Competition policy and challenges that lie ahead

THIS YEAR MARKS South Africa chairing BRICS, and for the past eight years BRICS competition authorities have taken active and practical steps to enhance co-operation in competition regulation.

The markets have increasingly become more complex and less constrained by borders. Thus, there’s glaring recognition that the challenges that lie ahead require joint concerted effort.

It is, therefore, imperative that these relationships are further cemented and continue in earnest.

The advent of democracy in 1994 ushered in a new regulation era in South Africa, and the government gave high priority to redressing the economic imbalances which corresponded with the racial divisions in the country.

Strong competition policy became and still remains an important industrial policy tool in attaining this. We all know that prior to 1994, in the era of apartheid, the entire economy was designed to exclude black South Africans from meaningful economic participation.

During this time, the government suppressed market competition and promoted anticompetitive behaviour through state-sanctioned monopolies and cartels.

Notwithstanding these post 1994 changes, South Africa’s market structures have remained largely unchanged, with high levels of concentration and very little economic transformation.

Previously state-owned entities still remain dominant in markets with very little meaningful and pervasive market entry by small to medium-sized firms.

For South Africa, this demands competition law and policy that is geared towards addressing these developmental concerns, which challenge the orthodox approach to market regulation. This will require looking at competition regulation and market conduct in new ways.

In keeping with the maturation of South Africa as a new democracy, between the years of 1999 to 2004 the competition authorities spent these formative years building institutional capacity for enforcement.

Competition authorities have since 1999 levied administrative penalties of about R7 billion, with the greater part of the penalties levied in the period 2008 to 2017. Remedies, including divestitures, have also been imposed to address market concentration and public interest concerns.

The economic challenges that face South Africa today require a strong policy response to the issue of economic concentration and inequality.

From a competition regulatory perspective, we are seeing a rise in cross-border cartels, including those in automotive components and foreign currency trading.

We have also prioritised investigations relating to the high cost of pharmaceuticals, building on the collaborative work in the BRICS working group.

The commission will continue its investigations in these markets and challenge the role of intellectual property rights to the extent that these rights lead to detriment in society.

The commission has previously intervened in these types of markets in relation to antiretroviral drugs (ARVs) and achieved significant outcomes which led South Africa being the world leader in the ARV roll-out programmes.

From a merger control perspective, we are also seeing a rise in cross-border merger transactions, recently in agricultural markets, including Dow/Du Pont, Bayer/ Monsanto, ChemChina/Syngenta as well as in beer, with ABInBev acquiring SABMiller. This will require that as a regulator, we actively apply our minds to new approaches to competition regulation and enforcement, recognising specific needs and demands of South Africa, the African region and its global position.

This will require innovative competition regulation and enforcement, which addresses developmental economic priorities. South Africa recognises that innovation and the pursuit of a knowledge economy will allow us to better exploit our comparative and competitive advantages.

Technology and innovation also have important roles to play in the lives of ordinary South Africans, and competition regulation must work towards ensuring that markets work for the betterment of society.

The commission is, therefore, cognisant of the role that tech giants such as Facebook, Apple, Amazon, Microsoft, Google and Netflix are playing on the global agenda.

South Africa is a country with a population of just under 57 million people, with approximately 22 million people with access to the internet, a figure that is growing annually.

Access to such technologies has meant that disruptors such as Uber, Taxify and Netflix have been able to make inroads within South Africa, increasing consumer choice and somewhat lowering the cost of transportation and broadcasting.

On the other side of the coin, however, the role of technology and the use of big data has come under severe criticism, especially in the wake of Facebook and data leaks and the growth of fake news.

From a competition perspective, the European Community has recently prosecuted and fined Google €2.4 billion for manipulating search results in order to favour its own offerings over those of rivals and entrenching its dominance of the search engine and online shopping sectors.

This raises regulatory issues of how competition authorities deal with technology in their assessment of markets, as well as considering issues of consumer protection in seeking to regulate such ubiquitous firms. The policy thinking towards big tech giants and dominant firms generally, is changing.

South Africa is also thinking about how to tackle market power and its abuse, this through the introduction of a Competition Amendment Bill, which raises some solutions to dealing with market power and market concentration.

New thinking and new approaches towards competition regulation also requires that regulators share their experiences and continue deep and meaningful co-operation in seeking to regulate for effective competition.

There are five uppermost challenges that competition policy should seek to tackle and address at present:

First – the rise in the use of data and associated connectivity in markets which are at the heart of the fourth industrial revolution.

Second – the continued growth of multinationals through mega-mergers, creating even larger firms that are dominant across different markets, value-chains and countries.

Third – trade agreements that include conditions which entrench the dominance of multinational firms rather than the promotion of competition and development in affected domestic markets.

Fourth – growing wealth inequality, primarily in developing countries. Competition policy should seriously confront questions of the distribution of wealth and resources in markets, access to markets by small and medium sized firms and dismantling barriers to entry, both regulatory and non-regulatory.

Fifth – the pervasive nature of cartels in local and global markets. Cartels are increasingly employing subtle techniques, including algorithms and other market signalling techniques that require an urgent global response.

Competition authorities, globally, should therefore be at the centre of tackling these new challenges to ensure competitive, growing and inclusive markets.