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Reports by Reuters indicate that the Competition Commission will be opening a case against wholesalers of liquefied petroleum gas (LPG) should they ignore recommendations to end long-term supply agreements by the end of September. This follows a decision in April that supply agreements should be capped at 10 years because deals lasting longer favoured big wholesalers and deterred new entrants into the market.

SA cartels to come under fireSpeaking at a forum at the Gordon Institute of Business Science (GIBS) recently, Competition Commissioner Tembinkosi Bonakele said that cartels are a growing concern for the commission. “The area of cartels is embarrassing to us as South Africans. It’s embarrassing to the business community, it’s also embarrassing to us as enforcers,” he told delegates.

“The fight against cartels has to be tightened, and it must bite. We have to really explore this issue of sending people to jail. I think if we don’t do that we are going to lose legitimacy,” he added. The current penalty is a fine of up to 10% of the firm’s annual turnover, but Bonakele believes this is too low.

Government is looking to introduce criminal sanctions of up to ten years in jail for collusion, but proposed amendments to the powers of the office of the Competition Commission include granting it the power to apply measures to address collusion rather than merely making recommendations.

“The only reason why government will take steps to promulgate deconcentration laws, is because of behavioural issues by dominant firms. Participants are concerned that dominant firms are blocking entry and expansion or are charging excessive price. Government is obliged to respond in a way that should strengthen policy co-ordination and evaluate alternatives. One of the obvious steps to take is to strengthen the capacity of competition authorities,” Bonakele said.

He added that the South African government and justice system needs to find ways to hold executives accountable for not complying with the Act of Prohibited Practices. This prohibits the abuse of a dominant position by firms in a market, but does not prohibit them from holding a dominant position.

Bonakele says it is difficult to prove abuse of dominance, requiring in-depth legal and economic analysis. For this reason, the Competition Commission prefers to take on fewer cases that are high impact, to set a precedent and curb future abuse of dominance in the market. “We are not interested in the hundreds of cases that are there, we want those few that are really impactful, that have an effect and that are winnable.”

Image credit: http://www.compcom.co.za/profile-of-mr-tembinkosi-bonakele/

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