Competition concerns
Competition Law in South Africa has received much publicity in recent months due to the active participation and investigations of the Competition Commission and the latest findings of the Competition Tribunal. The fame of the Competition Law was further fuelled by the recently enacted Competition Amendment Act, No. 1 of 2009, which brought with it some controversial issues of constitutionality.
The Competition Commission—a statutory body empowered to investigate business practices and abuse of dominant positions—is focused on rooting out anti-competitive behaviour. The commission has, in addition to implementing industry-wide investigations, also directed some of its attention to joint ventures that are being used by businesses to disguise and promote anti-competitive behaviour.
The commission has announced its concern that joint ventures are being formed as vehicles to facilitate collusion, which constitutes the act of working together with other businesses, usually in secret and in an anti-competitive way.
“The Competition Commission—a statutory body empowered to investigate business practices and abuse of dominant positions— is focused on rooting out anti-competitive behaviour. The commission has, in addition to implementing industry-wide investigations, also directed some of its attention to joint ventures that are being used by businesses to disguise and promote anti-competitive behaviour."
A joint venture is easily formed and is therefore at times a faster and more cost-effective way for businesses to effectively manufacture, market and/ or sell their products or services. A joint venture is a collaboration of skills and resources, and a sharing of risks, which makes it appealing for some businesses.
These businesses usually share common interests and clients, and could in their efforts to promote the products and services of the joint venture be guilty of anti-competitive conduct, if they end up sharing crucial information about each other’s core businesses, and especially if they further co-ordinate their prices, allocate their customers or keep information from customers.
The above practices have the effect of distorting or preventing competition and stifling the economy, in violation of Competition Law.
In some cases, joint ventures are formed to bid for tenders or projects. In these instances, the Competition Commission is concerned that the joint ventures may have been formed as a means to share information on prices, discounts, the identity of competitors and clients. Further to this concern, joint ventures have been found to submit uncompetitive bids, allocate tenders and even compensate losing bidders.
Joint ventures are therefore encouraged, in terms of tender processes and guidelines, not to exchange any information with any other tender prior to the closing of tenders.
The commission will approach the possibility of collusion on a case-to-case basis. The central question is whether the effect of the joint venture is in fact impairing competition or whether the efficiency of the joint venture offsets the harm to competition. The Competition Commission is alert to collusive conduct between joint businesses.
Therefore, a word of caution to the joint ventures that have a tendency to share too much information with each other: ensure compliance with the Competition Act and don’t share sensitive information.
Christina Sabatelli-Capelo is an attorney at DM Kisch Inc. She can be contacted at: christinas@dmkisch.com
