The Competition Act 89 of 1998 (hereinafter referred to as the Act) prohibits price fixing and collusion between competitors. The aforementioned conduct is commonly referred to as ‘anti-competitive conduct or behavior'. The Act encompasses certain aspects such as public interest and socio-economic upliftment. This is to ensure that customers have options regarding their purchases and to ensure competition exists in the market.
The collusion and price fixing in one sector can lead to many injustices for the average South African consumer. For instance, in 2006, a group of bread producers in South Africa were found guilty of price fixing and collusion. This led to a decline in consumer surplus and resulted in prices increasing above marginal costs.1
Legal Framework
Section 4(1)(b)(i) of the Act prohibits an agreement between, or concerted practice by, firms, or a decision by an association of firms, between parties in a horizontal relationship to directly or indirectly fix the purchase or selling price or trading condition in a market.
Essentially, the Act prohibits any agreement concluded between two or more parties ordinarily considered to be competitors that would be to the detriment of competition within a specific market or trade. However, the Act goes a step further to include that certain agreements can be justified based on an exemption which should be applied for and granted. Section 10 of the Act makes provision for the application of the exemptions and when the Competition Commission may grant such an exemption
Companies found guilty of transgressing the Act by participating in collusion or price fixing may be held liable for a penalty of up to 10% of the company's annual turnover.2 In a recent matter held at the Competition Tribunal, three (3) media company owners agreed to pay penalty fees pursuant to an investigation by the Commission for price fixing. The parties signed a consent order; by doing this, the parties are admitting to a contravention of the Act.3
Furthermore, if parties are found to be participating in a cartel, those found guilty by the Tribunal may face prosecution. However, the Act does make provision for leniency where a party comes forward and assists the Commission in bringing other cartel members to book.
Conclusion
The provisions of the Act affect every business operating in South Africa; it also prescribes serious consequences in instances of contravention. For these reasons, it is important to have a good understanding of the Act.
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Footnotes
1 https://www.iol.co.za/news/south-africa/the-great-bread-scandal-378568
2 The Competition Act 89 of 1998
3 The Competition Act 89 of 1998
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