Competition

Many countries across the globe (including BRICS countries) now have a competition enforcement regime in place. But why bother? Why is it so important to promote competition? Economics tells us that increased competition can lead to lower prices, increased quantities of goods and services being supplied, greater innovation, improved quality and a wider variety of choice for consumers. It also drives economic efficiency and dynamism, which can stimulate economic growth and job creation, thus contributing to broader policy goals.

So how successful have the South African Competition Authorities been in enforcing the Competition Act and in sending out the correct signal to current and would-be cartelists and abusive firms?

In September 2015, the Competition Tribunal found that Media 24 had contravened the Competition Act by engaging in a predatory strategy in order to eliminate a small competitor in the community newspaper market in Welkom.[1] The Tribunal found that the prices Media 24 had charged prices for advertising for one of its two titles in Welkom were lower than its cost of producing the newspaper over a sustained period. As the newspapers were distributed for free to readers, advertising costs were the only available source of revenue, so Media 24 was operating the paper at a loss. The Tribunal moreover found that Media 24 had done so with the intention of eliminating its competitor, and that following the exit of the competitor it had raised prices in the market in order to recoup the earlier losses. This had harmed customers (both advertisers and readers) by reducing price competition and limiting choice.

Pick n Pay’s new strategy called Brand Match collects weekly prices of their major competitors and drops Pick n Pay’s prices instantly in the event that any competitor has a lower price. This is a power information gathering exercise and signalling tool to competitors which undermines their incentive to drop prices. This change in the competitive dynamic is likely to result in harmful and coordinated outcomes despite no explicit agreement or meeting between competitors.

Recent revelations of collusion in the construction sector in South Africa have led to widespread anger and debate. In June 2013, the Competition Commission of South Africa reached settlement agreements with 15 of at least 21 construction companies implicated in the cartel. Much less has been heard on the matter in recent months, but this apparent quiet might just precede the storm to come.