Presentation to

1

• Presentation to
• Parliaments Portfolio Committee on Trade and
  Industry
• by
• Shan Ramburuth, Thulani Kunene and Tembinkosi
  Bonakele
• 28 March 2007

2
Why competition policy?

• Fairness and access
• Prices and Quality
• Innovation
• Consumer Choice

3
Competition Commissions activities

• Prosecution of anti-competitive behaviour
• Merger control
• Advocacy

4
Commissions structure
COMMISSIONER
CORPORATE SERVICES
POLICY RESEARCH
MERGERS ACQUISITIONS
FINANCE
LEGAL SERVICES
ENFORCEMENT EXEMPTIONS
COMPLIANCE
HR
IT
REGISTRY
SECURITY FACILITIES
5
Horizontal restrictive practices
A
C
B

• Agreement between competitors
• Rule of reason prohibition
• - substantial lessening or prevention of
  competition
• - technological, efficiency, pro-competitive
  gains defences
• Per se prohibitions
• - price fixing
• - division of markets
• - collusive tendering

6
Vertical restrictive practices

• Agreement between a firm and its suppliers, its
  customers or both
• Rule of reason prohibition
• - substantial lessening or prevention of
  competition
• - technological, efficiency, pro-competitive
  gains defences
• Per se prohibitions
• - minimum resale price maintenance
• - may recommend a non-binding price

Supplier
Firm
Customer
7
Dominant firms

• Threshold R5 million
• Market shares
• - 45 of market
• - between 35 and 45, unless it can show no
  market power
• - less than 35 with market power
• Market power
• -demand and supply substitutability
• -product and geographic markets
• -small but significant and non-transitory
  increase in price

8
Abuse of Dominance

• Excessive pricing to the detriment of consumers
• Refusal to give access to an essential facility
• Exclusionary conduct
• Requiring or inducing not to deal
• Refusing to supply scarce goods
• Tying
• Predatory pricing
• Buying up scarce supply of intermediate
  goods/resources
• Price discrimination

9
Exemptions

• Maintenance or promotion of exports
• Promotion of SMEs business owned by HDIs to
  become competitive
• Stop decline in an industry
• Economic stability of a designated industry
• Intellectual property rights
• Professional rules

10
Merger control

• Test
• Substantial lessening or preventing of
  competition
• Technological, efficiency and pro-competitive
  justifications
• Public interest grounds
• - Effect on particular industrial sector or
  region
• - Employment
• - SMEs or firms owned by HDIs to become
  competitive
• - Ability to compete in the international market

11
Public Interest

• Consideration is given to the effects of the
  merger on
• A sector or region
• Employment
• Ability of SMEs or HDIs to become competitive
• Ability to compete internationally

12
Case study Bread

• Initiation of complaint by Commissioner and
  complaint from bread distributor
• Against Blue Ribbon, Sasko, Duens and Albany
  bakeries in Western Cape region
• Evidence of price fixing/collusion
• Corporate leniency application
• Referral
• National investigation
• Milling

13
Case study Milk

• Complaint initiated against Clover, Parmalat,
  Ladismith Cheese, Woodlands Dairy, Lancewood,
  Nestle and Milkwood Dairy
• Price fixing of milk
• Manipulation of trading conditions
• Corporate leniency application
• Referral

14
Case study Motor vehicles

• Complaint against Toyota
• Minimum resale price maintenance
• Commissioner initiated complaints against BMW,
  General Motors, Daimler Chrysler, Nissan,
  Volkswagen, Citroen
• Discounting policies
• Smoking gun evidence
• Penalties totaling R51 million in settlement

15
Case Study TAC Ms Hazel Tau

• Complaint against GlaxoSmithKline Boehringer
  Ingelheim
• Excessive pricing, refusing competitor access to
  an essential facility, exclusionary conduct
• Impeded generic manufacturers from entering ARVs
  market
• Settlement agreements
• Agreement to issue patented licences of ARVs to
  generic manufacturers
• Prices of ARVs fell dramatically

16
The banking inquiry

• Concern relating to allegations of high bank
  charges
• National Treasurys research
• Competition Commissions research
• Market transparency
• Voluntary submissions
• Public hearings
• Recommendations on

17
Compliance

• Dedicated division to
• Promote voluntary compliance
• Promote culture of competition
• Through
• Education and Advocacy
• Communication
• Stakeholder Relations

18
Education

• Stakeholders Trade unions, consumer forums,
  SMMEs, business
• Advisory opinions, clarifications
• Corporate compliance programmes
• Workshops and presentations

19
Advocacy

• Government, Regulators, Parliament, organised
  business, professional associations
• Policy, legislation, regulations, administrative
  decisions, professional rules, business practices
  must be consistent with sound competition
  principles
• Examples
• - Pension Funds Adjudicators ruling on switching
  retirement annuity funds
• FAIS ombuds referral Changes to the Short Term
  Insurance Act - untying insurance and bond
• Mobile number portability

20
Communication

• Inform members of the public about what we do
• Create awareness of competition issues
• Every member of society a consumer
• Print and electronic media
• Publications

21
Stakeholder relations

• Addressing concurrent jurisdiction issues
• - Forum Shopping
• MOUs - ICASA, NER, Postal Services Regulator,
  negotiating with the SARB, FSB, NLA, DME
• South African Regulators Forum