1. Amendment to the Competition Act
In February 2020, a number of provisions that were introduced by the Competition Amendment Act No. 18 of 2018 (“Competition Amendment Act”), aimed at amending the Competition Act No. 89 of 1998 (“Competition Act”), came into effect. The relevant provisions deal with price discrimination and abuse of buyer power by dominant firms and have implications for the right of informants to claim confidentiality and on the accessibility of confidential information.
The price discrimination provisions prohibit discrimination by dominant sellers against small and medium-sized businesses and firms owned or controlled by historically disadvantaged persons, when setting prices. The appropriate test is whether the relevant discriminatory conduct impedes the ability of such firms to participate (i.e., sustain themselves) effectively in the relevant market.
The buyer power provisions prohibit dominant buyers, in sectors designated by the Minister of Trade Industry and Competition (“Minister”), from requiring or imposing unfair trading conditions or prices on sellers within the designated sectors.
2. Price Discrimination Regulations
To facilitate the interpretation and application of the above provisions, the Minister has published Price Discrimination Regulations and Buyer Power Regulations.
The Price Discrimination Regulations provide guidance for determining the application of the price discrimination provisions to firms owned or controlled by historically disadvantaged persons; and set out the relevant factors and benchmarks for determining whether a dominant firm’s conduct constitutes discrimination that impedes the participation of small and medium businesses and firms controlled or owned by historically disadvantaged persons (“HDP”).
An important point to note is that the Price Discrimination Regulations apply only to firms controlled or owned by historically disadvantaged persons that purchase less than 20% of the relevant good or service supplied by the dominant seller over the same period as the alleged discrimination.
3. Buyer Power Regulations
The Buyer Power Regulations provide separate factors for prices and trading conditions respectively, which should be considered when seeking to establish whether the price or trading condition is unfair. Beneficiaries of the Buyer Power Regulations are firms operating in the grocery wholesale and retail sector, the agro-processing sector, and the ecommerce and online services sector. An important point to note is that the Buyer Power Regulations protect HDPs that supply 20% or less of the purchases of the dominant buyer for the relevant goods or service.
4. Automotive Aftermarket Guidelines
The Commission has published final Guidelines for Competition in the South African Automotive Aftermarket (“Guidelines”). The Guidelines offer practical guidance to players in the automotive aftermarket industry, urging them to adopt procompetitive measures and to promote greater participation of SMEs and HDPs in the market.
5. School Uniforms
The Commission embarked on an extensive advocacy and awareness drive against anti-competitive behaviour in the procurement of school uniform. It engaged key stakeholders in the basic education sector as part of this process. These included, amongst others, the governing body associations and the Department of Basic Education. The Commission assisted the department in drafting a circular on school uniform guidelines. Subsequently, the guidelines were adopted by various school groups and governing bodies as a set of rules to regulate procurement of school uniform. Many schools immediately started to implement the guidelines and identified items like school ties, blazers, and caps, for example, as part of limited exclusive clothing.
6. Guidelines on collaboration between competitors on localisation initiatives
On 18 March 2022, the Commission Published Guidelines on collaboration between competitors on localisation initiatives. These guidelines are aimed at mapping out initiatives to increase localisation, which refers to the level of local procurement of production or services. These Guidelines set out the circumstances when government, industry, trade unions, or NGOs may lead competitors to collaborate to advance localisation initiatives, and implement commitments related to localisation initiatives. In terms of the guidelines, localisation initiatives are to be led by a Facilitator, and the Firms participating in the localisation initiatives. They may identify opportunities for initiatives, set industry local procurement targets, set individual firm local procurement targets, and undertake demand forecasting. All collaborations under these guidelines must still be in compliance with the Act and may only be done through an appropriate forum, without revealing competitively sensitive information to other market participants (unless disaggregated), while also keeping records of all meetings where these localisation initiatives are discussed.
On 19 May 2021, the Competition Commission (“Commission”) launched the Online Intermediation Platforms Market Inquiry (“Inquiry”). The focus of the Inquiry will be limited to the following four broad online intermediation platforms and market dynamics that specifically affect business users, namely: eCommerce marketplaces, online classified marketplaces, software app stores and intermediated services (such as accommodation, travel, transport and food delivery). The Inquiry is ongoing with a provisional report scheduled for release on 10 June 2022, and the final report scheduled for release on 4 November 2022.
