More teeth for competition regulations to protect consumers, small and medium firms

More teeth for competition regulations to protect consumers, small and medium firms

JOHANNESBURG – The government is looking at beefing up competition regulations in a bid to protect consumers and small and medium businesses owned by the historically disadvantaged people in the manufacturing and retail sectors. 

The Department of Trade, Industry and Competition on Monday published its draft regulations dealing with buyer power-band price discrimination for public comment to strengthen the Competition Act. 

The regulations were gazetted by Trade and Industry Minister Ebrahim Patel last week after promulgating certain sections of the Competition Amendment Act in July.

The reconfiguration of competition policy means that consumers would have better protection against excessive prices by dominant firms in a market, with the law setting out clear criteria that the courts can apply to determine if a price is excessive. 

It would also give competition regulators powers to investigate and address high levels of market concentration where these keep SMEs and black-owned enterprises out of the market.

The Competition Commission is expected to publish their draft guidelines on buyer power and price discrimination in terms of section 79 of the Competition Act next week.

The guidelines are expected to complement the regulations by providing guidance on how the commission will investigate potential cases.

In his February State of the Nation Address, President Cyril Ramaphosa said the structure of the economy was designed to keep assets in a few hands and had, to a large extent, confined to the margins many young South African entrepreneurs and small enterprise.

Ramaphosa then signed the Competition Amendment Act of 2018 as part of the government’s efforts to increase investment and to foster greater inclusion and create more opportunities.

“This will give the competition authorities the ability to address this problem, but more importantly it will open up new opportunities for many South Africans to enter various sectors of the economy and compete on an equal footing,” Ramaphosa said. 

For instance, the Competition Commission’s Health Market Inquiry has found that many retail malls limit the opportunity for young new entrepreneurs and small businesses through high rental charges, blocking access to key opportunities. 

The inquiry recently also found that three hospital groups dominated the market and that had the potential to “distort and prevent” competition.

The provisions dealing with buyer power and price discrimination are important amendments to the Competition Act and have been proposed to provide small businesses with protection against abusive practices by either dominant suppliers or customers.

During his Budget Vote speech, Patel said the department intended to promulgate sections of the Act that provide small businesses with remedies against price discrimination by dominant firms by the next month.

Patel added that the provisions would “provide small businesses with remedies when dominant buyers abuse their power by imposing unfair prices and other trading conditions”.

Starting from the next financial year, Patel said the Competition Commission planned to initiate one new market inquiry a year, complete more than 60 cartel investigations in the next five years, and initiate 10 investigations into abuse of market power by dominant firms.