Laws to curb buyer power, collusion and price discrimination one step closer

The department of trade and industry has published draft regulations which aim to tackle the abuse of dominance, collusion and price discrimination.

The publication of the draft regulations for public comment follows the signing of the Competition Amendment Act by President Cyril Ramaphosa in February and the subsequent promulgation of certain sections of the amendment act in July by trade and industry minister Ebrahim Patel.

The department of trade and industry said the provisions dealing with buyer power and price discrimination are important amendments to the competition laws, and have been proposed to provide small businesses with protection against abusive practices by either dominant suppliers (in the case of price discrimination) or customers (in the case of buyer power).

During his budget vote speech in July, Patel said that the provisions will “provide small businesses with remedies against price discrimination by dominant firms; or when dominant buyers abuse their power by imposing unfair prices and other trading conditions”.

The Competition Commission is expected to publish their draft guidelines on buyer power and price discrimination in terms of the Competition Act next week. The guidelines will complement the regulations by providing guidance on how the commission will investigate potential cases.

According to Daryl Dingley, partner at law firm Webber Wentzel, the contentious amendments to the Competition Act pertaining to buyer power and price discrimination have been a cause of concern for many companies.

“A clear set of final regulations and hopefully soon-to-be published guidelines will be essential to assess risk and guide compliance protocols,” Dingley said.

He explained that the draft regulations remove onerous benchmarks and incorporate parameters which seek to narrow the categories of prospective complainants against dominant firms.

Small and medium businesses must meet certain thresholds based on total full-time equivalent paid employees and total turnover. Firms controlled by historically disadvantaged persons must either buy less than 20% of goods or services supplied by a dominant seller or supply 20% or less of the purchases of a dominant buyer.

In assessing risk, companies will have to assess their own market position and determine whether suppliers or customers fall within these categories, said Dingley.

“It is also important to note that the Buyer Power Regulations 2019 only apply to three sectors — agro-processing, grocery retail and online intermediation services. The 2019 regulations are however, not without complications: for instance, it may have been more appropriate to designate sectors in separate gazetted notices.”

Furthermore, Dingley said, although the 20% threshold is welcome, it may possibly extend to relatively large buyers or suppliers, for example a purchaser that buys 20% of one-billion widgets.

“It will also be important to understand how dominance or  market power will be determined in purchasing markets, particularly in the context of small companies with beneficial arrangements in place with dominant firms.”

phakathib@businesslive.co.za