South African authorities take key step towards enforcement of novel price discrimination and buyer power provisions

The South African competition authorities this month took an important step towards enforcing novel price discrimination and buyer power provisions contained in the Competition Amendment Act No.18 of 2018 (Amendment Act), with the publication of draft Regulations (here) and Guidelines (here and here) by the Minister of Trade and Industry (Minister) and the Competition Commission (Commission) respectively.

Background

In February this year, the Competition Amendment Act, No. 18 of 2018 (Amendment Act) was signed into law, bringing with it a bold package of amendments to South Africa's competition laws directed principally at reducing the high levels of inequality and concentration in the economy and promoting inclusive growth.

Although an initial set of the Amendment Act's provisions was implemented with effect from 12 July 2019, the remainder are yet to be operationalised.  Among these are the new price discrimination and buyer power provisions, which specifically prohibit discrimination and abuses of buyer power as against small and medium enterprises and firms controlled or owned by historically disadvantaged persons.

The draft Regulations and Guidelines published in the past two weeks provide some helpful insights into the application and intended enforcement approach of the authorities to the provisions, once effective.

Use of guidelines to increase legal certainty

The Guidelines reflect some encouraging developments in the Commission's intended use of guidelines more generally to create greater legal certainty and better facilitate compliance.  For example, the Commission has for the first time indicated 'safe harbours' for acceptable price differentials that will not be investigated.  The Guidelines also expressly make reference to the approaches in the United States, United Kingdom and European Union, for example in relation to defining purchasing markets and the fairness of trading conditions.

Dispute resolution for price discrimination complaints

The Commission has indicated that, in respect of price discrimination, it will engage in dispute resolution between complainants and respondents at the screening stage in an attempt to resolve complaints without the need for litigation.  The Commission will then prioritise for investigation and prosecution those firms that are facing multiple complainants and which appear to have clear discriminatory policies in place.

Buyer power sector focus

For the buyer power provisions, an additional important element is that these will only apply to sectors designated by the Minister.  The Regulations currently designate the agro-processing, grocery wholesale and retail, and online intermediation services sectors.  These sectors are largely consistent with the Commission's priority enforcement areas to date, but also reflect the South African authorities' efforts to engage with the challenges associated with emerging digital markets.

Next steps

While the details of the Regulations and Guidelines are still the subject of public comment and will likely be further debated and refined, the current draft documents provide an indication of the South African authorities' intent to operationalise these provisions in a manner that is effective and which achieves the desired policy outcomes, while also promoting legal certainty and facilitating compliance by potentially affected firms.

Comments on the Regulations and Guidelines are to be submitted by 7 and 15 November 2019 respectively.  The expectation is for these to be finalised in order that the governing provisions can be brought into effect by the end of this year.

Contacts