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Patel: Structural features diminish effective competition, limit inclusivity of growth

Sep 01 2017 06:00

Cape Town - Given the "potent mix" of South Africa’s challenges with economic concentration and social exclusion, it is time to come up with practical approaches to address high levels of concentration in the economy, according to Minister of Economic Development Ebrahim Patel.
 
In his view, certain "structural features" diminish the promotion of effective competition in a number of markets and limit the "inclusivity" of growth.

"It seems to me to be better that it be done through the trusted and predictable processes of competition regulation and its sound institutions than that it be left to laws that simply mandate the breakup of companies irrespective of the economic logic thereof," Patel said at the 11th Annual Competition Law, Economics and Policy Conference at the Gordon Institute of Business Science.

In May this year, Patel advised Parliament of his intention to propose amendments to the Competition Act to enable more effective measures to be taken against certain features of market structure.

The key set of amendments will require the consideration of the concentration, ownership profile and structural impediments to entry or expansion in a market when that market is defined and assessed by the competition authorities in mergers or where anti-competitive conduct in that market is scrutinised in complaints referred to the Competition Tribunal for determination.

In addition, the competition authorities must be empowered to consider these questions proactively or at the request of key stakeholders, including parties who are demonstrably unable to overcome these barriers entrenched in the relevant markets, according to Patel.

"Markets plagued by over-concentration and untransformed ownership will need to be identified, investigated and appropriate measures applied to remedy these market features," he said.

"These inquiries, and any remedies that result, will target the primary structural impediments to market entry and ownership, including by black South Africans."

The proposed amendments could potentially seek to incentivise firms to develop relationships and adopt strategies that would alter market structure; reduce concentrations by encouraging entry of historically disadvantaged South Africans (particularly those who own SMMEs); reduce barriers to entry; and expand ownership to ensure that more enjoy substantive economic citizenship.

"I acknowledge that competition law on its own cannot address issues of economic concentration. A wider set of industrial policy measures, including public procurement policies, will have to play a key role. But clearly there is a role for competition law. I welcome your thoughts and proposals on that role," said Patel.

IP

The tension between intellectual property policy and competition policy will be a significant part of the policy debate and it may well be that the weight given to protection of intellectual property in global regulatory systems, will need to be rebalanced, in Patel's view.

"For developing countries like SA, the challenges of the Fourth Industrial Revolution include basic ones like the cost of and access to data that will fuel the new economy; and the question of the power dynamic between regulators in small jurisdictions when faced with large multinational enterprises," he said.

In May this year, he requested the Competition Commission to initiate a market inquiry into high data costs. The inquiry will benchmark SA data costs against international norms and assess the state of competition in the market by looking at, among others, market structure, the current regulatory regime, strategic behaviour by large fixed and mobile incumbents, costs faced and profits earned by telecoms operators, current arrangements for sharing of network infrastructure, investment levels, access to and allocation of spectrum and measures to promote entry of black South Africans into the sector.

It will make recommendations to government on measures to improve competitiveness in the sector and how data costs can be brought down.

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