Update on Competition Law: Competition Amendment Act. By Bobedi Seleke

On 12 July 2019 certain provisions of the Competition Amendment Act, No 18 of 2018 (the “Amendment Act”) came into effect following a presidential proclamation.  The Amendment Act introduces significant changes which seek to address concentration of ownership and to promote the participation in markets of small and medium businesses (“SMEs”), and firms controlled by historically disadvantaged persons (“HDPs”).  The Minister of Trade and Industry, Mr Ebrahim Patel, has said that the Amendment Act is one of the most important pieces of economic legislation of the 6th Administration and is evidence of Government’s continued commitment to drive economic transformation and inclusion.

Some of the notable changes introduced by the Amendment Act are:

·         the introduction of additional grounds for the competition authorities to consider when assessing a merger, including: the extent of ownership by a party to the merger in another firm or other firms in related markets; the extent to which a party to the merger is related to another firm or other firms in related markets, the impact on SMEs or HDPs and whether a merger promotes a greater spread of ownership within the affected market;

·         a list of relevant factors to be taken into account when determining whether the price charged by a dominant firm is excessive.  The Amendment Act introduces a reverse onus.  If the competition authorities are able to show that that the price charged is prima facie excessive, the onus will shift to the dominant firm to prove that the price is reasonable;

·         the re-introduction of advisory opinions.  The Commission previously provided non-binding advisory opinions, however this service was suspended.  The Amendment Act now forces the Commission to issue non-binding advisory opinions;

·         the maximum administrative penalty payable has increased from 10% to 25% of a firm’s annual turnover if a firm’s anti-competitive conduct is substantially a repetition by the same firm of conduct previously found to be a prohibited practice.  Further, the competition authorities are able to include the turnover of any firm that controls the firm that is found to have engaged in the prohibited practice thereby making the controlling firm jointly and severally liable for the payment of the administrative penalty; and

·         the introduction of additional grounds for the Commission to grant an exemption, such as the promotion of the ability of effective entry into, participation in or expansion within a market by small business, and medium businesses, or firms controlled or owned by historically disadvantaged persons to become competitive.

Interestingly enough, some of the more controversial provisions of the Amendment Act which have not yet come into effect are:

·         an additional ground under which price discrimination may be tested, which requires dominant firms to consider whether price discrimination has the effect of impeding the ability of SMEs and HDPs to participate effectively; and

·         the introduction of a parallel notification and investigation process to be administered by a committee constituted by the President to consider whether a merger involving a foreign acquiring firm has an adverse effect on national security interests.

The Amendment Act places enormous emphasis on protecting SMEs and HDPs.  As a result, dominant firms will have to be extra vigilant in how they do business.  Minister Patel has indicated that the remaining sections of the Amendment Act, will be phased in once additional work has been completed.