New rules toughen up on buyers and suppliers
‘Recently enacted buyer power and price discrimination provisions of the Competition Act and regulations governing these will have a significant effect on SA businesses on the buyer and supplier sides.’
So says Webber Wentzel’s Cara du Plessis, noting that provisions relating to confidential information, buyer power and price discrimination in respect of SMMEs and firms owned or controlled by historically disadvantaged persons (HDPs) came into operation on 13 February.
Regulations governing the buyer power and price discrimination provisions were also published on that date.
In her analysis in Business Day, Du Plessis notes that dominant firms are now prohibited from imposing unfair prices or other trading conditions on SMME or HDP suppliers, but limited to dominant purchasers in the grocery retail and wholesale sector, agro-processing sector and e-commerce and online services sector.
‘The prohibition applies only to SMMEs that meet certain thresholds based on total full-time equivalent paid employees and total turnover, and HDP firms that supply 20% or less of the purchases of the dominant buyer for the product or service in question.’
Additionally, dominant firms are also prohibited from engaging in price discrimination where it is likely to impede the ability of SMMEs or HDP firms to participate effectively. This prohibition, she notes, also applies to SMMEs that meet the prescribed thresholds, and to HDP firms that purchase 20% or less of the purchases of the dominant buyer.
‘Unlike the buyer-power regulations, these provisions are not limited to certain sectors.’
Du Plessis adds that the new laws also include anti-avoidance provisions, ‘which mean dominant businesses cannot simply refuse or avoid dealing with SMMEs or HDP firms to circumvent the buyer-power and price-discrimination provisions’.
She argues while the intention may be ‘laudable’, the potential downside is that this may protect inefficient businesses and/or stifle competition by favouring certain groups.
This, she says, may result in further difficulties for businesses and growth in SA.
Competition Amendment Act commencement and regulations on buyer power and price discrimination
Article disclaimer: While we have made every effort to ensure the accuracy of this article, it is not intended to provide final legal advice as facts and situations will differ from case to case, and therefore specific legal advice should be sought with a lawyer.
