Twenty-five years ago, the country’s journey towards a robust competition regime began amidst democratisation and a wave of economic reform. Apartheid-era economic policies had entrenched monopolies and restricted fair competition, stifling economic innovation and growth.
Recognising the need for a more equitable market system, South Africa’s new democratic government established the Competition Act in 1999, which aimed to dismantle monopolistic structures and promote fair competition for the benefit of all South Africans.
Impact
The first of the African competition regulators, the South African Competition Commission (Commission), was established in 1999 and successfully introduced competition advocacy, built capacity and expertise, engaged local stakeholders and international competition bodies, and investigated and prosecuted anti-competitive conduct.
The Competition Tribunal and the Competition Appeal Court (CAC) have shaped the body of jurisprudence in the country’s competition landscape. The Tribunal, established to adjudicate competition cases, has delivered numerous landmark rulings that have defined the application of the Competition Act. Its decisions have addressed a wide array of anti-competitive practices, from mergers and acquisitions to abuse of dominance, and have often set important precedents and clarified the scope of prohibited practices.
The CAC has further refined competition law by reviewing the Tribunal’s decisions. Its judgments provide critical interpretations of the Act and contribute to the evolving understanding of competition law.
Despite its track record over the last quarter century, the competition law framework faces ongoing challenges. The evolving global economy and rapid technological advancements require continual updates and adaptations to the legislation and its application. Issues such as digital market dominance, cross-border competition concerns, and changing business practices demand proactive and responsive approaches to ensure that the law remains relevant and effective.
The Commission, along with many other competition regulators around the world, are also grappling with the issue of where the boundary sits between competition enforcement and public interest. Since the Competition Act amendments in 2019, a core focus has been on addressing a greater scope of public interest imperatives generating much debate on the role, purpose and application of the public interest provisions.
South Africa’s competition regime has played a meaningful role in transforming an economy that was described as rigid, protected, highly monopolised and concentrated, largely due to the legacy of apartheid policies. However, these are not issues that can be resolved overnight and high levels of concentration persist. Transformation remains a key priority.
While challenges remain, the progress achieved over the past quarter-century highlights the importance of robust regulatory frameworks in fostering economic fairness, consumer welfare and safeguarding the public interest. Continued vigilance and adaptability will be essential in maintaining the momentum and ensuring that South Africa’s competition law continues to serve the best interests of its economy and its people.
Cartel Enforcement
Busting the bread cartel in 2006 was a significant milestone for the Commission as it attracted publicity and interest and had an impact on low-income earners.
The Commission continued to generate buzz around cartels when it unearthed the construction cartel linked to the 2010 World Cup stadiums. By introducing the fast-track settlement process, firms were incentivised to make full and truthful disclosures of bid rigging in return for an expedited process and lower penalties.
While the cartel provisions of the Act refer to presumptively anti-competitive conduct, characterisation was introduced in the Anzac case. This recognised that not all collaborations between competitors are anti-competitive, and allowed for an assessment to clarify whether the conduct concerned was aimed at excluding competition.
The Commission’s corporate leniency policy and use of dawn raids have been effective in exposing cartels. The significant penalties that may be imposed on cartel members have also acted as a deterrent, in particular, the introduction of criminal liability for directors and managers under the 2019 amendments. Although there have not yet been any criminal prosecutions, individuals could be exposed to a fine of up to ZAR 500 000 or 10 years’ imprisonment, or both.
Abuse of Dominance
One way of helping to transform the economy was through abuse of dominance provisions. It bears emphasis that it is not the position of dominance that is frowned upon, but whether that position of dominance is abused.
When they were established, the competition authorities could not simply break up monopolies or split dominant firms. They had to work within the ambit of competition legislation, and that remains the same today – the Commission is tasked with assessing the practices and conduct of dominant firms.
A key case decided by the Tribunal in 2005 provided clarity on exclusionary conduct on the part of dominant firms. The South African Airways (SAA) case involved incentive schemes used by the airline in its arrangements with travel agents.
SAA was a dominant player in the domestic travel market and the Tribunal ruled that, on a balance of probability, it was the practical effect of SAA’s incentive scheme that induced travel agents to not deal with the airline’s competitors. On this basis, and having implemented this conduct over time, SAA had engaged in an abusive, exclusionary act.
The Tribunal also noted that it was necessary to show that the exclusionary act had an anti-competitive effect, and this could be demonstrated by direct evidence of either an adverse effect on consumer welfare or evidence that showed that the exclusionary act was substantial or significant in terms of foreclosing the market to SAA’s competitors. Evidence as to both was presented and the Tribunal ultimately found that the Commission was correct, SAA had abused a dominant position.
This was a key case because it involved a state-owned enterprise being held liable for abuse of dominance. It paid what was then the highest penalty for abuse of dominance and had to adjust its conduct and practices.
That test for a finding of an abuse of dominance has remained the same – there must be a showing of significant anti-competitive effect attributable to abusive conduct. A recent and important change introduced under the amendments in 2019, introduces a focus on helping small and medium enterprises (SMEs) and firms owned by historically disadvantaged persons (HDPs). This means that dominant firms must now consider how they deal with these kinds of companies.
Interim Relief
Over the past 25 years, there have been close to 50 interim relief applications brought to the Tribunal, with the majority having been dismissed. Key aspects of section 49C of the Competition Act, being the provision that regulates interim relief applications in SA, have been clarified.
One of the aspects clarified by the Tribunal is that the requirements for interim relief need to be holistically considered. In the case involving eMedia investments and Multichoice, the Competition Appeal Court clarified that interim relief extensions may be granted on more than one occasion, provided that each time the extension did not exceed six months.
Market Inquiries
Amendments to the Competition Act in 2019 expanded the Commission’s powers, making market inquiries a key tool for intervention by the Commission in a broad range of sectors. There have been market inquiries into the online intermediation platform sector and media and digital platforms. Inquiries are also planned into other sectors, such as steel and plastics, and the fresh produce market inquiry is yet to be finalised.
Preparation for these market inquiries is critical, especially in terms of the presentation of detailed economic and other evidence.
The Commission’s recommendations following these inquiries have included requiring spend commitments and altering the way business models work. The Commission has taken the view that it can make binding recommendations, particularly those aimed at supporting HDPs and SMEs.
So far, five companies have challenged the recommendations in the Commission’s online intermediation platform’s market inquiry, either through an appeal to the Competition Tribunal and/ or via challenges to the High Court. These challenges focus on issues of substance and process, but also whether the Commission has the power to make binding recommendations.
Conclusion
The landscape of African competition law and African and global economies now presents a very different context to that which prevailed in 1999, with competition laws in effect across the continent on national, regional and soon, continental levels. In this diverse and changing context, adaptive and innovative solutions are required that give effect to the Commission’s imperatives, including facilitating effective participation by all actors within the economy, while remaining supportive of the competitiveness and functioning of business and the market itself.
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