Enforcement, Exemptions and Cartels

ENFORCEMENT, EXEMPTIONS & CARTELS (EEC) DIVISION

The main function of the Enforcement, Exemptions & Cartels (EEC) division is to enforce Chapter 3 of the Competition Act 2 of 2003. The chapter deals with practices that are anticompetitive and therefore prohibited, unless exempted in terms of Sections 27 to 32 of the Act.

Some undertakings may undermine competition by engaging in anticompetitive behaviour in order to increase their profits. An example of restrictive prohibited practice is when more than one undertaking, trading in similar goods/services, coordinates their activities. Such conduct is referred to as cartel activity where competitors fix prices, coordinate production/output or divide markets. Similarly, companies in a vertical relationship, such as wholesalers and distributors, are also not allowed to behave in a manner that will prevent or substantially lessen competition. Coordinated practices include price fixing; dividing markets; collusive tendering/bid rigging, etc.

Although there are many players in the economy, they are not all equal in terms of size. Some are small (SMEs) and others are big companies. Big companies that have a certain market share (over 45%) are said to be dominant in a particular market and can easily force small companies to exit the market as a result of their conduct.

When a company is dominant it is referred to, in terms of competition law, as having market power. This means that a dominant company can behave in any manner it deems fit without having regard for its competitors, suppliers and consumers.

Abuse of dominance classification

• With regard to competitors, a dominant company can price its goods/services below the cost of producing or supplying such goods/services. This is known as predatory pricing. The main aim is to drive competitors out of the market and thereafter increase the price to maximize profits.
• With regard to suppliers, a dominant company can force its suppliers not to deal with its competitors, thereby forcing its competitors out of the market. Secondly, a dominant company may also sell its goods/services at high prices to erode its profit margins. This is known as margin squeeze. A dominant company can also refuse to do business with another company. For example, a dominant supplier can refuse to deal with an SME, although it is economically viable to do so. This is in contravention of the Act.
• With regard to consumers, a dominant company may sell its goods/services at a high price and is referred to as excessive pricing. This reduces consumer welfare.

General information on exemption and complaints

The Competiton Act no.2 of 2003 provides for an undertaking to apply for exemption on certain conducts that may contravene some restricted business practices. Exemption may be sought in respect of professional rules, intellectual property rights and on general restrictive business prohibitions. Once the Commission receives an application it will decide on whether to approve or disapprove.

Anyone can lodge a complaint with the Commission if suspecting or is aware of anti competitive practices in the market. Anyone can also provide information on a confidential basis to the Commission, in accordance with the rules made under the Act.

GUIDELINES FOR ENFORCEMENT, EXEMPTIONS & CARTELS PROVISIONALLY WITHDRAWN

The Guidelines on Enforcement, Exemptions and Cartels have been provisionally withdrawn pending amendments.