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Amendments to Competition Act address “highly concentrated” SA economy


The Competition Amendment Draft Bill primarily seek to address economic concentration, spread of ownership and institutional and procedural processes.

In releasing the Draft Bill on Friday, Economic Development Minister Ebrahim Patel indicated that he expects the proposed legislation to be placed before lawmakers during the first half of 2018.

According to a press release issued by the department, the amendments are focused on addressing the structural issues of economic concentration and the racially-skewed spread of ownership in the economy. The Bill also deals with various institutional and procedural processes aimed at enhancing the efficiency and effectiveness of the competition authorities.

Adjustments have also been included in a bid to improve the Competition Act’s alignment with the Constitution and its own preamble, as well as to streamline the functioning of competition institutions.

Patel argues that the South African economy remains highly concentrated, pointing to the outcomes of a recent Competition Commission study that found there to be 294 dominant firms in defined markets identified in 31 sectors.

In addition, many parts of the economy are still faced with racially-skewed ownership profiles. The exclusion of most historically disadvantaged South Africans from the ability and opportunity to own productive assets must be remedied to unlock the competitive and development benefits of full participation by all in the economy.

“The effect of these structural features of the local market is to stunt economic growth, prevent entry of new players, reduce consumer choice, limit the levels of innovation and dynamism in the economy, and feed a growing resentment among black South Africans of the failure to realise the promises made by the Competition Act. They also diminish the promotion of effective competition. The proposed amendments seek to address these concerns within a framework that can promote faster and more inclusive growth,” Patel said.

The most significant amendments are to:

  1. Enhance the market inquiry process to empower the Commission to consider features of markets, including high levels of concentration and limited economic transformation and take any remedial action that is reasonable and practicable to address such features of a market that prevent, restrict or distort competition;
  2. Expand the consideration of cross-shareholdings, cross-directorships and the phenomenon of creeping concentration in merger control proceedings;
  3. Ensure scrutiny of the impact of mergers on the spread of ownership in the economy as a public interest issue;
  4. Require dominant firms to justify their conduct when they are accused of anti-competitive abusive practices and improve the prospects of prosecuting dominant firms for excessive or predatory pricing;
  5. Enable the Commission to research and report on the impact of merger conditions and behavioural or structural remedies so that all stakeholders are informed about how the competition regime achieves the purposes of the Act; and
  6. Streamline and enhance various procedures governing the work of the competition authorities and the involvement of the Minister in competition matters.

A Background Note to the proposed amendments was published in the Government Gazette on Friday, together with the draft Bill, which explains the proposed amendments in greater detail and enables stakeholders to provide informed comment during the consultation process.

The period for public comment is the next 60 calendar days. Government will also engage with parties in this period and the minister expects to complete the public consultation process by February 2018. All of this input will be considered before a final Bill is approved by Cabinet for presentation submission to Parliament for consideration, debate and adoption.