Ebrahim Patel says bill will help smaller firms by taking on predatory pricing

Economic Development Minister Ebrahim Patel has defended the contentious Competition Amendment Bill, saying it will open up the economy and boost small to medium enterprises by tackling predatory pricing, among key other objectives.

Some observers have criticised certain aspects of the bill saying they are likely to create significant uncertainty and potentially put off foreign investors.

According to international law firm Herbert Smith Freehills, one aspect of the proposed law that is of particular concern is that a politically appointed committee will be empowered to prohibit a proposed transaction that involves an acquisition by a foreign acquiring firm, as it relates to certain identified national security interests.

Patel said on Tuesday that the bill was an "effective and appropriate balance" between the interests of social partners and the policy imperatives of government.

"It [the bill] is a new deal for economic transformation and inclusion … it is essentially about opening up space in the economy … it will provide competition authorities with tools to investigate high levels of economic concentration," said Patel.

He said the government would identify sectors where there was concern about high levels of concentration, and whether those sectors excluded small business. A committee to be appointed would then consider evidence and would have the power to put in place remedies.

Patel said the amendments would also tackle predatory pricing — where a dominant firm prices its goods or services at such a low level that other firms struggle to compete and are forced to shut up shop. The bill sets out a clearer economic test of what predatory price is, said Patel.

The bill was presented to Parliament’s portfolio committee on economic development on Tuesday. The bill also seeks to, among others, amend the process by which the Competition Commission may initiate market inquiries; empower the economic development minister to initiate market inquiries; and to promote the administrative efficiency of the Competition Commission and Competition Tribunal.

Jean Meijer, a partner at Herbert Smith Freehills, said it was of great concern that a politically appointed committee would be empowered to prohibit a proposed transaction that involved an acquisition by a foreign acquiring firm and related to certain identified national security interests.

The list of national security interests contemplated (which must ultimately be identified by the President) is extremely broad: the provisions go far beyond traditional public-interest factors that have been the focus of legitimate ministerial intervention to date, said Meijer.

"In SA today, where the fight against corruption is a priority, it is of concern that a politically appointed committee will wield this power over foreign investment. This is particularly so in circumstances where there is no clear guidance as to what standard the committee will have to apply in making its decision to block or impose conditions on foreign investment."