 (6), [and] 14 (2) and 43B (4)(b), condone, on good cause shown, any non-compliance of—

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(i) the Competition Commission or Competition Tribunal rules; or

(ii) a time limit set out in this Act.”

Amendment of section 59 in Act 89 of 1998, as amended by section 10 in Act 1 of 2009


(a) the substitution of paragraph (a) in subsection (1) for the following —

“(a) for a prohibited practice in terms of section 4 (1), 5 (1) and (2), 8 (1) or 9 (1);”

Please also see comments under section 8(c) above

(b) the deletion of paragraph (b) in subsection (1) Please also see comments under section 8(c) above

(c) the substitution of paragraph (d) in subsection (3) for the following —

“(a) the market circumstances in which the contravention took place, including whether, and to what extent, the contravention had an impact upon small businesses and firms owned or controlled by historically disadvantaged persons;”

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(d) the insertion after subsection (3) of the following:

“(3A) An administrative penalty imposed upon a firm that contravened this Act may be extended to one or more other firms if those firms form a single economic entity with the firm that contravened this Act. ”

General concern regarding the amendments in relation to penalties centres on the proposed insertion of section 59(3A). This insertion is problematic from a company law perspective, as well as a competition law perspective. A subsidiary company cannot be held liable for the proverbial sins of its parent, unless exceptional circumstances exist.The Background Note makes it clear that the purpose of this addition is to prevent the manipulation of corporate structures to avoid administrative penalties being realised. However, this does not in and of itself justify disregarding company law principles, and competition case law, in order to extract penalties from entities over which the competition authorities would not ordinarily have jurisdiction. Further, there is already case law that prevents the manipulation of corporate structures in order to evade administrative penalties, being Delatoy Investments.3

This proposed amendment amounts to the competition authorities potentially being able to circumvent the ordinary rules of jurisdiction in order to extract the highest possible penalty for prohibited practices. This is contrary to Constitutional case law, which explicitly says that no state may “exercise its power in any form in the territory of another State.”4

Although there are instances when the “single economic entity” doctrine is sensible and practical (e.g. for exempting entities engaged in conduct prohibited in terms of section 4(1) of the Principal Act) this is not one such instance. The position in the European Union, as displayed by the Akzo Nobel5 case, is that a parent may only be held liable for the acts of a subsidiary company if the subsidiary does not independently determine its own conduct in the market. There is a presumption that this is the case if the parent company holds all or almost all of the capital in a subsidiary which has committed an infringement of the EU competition rules. However, this presumption is rebuttable. Further, it must be noted that the European case law refers to

3 The Competition Commission v Delatoy Investments (Pty) Ltd and Others (CR212Feb15) [2016] ZACT 37 (14 April 2016).4 Kaunda and Others v President of the Republic of South Africa (CCT 23/04) [2004] ZACC 5 (4 August 2004).5 Judgment of 10 September 2009, Akzo Nobel and Others v Commission, C-97/08 P, EU:C:2009:536,

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attributing conduct of a subsidiary to the parent company, and not the conduct of a parent company to a subsidiary. It also differs from the wording in the Draft Bill in that the Draft Bill only contemplates extending the penalty, rather than the conduct, to firms within a single economic entity. This amendment is not consistent with section 59(2) of the Principal Act, which states that an administrative penalty may only be imposed in respect of a firm’s turnover in, and exports from, the Republic. If a parent company is domiciled outside of South Africa, and does not derive any turnover in, or from exports from, South Africa, section 59(2) is that the competition authorities are not competent to impose a penalty on it. The amendment seeks to punish the subsidiary of a parent company, which may have no involvement in the conduct.Further, as noted above, the cross-reference to section 60(2) in the proposed new section 43D(2) .will potentially amount to the competition authorities imposing an extremely harsh penalty on individual parties during the course of market inquiry processes – something that is not in line with the purport of these processes. Penalties should be imposed where firms are found to contravene the Act, after this has been proven before the Tribunal and an order to that effect issued. Penalties should not be imposed on individual firms to remedy features of particular markets.

Furthermore, cognisance should be taken of the impact that giving effect to this provision may have on financial stability as contemplated in the Financial Sector Regulation Act 9 of 2017. Where financial institutions are concerned, the regulator should consult with the Prudential Authority, Market Conduct and SARB before giving effect.

Lastly, the section may be open to legal challenge on the basis that penalty should not be levied against a firm that was not the subject of a complaint and which did not have the opportunity to answer or defend a claim or complaint, regardless of whether it is a related

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party to a firm that has contravened the Act.



