28 March 2007

Mittal Steel decision is a groundbreaking Competition Tribunal ruling, say Harmony's lawyers

The Competition Tribunal decision on the Mittal Steel excessive pricing case is a ground breaking ruling, according to Cliffe Dekker, the law firm that acted for Harmony Gold and DRD Gold.

On 27 March 2007, the Tribunal found that Mittal had abused its dominant market position and was charging excessive prices for flat steel products, to the detriment of its customers.

Cliffe Dekker has acted for the complainants, Harmony and DRD Gold since they lodged their complaint with the Competition Commission in September 2002.

Nick Altini, a director in the competition department at Cliffe Dekker, said that this is the first excessive pricing complaint to be heard by the Competition Tribunal and sets a precedent. "It is one of relatively few precedents now available internationally," he said.

"Most restrictive practice provisions of the Competition Act deal with abuses between competitors or exclusionary conduct that has the effect of reducing competition. But excessive pricing is different," Altini said.

"Excessive pricing is about what happens when there is no competition at all in a market and no prospect of competition. It is about the exploitation of consumers by super dominant firms whose prices are not disciplined naturally by competitive market forces or artificially by regulation," he said.

Mittal was one of those firms. The Tribunal found that Mittal was not only dominant but also 'super dominant' in a local market that is naturally protected and thus impervious to normal competitive forces from importers.

Altini warned firms of this kind to exercise restraint in their pricing. "Even though their natural instinct would be to maximize profits, they must not do so in a way that exploits their consumers – by charging excessive prices," he said.

The Tribunal mentioned that excessive pricing is a particularly repugnant form of abuse of dominance and can attract an administrative penalty for a first transgression. The penalty could be as high as 10% of Mittal's annual turnover in the local flat steel market. This has yet to be determined at a hearing to be scheduled.

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