Amendment of section 8(d)(iv) of the South African Competition Act 89 of 1998 as a key tool to adjudicate exclusionary abuse

Abstract

Competition law primarily seek to make markets more competitive: it ultimately aims for low consumer prices or for high consumer welfare. However, this can only be achieved if resources are efficiently allocated. Due to abuse of dominance practices and concentrated markets, allocative efficiency does not always materialise, and government intervention is required to improve market outcomes for consumers. The Competition Act 89 of 1998 prohibits exclusionary acts namely, where a dominant firm prevents another firm from entering into or expanding within a market. Under the caveat of exclusionary abuse falls predatory pricing. The notion of predatory pricing is conceptually quite straightforward. It occurs when a dominant firm sets its prices so low for a sufficient period that its competitors are forced to leave the market and others are deterred from entering. Once the targeted competitor has been eliminated, the period thereafter is one of sharp price increases, enabling the predator to recoup the losses sustained in the period of predation because of its increased market power. A firm’s conduct will also be exclusionary if it sells its goods or services below their “average avoidable cost” or the “long run average incremental cost (LRAIC)”. South Africa is currently experimenting with a Competition Amendment Bill, 2017 wherein it seeks to implement a relevant cost benchmark into section 8(1)(d)(iv). Due to the novelty of predatory pricing in the South African jurisdiction, it is necessary to have regard to the evolution of predatory pricing in more developed competition jurisdictions. In light of this, this dissertation undertakes a critical and comparative study on the regulation of predatory pricing in South Africa, the European Union and the United States of America pre-empting that this study can draw from their experience and provide key lessons for South African authorities tasked with implementing and possibly refining the relevant legal regime.