South Africa: What Makes A Price Excessive?

Last Updated: 28 August 2014
Article by Mark Garden

Most Read Contributor in South Africa, September 2016

Section 8(a) of the Competition Act contains a single sentence, the length of which belies the complexity of the underlying prohibition. It reads simply that "it is prohibited for a dominant firm to charge an excessive price to the detriment of consumers". The legislative intent is equally apparent – a firm whose comparative size in a particular market means that it is less constrained by competition than would ordinarily be the case, is prohibited from abusing this enviable position by charging consumers excessive prices for the goods it sells or the services it provides. It is paradoxical, therefore, that one of the shortest provisions in the Competition Act continues to flummox competition law practitioners, regulators, judges and jurists alike.

The complexities involved in successfully prosecuting an excessive pricing complaint are perhaps best illustrated by that fact that the recent decision against Sasol Chemical Industries (SCI) marks only the third attempt at an excessive pricing complaint since the inception of the Competition Act in 1998. The first attempt, which entailed an excessive pricing complaint lodged by Harmony Gold Mining Company and Durban Roodepoort Deep against ArcelorMittal, was successful before the Competition Tribunal, but overturned by the Competition Appeal Court on appeal and ultimately settled out of court. The second attempt, in which Telkom faced allegations of excessive pricing brought by the Competition Commission, was unsuccessful on the basis of insufficient evidence.

When one considers the case law in relation to excessive pricing in South Africa, the greatest challenge facing any complainant seeking to establish a charge of excessive pricing is the definition of excessive price in the Competition Act. A price is excessive if it bears no reasonable relation to the economic value of a good or service and is higher than that value. In 2009, the Competition Appeal Court formulated the legal parameters for an excessive pricing analysis. First, the actual price of the goods or service must be ascertained. Second, the economic value of the goods or service must be established. Third, it must be determined whether the difference between the actual value and the economic value is reasonable or not. Fourth, if the difference is unreasonable, it must be determined whether the excessive pricing harms consumers.

In the SCI matter, the Tribunal was called upon to adjudicate whether or not SCI charged excessive prices for propylene and for polypropylene in the domestic market, to the detriment of consumers. In so doing, the Tribunal conducted its analysis within the framework of the four part test set out above.

The first part of the test, which required a factual determination of the actual prices for propylene and polypropylene in the domestic market over the impugned period, was discharged with relative ease on the basis of evidence reflecting historical prices charged. Since the Competition Act provides no definition for the term "economic value", nor does it provide guidance as to how one should go about calculating the "economic value" of a good, the Tribunal relied on the evidence of expert witnesses to discharge the second part of the excessive pricing test. The hybrid approach adopted by the Tribunal was to employ a range of price-cost tests; conduct a comparison of domestic prices with prices in other geographic markets; and conduct a comparison of SCI's export prices with domestic prices for each product, to arrive at the economic values of propylene and polypropylene. As regards propylene, the Tribunal held that the price-cost test provided the most reliable method of determining the economic value of purified product sold by SCI in South Africa during the complaint period. A combination of these methods was employed by the Tribunal to ascertain the economic value of polypropylene.

The Tribunal's next challenge was to ascertain whether or not the relationship between the actual values and the economic values were reasonable. Once again, the Competition Act provides no assistance in this regard, hence the leading of evidence from 13 witnesses, including 8 expert economists (both international and local), industry analysts, business analysts and financial experts during the proceedings.

The Tribunal placed tremendous store on the "ultimate objective and the policy and principles underlying the prohibition on excessive pricing in the context of our Act". In so doing, the Tribunal's approach to interpreting the prohibition against excessive pricing in section 8(a) of the Competition Act was to contextualise the impugned conduct within South African economic history. The Tribunal found, in this regard, that SCI "benefitted from significant state support over an extended period of time and its market positions in purified propylene and polypropylene are a consequence of that".

After having regard to the characters of the products concerned; their importance as intermediate inputs in industrial development; historical and prevailing market characteristics; the policy objectives of the Competition Act understood in the context of the South African economy; and the history of SCI and how it achieved its dominant market position, the Tribunal concluded that the propylene and polypropylene prices charged by SCI during the relevant period bore no reasonable relation to the economic values of those products. This resulted in the imposition of a R534 million administrative penalty and behavioural remedies designed to reduce the prices of propylene and polypropylene to local customers.

While various of the more established competition law regimes have either eschewed entirely, or else subsequently dropped, the offence of excessive pricing from their respective canons, the Tribunal's decision has breathed new life into this beleaguered section of our Competition Act. Given that SCI has expressed and intention to prosecute an appeal against the Tribunal's decision to the Competition Appeal Court, however, only time will tell whether or not that decision will ultimately prevail.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Mondaq Advice Centre (MACs)
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.