Speech by Sisa Njikelana during the debate on the Competition Amendment Bill,
21 August 2008
A case for reinforcing fair competition in our economy
Malungu ePalamente kunye
Nani nonke base Mzantsi
If one would ask an ordinary person in the street about the effect of this legislation definitely one would draw a blank. Whereas if the following question would be posed to the same person i.e. WHAT DO YOU THINK OF A LAW THAT ENSURES FAIR COMPETITION WHICH RESULTS IN FAIR PRICES? Without any doubt the positive answer would be accompanied by a smile as well.
One of the fundamental tenets of capitalism is undue and unfettered domination of the working class for unbridled accumulation of capital. Such malpractice, driven by avarice, further breeds unsavioury anti-competitive activities that are fraudulent, harmful to both the economy and subsequently the ordinary person. Since unfair competitive practice goes beyond artificial price manipulation which, at times, results in market failures, the amendments proposed in the bill will also address excessive entry barriers so as to ensure broadening of access to business opportunities for SMME’s, as well as lack of transparency in order to reinforce public confidence. What is also admirable as well is the intention of the amendments to enable the Competition Commission, in particular, to be pro-active in its initiatives where necessary.Some of the submissions during public hearings exposed that certain sectors were seriously ensuring that the amendments are crafted in such manner that would serve their group interests and unfortunately not public interests.
Good examples are the demand for complete removal of the clause on complex monopolies, subjugation of market inquiry to excessive consultation processes to such an extent that would render an inquiry with little or no value.The recent successes by the Competition Authorities combined with the passion they, together with Dti, demonstrated in addressing anti-competitive behaviour has been so obvious and admirable as well. Therefore the expected additional support for Competition Authorities by especially Dti and National Treasury to ensure requisite resourcing aught to be a logical consequence.
However I hereby make a strong appeal and in fact adding to numerous calls for an enhanced team effort amongst various government institutions such as Dti, Competition Authorities, Justice Department, SAPS, etc. It is only through well coordinated efforts amongst those institutions that overall law enforcement against anti-competitive conduct can be effective.
Whilst there is strong evidence of enhancement of consumer protection in this refinement initiative, a call must be made to every responsible citizen to make the legislation effective by cooperating with the State in its implementation.
The advances by Competition Authorities in pre-empting and undoing mergers that were and may still be posing a threat to fair competition also revealed an inherent inability to disentangle complex monopolies including inherited monopolies. What is interesting is the sharp attack through a number of submissions on the introduction of this concept in South Africa.Whilst, as it is claimed by certain quarters, this concept has been ditched by countries such as United Kingdom and United States, such bears to question the wisdom of solely relying on foreign experiences and models whilst local realities indicate otherwise. Have we not, as South Africa, not trailed the blaze by formulating a comprehensive medicines price control regime which even the WHO acknowledged as ground breaking? What about our Consumer Credit Act which the US, with a subtle lamenting, expressed admiration thereon? As the story goes the lament was that had there been such outstanding law in US, the sub-prime credit crisis could have been avoided. On the same breath South Africa can capably reconceptualise complex monopolies as they factually manifest themselves in South Africa. Any legalistic challenge to the concept of complex monopolies is a veil of the real motive to ensure this concept is not part of the new legislation.
Competition policy, according to the African National Congress (ANC) is located within a range of policy areas meant to pursue a broader programme of economic transformation. That is why the ANC has argued that, “in transforming the structures of production and ownership”1, there is a need to put in place effective, “Anti-monopoly and anti-concentration policy aimed at creating competitive markets. But also such policies should seek to broaden ownership and participation by our people, addressing monopoly pricing and other forms of rent-seeking and anti-competitive behaviour. As an integral part of such policies would be to overcome barriers to entry that inhibit the growth of small enterprises, including strategies to increase competition by promoting the emergence of new players in South Africa”.2
This further indicates that the ANC has been concerned about competition and what might lead to uncompetitive behaviour thus undermining the growth and development of the economy. From as early as the Ready to Govern document the ANC spoke extensively about the need to implement an anti-monopoly policy. In this regard the ANC stated that, “the concentration of economic power in the hands of a few conglomerates has been detrimental to balanced economic development in South Africa. The ANC is not opposed to large firms as such. However, the ANC will introduce anti-monopoly, anti-trust and mergers policies in accordance with international norms and practices, to curb monopolies, continued domination of the economy by a minority within the white minority and promote greater efficiency in the private sector”.3
Whilst investigations into anti-competitive activities hitherto have been reactive in character, such approach left a number of economic sectors untouched in instances where there may have been signs of market failures or competition deficiencies. The introduction of provisions for market inquiry will strengthen the ability of competition authorities to stem such behaviour without causing severe damage or closest to the budding stages. Lest we forget the ideal for best practice in business is, amongst a host of business practices, fair competition – something which is still far from reality under current conditions of capitalism.
- COSATU has warned of creeping concentrations where it claims that large companies are steadfastly acquiring smaller companies who, at times, have unique products and services to buttress their market dominance. This is just another piece of evidence about the level of sophistication that unsavoury behaviour is preparing to indulge into.
- The competition authorities maybe at the apex of creating a competitive business environment, however cognisance of sector regulatory authorities such as NERSA, ICASA, etc, have to seriously be taken on board.
It is through a combinative approach between each authority and Competition Commission that we shall witness a visible improvement in the honest and noble endeavours towards creation of fairly competitive markets.
However one has to seriously caution that whilst the amendment proposes agreements to regulate and guide working relations between Competition Commission and each authorities, this has been and will still be big challenge in practise given the unacceptable turf battles, forum shopping that may bedevil or undermine the effectiveness of such expected partnerships.
- In spite of the successful prosecutions of companies involved in anti-competitive activities recently, what was also revealed by the same activity was the inability to extend penalties to individuals who were central to such unlawful activities.
One of the most sensitive issues about this legislation is serious endeavour to avoid unintended consequences. A feature which I trust Dti and the Competition authorities will closely monitor and handle with care. As the saying goes
“BIG IS NOT NECESSARILY BAD”.
- Amongst the most notable supporters of this bill was the Black Sash who even went further and insisted that companies found guilty of anti-competitive behaviour should be barred from doing business with government. If there is stronger expression of public opinion regarding anti-competitive behaviour I am very keen on it.
It is incumbent on the state to ensure a conducive environment for economic development and growth through, amongst other things, fairly competitive business practices. Any opposite practice does not only have negative effects on the economy, it also has serious harm on socio-economic being of the poor. The state is therefore expected not only to react but be pro-active against malpractices which include anti-competitive behaviour.
- In conclusion allow me to state the obvious – the state should spare no effort to create conducive environment for dynamic business activity and consequently enhanced socio-economic well-being of the citizens. Such efforts include the role of the government providing leadership through creation of a fair competitive business environment.
THE ANC UNEQUIVOCALLY SUPPORTS THIS COMPETITIONS AMENDMENT BILL!
1. African National Congress, 52nd National Conference Resolutions, 2007.
2. African National Congress, 52nd National Conference Resolutions, 2007.
3. African National Congress, Ready to Govern, 1992.