On 25 March 2022, the Commission also launched a market inquiry into the South African fresh produce market. This inquiry will examine whether there are any features in the fresh produce value chain, which lessen, prevent or distort the competitiveness of the market. It will focus on the following themes: (i) efficiency of the value chain; (ii) market dynamics and impact of key inputs for growers; (iii) small and HDP growers and their ability to effectively participate in the market; and (iv) barriers to entry in relation to the regulatory environment affecting the market. The final report is intended to be completed within 18 months of the publication of the final terms of reference.
The Commission has also released provisional findings and recommendations in relation to the following market inquiries that were initiated prior to January 2019:
a) Health Market inquiry: Final Findings and Recommendations Report released in September 2019;
b) Data Services Market Inquiry: Final Findings and Recommendations Report released on 2 December 2019;
c) Grocery Retail Market Inquiry: Final Findings and Recommendations Report released on 25 November 2019; and
d) Land Based Public Passenger Transport Market Inquiry: Provisional Findings on Metered Taxis and E-hailing Services released on 19 February 2020 and the Land Based Public Passenger Transport Market Inquiry Final Report released on 7 April 2021. There were two reports released, the first of which focused on the traditional markets (i.e., minibus, bus and rail), whilst the second report focused on e-hailing and metered taxi services.
1. Sectors in relation to which the Commission has expressed concern
The Commission has expressed concern about the healthcare, data and retail sectors in its provisional findings in respect of the market inquiries referred to in the above response. In particular, the Commission found that there are features, or a combination of features, of the above sectors that may prevent, distort or restrict competition within the sectors. Since January 2019, the Commission has undertaken extensive work to address the concerns noted in the data market and the retail market.
2. Data Services Sector
In relation to the data services sector, the Commission has engaged with South African telecommunications companies in an effort to reduce the cost of data bundles. This has culminated in the Commission concluding settlements with various telecommunication companies, in terms of which, the companies have undertaken to:
a) reduce the cost of their respective data offerings;
b) make additional commitments to offer lifeline packages, zero-rated access to certain educational websites and websites of public benefit organisations; and
c) provide increased transparency in relation to the pricing of data bundles.
3. Retail Sector
In the retail grocery sector, the Commission has engaged with various large chain supermarkets in an effort to abolish exclusivity clauses in lease agreements between shopping centres and the relevant supermarkets. These efforts are in line with the recommendations made by the Commission in its Grocery Retail Market Inquiry. In these recommendations, the Commission had found that exclusivity clauses contained in various leasing contracts impede competition in the South African grocery retail sector, with no compelling justifications for their continued existence.
4. Forestry Sector
The Commission has also published its final report on an impact study conducted on the forestry sector, which found that the sector is characterised by a few large vertically integrated firms that tend to dominate both upstream log supply and downstream milling and processing operations. The vertical integration is the result of numerous approved mergers and plantation acquisitions that occurred over the past 15 years, which fall below the mandatory merger notification thresholds.
The Commission made several recommendations aimed at ensuring that firms, particularly SMMEs and HDPs, are able to sustainably enter, expand and compete in the forestry sector.
5. COVID-19 Impact Study
The Commission has published its final report on an impact assessment study it conducted on the impact of the COVID-19 block exemptions and the enforcement work done by the Commission during the pandemic (“COVID-19 Report”).
The study found that the COVID-19 block exemptions, granted by the Minister, in respect of three key sectors (namely the healthcare, retail property, and banking sectors) allowed the players in those markets to collaborate and coordinate helped mitigate the negative social and economic effects of the crisis. Such coordinated conduct would have contravened section 4 and/or section 5 of the Competition Act under normal circumstances.
In the healthcare sector, the block exemptions allowed patients to be moved from public to private hospitals to ensure they were provided with care when the capacity of public hospitals became constrained. Furthermore, the sector collaborated to reduce the cost of COVID-19 tests from between ZAR 1,000 (approx. USD 66) and ZAR 1,500 (approx. USD 100) to ZAR 850 (approx. USD 56).
In the retail property and banking sectors, the exemptions were used as forums for negotiation that led to financial relief being provided by landlords and lenders, respectively, to assist tenants (in respect of the former) and debtors (in respect of the latter) who were struggling to meet their financial obligations due to the pandemic.
