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Review 7 Years On

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Decision Comment

Purposes & Aims of the Competition Act – who it is meant to protect & what it intended to achieve:

To be dogmatic can be a serious mistake.  It can lead one down a wrong and dangerous path.  We ask that the reader merely consider with an open mind the difficult questions posed by the Act.  Read on and make up your own mind.  These comments are a summation of our views, and remember from whence we come.  (See part 1)

In the writer’s opinion, exquisitely crafted, there can be no better source than the Act to answer as to who should be protected and why protection is necessary.  Let the reader judge for himself as to the content and intent of the Act.  No further comment is necessary, other than to note that the Act was passed unanimously in Parliament.  Beginning with the Act, we then provide extracts from the parliamentary record so that we should not be accused of bias in our interpretations.

Let us briefly examine the preamble of the Act and see if we get any guidance in this regard.  The preamble tells us that duly elected, parliament recognised the following:

1)  That apartheid and other discriminatory laws and practices of the past resulted in:

1.1)  excessive concentrations of ownership and control within the national economy

1.2)  inadequate restraints against anti-competitive trade practices, and

1.3)  unjust restrictions on full and free participation in the economy by all South Africans.

2)  That the economy must be open to greater ownership by a greater number of South Africans.

3)  That credible competition law, and effective structures to administer that law, are necessary for an efficient functioning economy.

4)      That an efficient, competitive economic environment, balancing the interests of workers, owners and consumers and focussed on development, will benefit all South Africans. 

This then is the point of departure taken universally by the leaders of this nation.  The historical perspective clearly recognises both the distortions present in our markets and the historical legacy of those distortions.  Also recognised are the imperfections of the old Act and that the old regime did not properly protect the interests of competition in its greater sense, and the interests of all South Africans.  Finally, it tells us that ownership of commerce must be broadened in scope. 

The preamble then continues, telling us why these matters are important.  The Act seeks to:

1)  provide all South Africans equal opportunity to participate fairly in the national economy;

2)  achieve a more effective and efficient economy in South Africa;

3)  provide for markets in which consumers have access to, and can freely select, the quality and variety of goods and services they desire;

4)  create greater capability and an environment for South Africans to compete effectively in international markets;

5)  restrain particular trade practices which undermine a competitive economy;

6)  regulate the transfer of economic ownership in keeping with the public interest;

7)  establish independent institutions to monitor economic competition;   and

8)  give effect to the international law obligations of the Republic.

Clearly the Act sets out to achieve many things, none of which are in the least bit contentious.  Each aim of the Act is intended to promote things that make sound commercial and political sense.  Two matters stand out, firstly that the Act is intended to protect all South Africans, be it big business, small business or the individual seeking to make a living.  The Act does not discriminate. By implication, the structures intended to enforce the Act should not discriminate in their duties.  Also by implication, we should expect and demand that all matters are treated with an equal sense of urgency and conviction.  This is especially so given the aim to broaden the concentrations of ownership in our economy. 

The second point is that the Act is seen as an instrument intended to exercise commercial change. The Act clearly intends that consumers should have freedom to choose when buying goods or services.  In markets dominated by few suppliers, this is not possible.  The Act by implication criticises and seeks to change the presence of markets dominated by a few players.  It sees such domination as unhealthy for competition and consumer choice. The question is whether the aim of commercial changes is intended to promote the social changes so desperately needed.  Our view is that it is hard to imagine social change without commercial change.  If commerce of the past is to be entrenched then entrenched will be the social evils of poverty and economic disparity.  So what are the purposes of the Competition Act?  In this regard, the purpose of the Act is listed below. 

The purpose of this Act is to promote and maintain competition in the Republic in order –


1.)               to promote the efficiency, adaptability and development of the economy;

2.)               to provide consumers with competitive prices and product choices;

3.)               to promote employment and advance the social and economic welfare of South Africans;

4.)               to expand opportunities for South African participation in world markets and recognise the role of foreign competition in the Republic;

5.)               to ensure that small and medium-sized enterprises have an equitable opportunity to participate in the economy; and

6.)               to promote a greater spread of ownership, in particular to increase the ownership stakes of historically disadvantaged persons.

