Shift in Emphasis

9th June 2017 By: Terence Creamer - Creamer Media Editor

Shift in Emphasis

A significant shift in emphasis from behaviour to structure appears to be at the heart of proposed changes to South Africa’s Competition Act.

Economic Development Minister Ebrahim Patel has established an advisory panel to develop the draft amendments, with a view to bolstering South Africa’s legislative capacity to address “persistently high levels of economic concentration”.

The changes would compel the competition authorities to consider structural impediments to market entry (not only the ownership profile) when assessing mergers or complaints of anti- competitive conduct.

The panel, which is expected to report within weeks, is made up of Advocate Michelle le Roux, of the Johannesburg Bar, Doris Tshepe, a partner in a Johannesburg law firm, Liberty Mncube, the Competition Commission’s chief economist, and Professor Imraan Valodia, dean of the Faculty of Commerce, Law and Management at the University of the Witwatersrand.

Its mandate is to propose legislative remedies for “economically unjustified” concentration, thus broadening the Act’s powers to include the optimisation of the structure of markets. Hitherto, the Act has been concerned primarily with the anticompetitive effects arising from the conduct of market participants.

Patel argues that the amendments could have both social and economic benefits. Economically, the easing of impediments to competition could facilitate new market entrants into certain sectors, thereby enhancing consumer choice and bolstering innovation. Socially, such legislation could open markets to greater participation by historically disadvantaged South Africans.

“Markets plagued by overconcentration and untransformed ownership will be identified [and] investigated and appropriate measures [will be] applied to remedy these market features. These enquiries, and any remedies that result, will target the primary structural impediments to market entry and ownership by black South Africans,” Patel explained in an explanatory note released together with his Budget Vote in May.

The note added that the proposed amendments would further the objectives of competition policy and bolster the remedial tools available to the competition authorities to ensure the Act’s objectives were met. Patel also promised that the amendments would be subjected to public consultation and Parliamentary scrutiny.

Close examination will indeed be critical, given that the Act (with its current narrow focus) has been wonderfully successful in ensuring that competition concerns now help shape corporate decision-making. In theory, broadening its scope could further strengthen that impact. But there is also a risk of that impact being diluted by asking the legislation to do too much.