A survey by Nielsen found that that the Commission’s advocacy and enforcement of the Anti-Price Gouging Regulations had a deterrent effect on price gouging, as retailers and wholesalers of essential products and basic food necessities were made aware of the Anti-Price Gouging Regulations, either through direct advocacy, word-of-mouth about the Commission’s enforcement actions, or consumer activism bolstered by the Commission’s advocacy work. The survey found that the AntiPrice Gouging Regulations were effective in achieving their purpose and deterring price gouging.
6. Essential Food Pricing Monitoring Report
The Commission’s fifth Essential Food Pricing Monitoring Report (“Essential Food Report”), which is released quarterly focused on the tracking the impact of the COVID-19 pandemic and consequent economic crisis on food markets.
The Essential Food Report highlighted a decrease in the number of farmers and an increase in concentration across the value chain as well as concerns about market power across the value chain with farmers, particularly small scale farmers facing low operating margins.
The Essential Food Report show various areas of concern such as wide farm-to retail spread in prices, large price differences between regions for fresh produce, growing margins at the processor and retailer level, as well as a general trend of price inflation from the start of the pandemic for some fresh produce as a result of global supply chain issues and exchange rate effects. It also highlighted that the increased frequency of extreme weather events, both locally and internationally, seemingly to have resulted in high food price inflation over the 18-month period prior to the release of the report.
Yes. The Commission monitors concentration levels in what has become known as “priority sectors” to the Commission. The priority sectors are the:
a) food and agro-processing;
b) healthcare;
c) intermediate industrial inputs;
d) construction and infrastructure;
e) banking and financial services;
f) information and communication technology; and
g) energy.
Dawn raids by the Commission are a moderate to high risk in South Africa. The Commission has used, and continues to use, dawn raids as a tool to gather evidence of anticompetitive conduct by businesses in South Africa. All businesses are potentially at risk of a dawn raid by the Commission, at any time and without notice. The Commission, however, has not conducted any dawn raids since January 2019.
Yes. The Minister issued the following Regulations in response to the COVID-19 pandemic:
1. Consumer and Customer Protection and National Disaster Management Regulations and Directions
These Regulations, published on 19 March 2020, apply to the supply of a list goods and services that have been deemed essential during the COVID-19 pandemic. The Regulations are aimed at promoting concerted conduct to prevent an escalation of the national disaster and to alleviate, contain and minimise the effects of the national disaster. The Government intends to protect consumers and customers from unconscionable, unfair, unreasonable, unjust or improper commercial practices during the national disaster. As of 5 April 2022, these regulations are no longer in force as the COVID-19 national state of disaster has been lifted.
2. Block Exemptions
These Regulations sought to exempt a category of agreements or practices in the various sectors from the application of the Competition Act, in response to the declaration of COVID-19 pandemic as a national disaster. As of 5 April 2022, these block exemptions are no longer in force as the COVID-19 national state of disaster has been lifted.
The following sectors had block exemptions:
a) Healthcare Sector
The block exemptions in this sector are aimed at promoting access to healthcare, preventing exploitation of patients, enabling the sharing of healthcare facilities, management of capacity and reduction of prices.
b) Banking Sector
The block exemptions in this sector sought to enable the banking sector to minimise the negative impact on the ability of customers, including both business and private individuals, to manage their finances during the national disaster, and be in a position to continue normal operations beyond the national disaster. They also aimed to enable the banking sector to manage the banking infrastructure, including the payment infrastructure, ATMs and branches.
c) Retail Property Sector These exemptions sought to enable the retail property sector to minimise the negative impact of COVID-19 on the ability of designated retail tenants, including small independent retailers, to manage their finances during the national disaster and be in a position to continue normal operations beyond the national disaster.
d) Hotel Industry
The purpose of this exemption was to enable the hotel industry to collectively engage with the Department of Health and the Department of Tourism in respect of identifying and providing appropriate facilities for persons placed under quarantine, as determined by the Department of Health.
Yes. The Commission has successfully prosecuted two firms for excessively pricing face masks during the COVID-19 pandemic. The Commission has also concluded a substantial number of settlement agreements with firms that have excessively priced on essential items such as hand sanitiser, facemasks and food items. While the Commission has largely relied on the Consumer and Customer Protection and National Disaster Management Regulations and Directions as the basis for concluding the settlement agreements, the Commission’s two successful prosecutions were on the basis of an infringement of the Competition Act. This was due to the fact that the relevant conduct had occurred before the Consumer and Customer Protection and National Disaster Management Regulations and Directions had come into force.
