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More Protection for Small Businesses and HDPs 

by Aidan Scallan, Tayla Theron

Published: March, 2020

Submission: May, 2020

 



On February 13, President Cyril Ramaphosa announced the promulgation of certain significant sections of the Competition Amendment Act, 2018, including a change to the confidentiality regime, the new buyer power provision and the new price discrimination provision.


The trade & industry minister has also published new regulations on buyer power and price discrimination. These amendments seek to support fair participation in the economy by small and medium-sized businesses (SMEs) as well as firms controlled or owned by historically disadvantaged persons (HDPs).


Key takeaways include:


  • A dominant buyer in the grocery retail, agroprocessing and online intermediation services sectors may not require from or impose on an SME or HDP supplier unfair prices or trading conditions.
  • A dominant supplier cannot discriminate on price against an SME or HDP firm, if it is likely to have the effect of impeding the SME or HDP firm’s ability to participate effectively.

COMPETITIVE EDGE


  • In relation to dominant suppliers, price difference based on quantities purchased is no longer a valid justification when selling to an SME or HDP firm.
  • Wider powers have been granted to the Competition Commission in determining whether information is co n f idential . These provisions are in force and effect from February 13 2020.

BUYER POWER PROVISION


The new buyer power provision prohibits dominant firms in the grocery retail, agro-processing and online intermediation services sectors to require or impose on an SME or HDP firm unfair prices or other trading conditions. A dominant firm is also prohibited from avoiding or refusing to purchase goods or services from an SME or HDP firm to circumvent the new buyer power provision. HDP firms that supply more than 20% of the relevant good or service purchased by the dominant buyer do not fall within the category of HDP firms to which section 8(4) applies. The factors that must be considered in establishing a contravention of the new buyer power provisions include:


  • The buyer must operate within a designated sector and be dominant within that sector in relation to the goods or services that are the subject of the complaint; The supplier must be an SME or HDP firm within the identified parameters;
  • The price or trading condition must be imposed by the buyer;and
  • The price or trading condition must be unfair. In determining the unfairness of the price, the commission may consider the prices paid to other suppliers of like goods or services and compare the magnitude of any differences in prices. Any retrospective, unilateral or unreasonable imposition of costs by the dominant buyer on the SME or HDP firm will be viewed in a negative light.

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