The Portfolio Committee on Economic Development received briefings from various stakeholders on the second day of public hearings on the Competition Amendment Bill, which had officially been introduced to the National Assembly last month. Its primary objective was to address the structural challenges that were considered by the Minister of Economic Development to be constraining the South African economy.
Most of the oral representations during the hearing were in full support the Bill’s provisions. The Committee heard from private individuals, academia, economists, business, non-governmental organisations and trade unions. Suggestions on possible improvements to provisions of the Bill were made relating to the protection of small, medium and micro enterprises; the development and participation of the historically disadvantaged individuals (HDIs) in the economy; abuse of dominance; buying power; price discrimination; national security, initiating and conducting market inquiries; the penalty regime; and review and appeal provisions. The Committee was also requested to consider the developmental imperatives of the state, including transformation of the economy, industrial expansion and job creation.
Business Unity South Africa (BUSA), in a detailed presentation, welcomed the Bill, as long as the Competition Commission and the Competition Tribunal could keep each other's powers in check. Unilateral findings against companies had to be avoided. Regarding market inquiries, BUSA proposed that no binding remedy be imposed without a finding by the Commission and confirmation from the Competition Tribunal. A finding should be subject to appeal. Regarding the Bill's stance on removing the “yellow card regime” and imposing penalties on first time anti-competitive offenders, BUSA said it was necessary for borderline conduct to be scrutinised and oversight strengthened, but that it should be differentiated from clearly anti-competitive behaviour. A viable middle ground would be to do away with “yellow card” protection once the Competition Tribunal or Competition Appeal Court had issued a final judgment that that conduct was prohibited.
Members sought more information on whether other jurisdictions were more immune to political interference than South Africa, if the Act was in full compliance with international law, whether the 18-month period being introduced was sufficient, the basis for the fear expressed that the President might abuse his powers in terms of the Bill; and recommendations on how the Bill could be enhanced to improve the state of small businesses.
Opening remarks by the Chairperson
The Chairperson said the purpose of the Competition Amendment Bill "is to emancipate our people," and that special attention had to be paid to it because of South Africa's unique experiences. The successes achieved over the 20 years of the Act had been tremendous. The country was catching up with the world and was now in the league of those considered to have innovative practices.
She outlined the programme of the day and announced that each presenter would be allocated 25 minutes to present. She apologised for the disturbances that had occurred the previous day, and announced that MTN would not present but would be replaced by Section 27.
Centre for Competition, Regulation, and Economic Development, University of Johannesburg
Professor Simon Roberts, Centre for Competition Law and Economics (CCLE), University of Johannesburg (UJ), said that they were economists and were therefore talking from an economic point of view, and not a legal standpoint. They worked as economic advisors in the East African region and parts of Asia.
Competition law could only apply where there was a competition policy agenda. The Act needed to be in conformity with international law and practices.
Dr J Cardo (DA) asked the professor to expand on his point that competition law could apply only where there was a competition policy agenda. Were other jurisdictions more immune to political interference than South Africa?
Prof Roberts responded that competition law was only one tool, but there needed to be five tools for reducing barriers to entry.
Ms A Mfulo (ANC) asked whether the Act was in full compliance with international law.
Prof Roberts said that if the Act was weaker than in other countries, this would create a problem.
Ms Umunyana Rugege, Healthcare Services & Basic Education Researcher: Section 27, said the entity was a non-governmental organisation (NGO) group of human rights researchers that worked on two basic rights -- healthcare services and basic education.
She said the Competition Commission would not be able to determine the interests of a party, participant or stakeholder, and ran the risk of creating a second tier of stakeholder.
Clause 43(g) and 44(g) should be amended to level the playing field for all consumers and stakeholders.
The amendments violated the constitutional values of inclusiveness, transparency, and accountability, and a judge had previously ruled to that effect.
There was a need to tighten procedures to ensure the hearings did not go on "forever", but there had to be clarity on the extent of that tightening to prevent the views of consumers going unheard. This view was also held by the former Deputy Chief Justice, who was the chairperson of the health market inquiry.
The Chairperson asked whether they wanted Section 43 amended because it excluded civil societies and communities.
Ms Rugege responded that that was correct, saying there should be a level playing field for everyone as espoused by the Constitution. They proposed that the entire Section 43(g) should be redrafted. There should be only one class of stakeholder.
