MARTIN VAN STADEN: It’s time to abolish or overhaul the Competition Commission

The Competition Commission is often praised in SA. However, like the undeserved acclaim afforded to so many other government programmes, this praise is often based on a misunderstanding of how markets function. In fact, the commission is hugely destructive. It should be either drastically reformed to serve the public interest or abolished completely.

When I was at university in 2014 we were taught that the Competition Act and Competition Commission serve a vital role: to ensure the market remains free from dominance by large firms that tend to crowd out smaller ones, since the market must be competitive if it is to serve consumers. This was a nonsensical misrepresentation of SA’s competition law dispensation at the time, but it has become even more out of touch with reality since.

Whatever pretences it may have had in the past about being a neutral guarantor of market fairness, the Competition Commission long ago morphed into yet another enforcer of political market command. It is no surprise that political activists from their university days have often ended up as bureaucrats at this state institution.

This political enforcement is particularly evident in racial engineering. Sakeliga, an independent business community, predicted that the commission would take such a turn back in 2018, with the publication of the Competition Amendment Bill.

Like so many government commissions from the 1960s and 1970s, the Competition Commission applies racial formulas to determine whether some or other economic transaction — like a merger — is lawful. It does not concern itself with the actual state of market competition but with academic, ideological goals set by the governing party, expressed through a narrow take on the public interest.

The commission’s existence could, with some difficulty, conceivably be justified if it stuck to ensuring market contestability rather than applying arbitrary formulas and percentages to determine so-called market dominance or to bring about “transformation”.

These political formulas are meaningless when it comes to serving the public interest. In fact, a firm might legitimately dominate 100% of the market if consumers preferred it that way, though that is highly unlikely to occur in the real world. There would be nothing wrong with such a phenomenon, except if that firm — or more likely, government — guarantees that dominance through coercion, legislation, regulation or licensing.

A far more rational use of the Competition Commission would be for it to ensure contestability through the monitoring of government interference in market processes. When some department or organ of state, such as the SA Post Office, is found to benefit from a nonmarket guarantee the commission could be granted the power to order that entity to desist, or even be dissolved or privatised.

The Post Office is in court trying to re-operationalise its antiquated monopoly on delivering packages weighing 1kg or less. The Competition Commission has not made a peep about this initiative, nor to my knowledge has it applied to be an amicus curiae (expert friend of the court) in the matter to guide the court towards an appropriate outcome. The commission turns a blind eye to the real, deleterious monopolistic and anticompetitive phenomena in the SA economy that are the result of government behaviour.

The premise of the Competition Commission’s existence — and of competition or antitrust law in general — is fundamentally flawed. Ask any South African whether they can think of any private company that is truly a monopoly or is truly somehow “abusing” its “dominance” in the marketplace, and you will struggle to get a solid answer. Yes, there are large companies that dominate certain markets, but that is largely due to consumers preferring their products or services over others. It is not because Coca-Cola is abusing its position or has a monopoly that aspiring soft drink entrepreneurs tend to fail, but because consumers almost universally prefer the products of the Coca-Cola Company over anything else.

This matter gets more complex when costly regulations eventually shape industries in favour of large-scale production. Yet deregulation is not on the commission’s radar. Rather, it busies itself being a highly coercive gatekeeper and controller of private enterprise.

Given the opportunity, the Competition Commission is likely to find fault with Coca-Cola’s “dominance”. If it does so, its market interference will only use the Coca-Cola Company as a proxy for its real war against consumer choice and economic freedom.

The commission recently announced that it will be investigating the increasing prices of basic foodstuffs in SA, citing concern about its effect on the poor. The commission says there is “reason to believe that there may exist market features which impede, distort or restrict competitiveness of the SA fresh produce food market”.

Many South Africans, beleaguered by price inflation and looking desperately for relief, might welcome such a move. The problem is that we already know why prices have been rising so steeply in recent months. Governments around the world imposed anti-Covid lockdowns of varying severity on their domestic — and the international — economies, which disrupted supply chains, kicked millions into unemployment and forced (conservatively) hundreds of thousands of enterprises to close down. That life would get more expensive as a result was eminently foreseeable.

As with practically all other “market inquiries” the Competition Commission undertakes, the real source of the problem does not lie with moustache-twirling top-hat capitalists trying to financially exploit and wipe out their customers, but with some or other government interference in the economy.

The commission would do far better to investigate the effect of lockdowns on the price of food, rather than going down a route that will inevitably conclude with it imposing fines on an already struggling sector of the economy.

Experience tells us the commission will not take the high road, but the easy road. And reform of the commission is unlikely given how feel-good activism has become baked into its DNA. It is probably more useful at this point to militate for its total abolition instead.

• Van Staden is a legal fellow at Sakeliga.