MINISTRY OF ECONOMIC DEVELOPMENT SEEKS PUBLIC COMMENT ON REVISED PRICE DISCRIMINATION AND BUYER POWER REGULATIONS

The Ministry of Economic Development has invited public comment on the revised Price Discrimination and Buyer Power Regulations (the revised Regulations) to the Competition Act 89 of 1998 (the Act). The revised Regulations were published on 10 October 2019.

Written submissions can be made to Ms Linda Herbst at the Department of Economic Development by 6 November 2019 and can be sent by e-mail to [email protected]

The revised Regulations replace the draft regulations that were published for comment in December 2018. 

Price Discrimination Regulations

The revised Regulations dealing with Price Discrimination (Price Discrimination Regulations) apply to a designated class, being small or medium-sized businesses as defined in section 1 of the Act or any regulations made by the Minister of Economic Development; or alternatively, to firms controlled or owned by historically disadvantaged persons purchasing less than 20% of the relevant products or services supplied by a dominant seller (Designated Class in the Price Discrimination Regulations).

The factors and benchmarks for determining whether price discrimination is likely to impede effective participation by the Designated Class in the Price Discrimination Regulations include the following:

1. The extent of the difference in respect of price or other factors outlined in section 9(1)(c) of the Act relative to other purchasers in the same or adjacent downstream markets;
2. The significance of the input in the cost structure of production or as a driver of sales in the downstream market;
3. The duration and timing of the price differential;
4. The likelihood that the elimination of the differential would result in the Designated Class in the Price Discrimination Regulations facing increased demand for its goods or services in the downstream market; and
5. The likelihood that the elimination of the differential would improve profitability and investment for the firm in the Designated Class in the Price Discrimination Regulations.

Buyer Power Regulations

The revised Regulations dealing with Buyer Power apply to a designated class, being small or medium-sized businesses as defined in section 1 of the Act or any regulations made by the Minister of Economic Development; or alternatively, to firms controlled or owned by historically disadvantaged persons who supply 20% or less of the purchases of the dominant buyer for the relevant goods or services (Designated Class in the Buyer Power Regulations).

The factors determining the unfairness of a specific price include, but are not limited to, the following:

1. The price paid to other suppliers of like goods or services, in particular those outside the Designated Class in the Buyer Power Regulations, and whether such prices are higher;
2. The magnitude of any differences in prices to other suppliers of like products or services;
3. Whether reductions in the purchasing price are directly or indirectly required from or imposed;
4. Whether reductions are retrospective and /or unilateral and /or unreasonable;
5. Whether costs are directly or indirectly imposed on or required from the supplier which reduce the net price received; or
6. Whether the direct or indirect imposition or requirement of costs is retrospective and /or unilateral and /or unreasonable.

A trading condition that may be deemed unfair includes, but is not limited to, the following:

1. A trading condition unreasonably transferring risks or costs onto a supplier in the Designated Class in the Buyer Power Regulations;
2. A trading condition being one-sided, onerous or not proportionate to the objective of the clause (such as unduly long payment terms); or
3. A trading condition bearing no reasonable relation to the objective of the supply agreement.

In addition to the Designated Class in the Buyer Power Regulations, the Buyer Power Regulations only apply to the grocery retail sector, agro-processing sector and the online intermediation services sector.