A case of misapplication? An analysis of the application of the market share definition on the grain commodities storage market against the background of the grain trading market in determining dominance

Abstract

Market definition is widely regarded as one of the most important analytical tools to examine and evaluate the competitive constraints that a firm faces and the impact of its behaviour on competition. As such market definition serves several purposes in identifying the scope of competition in a market. By defining the relevant market and then calculating and assigning market shares, competition authorities are able to assess the market power of firms, which is critically important in understanding competition effects. An investigation into abuse of dominance generally commences with the definition of the relevant product and geographic market to enable a calculation of the allegedly dominant firm’s market share, and a subsequent determination of its market power. It is accordingly fundamentally important that the market in which any competition law contravention, and specifically abuse of dominance, occurs, is correctly defined given the severe impact on a firm in the event of an investigation by the competition authorities and a subsequent finding of contravention of the Act. This dissertation points out that besides defining the market the “substitutes” belonging in the market should also be properly judged. A relevant market accordingly has various dimensions which generally include product, functional and geographic markets. The Competition Act 89 of 1998 which, inter alia, aims to promote and maintain competition in order to promote the efficiency, adaptability and development of the economy, does not provide formal guidelines on how markets are to be defined. The Afgri case was the first South African case to deal with the “storage and handling” market definition in the commercial grain commodities sector. In a subsequent matter concerned with grain storage, the Senwes case, the Tribunal ruled that the grain storage and handling market could be categorised into an “upstream market for grain storage”. The Tribunal suggested that “each silo constituted a local grain storage market for a radius of approximately 60 kilometres surrounding it.” This dissertation will, against the backdrop of the current case law and the prevailing application thereof regarding the actual factual physical market realities, consider the definition of dominance in the Competition Act and the application thereof. This dissertation aims to show that the assumptions made in the Senwes case that alternative storage options are not adequate substitutes can be refuted and that the market delineation in the Senwes case is no longer applicable to current circumstances.