On Wednesday, 31 August 2022, the Minister of Trade, Industry and Competition published for comment draft Block Exemption Regulations for Small, Micro and Medium-Sized Businesses ("SMMEs") after consultation with the Competition Commission (the "Commission"). The public has been given a period of 30 days from this date to make written submissions to the Acting Director-General: Department of Trade, Industry and Competition(the"DTIC").
In response to the economic consequences of the COVID-19 pandemic, the government has developed the Economic Reconstruction and Recovery Plan ("ERRP") which aims to stimulate economic growth and inclusivity for all.
The Commission's study on Measuring Concentration and Participation in the South African Economy: Levels and Trends found that the share of SMMEs of the country's aggregate income is comparatively low and declining.
The purpose of the draft regulations is therefore to exempt a category of agreements or practices for SMMEs from the application of the Competition Act, 1998, to stimulate growth and participation in the economy by SMMEs.
These types of practices are very specifically set out in the regulations and include:
- joint purchasing agreements;
- joint selling prices to business customers;
- collective negotiations with large buyers and suppliers; and
- other specified types of conduct
They also include types of conduct which are absolutely prohibited by the Competition Act. The regulations, however, do not apply to the "fixing of selling prices of goods or services to end consumers".
SMMEs wishing to implement the Regulations are to notify the Commission and the DTIC of the agreement or practice within 30 business days of its implementation. Furthermore, the SMMEs are under an obligation to keep a record of meetings held with regards to any agreements or practices that fall within the ambit of the exemptions.
The regulations will come into effect on date of publication in the Government Gazette and will endure for a period of five years.
This is a very welcome proposal for SMMEs who would historically have had to apply for an exemption to engage in this type of conduct, and should hopefully have the effect of enabling SMMEs to compete more effectively against larger players.
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