COMPETITION COMMISSION RELEASES BUYER POWER AND PRICE DISCRIMINATION GUIDELINES

On 18 May 2020, the Competition Commission (“the Commission”) issued Buyer Power and Price Discrimination Guidelines which aim to bring fairness to emerging entrepreneurs and small businesses.

The objective of the buyer power provisions is to strengthen the participation of small and medium enterprises (“SMEs”) and historically disadvantaged persons (“HDPs”) in the economy. The new buyer power and price discrimination provisions are derived from sections 8(4) and 9 of the Amendments to the Competition Act (“the Act”) respectively, and they prohibit dominant buyers in designated sectors from imposing unfair prices or trading conditions on SMEs or HDP firms.

The new section 8(4) of the Act came into operation on 6 January 2020 and the corresponding Regulations were gazetted on 13 February 2020. The Regulations set out the sectors to which the new buyer power provisions apply, namely agro-processing, grocery wholesale and retail, e-commerce and online services.

The Buyer Power Guidelines seek to provide guidance by outlining how the Commission intends to interpret the new buyer power provisions for enforcement purposes, and furthermore, how it will seek to screen and assess complaints laid in terms of the new provisions.

The Buyer Power Guidelines may evolve as the Commission gains experience in investigating and litigating complaints, and in light of decisions of the Competition Tribunal, the Competition Appeal Court and the Constitutional Court in the enforcement of the provisions.

In addition to the Buyer Power Guidelines, the Commission has also issued guide summaries on the unfair trading conditions in the designated sectors, the types of pricing imposed on suppliers that are likely to be considered as unfair, and answers to a number of “Frequently Asked Questions” that relate to the application of section 8(4) that will assist with compliance.

Section 59(1)(a) of the Act stipulates that a contravention of section 8(4) carries with it an administrative penalty for a first-time offence. In terms of section 59(2), this penalty may be up to 10% of turnover for a first-time offence or, as per section 59(2A), up to 25% of turnover for a repeat offence. Section 59(3A) also provides for the administrative penalty to include the turnover of any controlling firm(s) where such controlling firm(s) knew or should reasonably have known that the respondent was engaging in the prohibited conduct.

The Commission’s Commissioner, Tembinkosi Bonakele, stated that “[t]he buyer power provisions present an opportunity for SMEs and HDP firms to effectively participate in the economy without undue hinderances as a result of abuse of market power by dominant buyers. This is an important step towards the realisation of a growing and inclusive economy in South Africa. These Guidelines also come at an important time when the Commission is seeing such participation in the economy under threat from the COVID-19 crisis.”

Should you require additional information on the Buyer Power Guidelines, please contact Anthony Norton on 082 452 7336 or by email on anthony@nortonsinc.com; or Leago Mathabathe on 082 400 6805 or by email on leago@nortonsinc.com.