The Chairperson asked if they found that the 18-month period being introduced was sufficient.
Ms Rugege replied that there should be more flexibility in the time, in respect of when it started and ended, and not every case was similar. So other stakeholders should not be restricted, and the same rules must rather apply to everyone.
The 18 months should be more flexible, to allow for deeper complexity.
Helen Suzman Foundation
Ms Kimera Chetty and Ms Mira Briel, Legal Researchers, Helen Suzman Foundation, said they had a problem with the inclusion of Section 18(a) as drafted, dealing with the creation of a committee dealing with national security matters and having veto powers. They felt, this brought about constitutional non-compliance arguments.
They endorsed point 60 of the Law Society of South Africa's written submission, and indicated that to the extent that the HSF's position deviated, it would be flagged to the Committee.
They objected to the matter of how to object to, or challenge, a finding of the proposed committee on national security. They proposed the creation of an appeal mechanism. A definition of “effective management” should be included in the Bill for the committee, and its members should be from the security and national intelligence services. It should be a standing committee, and not an ad hoc committee.
The committee dealt with national security risks from the merger of a company with a foreign company. There was no clarity on the recourse options available -- was it through a tribunal, was it directly to the committee, or was it through judicial interventions in the form of a court of law?
It was unclear what powers the committee had to review its own decisions in the form of an internal review mechanism.
Foreign jurisdictions such as the USA, Canada, and Australia, provided good models to borrow from in respect of mitigating national security risks that may arise from a foreign business coming into the country through a merger.
The list of national security interests contemplated was extremely broad – the provisions went far beyond traditional public interest factors that had been the focus of legitimate ministerial intervention to date. Another key change was the proposed increase of the maximum administrative penalty from 10% of a firm’s annual turnover in SA, to 25%, in circumstances where that firm was found to have engaged in a repeat offence of the Act.
Was the list of factors in Section 18(a)(4) helpful in helping the President of the Republic to make a decision on whether a merger was harmful to national security or not?
The inclusion of the executive in the competition arena, and the President having the prerogative to delegate the determination of national security risks to any Cabinet official, created concern about a potential abuse of power.
The Chairperson asked for clarity on what the Foundation meant by “an appropriate legislation,” as per the law society.
Ms Chetty replied that it all depended on the redrafting of Section 18(a).
Mr Cardo asked whether they were saying Section 18(a) did not belong in competition legislation at all. He requested more detail on the reservations on section 18(a) (4).
Ms Briel responded that Sections 18(a) (4) (d), (e), (h) and (f), were the problematic areas, since they allowed for potential abuse, and hurt the President’s ability to make a proper determination.
Mr S Tleane (ANC) commented that their arguments were drawn from the situation in the USA, Canada, and Australia, and wondered why it was necessary to find good models in developed countries to apply to a developing country such as SA.
Ms Chetty said that they included overseas models simply because they worked better, as opposed to a model like China, which pursued a protectionist model.
The Chairperson asked what the basis for the fear of the President abusing his powers in terms of the Bill was. “Is it because there had been such abuse in some of the jurisdictions you mentioned?”
Ms Chetty replied that it was more of a precautionary measure, and not that they were pre-empting abuse.
Ms Mfulo asked why assumptions of abuse were only on the President’s side, and not on the businesses abusing the merger laws.
Ms Chetty and Ms Briel said they were unable to answer that question, because they had looked only at what directly affected them as an organisation.
The Chairperson asked why the committee should be a standing one, rather than an ad hoc committee, and what would happen if it did not have the relevant competence to deal with all national security-related matters?
Ms Chetty said that it was unclear whether, were it to be an ad hoc committee, it would be formed “merger to merger,” or if it did come up, how long would it last. They proposed various broad levels of expertise on the committee so that there was an expert in every competency.
The Chairperson queried whether they believed the President did not have the competency to nominate competent members to the committee, based on a case-by-case basis.
Ms Chetty said that that was not her suggestion or implication in the slightest. The recommendations sought only to help the office of the President in making the determinations.
The Chairperson wondered if it was not better to have an ad hoc committee so that the President could appoint people who had expertise in a particular matter as they came up, rather than having a permanent standing committee with set competencies to deal with all possible cases.
Mr Tleane asked for pricing proposals.
Ms Briel said their presentation was limited only to Section 18 and so they had not considered pricing aspects.