(a) insertion after paragraph (b) in subsection (2) of the following —

“(c) after a market inquiry conducted in terms of Chapter 4A, the Competition Commission finds that there is an adverse effect on competition in the relevant market and makes a recommendation to the Competition Tribunal that such an order is appropriate.”

60(1)(a) of the Act allows the Tribunal to make an order directing a firm to sell any shares in a firm. The proposed 62(2)(c) would have serious repercussions. The order should not only be based on a decision of the Commission but rather on a decision of the Tribunal and only after hearing representations from all affected parties.

(b) substitution for subsection (4) for the following —

“(4) An order made in terms of subsection (1) or (2) may set a time for compliance, and any other terms that the Competition Tribunal considers appropriate, having regard to the commercial interests of the party concerned and the purposes of this Act .”


33 The Principal Act is hereby amended by the substitution for subsection (4) for the following—

“(4) An appeal from a decision of the Competition Appeal Court in respect of a

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matter within its jurisdiction in terms of subsection (2) lies to the [Supreme Court of Appeal or] Constitutional Court, subject to section 63 and [their] its respective rules.”



(a) substitution for subsection (2) for the following subsection —

“(2) Subject to the Constitution and despite any other law, an appeal in terms of section 62(4) may be brought, [to the Supreme Court of Appeal or if it concerns a constitutional matter,] to the Constitutional Court [,only] —

(a) [with the leave of the Competition Appeal Court; or

(b) if the Competition Appeal Court refuses leave], with the leave of [the Supreme Court of Appeal or] the Constitutional Court [, as the case may be].”(b) substitution for subsection (4) for the following subsection —

“(2) [If the Competition Appeal Court, when refusing leave to appeal, made an

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order as to costs against the applicant, [the Supreme Court of Appeal or] the Constitutional Court may vary that order on granting leave to appeal.]”

(c) deletion of subsections (7) and (8).


35 The Principal Act is hereby amended by the substitution for subsection (1) for the following subsection —

“(1) A complaint in respect of a prohibited practice that ceased more than three years before the complaint was initiated may not be [initiated more than three years after the practice has ceased] referred to the Competition Tribunal.”


36 The Principal Act is hereby amended by the substitution for subsection (b) for the following subsection —

“(b) in any case, to a fine not exceeding [R2 000-00] R10 000-00 or to imprisonment for a period not exceeding six months, or to both a fine and imprisonment.”


37 The Principal Act is hereby amended by the substitution of section 79 with the following section —

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“79. Guidelines

(1) The Competition Commission may prepare, amend, replace and issue guidelines to indicate the Commission’s policy approach to any matter within its jurisdiction in terms of this Act.

(2) A guideline referred to [prepared] in [terms of] subsection (1) [—

(a)] must be published in the Gazette. [; but

(b) is not binding on the Competition Commission, the Competition Tribunal or the Competition Appeal Court in the exercise of their respective discretion, or their interpretation of this Act.]

(3) Before the Competition Commission issues a guideline referred to in subsection (1), the Competition Commission must —

(a) publish a notice in the Gazette —

(i) stating that a draft guideline has been prepared;

(ii) stating the place, which may include the Competition Commission’s website, where a copy of the draft guideline may be obtained;

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and

(iii) inviting interested parties to submit written representations on the draft guideline within a reasonable period; and

(b) consider any representations which were submitted within the period specified in the notice.

A minimum time period should be explicitly stated, and business suggests that a minimum of 30 working days be allowed.

In addition to receiving representations from interested stakeholders on the draft guidelines, the Commission should after 30 working days of the due date for submission of comments issue the final guideline for publication so all the interested parties have sight of the final guidelines which the Commission will implement in their day to day activities.

(4) A guideline referred to in subsection (1) is not binding, but any person interpreting or applying this Act must take it into account.”

This provision appears contradictory and ambiguous on the basis that guidelines are by definition not binding; by implication, it cannot be peremptory for a person to take it into account. Therefore, a person may choose to read the guidelines but nevertheless act contrary to its provisions without any consequences.


38 The Principal Act is hereby amended by the insertion of the following subsection after section 83(2) —

“(3) Until a leniency policy referred to in section 49E is published in the Gazette , the leniency policy published in Government Gazette No. 31064 (GN 628 of 23 May 2008) and amended in Government Gazette No. 35139 (GN 212 of 16 March 2012) will remain in effect.”

39 Short Title and commencement of Act. —

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This Act is called the Competition Amendment Act, 2017, and comes into operation on a date fixed by the President by proclamation in the Gazette.

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· web viewbusiness acknowledges the impetus to amend the competition act, 1998 to strengthen...

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