FAQs: Anti-competitive behaviour

 

What is competition law?

Competition lies at the heart of the South African free market economy. Competition is said to drive innovation, lower prices and improve consumer choice. Protecting competition is therefore a vital part of government policies which aim to improve the lives of all South Africans. Competition law protects these important aspects of the economy, by prohibiting anti-competitive behaviour such as price fixing or abuse of a dominant position. Competition law also provides the legal framework for the investigation of mergers and takeovers, which might ultimately result in a reduction in competition if not properly conducted. Competition law is practised by commercial lawyers.

What is anti-competitive behaviour?

Anti-competitive behaviour, in simple terms, is any business practice which is conducted with the advertent or inadvertent result that competition in a particular market is reduced. For the purposes of South African law, anti-competitive behaviour is defined in the Competition Act 1998 which divides anti-competitive behaviour into three categories:

  • Horizontal anti-competitive behaviour is said to occur between companies in the same market
  • Vertical anti-competitive behaviour occurs between a company and its suppliers or clients
  • Abuse of a dominant position is conducted by large companies within a market

What activities might constitute anti-competitive behaviour?

There are no hard and fast rules defining the exact actions which might be deemed to constitute anti-competitive behaviour by a South African court. If you are unsure about any business practice you are currently engaged in, or are considering commencing, you are best advised to seek independent legal advice from a commercial lawyer. In brief, anti-competitive behaviour typically involves inappropriate collusion, concerted practices or business decisions which are designed to, or have the effect of restricting competition. Classically, this might include agreements to fix prices, to divide a geographical territory between competitors, or to affect the price of a competitor in a closed tender.

What is retail price maintenance?

Retail price maintenance is an example of vertical anti-competitive behaviour. In retail price maintenance, firms at different points along a supply chain agree to fix their prices, resulting in a higher price to the consumer at the end than might have existed if no such agreement was in place. This type of anti-competitive behaviour is outlawed in the first instance that is that there is no defence if this behaviour is found to have taken place. If you suspect an agreement you have may be in violation of competition law, then consult a commercial lawyer at the earliest opportunity.

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