This page is a comment on the
decision reached by the Competition
Tribunal in 31st
March 2005. It relates
to the
price discrimination case
brought by Nationwide Poles cc against Sasol Oil (Pty) Ltd.
Pending an appeal against the decision, the comments
we make are limited.
The
decision covers the background to the
price
discrimination legislation embodied by our law and the
interpretation
of that
law. Its effect is to shed light on
the
way our competition authorities view the practice of price
discrimination by
dominant suppliers. It sets out the
approach that the authorities intend to take in such matters and
spells
out the
status of small enterprises in the grand scheme of competitive
matters.
The decision deals with
five main points. These are as
follows:
1.
The relevant market
The question of
the relevant market appears to have been
decided based on an analysis of substitutability between products. Since wax additive creosote is
found to be interchangeable with other creosotes in the production
process, product
preference appears not to be reason enough to limit market
definition. It appears the key
product attributes were
important in determining the scope of the relevant market.
2.
Dominance of a supplier in the
relevant
market
Dominance was
shown to be present in the creosote market. This
was shown by two methods. Firstly by
way
of market share data extrapolated from the Sasol and Suprachem
documents.
Secondly and
critically, since Sasol did not take into
account the pricing of CCA, an alleged substitute, or indeed the
price
of other competitor creosotes, when setting its
own prices
for creosote. It was accordingly found that market power and hence
dominance was
present.
It seems that if the price of a substitute is ignored in the
process of
setting
price, then this is an indicator that the relevant market does not
include that
substitute.
3.
Effect of substantially preventing or
lessening
competition
One of the things that is required by the
Act is that
competitive relevance is required. In
the judgment, the Tribunal clearly suggests that competitive
relevance
is the
key requirement of the relevant portion of the Act.
A complainant would not it appears be
required to prove the actual presence of competitive harm to a
market.
The word substantial was found to be present
in the Act in
order to exclude trivial or competitively inconsequential claims. The word likely was found to determine competitive
relevance.
4. The concept of
equivalent
transactions
The Tribunal takes a broad view of
equivalent
transactions. It suggests that
transactions are equivalent of they have the same or similar
economic
effect. Such an approach provides
significant leeway to the Tribunal in future decisions.
Such leeway opens the door to debate and
interpretation, thereby creating uncertainty.
Uncertainty
is not conducive to the SME seeking to know
whether in its
own particular circumstances, it has a case.
Equally,
the Commission will be required to consider most
carefully any
possible prosecution and make an assessment on the degree of
similarity
of
economic consequence.
It also provides for separation of product
based on more
general economic practice. Thus for
example, a timing or long term contract may impact on whether or
not
products
are functionally equivalent.
In the case of long term contracts, the
obligation to
purchase specified volumes regardless of production requirements
may
offer a
benefit to a supplier. This it seems
to
us to be an unduly onerous interpretation of the meaning of
equivalent
transactions. It has the effect of
creating a defence
within the ambit of the main section of the price discrimination
provisions. We would suggest that
this is
not something
that should have a place in our competition law.
If
such a defence is intended by our
legislation, then its proper place is within the ambit of the
exceptions. After all, the defences
available under
section 9(2) are limited and the subject of very specific
circumstances.
5)
Discrimination
by way of price,
discounts provided, services provided.
This is common cause. The
price
lists were found to be adequate evidence for the
presence of
price discrimination.
Updated 25 May 2005
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