In an effort to protect consumers and increase consumer satisfaction, the Competition Commission of South Africa will now prioritise filed cases according to importance as part of its strategy to tackle cases that have a significant effect on con-sumers, says deputy commissioner Tembinkosi Bonakele.
He explains that the impact a product has on consumers will be taken into account when prioritising cases, and that the cases involving basic goods and services will be given preference for investigation.
“Price fixing of commodities such as bread is the most serious as these are products that consumers need every day. Many firms form cartels for flour, bread and even maize meal and this has a direct impact on the poor especially. This is the ultimate expression of abuse by market participants,” says Bonakele.
Cases that involve commodities that have significant effects on the wider economy, such as gold, will also be given priority, he adds.
Bonakele says the authority’s main aim is to ensure that consumers are given fair purchase choices and that prices are competitive. He also emphasises that the objectives of competition law are to encourage economic growth and job creation.
He highlights that the aim of the law and the commission is to prevent anticompetitive behaviour and price fixing.
To help reduce the number of cartels and improve competition between South African businesses, the commission has adopted a corporate leniency policy, which allows companies that are associated with cartels to disclose information regarding the cartel to the commission in exchange for immunity.
Bonakele reveals that this policy has already enabled the commission to investigate several cartels.
Meanwhile, the authority is eagerly awaiting the approval of a law that will criminalise cartels involved in price fixing and market allocation. This will allow the commission to conduct market enquiries into cartel behaviour in certain markets.
Further, he states that competition law has had a major effect on the economy, as well as on how business is conducted. He says the after effects of exposed cartels are also investigated and it has been revealed that the prices of products and services dropped once the cartel was exposed.
Meanwhile, Bonakele notes that there has been a significant increase in mergers and acquisitions as the economy started emerging from the effects of the recession. The number of filed cases has also grown, which has increased the commission’s workload, he says.
This workload increase is evident in the commission’s 2010/11 annual report, which reveals that, out of the commission’s target of ten, only two abuse and restrictive practice cases were referred for adjudication.
The reason cited for this deviance was related to the prioritisation framework. According to the report, the focus for that year was finalising cases with a poor prospect of success, so as to free resources to focus on the remaining investigations.
At least 200 mergers were approved and two were prohibited during the 2010/11 financial year. A total of 19 completed cartel investigations were referred for adjudication.
“The commission’s work has direct benefits for consumers and markets. As an institution, it is quite effective. However, there are certain things that could be strengthened in legislation and in its operation. Some consumers are not satisfied businesses are getting away with their crimes. Some of these cases involve sensitive products and I understand where consumer’s frustration comes from,” comments Bonakele.
Meanwhile, Bonakele notes that the behaviour of construction companies reflects an industry culture that operates in a cartelised way. He notes that many of these companies are found guilty of overpricing.
Investigations into the construction sector began in 2009, following allegations of bid rigging (which artificially raises the cost of construction projects) and collusion.
By the end of 2011, the commission had scrutinised 65 bid-rigging cases, which implicated over 70 projects with an estimated value of R29-billion.
Markets for the construction projects included concrete pipes, wire mesh and reinforcing steel bar installations. Investi-gations revealed that subsidiaries of several major construction companies were involved in cartels.
The commission is currently awaiting approval from the Constitutional Court to extend its investigative powers. Bonakele states that this will be a watershed moment for the commission, as it will shape how competition law is enforced in South Africa.
“The commission has approached the Constitutional Court to assess whether it can be granted powers to expand its investigations beyond what the complainant highlighted. It is all about powers and execution and how they are exercised,” he says.
The authority also remains challenged by resource issues and many cases are delayed because of this.
“Another challenge related to resources is protracted litigation, which slows down the investigative and court processes. Cases are often dropped owing to mere technicalities; it is often not about the merit of the case,” adds Bonakele.
However, despite these challenges, Bonakele feels that 2012 will prove to be a successful year for the commission.
“We are going through strategic options to map out plans for the next five years. We are consulting stakeholders to be aware of the priorities for the next five years and we are finalising settlements with major construction companies. This is also a big year with regard to the Massmart-Walmart merger, as a decision will be announced this year. We will also await the ruling on the cases put forward by the commission to the Con-stitutional Court,” concludes Bonakele.