Race clause in new Competition Bill open to abuse
26 Jul 2018 - by Nicole Jacobs
The new Competition Amendment Bill which has been passed by cabinet and is now with parliament could create new channels for cronyism and corruption.
This is the opinion of Free Market Foundation legal researcher, Martin van Staden, who told FTW Online that “the Competition Commission is being called upon to look at the racial character of businesses wishing to merge in determining whether the merger should be allowed or not.
“When an official can base their decision simply on their own interpretation of the facts nothing protects them from giving in to the temptation to favour some at the expense of others, other than their own strength of character.”
Van Staden says the provision has nothing to do with the fundamental nature of competition regulation which is aimed at ensuring the market is contestable and not monopolised.
He said that, for competition to flourish, government needed to dismantle anti-competitive legislation and regulations as well as state-sponsored or owned monopolies that force private competition out of their respective markets.
“Competition in the marketplace is not stimulated by active government interference in the affairs of firms and entrepreneurs,” added van Staden.
“Government interference leads to price distortions caused by factors such as increased compliance costs and perverted incentives.”
He says the role of government should simply be to ensure firms do not force or deception to deny market entry to their rivals.
However, Economic Development minister, Ebrahim Patel, believes the bill will equip competition authorities with the tools to probe anti-competitive behaviour and strengthens all applicable penalties.
“We believe that the amendments, taken as a package, will boost SMEs and economic inclusion, opening up the economy to fresh investment and innovation,” he said in a statement.
“It gives greater clarity to firms and investors on prohibited practices and what constitutes abuse of dominance.”
The Competition Amendment Bill was drafted in 2017 following concerns that anti-competitive behaviour was increasingly making it difficult for smaller players to penetrate the economy and was recently presented to Parliament for approval.