President Cyril Ramaphosa signed the Competition Amendment Act into law earlier this week (13 February 2019).
Nick Altini, partner and head of the Competition and Antitrust Practice at Baker McKenzie, said that the changes arose from an apprehension that economic concentration was too high in a number of South African markets.
Issues affecting healthy competition in the marketplace such as excessive pricing, predatory pricing or other exclusionary conduct by dominant companies and the inability of new entrants to compete against established firms are all addressed by the Competition Act, he said.
Altini added that the act is likely to prove controversial as it place a reverse onus on large companies and the stipulation that it is now a contravention for dominant firms to force small, medium and PDI suppliers in sectors to be designated to supply goods or services, or pay for them, at prices that are ‘unfair’.
“This means it will now be on dominant firms to counter the Competition Commission’s cases of these abuses of dominance against them,” he said.
“This is very different from the way our legal system currently works, which has generally always followed the concept of innocent until proven guilty.
“The protection of small, medium and PDI (previously disadvantaged individuals) business is a shift away from the way competition law has developed until now, which has never been about protecting the welfare of one competitor, but rather ensuring competition was maintained in markets overall.
“The new amendments therefore involve a measure of socio-economic engineering, which is unorthodox when one compares the Amendment Act to competition law regimes in other jurisdictions, but not necessarily an illegitimate aim,” he said.
Altini added that when dominant firms set their own prices, they need to be certain that they can justify them as reasonable and not excessive because of the shift in onus.
Firms will have to ensure they implement pricing policies that are sustainable, deliver fair returns to shareholders but do not tend towards consumer exploitation, he said.
“Many firms have focused their competition law compliance efforts up to now on collusion, and that is and must remain an essential element of compliance, but these efforts should not start and end there.
“One of the clear messages of the Amendment Act is that there are going to be more abuse of dominance investigations, prosecutions and adverse rulings than has been the case up to now,” Altini said.
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