Yes. Since 17 March 2020, the Commission had investigated 1,199 cases, 61 of which were referred to the Competition Tribunal (“Tribunal”) for adjudication. Where the Tribunal found a contravention of the anti-price gouging regulations, it either imposed an administrative penalty on the firms, ordered them to make donations to the Solidarity Fund (established to provide COVID-19 relief), ordered them to donate essential goods to members of the general public, or a combination of the three.
General confirmations and undertakings in consent agreements include the following:
a) the conduct complained of had already ceased;
b) the firm would refrain from engaging in such conduct in the future;
c) the firm would donate essential goods to the public to the value of the alleged overcharge; and
d) the firm would develop and implement a competition law compliance programme.
The majority of cases investigated by the Commission related to basic food products, face masks, and hand sanitisers. About 54% of these cases were against national retailers, including grocery retailers such as Spar, Checkers and Shoprite, as well as pharmacies such as Dis-Chem and Clicks. More recently, the Commission had been investigating alleged excessive pricing of COVID-19 PCR tests, the prices of which subsequently decreased dramatically, after settlement agreements were entered into between the Commission and a number of key clinical laboratories. The Commission went further, to call upon all laboratories conducting PCR tests to use the settlement agreements as “a guidance”.
The Commission has not yet adopted new regulations applying to firms active in the digital space. However, it has made three notable contributions in respect of digital markets:
1. Publication of the second version of the Competition in the Digital Economy Report, which sets out the approach of the Commission will take in regulating digital markets, and the digital economy, more broadly. The paper examines the competition, regulatory and industrial policy issues at play while advocating a technology neutral approach with regulation aimed at levelling the playing field and reducing regulatory barriers to entry and expansion.
2. Online Intermediation Platforms Market Inquiry. The Inquiry is focused on whether there are any digital platform market features that may impede, restrict or distort competition and/or undermine the purposes of the Competition Act. Please see the response to question 2 above for additional information.
3. Draft Guidelines on Small Merger Notifications, which contain specific guidelines applicable to the assessment of “digital mergers”. The draft guidelinesindicate that the Commission will require notification of small mergers where either the acquiring firm, target firm, or both operate in one or more “digital markets” subject to meeting certain thresholds.
In addition, in February 2022, a Joint Statement was released by the heads of the Commission, Egyptian Competition Authority, Competition Authority of Kenya, Competition Commission of Mauritius, Federal Competition and Consumer Protection Commission of Nigeria noting that the authiorities are committed to expanding and deepening the dialogue on digital markets amongst competition regulators on the continent. Particularly, the competition authorities agreed to collaborate by undertaking to:
- scope the conduct in digital markets that has been the subject of investigation in other jurisdictions on African consumers, businesses and economies with the purpose of fair regulation and enforcement in Africa (where applicable);
- research the barriers to the emergence and expansion of African digital platforms and firms that may contribute to enhanced competition and inclusion in these markets for the benefit of African consumers and economies;
- cooperate in the assessment of global, continental, and regional mergers and acquisitions in digital markets, including harmonising the notification framework, without prejudice to confidentiality commitments;
- share information in accordance with existing laws and applicable protocols; and
4. share knowledge and build capacity to deal with digital markets.
A number of industries or sectors are considered to be concentrated in South Africa by the Commission including:
a) Highly Concentrated industries with a presumptively dominant firm, which include farming inputs (seeds, seed treatments and fertiliser), agro-processing (grain processing for human consumption, fisheries, ostrich meat and leather), sin-industries (alcohol, gambling and cigarettes), healthcare (medical schemes and administration, pathology), communications (mobile, fibre to the home, publishing and broadcasting), upstream steel value chain (iron and ferrochrome mining, steel production) and chemicals (including plastics and ethanol); and
b) Highly Concentrated industries without a presumptively dominant firm, which include many of the same sectors mentioned above such as farming inputs (grain storage, fungicides and insecticides, animal feed), agro-processing (grains processing for animal consumption, bread, poultry, sugar processing), healthcare (hospitals and pharmacies), transport (airlines and commercial vehicles), financial services (all areas of insurance, banks), and petrochemicals (refineries).