Chairperson, hon members and members of the portfolio committee, I am greatly honoured to table the second reading of the Competition Amendment Bill in the National Assembly today.
The Competition Amendment Bill is aimed at strengthening the provisions of the Competition Act to enable the competition authorities to deal more effectively with anticompetitive practices such as hardcore cartels. It is not the intention of these amendments to overhaul the current competition regulatory framework, but rather to build on the existing foundation and to fill in the gaps that have been identified through the practical experience of implementing the law and the policy.
It is our observation that whereas great strides have been achieved by the competition authorities in uncovering cartels in various sectors, including milling, bread, milk, pharmaceuticals and scrap metal, it is doubtful whether the sanctions provided by the Act serve as an adequate deterrent to such conduct. Furthermore, we see behaviour in concentrated markets that cannot easily be impeachable under the Act, but whose outcomes are detrimental to consumers.
Other challenges relate to the interface between competition authorities and sector regulators in exercising overlapping jurisdiction in terms of competition considerations in regulated industries. There is also a need to strengthen the hand of the Competition Commission robustly to undertake market inquiries such as the one recently concluded on banking.
Chairperson, in addressing the above, I will now turn to the main provisions of the Bill. The purpose of the complex monopoly provisions is to deal with multifirm behaviour or co-ordinated conduct that would evade the current horizontal and vertical restrictive practices, as well as abuse of dominance provisions of the Competition Act. Firms would usually resort to such behaviour without an agreement, thus making it difficult to prosecute in terms of the existing provisions of the Act. An example could be import parity pricing, which leads to high input costs, to downstream consumers of raw materials, but where there is no agreement among players to price at that level. Similarly, the Act currently proscribes certain behaviour by a dominant firm and defines what such a firm would be. It is common cause that where one firm may not be dominant individually, it may be in a position of joint dominance with one or more other firms and could be abusing such joint or collective dominance. Such behaviour, therefore, would currently fall within the cracks.
To address this challenge, the Bill introduces an insertion of a new clause, 10(a), which defines a complex monopoly and prohibits participation in such a monopoly if it has the effect of substantially preventing, or lessening, competition. It also empowers the Competition Commission to conduct an investigation without having to first formulate a complaint, and to refer the matter to the Competition Tribunal if the evidence warrants an allegation of prohibited practice. It is important to note that complex monopoly refers to the conduct of firms and not the structure of a market, although it is common cause that certain structures may facilitate anticompetitive behaviour.
It is our view that adding an element of personal liability to price-fixing offences increases the cost of being caught and this will deter officers of firms from engaging in cartel activity.
As a result, clause 12 of the Bill introduces a new offence section to the Competition Act, making it an offence for a director or officer of a company to cause, or knowingly acquiesce to the firm engaging in cartel behaviour.
In addition, proposals currently included within the scope of the Companies Bill would, if enacted, empower the Competition Commission or other industry-specific regulators to seek a court order disbarring a person from serving as a director of a firm if that person was responsible for the firm contravening the Competition Act or relevant industry-specific legislation. It is the Department of Trade and Industry's position that this power is best introduced globally within a reformed Companies Act rather than in a piecemeal fashion in other Bills.
With respect to concurrent jurisdiction, the policy intention is to clarify and provide certainty in terms of the management of concurrent jurisdiction in order to avoid forum shopping, policy inconsistencies, and protracted legal challenges in regulated sections.
The Bill does this by inserting a provision for clear distinction and assignment of roles between competition authorities and sector regulators in dealing with competition matters in regulated industries. The Bill vests in the competition authorities the competency to oversee and review competition considerations while sector regulators are charged with regulatory considerations.
The Bill further provides that a proper framework for co-operation and constructive relationships between the competition authorities and sector regulators need to be developed and enshrined in the memoranda of agreement. These measures will, if managed properly, go a long way to maintaining a proper balance between sector regulation on the one hand, and competition regulation on the other for the promotion of economic growth and competitiveness.
Consequential amendments to section 67(9) of the Electronic Communications Act are proposed to remove inconsistencies created and reinstate the policy stance on concurrent jurisdiction in the electronic communications sector.
A market inquiry is exploratory probing intended to inquire into competition deficiencies, the operation of markets, and why consumer needs are not being met. It is also intended to inquire into any matter concerning the purposes of the Act, including the achievement of social goals or public interest issues. It serves as a tool to enable the commission to play a more proactive role in investigating markets.
The policy rationale is to amplify the existing provision of the market inquiry to enable the Competition Commission to undertake an inquiry in a more structured, effective and transparent manner. In this regard, the Bill provides for the process and procedure for the initiation of market inquiries, including the mandate to initiate market inquiries, and the timeframe for the completion of market inquiries, as well as the dissemination of the results of a market inquiry.
The Corporate Leniency Policy is a tool used by the competition authorities to detect cartel activity by encouraging those involved in cartel activity to come forward and disclose information to the Competition Commission in return for leniency from prosecution. The policy rationale is to give legal backing to the leniency policy in order to avoid any possible restrictive interpretation that the Competition Commission does not have powers, or the discretion, to grant leniency. As a result of the personal liability provisions, the Bill also provides for the granting of leniency to individuals.
Let me stop there, Chair. Whatever I have not covered, I will come back to at the end.