These then are the purposes of the Act.  They cannot be denied.  Judge for yourself whether economic disparities of capital will contribute to these outcomes.  Ask yourself whether the concentrations of capital so prevalent in our economy seek the greater good.  It seems to us that there is no way around the inevitability of economic change.  For orderly economic change is a prerequisite to orderly social change.  And social change there must be.  At least the last part appears to have become universally recognised in our society. 

To what extent the aims and purposes of the Act will influence the Competition Tribunal in its decisions is still an unknown.  This is one of the key questions posed to the Tribunal in the Nationwide vs. Sasol case, and judgment is anticipated during February 2005.  But know this, that in terms of the Act, each member of the Tribunal must be committed to the purposes and principles set out in the purposes listed above.

It is clear to us at least, that the Act is intended to be a tool in the process of social and economic change in South Africa.  We note in particular, the intent to remove competitive barriers from small, medium and BEE businesses.  We note too the intent to provide a greater spread of ownership in the economy.  These intentions will not be seen as preferred outcomes to some businesses.  Some businesses have already placed competition matters at or near the top of their threat matrix.  To other businesses, the Act is a major opportunity. 

What then did Parliament think of the Bill when it passed through the legislative process?  This is important because evils and mischief that society intends to discourage should be considered when interpreting a new Act.  The parliamentary record tells us of these things.  The following extracts from Hansard offer insight.

The commitment to pass the Bill “was a determination to limit the potentially harmful consequences of large concentrations of economic power – a power that could be potentially harmful to the economy – and our commitment was to ensure that the economy operates to the greater benefit of our people. …  The Bill seeks to encourage competition, not because we wish to adhere to some textbook ideal, but rather because of what it can contribute to realizing some of these important economic and social objectives.  We need to ensure efficiency and adaptability if we are to survive in the global economy.  Consumers must have access to a wide range of high-quality products and services at the lowest possible prices. 

It is essential that that we see the development of a vibrant small, medium and micro enterprise sector.  There is a need for a diversification of ownership in favour of historically disadvantaged communities.  These are the potential outcomes of high levels of competition, and these are the objectives enshrined in the Bill.  …

…  the Bill prohibits outright the most serious anticompetitive conduct, such as price fixing by agreement between competing firms;  or the practice, all too common in South Africa, whereby competitors in pursuit of the quiet life divide up markets between themselves’ or finally, the imposition by suppliers of minimum retail prices on their retail customers. 

The stated objective … is the promotion of competition for all South Africans and not exclusively for a minority.  It will promote efficiency and competitive prices.  It will promote employment, ease of access for SMME’s and a greater spread of ownership. 

It (the Act) will deal with employment, it will have an impact on social and economic welfare, on our participation in world markets, on the state and condition of medium and small enterprises, on the question of the spread of economic power, and, in particular, the ownership of members of historically disadvantaged communities.  It is a wide ranging measure that we would say is one of the most important pieces of economic legislation that has come before this house in many years.

Some while ago, an acquaintance approached the writer during a flight back from one of the Tribunal hearings in Pretoria.  As management of a substantial foreign owned firm, he had just spent a few days participating in a competitions conference arranged by the foreign firm.  The crux of the message was that the parent company did not under any circumstances want to be criticized for having contravened the competitions law by virtue of doing business in South Africa.  We applaud this correctness.  The friend then said that his company would have to re-look at their entire way of doing business, and in particular the pricing policies.  These policies had been in place for as long as anyone could remember.  Management of the South African subsidiary had, until the conference, not been aware of the contents of the Act.  Changes, it appears, were needed in order to comply with the interpretation placed upon the law by the consultants they employed.  At least one large corporate has been awakened to the requirements of the Act.

It remains of course to see what their customers and business partners think of any changes that may be implemented.  No doubt, someone will be unhappy.  But then others will probably be rather pleased with the changes anticipated.  I guess it all depends on whether unfair competitive practices have been supporting or hindering a business, and whether things will change for the better or not. 

The next comment deals with the processes of competitive challenge.  What happens and what can be expected. 



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Disclaimer: This site does not profess to offer legal assistance or interpretation.  It’s content reflects the view and experience gained by of the author during a hearing at the Competitions Tribunal of South Africa.  It may help you to figure out what happens & why.