Abstract
In February 2005 the Supreme Court of Appeal of South Africa ruled that in deciding whether firms have contravened section 4(1)(b) of the Competition Act 89 of 1998, as amended, by engaging in, for example, ‘per se’ illegal price fixing, the Competition Tribunal must admit evidence relating to the nature, purpose and effect of the horizontal agreement or practice in question. This article examines the economic and legal rationale, as well as the implications, for allowing an appropriate characterisation of conduct to determine whether such conduct falls within the per se prohibition. Firstly, we comment on the rationale behind the per se rule as a standard for the adjudication of certain types of conduct. We analyse a number of cases in the United States, which, post 1979, revolutionised the approach to the strict per se rule. Secondly, we examine how the per se standard is reflected in the particular structure found in section 4(1) of the Competition Act and evaluate whether it makes for a sufficiently robust application of the per se rule. Thirdly, the content of the Supreme Court decision regarding characterisation is critically examined with a view to assessing whether such characterisation is consistent with the policy objective of achieving maximum deterrence of hard core cartel behaviour like price fixing and market division. Finally, we explore and suggest (in the absence of a Tribunal decision) a possible framework, based on decision theory, for determining a method of characterisation that is consistent with the robust application of the per se standard and is in line with the Supreme Court ruling.
Highlights
It is well understood by economic thinkers and policy makers that agreements between competitors that prevent or restrict competition can do serious harm to the ability of the market mechanism to deliver the benefits of productive enterprise to consumers
The Act is in the early stages of its implementation and the jurisprudence has not yet settled on a definitive approach. This state of affairs is most evident in the recent ruling of the Supreme Court of Appeal (“the SCA”) of South Africa in the matter of the American Natural Soda Ash Corporation (Ansac) versus the Competition Commission (‘the Commission’), the Botswana Soda Ash Company (Botash) and others[1]
The content of the Supreme Court decision regarding characterisation is critically examined with a view to assessing whether such characterisation is consistent with the policy objective of achieving maximum deterrence of hard core cartel behaviour like price fixing and market division
Summary
It is well understood by economic thinkers and policy makers that agreements between competitors that prevent or restrict competition can do serious harm to the ability of the market mechanism to deliver the benefits of productive enterprise to consumers. In enacting laws against cartels these countries have accepted the conventional economic wisdom that, as a general rule, agreements among competitors to fix prices or divide markets are likely to have such a deleterious effect on competition that it is of great importance that laws preventing such conduct be applied effectively and expeditiously. The early stages of its implementation and the jurisprudence has not yet settled on a definitive approach This state of affairs is most evident in the recent ruling of the Supreme Court of Appeal (“the SCA”) of South Africa in the matter of the American Natural Soda Ash Corporation (Ansac) versus the Competition Commission (‘the Commission’), the Botswana Soda Ash Company (Botash) and others[1]. We explore and suggest (in the absence of a Tribunal decision) a possible framework, based on decision theory, for determining a method of characterisation that is consistent with the robust application of the per se standard and is in line with the SCA ruling
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