Centre for Competition Law and Economics (CCLE) – Stellenbosch University
The presentation of Professor Willem Bischoff and Professor Philip Sutherland focused on the following:
- Market concentration and its relation to competition;
- Emphasis on the limits of market concentration as a predictor of economic behaviour;
- Importance of accounting for developments in economic theory, while keeping the policy flexible.
They said competition was influenced by many factors, of which concentration was one. Economic analysis of these matters differed. There was market concentration, which referred to the number and size of firms, and ownership concentration, which referred to the number and size of owners.
Investment by foreign firms was absolutely critical and there were no real alternatives since SA was attracting too little foreign investment. This led to the following implications:
- The rules of the game must be clear;
- Amendments with respect to national security-related mergers were vague and open to abuse -- and even to state capture;
- Rephrase, and leave it to the competition authorities.
They opposed Section 43B (1) (b) that the Commission could initiate, “if it had reason to believe,” that the features of the market “impedes restricts or distorts competition”; and the Minister may initiate inquiries, but not subject to this constraint.
They proposed the market inquiry power in Section 43D be better aligned with normal enforcement actions. It should not replace enforcement of more specific provisions.
Mr P Atkinson (DA) asked for clarity on the statement that “investment by foreigners was critical, because foreign investments were not enough”. Did the Bill hamper foreign investment?
Prof Bischoff responded that it would depend on its implementation, because it created uncertainty and economists preferred the rules to be specified independently of temporary political interventions.
The Chairperson asked whether he should be fearful of the impact on the economy.
Prof Bischoff said economists tried to make predictions based on the information they had.
Prof Sutherland added that currently, SA competition law was on a par with international benchmarks.
Mr Cardo asked if there was a danger of the Bill trying to achieve economic objectives that would ordinarily lie outside competition aspects.
Prof Bischoff responded that the main aim of competition legislation was to manage and control competition, and it was key, particularly when considering SA’s past.
Ms Mfulo asked why the World Bank was saying there was economic concentration in SA, but Prof Bischoff was saying the opposite.
Prof Bischoff responded that he doubted the international mark-ups available for South Africa.
Mr Jim Foot (Independent presenter)
Mr Jim Foot, independent risk and management consultant, and owner of Nationwide Poles, said he was an expert on price discrimination and unfair competition. He narrated how he had used R2 million of his own personal funds in legal action in support of fair competition and price fairness.
He disagreed with Section 9 of the Bill, which required small businesses to provide assurances. He believed government was unwittingly complicit in the problem. The Competition Commission looked out only for those cases that had a big market impact. This did not benefit small businesses.
The fines proposed in the Bill were “way too lenient.”
Big business was of the view that if the Bill went through, there would be a significant negative effect on the South African gross domestic product (GDP).
Many of the provisions in the Bill were good and supported businesses, but there needed to be proper funding provisions for the Competition Commission, or a provision in the law for a Small Business Commission to be established to protect small businesses and the interests of small businesses, while preventing big business monopolies.
It had cost him R 2million in direct costs and another R2 million in indirect costs to fight this fight, and he had done so out of principle. He asked why something should cost a certain price at one place and a different one at another place down the road, yet there were no significant transport cost differences.
Mr Atkinson asked if there was anything else Mr Foot would propose that would assist small businesses.
Mr Foot responded that the Bill, as it stoodds, supported small businesses, but it was necessary to give the Commission “teeth” and resources, and the power to implement.
Ms K Hlonyana (EFF) asked whether he was still in business.
Mr Foot said he was still in business, but in a very different role. He had had to switch industries because he could not make a profit.
Ms C Matsimbi (ANC) asked what challenges small businesses faced, and whether large firms abused their positions of dominance.
Mr Foot said the biggest challenge was to get customers, because the pricing and cost structure of small businesses did not match those of big businesses in respect of the input cost differentials.
National Labour & Economic Development Institute (NALEDI)
Ms Hameda Deedat, Senior Researcher, NALEDI, said that NALEDI was the research arm of the Congress of South African Trade Unions (COSATU), and submitted that the Bill represented an important step towards strengthening the powers of the competition authorities with the intent to address the challenges of economic exclusion, high levels of concentration, and racially skewed ownership and control of the economy.
These vices made SA the most unequal society in the world. A small number of large firms dominated the economy and most sectors, which remained one of the country’s greatest economic challenges. Its views on the Bill were similar to those of COSATU and its affiliates.
