South African competition law's approach to dual distribution arrangements

Abstract

Dual distribution arrangements are arrangements that, for the purposes of competition law, can simultaneously be classified as vertical and horizontal. In terms of the Competition Act No, 89 of 1998 (“the Act”), the actions that can be taken, and the legal consequences of those actions, are vastly different depending on the type of relationship between the parties. Unlike in a conventional horizontal relationship, in a dual distribution arrangement the manufacturer creates competition with itself. This type of hybrid relationship has confused competition authorities, as it is difficult to decide whether the horizontal or vertical aspect should prevail in order to characterise the agreement. In some instances, competition authorities have elected to disregard the other elements of the relationship and prosecute parties for contraventions of the Act based purely on one dimension of the relationship.