11 March 2013

The Competition Amendment Act market enquiries clause to take effect on 1 April

On Friday 8 March it was announced in the Government Gazette that one  provision of the Competition Amendment Act will come into effect on 1 April 2013 – the clause relating to market enquiries. The other provisions will presumably be given commencement dates at  a later point in time.

Nick Altini, Director and National Head of the Competition practice explains that the Competition Amendment Act was enacted in 2009.  The Amendment Act sought to clarify certain matters (such as the concurrency of jurisdiction between the Competition Commission and other regulators in whose regulatory purview competition regulation may fall). It also introduced certain innovations into competition regulation such as the criminalisation of collusive conduct for certain individuals involved in such activities or who knowingly permit them to take place; the concept of a complex monopoly and related conduct that would be deemed to be anticompetitive; and the power of the Competition Commission to conduct a "market enquiry".

Altini notes, “The Amendment Act has caused much anxiety amongst competition practitioners and players in the commercial world alike. However, since is promulgation, the Act has merely been an increasingly feint threat of future difficulty because it was never, until now, given a commencement date and there has been an increasing feeling that it would never come into effect.”

Altini says that whether the most contentious provisions relating to the criminalisation of cartel conduct and complex monopolies do come into effect, and when, remains to be seen, but it is of significant interest that, at last, one provision has been given life – that relating to market enquiries.

“It is common knowledge by now that the Competition Commission (Commission) has long intended to proceed with an inquiry into the working of the private healthcare sector.  This inquiry will, presumably, be similar to the inquiry previously made into the banking sector, which the Commission undertook during the course of 2009. 

“One apparent difference is, however, that the Commission seems to be taking a more focused approach in respect of the proposed inquiry, with the Commission publicly stating that it would only proceed with this inquiry into the private healthcare sector if the Amendment Act came into force.

“This approach by the Commission is based on fact that the Amendment Act provides the Commission with much wider, and more focused, investigatory powers than that which it was able to employ in the banking enquiry where participation by the stakeholders concerned was on a voluntary basis,” he notes. 

Leana Engelbrecht, Associate in the Competition practice, explains further that the Amendment Act expands the Commission's investigatory powers to specifically provide for market inquiries. 

“The Competition Act, 89 of 1998 (the Act) does not, in its current form, provide specifically for market inquiries and the Commission must currently rely on its general functions set out in section 21 of the Act to hold an inquiry into a specific market, but this did not imbue the Commission with very significant powers in that context,” she explains.

Engelbrecht says that now that the market enquiry provision of the Amendment Act will come into force on 1 April 2013, the Commission will be able to conduct market inquiries within formal parameters. 

“Simply put, (i) notice of the market inquiry must be published in the Gazette at least 20 business days before the inquiry starts; (ii) any information deemed to be relevant can be called for and confidential information submitted by a subject of the enquiry may be claimed as confidential within extant procedures provided for in the Act; (iii) the market inquiry may not be conducted by "dawn raid" (in other words, there can be no surprise search and seizure visits by the Commission to extract information and subject of the enquiry must be given notice of what they are asked to provide; (iv) the Commission will be able to summons people to testify before it or to provide documents to it; and (v) the inquiry panel will have powers akin to that of the Competition Tribunal when conducting its "interrogations" in that questioning  will be done under oath, may be done orally and further information than requested may be provided to the panel.”

Altini says that a further difference is the outcome of such an inquiry.

“As the outcome of the banking inquiry showed, the Commission was only able to release a report on its findings and make recommendations.  In terms of the Act, the Commission, on conclusion of a market inquiry, has no explicit power to act on its recommendations, save for initiating investigations in terms of the Act and, consequently, referring the matter to the Competition Tribunal (Tribunal). 

“The Commission will, once the Amendment Act comes into force, be specifically empowered to initiate a complaint (as an outcome of the enquiry), refer the complaint to the Tribunal and enter into consent order with any person against whom such a complaint is initiated.

He adds, “The Commission will no doubt welcome the advent of the market enquiry provisions of the Amendment Act as it effectively allows the them to exercise considerable investigatory powers into sectors where they may believe that there is a lack of competition, but where it does not have reasonable grounds to believe that particular forms of anticompetitive conduct are taking place – a threshold for investigation that has been set by the superior courts in various cases dealt with over the last three years (Woodlands Dairy, Loungefoam and the SAB referral in particular.”

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