BUSA (Business Unity South Africa)
Mr Olivier Serrao, Director: Economic & Trade Policy: Business Unity South Africa (BUSA), described BUSA as a confederation of business organisations, including chambers of commerce and industry, professional associations, corporate associations, and uni-sectoral organisations. It represented a cross-section of businesses, large and small. Its function was to ensure business played a constructive role in economic growth, development and transformation. As the principal representative of business in South Africa, BUSA conveyed the views of its members in various structures, including in the National Economic Development and Labour Council (NEDLAC).
BUSA had participated in the NEDLAC process on the Bill, along with the Department of Economic Development (EDD) and organised labour. Meetings had been held on 5 December 2017, and on 29 January, 23 April, 4 June, 7 June and 16 July 2018. Additional bilateral meetings between BUSA and the EDD had been held on 28 March, 23 April and 31 May 2018. Engagements at Nedlac had been substantive and robust, with consideration by government of the various proposals put forward by social partners.
During the engagements at Nedlac, business -- represented by BUSA -- had compromised significantly on several counts with a view to maximising consensus. BUSA's position, therefore, reflected not only the overarching views of business, but was also a sincere effort to accommodate the policy imperatives of the government in workable legislation that struck the required balance between an effective competition regime and investment promotion/ease of doing business.
BUSA recognised the importance of finding the right balance between addressing anti-competitive practices and behaviour; dealing with markets that were exclusionary; and stimulating competitive practices to enable investment and growth in the economy. BUSA largely endorsed the objectives of the Amendment Bill, particularly the promotion of entry into market of small and medium businesses and firms owned by historically disadvantaged persons. BUSA was, however, concerned that the balance may be disproportionately weighted against the ease of doing business.
A key concern for BUSA was the initial diagnosis of the problem. In the background note to the December 2017 version of the Bill, subsequently amended, concentration levels for various industries had been provided. BUSA understood the motivation to address concentration to be unchanged since the initial version of the Bill. However, analysis by BUSA members showed very different results. Levels of concentration were often much less than often assumed. In addition, major jurisdictions in the European Union (EU) distinguish between market share and dominance. They also distinguish between dominance and economic harm.
One problem was how to define market share. Market share could refer to a firm's participation in certain product lines in a market, or its share in a market (e.g., a bank’s share in the mortgage bond market, or its overall share of the banking sector -- itself distinct from the financial services sector). This debate was not simply academic if it informed the use of some of the powers created in the envisaged legislation. Market inquiries, for example, were time-consuming and expensive exercises for businesses and should be informed by credible data and evidence of harm.
Withdrawal of the “yellow card” regime
The current version of the Bill does away with the "yellow card" regime currently in place through the amended Section 59, providing for an administrative penalty for a first-time offence in relation to all of 8(1). The yellow card regime provided for an area of less prescriptive regulation, in cases where conduct was not automatically identified as anti-competitive. BUSA viewed it as necessary to maintain provision in the legislation for such borderline conduct to be scrutinised and strengthened, but for the treatment thereof to be differentiated from clearly anti-competitive behaviour.
In BUSA's view, a viable middle ground would be to do away with yellow card protection once the Competition Tribunal, or Competition Appeal Court, had issued a final judgment that that conduct was prohibited. This proposal would bind other firms in relation to the same or similar conduct going forward. BUSA had a proposed text to amend the current Section 59(1) (b) in this regard.
BUSA appreciated the concerns of government that retaining the yellow card may open the door to “vexatious or frivolous litigation”. This could be mitigated in the legislation and discouraged through enabling the Competition Tribunal to award costs against parties guilty of vexatious or frivolous litigation. This had the benefit of retaining the advantages of the yellow card regime, while addressing the government's concerns,
Provisions introduced to section 8 by the Amendment Bill seek to reduce the onus on the Commission in the cases that it wishes to pursue. The Amendment Bill allows the Commission to refer a complaint without having conducted a substantive investigation. This could lead to spurious and unjustified litigation, which would likely disproportionately prejudice large entities.
Section 9: Price discrimination
Section 9 of the Act, as it currently stands, prohibits price discrimination by a dominant firm if the price discrimination implicates equivalent transactions, and is likely to result in a substantial lessening or prevention of competition. The discrimination may be justified on certain grounds, including allowances for differences in costs of supply, meeting price competition, and changing market conditions.
