Following the enactment of the Competition Amendment Act during 2019 and the subsequent promulgation of a number of the provisions, the latest tranche of sections of the Competition Amendment Act came into operation on 13 February 2020. The newly operational sections include buyer power provisions, price discrimination provisions, as well as sections relating to confidentiality and the disclosure of information, and the section relating to administrative penalties for the buyer power and price discriminations provisions. The regulations relating to buyer power and price discrimination have also come into operation.
The newly operational provisions amend Section 8(4) of the Competition Act introduce buyer power provisions, stating that a dominant firm in a designated sector may not impose unfair prices or other trading conditions on suppliers that are small and medium businesses ("SME") or firms controlled by historically disadvantaged persons ("HDP"). A dominant firm can't circumvent this by refusing to purchase from a supplier which is an SME or an HDP. If there is a prima facie case against the dominant firm, it must show that the price or other trading condition is not unfair, or that it has not avoided purchasing goods or services from the SME or HDP supplier.
The corresponding Buyer Power regulations designate sectors in which dominant firms are prohibited from requiring or imposing unfair prices or other trading conditions on a supplier. These sectors include the grocery wholesale and retail sector, the agro-processing sector, and the ecommerce and online services sector. The regulations also set out the relevant factors and benchmarks for determining whether prices and other trading conditions imposed are unfair. The regulations apply to SMEs or HDPs that supply 20percent or less of the purchases of the dominant buyer for the relevant goods or services.
Section 9 of the Competition Act relates to price discrimination by a dominant firm as a seller rather than a buyer. In terms of the amendments to this section, it is prohibited for a dominant firm to engage in any price discrimination that substantially prevents or lessens competition, or impedes the ability of SMEs or HDPs to participate effectively. A dominant firm may also not refuse to sell (or now avoid selling) goods or services to an SME or HDP purchaser. It won't be considered price discrimination if the dominant firm is able to show that the difference in price relates to a reasonable allowance for differences in cost associated with manufacturing, distribution, sales, promotions or delivery as a result of the location of the purchaser, method of deliver to the purchaser, or the quantities sold to the purchaser.
The Price Discrimination regulation aims to provide benchmarks for determining which firms constitute SMEs or HDPs for these purposes, and whether or not a dominant firm's action is price discrimination that impedes the participation of SMEs or HDPs. The regulations apply to SMEs or HDPs that purchase 20percent or less of the relevant goods or services of the dominant seller. Factors that will be considered include the duration and timing of the price differential, whether or not the differential price will impede the effective participation of an SME or HDP, and whether or not it will decrease investment by the purchaser.
Section 44 of the Competition Act now allows the Minister of Trade and Industry access to any confidential information submitted to the Competition Commission or the Competition Tribunal. It has also extended the powers of the Commission to allow the Commission to determine whether or not information is confidential, a power that has previously only been held by the Tribunal. The owner of the confidential information may refer any decision relating to confidentiality by the Commission to the Tribunal for final determination. Section 45 of the Competition Act which relates to the disclosure of confidential information has been brought in line with the amendments to Section 44.
Given that the Competition Amendment act abolished the "yellow card" provisions of the Competition Act for certain first time offenders, any violators of the buyer power or price discrimination provisions, even if a first time offender, may face an administrative penalty of up to 10percent of the firm's annual turnover. Furthermore, a repeat offender faces a possible penalty of up to 25percent of its annual turnover.
We have now seen the coming into force of some of the more controversial changes to the Competition Act, and it will be interesting to monitor the Commission over the next few months to see how it proceeds with these amended sections and extended powers.
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