Chapter 31 The law of competition

Faculty of Law
CHAPTER 31: THE LAW OF COMPETITION

What is competition law?
 Aimed at preventing anti – competitive behaviour and in
promoting open markets
 SOUTH AFRICAN COMPETITION LAW
 Two parts:
1. Public competition law: maintaining and promoting
competition between businesses
2. Private competition law: deals with unlawful competition
Unlawful competition: when an action of a competing business

crosses the limits of free competition.
Unlawful competition
• One trader wrongfully infringes the competitor’s right to
goodwill
• Matthews & Others v Young: unlawful competition would
constitute an injuria for which the Lex Aquilia lies if it has
directly resulted in loss
• Liability based on lex Aquilia = compensation to the owners
of property damaged by someone else’s fault
• Delictual in nature
• Elements:
– Conduct;
– Wrongfulness;
– Fault
– Cause;
– damages
• Direct infringement: person makes false/injurious
statements regarding the business of a competitor
• Indirect infringement: person uses his own goodwill

in an unreasonable manner eg passing off – one
person uses another’s trade mark in an
unreasonable manner so as to confuse the public
• Elements of passing off:

– Party alleging passing off must have a
reputation/distinctive mark that is infringed;
– Others party’s conduct amounts to misrepresentation
(party’s goods are the same/linked to the others)
– Likelihood of confusion in the public’s mind
 COMPETITION ACT: regulates only public companies.
 Main purpose: maintain and promote competition between

businesses
 Allows competition and encourages the establishment of
businesses
 Not only prices controlled by competition but consumer given
widen a wider choice of goods
 Promotes: equal opportunities for all South Africans to
participate freely in the economy
 Further promotes competition – unfair competition prevented
through restraints of trades (contract law)
RESTRAINT OF TRADE
 Def: agreement that prohibits a person from working for the
competition or to open a competitive business for a certain
period of time within a certain area.
 Limits a person’s freedom to participate in commerce.
 COMMON LAW
• English law: prima facie against public policy
• Void unless person who wanted to enforce the restraint could
prove that it was reasonable.
 MAGNA ALLOYS & RESEARCH (SA)(PTY) LTD v ELLIS
• Court overturned English law approach
• Found that restraint of trade agreements made in a contract
were valid
 In SA, ROT are enforceable if they are reasonable and not

contrary to public policy
 If not, unenforceable
INSTITUTIONS, ENFORCEMENT &
REMEDIES
 COMPETITION COMMISSION
 Independent juristic person
 Comprises a commissioner and 1/more deputy
commissioners
 Commissioner: appoints investigators and staff to assist
CC
 Functions:
• Implement measures to increase market transparency
• Investigate and evaluate alleged contraventions
• Authorise, prohibit or refer applications for intermediate mergers.
 COMPETITION TRIBUNAL
 Juristic person and tribunal of record
 Consists of chairperson and 3 to 10 members appointed
by President
 Functions:
• Adjudicate on prohibited practices and impose any remedy
• Adjudicate on any matter provided for in the CA
• Hear appeals from or review any decision of the CC
• Make any ruling/order necessary
 COMPETITION APPEAL COURT
 Court of record and has same jurisdiction as HC
 Consists of: at least 3 judges
 Functions:
• Review any decision of the CC/CT
• Consider an appeal arising from the CT
 Enforcement done by Enforcement & Complaints Division

 Functions: investigate complaints and evaluate applications
 PROHIBITED PRACTICES
 C.A forbids certain activities or practices which will be harmful

to competition and to public interest
 Include: restrictive horizontal and vertical practices and
abuse of dominant position
 Restrictive horizontal practices:
• Agreements made between companies on the same level

which restricts or prevents competition
• Price fixing, collusive tendering and market division
• Companies may be allowed to make agreements with other
companies – to prove that agreements are not harmful to
the economy but beneficial.
• However, no defence against price fixing, collusive
tendering and the division of the market.
 Price fixing: competitors work together to fix the price or any condition of goods
or services eg. Pioneer Foods, Tiger Consumer Brands and Premier Foods
scandal
 Collusive tendering: competitors work together to tender in a manner that is
not free and fair tendering eg. In one tender, competitor A makes lowest bid,
next tender, competitor B makes lowest bid. Competition excluded
 Market division: parties divide a territory or specific goods or services in a
specific market eg. competitors fix quotas for manufacturing and selling of
goods
 Restrictive vertical practices:
• Practices between a company and its clients/customers

and includes agreements between a wholesale seller and
resellers
• Act does not allow:

o Agreements between these different traders that prevent
competition
o The setting of minimum retail price.
Abuse of dominant position
A Co. in a dominant position in a particular market may not
abuse its dominance to gain anti-competitive advantage in that
market
•Dominant if it has:
1.At least 45% of the market;
2.At least 35% but less than 45% of market unless the co. can show that it
does not have market power;
3.Less than 35% of the market but it has market power.
Market power: Co. having power to control prices, to

exclude competition or to behave to an appreciable extent
independently from its competitors, suppliers or
customers.
Therefore, if co. can act independently & fix prices in a market,
it has market power
PROHIBITION OF PRICE DISCRIMINATION
 A dominant co. is prohibited from acting in a manner that

constitutes price discrimination
 Dominant co. is prohibited from:
• Acting in a manner that is likely to have the effect of
substantially preventing/lessening competition;
• Selling goods/services, in equivalent transactions, to
different purchasers and,
 Mergers
• An amalgamation of 2 or more companies into one entity
• Mergers & Acquisitions Division of the Competition
Commission: reviews any merger contemplated ito the CA
• Intermediate merger: CC must approve merger prior to
merger taking place.
• Large merger: CT must approve prior to merger taking
place.

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Faculty of Law

CHAPTER 31: THE LAW OF COMPETITION

 SOUTH AFRICAN COMPETITION LAW

Unlawful competition: when an action of a competing business

• Indirect infringement: person uses his own goodwill

• Elements of passing off:

 Main purpose: maintain and promote competition between

 In SA, ROT are enforceable if they are reasonable and not

 Enforcement done by Enforcement & Complaints Division

 C.A forbids certain activities or practices which will be harmful

 Restrictive horizontal practices:

• Agreements made between companies on the same level

• Practices between a company and its clients/customers

• Act does not allow:

Market power: Co. having power to control prices, to

 A dominant co. is prohibited from acting in a manner that

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