7 December 2015 by Cliffe Dekker Hofmeyr Competition Matters

Co-operation agreement entered into between the Competition Commission and the International Trade Administration Commission

The Competition Commission recently entered into a Memorandum of Agreement (MOA) with the International Trade Administration Commission (ITAC) on the basis that these authorities share areas of common interest and function, necessitating co-operation between the two.

Although the Commission and ITAC are both focused on optimising the market place and achieving an effective economy, there can be fundamental disparities in the policies adopted by each authority, in pursuance of its shared objective.

For example, the Competition Act, No 89 of 1998 (Competition Act) is aimed at guarding against conduct that limits competition and harms consumers. The Commission’s philosophy is that the presence of sufficient competitors in a market, increases competitiveness and drives down prices, which benefit consumers. In contrast, trade policies adopted by ITAC are often aimed at creating import tariff market barriers to protect domestically produced products, at the expense of foreign imports.

A practical dilemma of these differing policies was experienced in the poultry industry. In 2013, the South African Poultry Association (SAPA) acting on behalf of its members, local chicken producers, lodged an application with ITAC, to increase import tariffs on frozen chicken imported into South Africa. SAPA motivated amongst others, that local business was threatened by increases in imports and local chicken producers were not profitable. The Association of Meat Importers and Exporters (AMIE) opposed this application. AMIE also lodged a complaint with the Commission, arguing amongst others, that the increase in import tariffs will restrict import competition and thereby allow SAPA members to increase the price of their poultry products to the detriment of consumers.

The International Trade Administration Act, No 71 of 2002 allows a person to apply for an increase in import tariffs, whilst the Competition Act considers import tariffs as a factor that stifles competition. The above situation is therefore a common example of how tariffs can distort a market, where players in the market are abiding by legislation.

In the terms of the MOA, the Commission and ITAC have specifically agreed:

  • to co-sponsor joint workshops on competition and international trade matters as and when necessary and to also conduct joint sector research or impact study assessments on topics of mutual interest;
  • to refer complaints/applications to one another, advise and receive advice, and make representations to each other where necessary; and
  • in analysing merger transactions and where the Commission is of the view that the merger presents international trade regulatory issues subject to the jurisdiction of ITAC, the Commission may consult with ITAC to obtain their input.

Although it remains to be seen how the Commission and ITAC will give effect to this arrangement, the idea behind the MOA is to be welcomed in that it ensures co-operation between the two authorities, at the very outset, on matters impacting competition law on the one hand, and international trade on the other.

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