Evolution of Competition Policy

Evolution of Policy in SA – Complete document        [Word Document]

1. The Department of Trade and Industry has been working with experts and stakeholders over the past three years to establish a competition policy framework for South Africa. These policy guidelines represent the current thinking of the Department, and are offered in order to spur public debate about how competition policy can contribute to the restructuring of our economy.

2. The overriding goal is to achieve a more effective economy, which in turn requires us to better define what is meant by the public interest with respect to South Africas corporate structure and firm behaviour. The Department believes that competitiveness and development are mutually-supporting rather than contradictory objectives, if policies are properly aligned.

3. The Competition Policy Guidelines are best seen as supporting both the macro-economic (national economic management) strategy and microeconomic restructuring (promoting more efficient firms and industries). This support requires a consistency across the various fields associated with competition policy, particularly trade and industrial policies, state asset restructuring, and approaches to empowering emerging entrepreneurs.

4. Because of the challenges that follow from our legacy of economic distortions, a uniquely South African approach to competition policy is required. That policy must be grounded in the underlying mandate given to the Department of Trade and Industry through political processes prior to the 1994 election, and through strategies of governance approved since. This set of policy guidelines fuses these different mandates, by assuring the public that on the one hand competitiveness and efficiency are pursued, and on the other that this process will ensure access to many more people previously denied an equal opportunity to participate in the economy.

5. Existing competition law offers neither the power nor the broader contextual approach to succeed in meeting these objectives, so another law is required. For example, current legislation does not address the extent of concentration of ownership nor market share; there are no provisions for vertical or conglomerate relations; there is little leverage to prevent (or even know in advance of) mergers and acquisitions which intensify concentration; and there are only relatively weak prohibitions of anti-competitive activity. There are additional logistical problems that stifle the law and its enforcement.

6. The instruments and institutions that must be established are not particularly complex. With respect to the legislative brief, Government proposes that a new monopolies law be directed at restrictive practices and abuse of dominance, and that it also contain provisions addressed at ownership concentration. Government is obviously cognisant of the link between structure and conduct. For that reason, Governments competition authority will retain the power to institute or to trigger structural remedies, both preemptively (to prevent anti- competitive mergers and acquisitions) and with respect to compelling disinvestment or exit from particular markets.

7. It will be crucial to strengthen the agency mandated in a new Monopolies Act to enforce competition policy and law more rigorously. This will include more autonomy, and should also entail the establishment of a dedicated national inspectorate that deals with monitoring and enforcement.

8. The Competition Policy Guidelines imply that there will be government interventions beyond competition law and enforcement. The following list summarises the steps

Government plans to take so as to ensure policy alignment between goals of competitiveness and development.

Government proposes:

  • a competition policy integrated with our overall national policy objectives and the particular objectives of our industrial and macro-economic policies;
  • a reformed and much strengthened monopolies law directed at anti-competitive conduct under the direction of a competent, professional and powerful administrative authority;
  • a strengthening of divestiture measures; a review of existing securities regulations and institutions with principal oversight of corporate structure;
  • a review of current practices and regulations in the area of corporate governance;
  • a review of the Harmful Business Practices Act which will bear principal responsibility for protecting consumer interests; and
  • a review of the competitive interface between public corporations and the private sector.

9. A way forward is suggested in the Policy Guidelines. Nedlac will host discussions about the competition policy through February 1998 and other consultations will also occur. The drafting of a new Monopolies Act will take comments into consideration, a draft bill will be presented during the first quarter of 1998. Parliamentary approval and implementation are anticipated by the end of 1998.

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