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This page is a comment on the decision reached by the Competition Tribunal in 31st March 2005.  It relates to the price discrimination case brought by Nationwide Poles cc against Sasol Oil (Pty) Ltd.  Pending an appeal against the decision, the comments we make are limited.  

The decision covers the background to the price discrimination legislation embodied by our law and the interpretation of that law.  Its effect is to shed light on the way our competition authorities view the practice of price discrimination by dominant suppliers.  It sets out the approach that the authorities intend to take in such matters and spells out the status of small enterprises in the grand scheme of competitive matters.

 The decision deals with five main points.  These are as follows:

1.    The relevant market

The question of the relevant market appears to have been decided based on an analysis of substitutability between products.  Since wax additive creosote is found to be interchangeable with other creosotes in the production process, product preference appears not to be reason enough to limit market definition.  It appears the key product attributes were important in determining the scope of the relevant market.

 2.              Dominance of a supplier in the relevant market

Dominance was shown to be present in the creosote market. This was shown by two methods.  Firstly by way of market share data extrapolated from the Sasol and Suprachem documents.

Secondly and critically, since Sasol did not take into account the pricing of CCA, an alleged substitute, or indeed the price of other competitor creosotes, when setting its own prices for creosote. It was accordingly found that market power and hence dominance was present. It seems that if the price of a substitute is ignored in the process of setting price, then this is an indicator that the relevant market does not include that substitute.

3.               Effect of substantially preventing or lessening competition

One of the things that is required by the Act is that competitive relevance is required.  In the judgment, the Tribunal clearly suggests that competitive relevance is the key requirement of the relevant portion of the Act.  A complainant would not it appears be required to prove the actual presence of competitive harm to a market. 

The word substantial was found to be present in the Act in order to exclude trivial or competitively inconsequential claims. The word likely was found to determine competitive relevance.

4.    The concept of equivalent transactions

The Tribunal takes a broad view of equivalent transactions.  It suggests that transactions are equivalent of they have the same or similar economic effect.  Such an approach provides significant leeway to the Tribunal in future decisions.  Such leeway opens the door to debate and interpretation, thereby creating uncertainty.  Uncertainty is not conducive to the SME seeking to know whether in its own particular circumstances, it has a case.  Equally, the Commission will be required to consider most carefully any possible prosecution and make an assessment on the degree of similarity of economic consequence.

It also provides for separation of product based on more general economic practice.  Thus for example, a timing or long term contract may impact on whether or not products are functionally equivalent. 

In the case of long term contracts, the obligation to purchase specified volumes regardless of production requirements may offer a benefit to a supplier.  This it seems to us to be an unduly onerous interpretation of the meaning of equivalent transactions.  It has the effect of creating a defence within the ambit of the main section of the price discrimination provisions.  We would suggest that this is not something that should have a place in our competition law.  If such a defence is intended by our legislation, then its proper place is within the ambit of the exceptions.  After all, the defences available under section 9(2) are limited and the subject of very specific circumstances. 

 5)      Discrimination by way of price, discounts provided, services provided.

This is common cause.  The price lists were found to be adequate evidence for the presence of price discrimination.

Updated 25 May 2005

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Disclaimer: This site does not profess to offer legal assistance or interpretation.  Itís content reflects the view and experience gained by of the author during a hearing at the Competition Tribunal of South Africa.  It may help you to figure out what happens & why.