While BUSA supports the Minister's objective behind the proposed amendments to address the potential effects of anti-competitive price discrimination on small, medium and micro enterprises (SMMEs) and firms controlled by historically disadvantaged persons (HDPs), there were concerns around the move away from the existing test of establishing a substantial lessening of competition (SLC). For this reason, BUSA would be supportive of provisions that specifically protect small businesses and firms owned by HDPs, while retaining the overall SLC test.
BUSA understood the necessity to hold market inquiries to investigate and create the platform to address anti-competitive market structures, particularly where these have been the result of historical factors. Alongside this, was the imperative to create a conducive market to grow the economy and power job creation. In this regard, BUSA had a few concerns regarding market inquiry provisions in the draft Bill.
The Commission may impose far-reaching, binding remedies following a market inquiry – such as structural, pricing or other behavioural remedies -- on a no-fault basis. The competition test had been watered down significantly from a "substantial lessening of competition," to an "adverse effects" test. This was a matter of significant concern, since it allowed the Commission to intervene in markets in which it considered there to be a restriction, or a lessening or prevention of competition, and to impose remedies that may change the structure and terms of supply and demand in a market in circumstances where there had been no breach of the Act.
The proposals in the Bill envisage a limited role for the Tribunal in exercising oversight. The Tribunal constitutes an important safeguard, and has the capacity to regulate complex findings arising from market inquiries. As a result, the Tribunal should have a role in developing recommendations.
BUSA proposes that no binding remedy may be imposed in the absence of a finding by the Commission and confirmed by the Tribunal, based on substantial lessening of competition. This should also be subject to appeal. Furthermore, the trigger for a market inquiry should be based on credible information. A market inquiry should be in two stages -- an initial fact-finding exercise through requests for information (RFIs), followed by a "full-blown" market inquiry based on anti-competitive features made visible in the fact-finding exercise.
While BUSA had not argued against the concept of the national security provisions (envisaged in section 18A) when it was raised in the context of the NEDLAC engagements -- given the fact that there were similar provisions which had been adopted in comparable jurisdictions -- there were justifiable concerns around how this provision would be implemented in practice. It would be incumbent on the executive to use these new found powers in a manner that struck an effective balance between securing South Africa's national interest and encouraging investment.
Interventions in this regard should not be being exercised arbitrarily, or result in undue delays in merger proceedings. In BUSA's view, it was essential that these powers be used responsibly, and that government provide maximum guidance to the market on its approach to national security (policy transparency); how choices were made (executive transparency); and communicating interventions (information transparency).
Furthermore, the trigger for a market inquiry should be based on credible information. A market inquiry should be in two stages: an initial fact-finding exercise through requests for input, followed by a full-blown market inquiry because of anti-competitive features made visible in the fact-finding exercise.
BUSA acknowledged the difficult task of finding the right balance between firmly addressing anti-competitive practices and behaviour, dealing with markets that were exclusionary, and stimulating competitive practices to grow investment and the size of the economy. The proposals set out were aimed at finding such solutions, while signalling areas that had gone too far and would stunt competitive forces, rather than provide an environment and investment climate in which to activate them.
Mr Cardo asked for elaboration on the dangers of doing away with the yellow cards and if it might hamper dynamism, innovation, and competitive behaviour by firms.
Mr Serrao responded that by removing the flexibility of the yellow card, it would reduce collaboration between larger and small firms, and competitive behaviour could be “shunned”. Internationally, 95% of all employment was generated by small businesses, while in SA it was only 60%, which clearly indicated there was a problem.
The Chairperson commented that their view seemed to have changed or evolved.
Mr Serrao confirmed that the document presented was their final official position.
Mr Cardo referred to Section 18 (a) on national security, and asked what safeguards could be built into the section to ensure it did not deter foreign investment.
Mr Serrao said that to strengthen the provision, there needed to be some kind of certainty created or guidelines that would be used, because uncertainty and business did not go well together.
Congress of South African Trade Unions (COSATU)
Mr Tony Ehrenreich, regional secretary of the Western Cape region of COSATU, made a submission on behalf of the Congress’s 16 affiliates and their almost 2 million members.
