Competition laws abuse grows

Johannesburg - There is growing abuse of competition law by both firms and competition authorities, law firm Webber Wentzel said on Wednesday.

According to Daryl Dingley, partner in competition law at Webber Wentzel, this was often driven by interest groups at the competition authorities.

"This manifests in the adoption of blanket approaches to certain business arrangements irrespective of whether these arrangements are credible responses to firm or market conditions.

"For example, in the investigations into food and the steel sectors, the competition authorities are attempting to have import parity pricing prohibited as they regard such domestic pricing as indicative of collusion between domestic suppliers or an abusive practice by a dominant domestic supplier," Dingley said.

But import parity pricing was not always an anti-competitive practice as the domestic producer might not be as efficient as a foreign producer and could therefore, be charging a cost based price that was close to import parity, he added.

Dingley noted, however, that the exploitation of competition law was most often driven by firms trying to secure their own interests, gain access to sensitive business information, or derail a competitor's business strategy.

"This can be done by a competitor exploiting the expensive and complicated nature of competition law proceedings for purposes of harassing a rival that is attempting to merge with another entity.

"For example, a competitor could prevent or delay a rival's strategic acquisition by vociferously arguing, on the basis of a contrived theory of harm, that the acquisition gives rise to substantial competition concerns," Dingley said.

This could be done by making submissions during the Competition Commission's investigation stage, or more formally as an intervener in the proceedings before the Competition Tribunal.

"This strategy is particularly effective as submissions are welcomed by the Commission, confidentiality can often be claimed on the content of those submissions and intervener status is granted with relative ease by the Tribunal," he said.

Besides merger proceedings, a competitor could also hamstring a rival by filing a complaint - or making an anonymous submission.

"This could result in a rival firm's executives being tied up for weeks with their lawyers as they may have to provide lengthy explanations of their behaviour to the authorities," he added.

"A firm could also use competition law to change or obtain better contract terms with a supplier or customer, by for example, threatening to expose a party to competition law scrutiny unless better contracting terms are established," Dingley said.

Although competition laws were established to promote and enhance competition in the market, they could also be used to prevent competition, or to secure a particular interest or position.

"Firms need to accordingly take cognisance of the strategic use or abuse of competition law, and either apply the laws to their advantage or protect against the use of the law by competitors and the authorities," Dingley said.

- Sapa