Regulation of predatory pricing in the Republic South Africa

Abstract

The purpose of competition law, amongst others, is to promote competition in the markets and to prohibit any conduct which is inconsistent with these and other purposes of the competition law. In this dissertation, I discuss section 8(c) and 8(d)(iv) of the Competition Act 89 of 1998 (the Act) which regulate predatory pricing in South Africa (RSA). Dominant firms are prohibited from engaging in exclusionary acts. An exclusionary act is an act that impedes or prevents a firm from entering into, participating in or expanding within a market. The Act lists ‘predatory pricing’ as one of the exclusionary acts. According to section 1 of the Act, ‘predatory pricing’ means prices for goods or services below the firm’s average avoidable cost (AAC) or average variable cost (AVC). AAC is the sum of all costs, including variable costs and product-specific fixed costs, that could have been avoided if the firm ceased producing an identified amount of additional output, divided by the quantity of the additional output. On the other hand, AVC means the sum of all the costs that vary with an identified quantity of a particular product, divided by the total produced quantity of that product. I will also discuss recent predatory pricing cases and recent amendments to the Act. Furthermore, I will critically analyse the regulation of predatory pricing in United States of America (USA), Canada and European Community and then highlight key differences between the regulation of predatory pricing in RSA and in the aforementioned three jurisdictions.