The Bill would help to address economic concentration and major economic problems in SA, including:
- Continued income and wealth inequality: Wealth was concentrated among a few and in certain parts of the economy. This hampered economic growth;
- Lack of transformation – there was still largely an “old, white boys' club;”
- Lack of competition (per World Bank and others): Economic concentration -- monopolies and monopsonies; economic corruption, cartels and collusion; very high profits in parts of the economy (at the expense of others); high prices; high barriers to entry; lack of innovation; inequality; struggling new entrants (black-owned and SMMEs); financialisation; and low investment compared to international peers.
COSATU believed that the instances of collusion by mainly white-owned apartheid-style companies had flourished due to the previous economic practices. This Bill sought to end the rampant corruption by the “old boys’ club,” and bring the competition rules in line with many other developed countries. COSATU was not surprised that the business constituency had not been very forthcoming in the negotiations, as they would like to see the old regime continuing.
Mr Matthew Parks, COSATU Parliamentary co-ordinator, said the federation supported the Bill's expansion of the mandate of the competition authorities to deal with economic concentration.
Certain measures needed to be taken to elevate employment, including:
- Employment considerations as criteria for merger approvals;
- Selective interpretation of existing acts by the Commission;
- General failure to attach employment and social and economic welfare promoting conditions to the approval of mergers, and the lack of monitoring and enforcement of non-compliance with such conditions.
- Section 12A (3) had been amended with the introduction of an additional test to public interest criteria applied to mergers, namely the extent to which a merger would promote greater ownership, including workers employed at the firms concerned.
The national security veto was necessary because the Government had a constitutional responsibility to protect South Africa. What could the Government do if a firm owned by a hostile government bought SA firms that were strategic, or a firm bought a South African private security firm and had a private army in SA? There were no powers in law to deal with that.
COSATU described how workers would benefit:
- The status of public interest matters, like employment, would be clarified when investigating mergers. Case law, including from the Walmart merger, were now solidified in law. Authorities had to examine public interest matters, like employment.
- Worker ownership was included as a public interest matter in mergers.
- If merged firms did not abide by employment and other conditions, a merger could now be undone, as it was written into legislation now.
- Unions now had a right to be part of market enquiries.
- There was guaranteed ministerial intervention in mergers to represent public policy matters, such as employment.
Mr Tleane asked whether they had hopes that the Bill would benefit the people the way it was intended.
Mr Ehrenreich responded that as a trade union organisation, they believed it would fulfil the promises made to the people in 1994, in line with radical economic transformation.
The Chairperson commented that there was a norm that where beautiful legislation was made, but the implementation became wanting, the goals of the legislation were not met.
Mr Ehrenreich said that in the last 24 years, the country had been over-compensating for the fears of the rich white minority, while neglecting the wishes of the black majority. The leadership of former President Jacob Zuma had disappointed COSATU, and they now hoped for a new dawn in the country.
Mr David Andrew, Vodacom representative, said that Vodacom was a member of BUSA and concurred with the views presented by BUSA.
The Chairperson asked why Vodacom would want to put themselves in a position of obtaining a loss, just so it would not be penalised by the 25-30% penalty proposed in the Bill.
Mr Andrew’s response was that being perceived as “non-compliant” was a worse fate for a dominant firm such as Vodacom.
Mr Tleane commented that business by its nature was a risk, and therefore there was no perfect law. He wondered why Vodacom wanted to exaggerate the matter of uncertainty, as if SA was the only country in the world that had uncertainty.
Mr Andrew said Vodacom was a Level 3 high-level contributor, and this Bill would greatly penalise Vodacom, but it had done much better than other telcos. The metrics for penalising were also subjective, and not very clearly spelt out.
Ms Mfulo asked how price increases being passed down to consumers supported small businesses. She asked why Vodacom Egypt charged US$0.84 cents for 500 MB (Mega Bytes) of data, yet in SA, they charged over US$7 for the same.
Mr Andrew promised that a price comparison for different markets would be included in the Member’s document packs. The report also showed how SA performed in terms of 2G, 3G, and 4G network coverage. He added that data prices were falling, and now the price per MB was US$0.03 cents.
Mr Cardo asked why the Constitutional Court guidelines were of particular interest to Vodacom, and about its association with the Independent Communications Authority of South Africa (ICASA).
Mr Andrew said a Constitutional Court judge had decided against ICASA because of its decision to not undertake a competition inquiry, and had instead relied on the Competition Commission.
