Major amendments to the South African competition regime brought into effect
Following a presidential proclamation on 12 July 2019, a package of wide-ranging and sweeping reforms to the South African (SA) competition regime have been brought into force with immediate effect. The proclamation implements the vast majority of reforms set out in the Competition Amendment Act (the Amendment Act), which was signed into law in February 2019. Although some of more controversial aspects of the Amendment Act will only be implemented at a later date, the proclamation marks the start of a new era for competition enforcement in SA.
The Amendment Act represents the most significant and comprehensive overhaul of the SA competition regime since it was introduced in 1998. One of the main policy objectives of these reforms is to open markets for small and medium businesses as well as firms controlled or owned by historically disadvantaged persons (HDPs) by, for example, introducing material amendments to the rules on abuse of dominance. Going beyond this policy objective, the reforms are broad in nature, ranging from the toughening of the financial sanctions that can be imposed for antitrust violations to introducing a new approval process for mergers involving foreign acquirers in areas of national security.
While the Amendment Act was signed into law in February 2019, no commencement date was announced at the time. The presidential proclamation on 12 July 2019 brings into immediate effect the vast majority of the reforms, including:
- the increase of fines on repeat offenders from 10% to 25% of annual SA turnover;
- the removal of the immunity from fines for first time violations of the provisions relating to anti-competitive vertical agreements (excluding resale price maintenance) or horizontal agreements (excluding cartels);
- the extension of liability to controlling firms for fines imposed on subsidiaries if they knew or should have known of their subsidiaries’ conduct;
- the introduction of new grounds of exemption from antitrust rules to allow increased participation of HDPs and to further the public interest;
- the introduction of new grounds to review mergers in respect to the impact on HDPs as well as the promotion of a greater spread of ownership;
- the increase of the Minister’s participation into mergers (including a right of appeal) and market inquiries; and
- the widening of the Competition Commission’s powers regarding market inquiries by introducing a broader set of public interest considerations and providing for divestiture among possible remedies.
Some of the more controversial provisions, namely the new buyer power and price discrimination rules for dominant firms and the approval process for foreign investment, have not yet been introduced into law as yet. These provisions require extensive implementing regulations, which will be subject to consultation in due course.
Even with the exclusion of these provisions for the time being, the presidential proclamation marks the beginning of a new era for competition enforcement in SA. In particular, while the Competition Commission has long used the merger control provisions for public policy objectives, the Amendment Act signifies a much broader usage of the SA competition regime to transform the SA economy.