NEDLAC REPORT ON COMPETITION POLICY

Thursday, 21 May 1998

Nedlac today handed over its report on the negotiations conducted in the competition policy task team, under the auspices of the Trade and Industry Chamber. The task team's mandate was to reach agreement between business, government and labour on the policy principles informing new competition legislation.

The Competition Bill published by government today was drafted concurrently to the Nedlac negotiations. Throughout the process, government negotiators conveyed the outcome of the discussions in the task team to the drafters of the Bill.

The Nedlac Process

The Minister of Trade and Industry tabled government's discussion document "Proposed guidelines forcompetition policy: a framework for competition, competitiveness and development"on 27 November 1997. The negotiations were characterised by the mature approach adopted byall parties. Even though the negotiations were tough, and the issues contentious, it was aprocess during which parties were able to learn from each other as they grappled with the various issues. Although the main objective of the process was to reach agreement on the principles underlying competition policy, the parties were also able to examine the draft bill (the details) and express their reservations on certain aspects. The Nedlac report reflects both the agreements and disagreements on principles as well as the reservations on the draft bill.

Areas of agreement

• The objective of competition legislation - parties agreed that the new legislation should promote competition, whilst still addressing South Africa's developmental challenges.
• Principles informing (1) what kinds of vertical and horizontal relationships between firms would be prohibited, and (2) when a firm abuses its dominance in the market.
• Conditions informing the granting of exemptions.
• Procedures for assessing anti-competitive effects of mergers.
• Institutions to implement the new legislation - parties agreed there should be a new competition authority, which would comprise an investigative division (the "competition inspectorate") and an adjudicative division (the "competition tribunal").
• Right of appeal - parties agreed the legislation should provide for a right of appeal from the decisions of the competition tribunal to a competition appeal court.

Areas of disagreement

• Parties disagreed on the power of the Minister in reviewing decisions of the competition authority on mergers. Business felt that it would politicise decision-making, whilst labour supported government's proposal with certain proviso's relating mainly to job losses.
• Parties disagreed on the divestiture provisions - i.e. those provisions aimed at regulating concentrations of power. Labour felt that the forced divestiture provisions should be strengthened, whereas business felt that divestiture was only appropriate where there was persistent abuse of dominance and no other adequate remedy was available.

Releasing the report, NedlacExecutive Director, Jayendra Naidoo, said

"We believe that it was an excellent process, during which parties really accommodated each others' needs to address those issues that were important to their constituencies. The Nedlac process has produced a modern competition policy which reflects international best practice while still addressing the specific needs of South Africa at this phase of our economic development."