Mr James Hodge, Director and Managing Partner: Competition and Regulatory Economics, Genesis Analytics, said they supported the Act but were not convinced that the goals espoused were completely achievable.
They particularly supported the provisions of the legislation that dealt with:
- Price discrimination or excessive pricing by dominant firms, which would make it easier for small and medium-sized businesses to compete.
- Abuse of dominance by large firms that impeded the ability of small and medium-sized businesses to operate.
- Situations where power rested with large buyers, who could dictate prices to small suppliers, as it would prohibit such buyers from requiring small suppliers to sell its products at prices which stopped them from being sustainable.
- Strengthening of market inquiries to deal with economic concentration, which saw large firms dominate in the economy.
- The national security veto on mergers, as it may be necessary for Government to intervene in mergers with national security implications; and
- Authorities' ability to exempt collaboration between small and medium-sized businesses, which would enable industrial expansion, transformation and development.
Small and medium businesses were an important part of the South African economy. Strengthening the Competition Act, as envisaged by the Bill, would help grow these businesses and help transform the economy.
He gave the example of a small firm, which was paid in 90 days by a retailer like Pick n Pay, while a large firm was paid in only 30 days. This was part of the unfair business practices perpetrated by big businesses against small businesses.
Mr M Cele (ANC) asked if the competition provisions in the Bill were appropriate, compared to other jurisdictions like the United Kingdom (UK).
Mr Hodge answered that market inquiry was designed to enhance competition in the market, and one had to trust the implementing institutions to regulate competition fairly. It was more a matter of practice and how it was implemented, but the provisions were sufficient.
Mr Atkinson asked if he had any recommendations on how the Bill could be enhanced to improve the state of small businesses.
Mr Hodge replied that he suggested the Committee and Commission should look at codes of practice, with clearly defined rules, to make an impact immediately and substantially.
Mr Cardo asked his opinion on whether there was a danger in using a narrow instrument like competition legislation to achieve a broader economic agenda.
Mr Hodge said that good mergers were meant to result in improvements and gains because of complementarity and skills sharing. Bad mergers would lead to retrenchment and unfair competition practices. The Competition Commission and the regulator (ICASA) could be pursuing different objectives, and therefore the legislation must define these objectives.
African Centre for Biodiversity (ACB)
Mr Stephen Greenberg, Research Co-ordinator, African Centre for Biodiversity (ACB), said they supported the amendments and the expansion of market inquiries. It was an opportunity to look at the structure of the economy in an effort to promote decentralisation.
Two foreign multinational firms controlled the entire SA agriculture produce --Bayer Monsanto and Pioneer (owned by DuPont). This fact signified that there was a problem with the competition framework. These two entities were completely dominant because of their mergers, which were all in the same year, which suggested some coordination. They also practiced “patent pooling,” among other practices.
90% of all commercial maize in SA was genetically modified organism (GMO) maize, where Bayer Monsanto was dominant. There was therefore a need to cap the size of these two corporations, as part of an active decentralisation process. These two companies were presently considered “too big to fail”.
Food security was also a national security matter.
The definition of historically disadvantaged people should also include women, particularly, black women.
The World Trade Organisation (WTO) specified that every member country must import a certain quantity of certain foods and crops, even though the country did not need the crop. This negatively affected the local producers.
The Chairperson complimented Mr Greenberg’s passion for what he was talking about, and noted that because of its clarity, there were no questions from the Members.
Chairperson’s final comments
The Chairperson said that all inputs would be collated and considered and, together with the legal teams, it was hoped that a draft would be ready before the end of October.
She thanked all the stakeholders for their participation and commitment to making “our democracy work for us”.
She announced that that marked the end of the public hearings stage for the Bill, and that Members would be informed of the following week’s programme by the next day.
The meeting was adjourned.
- SECTION27 submission
- BUSA submission
- Genesis Analytics submission
- Helen Suzman Foundation submission
- Vodacom sibmission
- MTN submission
- NEHAWU submission
- COSATU submission
- COSATU presentation
- Jim Foot submission 1
- Jim Foot submission 2
- Centre for Competition, Regulation and Economic Development University of Johannesburg submission
- Centre for Competition Law and Economics presentation
- Centre for Competition Law and Economics submission
- Centre for Competition Law and Economics letter
- National Council of Trade Unions submission
- SACTWU submission