State rivalry rages over competition law

One of these days, a new administration will be in place and honest debate will start again on the government’s economic policy priorities and how best to pursue them. When it does, all the conflicting positions and interests within the government will — and should — surface. And though new leaders have been promising policy certainty and policy coherence, negotiating it won’t be easy.

A taste of this was on offer last week at a panel discussion on the proposed amendments to the Competition Act. Economic Development Minister Ebrahim Patel has proposed to tackle SA’s high levels of economic concentration. The amendments, which were published for public comment at the beginning of December, aim to tackle concentration using an expanded version of the existing tools of competition law. The competition authorities would be required to take levels of concentration into account explicitly when they evaluate mergers or scrutinise anticompetitive conduct cases.

But the main tool, which is already in the Competition Commission’s toolkit, would be the market inquiry. The commission would be empowered to institute market inquiries into sectors deemed highly concentrated, where there are concerns about whether this affects pricing, output and access to the market, particularly by smaller, black-owned firms. The amendments set tighter rules and timelines for market inquiries — and, crucially, make the findings binding.

All of this is raising some concern among competition lawyers and surely will not go down that well in big business circles, but one might expect it to be relatively uncontroversial within the government.

This is Patel doing his bit for radical (socio) economic transformation. His plan to reduce levels of concentration in a bid to open up the economy to new players and boost economic growth has been backed by new ANC president Cyril Ramaphosa and by the party, whose January 8 statement said “the concentration of ownership of the economy in the hands of a white minority constrains sustainable growth and transformation” and undertook to change the ownership structure of the economy.

The more extreme antiwhite monopoly capital elements would no doubt have preferred the competition amendments to adopt a much tougher approach.

Instead, the measures try to strike a balance between undermining investor confidence and potentially destroying successful firms that have grown big for good economic reasons, while at the same time tackling the need to open up the economy.

On the quiet, Patel and Ramaphosa are trying to promote a way into black economic empowerment that relies more on opening up opportunities for new, entrepreneurial firms than on endlessly transferring shares in existing firms to black owners, often at great cost to the firms but little economic benefit for black South Africans.

Whether the Department of Economic Development’s new amendments would have that effect is a debate in itself, but the Centre for Competition Regulation and Economic Development discussion showed they are already treading on some sensitive toes in rival departments.

The Department of Trade and Industry’s Garth Strachan warned of the risk of what he called “competition fundamentalism” , or worse, “free-market fundamentalism” and suggested the competition folk didn’t always know the difference between collaboration and collusion.

He talked about the need for national industry champions and the necessity for competing companies to collaborate, and collaborate with the government – specifically when the government uses designated procurement to support local production.

Concern about dominant companies have, it seems, put a stop to the department’s efforts to promote large local suppliers in some cases – as well as hindering industry associations that are supposed to develop national standards.

“We need to be very careful to ensure the amendments to the act don’t close the space for industrial policy instruments,” said Strachan.

It was a clear reflection of some of the inevitable tensions between Patel’s Department of Economic Development and Davies’s Department of Trade and industry , but the proposed amendments may tread on other toes too – particularly those of other regulators.

There is already an issue in the telecommunications space, where it’s not clear how the Competition Commission’s market inquiry into data prices will fit in with the Independent Communications Agency of SA’s (Icasa’s) primary role in regulating data prices.

A question that was raised at last week’s discussion was what happens if one of the new market inquiries makes findings that are binding on the telecommunications regulator but possibly conflict with its objectives? Who wins?

Perhaps the most telling question came, however, from

Garth Strachan

Department of Trade and Industry a small business owner from Soweto, who asked the panel how the proposed amendments were supposed to help township businesses.

That, in a way, goes to the heart of the policy coherence problem and the limitations of Patel’s new proposals. Unless measures to tackle concentration are aligned with efforts across the government to make it easier and more attractive for new entrants to do business, they could end up doing nothing for competition or transformation or growth.

The biggest gap in the amendments, as Genesis Analytics’ James Hodge put it, is their inability to deal with regulations elsewhere in the government. At the very least, other departments and regulators should be required to answer the findings of market inquiries, he suggested.

But policy coherence and certainty require much more, and if new political leaders are to deliver on their promise, the big decisions will have to be made about priorities.

A good start might be to streamline the new Ramaphosa cabinet, when it happens, so that there are at least fewer competing empires.

WE NEED TO BE VERY CAREFUL TO ENSURE THE AMENDMENTS TO THE ACT DON’T CLOSE THE SPACE FOR INDUSTRIAL POLICY INSTRUMENTS