Presentation to the

National Council of Provinces SELECT COMMITTEE ON ECONOMIC AND FOREIGN AFFAIRS

by

Shan Ramburuth

Competition Commissioner

6 March 2007

Why competition policy?

• Fairness and access

• Prices and Quality

• Innovation

• Consumer Choice

Competition Commission’s activities

• Prosecution of anti-competitive behaviour

• Merger control

• Advocacy

Application of the Act of the Act

• All economic activity within or having an effect within South Africa

• Conduct of all enterprises: public or private

• Concurrent jurisdiction:

-Sector regulators

-“Forum Shopping”

-MOUs with ICASA, NER, Postal Services Regulator, negotiating with the SARB and FSB

The Competition AuthoritiesThe Competition authorities

E XTERNAL

PARTIES

Competition Commission

Competition Tribunal

Competition Appeal Court

Appeal of Tribunal decisions

Referral of complaints & large mergers

Exemption applications, complaints and merger notifications

Appeal of Tribunal decisions

Appeal of exemptions, intermediate mergers or non-referral decisions, defence of referral decisions

Enforcement: 2005/2006

Complaints (105)

Investigations (134)

Non-refer after screening/further investigation (74)

Referral (6)

Respondent defends

Respondent successfully

defends

Interlocutory applications

Consent order (8)

CT approves/ agrees with CC

Price fixing: 2005/2006

• General Motors, Daimler Chrysler, Nissan, Volkswagen, Citroen: Minimum resale price maintenanceSettlement, consented to penalty totaling R25 150 000

• Subaru and BMW: Fixing of prices and/or trading conditionsSettlement, consented to penalty totaling R 8 500 000

• Lufthansa Fixing of trading conditionsSettlement, consented to penalty of R8 500 000

South African Airways (SAA) cases: South African Airways (SAA) cases: 2005/20062005/2006

• Litigation in Tribunal (Nationwide complaint)

Abuse of Dominance: Travel agents’ incentives Tribunal imposed penalty: R25 million

• Consent Agreements:

Collusion, code sharing with Lufthansa: R20 million

Collusion, fuel levies with SA-Airlink,-Express, Comair: R20 million

Abuse of Dominance, travel agents’ incentives (Comair complaint): R15 million

Current cases

• Harmony Gold/Mittal SteelExcessive pricingTribunal’s decision pending

• SAVA/TelkomAccess to essential facilityLitigation in the High Court over jurisdiction

• Ansac/BotashFixing of trading conditionsMany interlocutory applications, appeals Tribunal must still hear the merits of the case

Current cases

• Profert/SasolRefusal to supplyReferred to the Tribunal

• CC/Dairy Processors (Clover, Parmalat, Ladismith Cheese, Woodlands Dairy, Lancewood, Nestle and Milkwood Dairy)Price fixing of raw and retail milkReferred to the Tribunal

• CTH Trading/SenwesAbuse of dominance – exclusionary conduct and price discriminationReferred to the Tribunal

Current cases

• CC vs Blue Ribbon, Sasko and Albany

Fixing of prices and trading conditions

Western Cape investigation widened to national

• Big Daddy vs South African Breweries

Dividing markets, minimum resale price maintenance and exclusionary conduct

• Barnes Fencing vs Mittal Steel (Long steel)

Price fixing and price discrimination

• Maintenance or promotion of exports

• Promotion of SMMEs & business owned by HDIs to become competitive

• Stop decline in an industry

• Economic stability of a designated industry

• Intellectual property rights

• Professional rules

Exemptions

Corporate Leniency Policy

• Introduced 6 February 2004

• Regulate cartel behaviour

• Indemnity to firms providing information on cartel

• “First through the door”

• Assist CC in case against other cartel members

• Not instigator

• 10 applications to date, 6 granted conditional leniency

Merger control

•Change of control

•Small, intermediate and large

•Test:

-Substantial lessening or preventing of competition

-Technological, efficiency and pro-competitive justifications

-Public interest grounds:

Effect on particular industrial sector or region

Employment

SME’s or firms owned by HDIs to become competitive

Ability to compete in the international market

Merger notifications

0

5

7

9

14

213

194

262

285

376

2

1

1

4

4

0 50 100 150 200 250 300 350 400 450

2001/2002

2002/2003

2003/2004

2004/2005

2005/2006

Conditionally approved Unconditionally approved Prohibited

Prohibited mergers: 2005/2006

• 4 out of 394

• Eyethu/Ultra Registrars Small merger, abandoned

• Sasol/Engen Large merger, prohibited by Tribunal

• Foskor/Sasol’s phosphoric acid businessLarge merger, abandoned

• Medicross/Prime Cure Large merger, prohibited by Tribunal, allowed by CAC

Conditional approvals: 2005/2006

• 14 out of 394

• IntelSat/PanAmSatIntermediate merger, behavioural conditions

• AP Moller-Maersk/Royal P&O Nedlloyd NVLarge merger, structural conditions

• Tiger Bands/Ashton Canning Large merger, employment-related conditions

Current merger cases: 2007Current merger cases: 2007

• Telkom/BCX

• Prime Media/Khaya FM

• Pick ‘n Pay/Fruit and Veg City

• Mila Nutri/Yara SA

International contributions

• International Competition NetworkHosted 2006 conference

• Organization for Economic DevelopmentObserver status since 2006

• United Nations Committee for Trade and Development Competition Committee

Advocacy

• FAIS ombud’s referral: Changes to the Short Term Insurance Act - “untying” insurance and bond

• Pension Funds Adjudicator’s ruling on switching retirement annuity funds

• Postal Regulator’s competition guidelines

• Comments on the MIDP

• Workshops with Estate Agents Board

• Joint working committee with ICASA

The banking inquiry

• National Treasury’s research

• Competition Commission’s research

• Market transparency

• Voluntary submissions

• Public hearings

• Recommendations on:

-Access to payment system-Bank charges

Way forward - strategic planning

• Increase staff morale and motivation

• Align structure and work processes with strategy

• Importance of approach and methodology

• Knowledge management

• Communication and advocacy