Mathabo Le Roux
28 October 2008
Johannesburg — WHEN the Competition Tribunal made its precedent-setting ruling against Arcelor Mittal SA, the body was careful not to cast itself in the role of a regulator.
The public debate has been almost exclusively on Mittal's notorious import parity pricing model.
But wearing the hats of economists and mindful of business's aversion to heavy-handed state interference in the private sector, the tribunal came up with a more sensible approach.
It opted not to pronounce on the appropriate price level, with the tribunal's chairman Dave Lewis stating: "We cannot find that the import parity price level is an abuse of dominance, the 'wrong' or 'excessive' price level, any more than we would declare the export parity price to be the 'right' price level."
Instead the tribunal assessed the prevailing market situation.
It found that Mittal had in effect operated its own industrial policy, which led to the segmentation of the market. It did so through an intricate rebate system which favoured some customers on price, and prevented the resale of product into the domestic market. Through this practice, the group reduced steel volumes in the domestic market, and thereby artificially maintained higher -- or excessive -- prices, was the tribunal's argument.
But running like a refrain throughout last week's appeal were questions about how the tribunal had given substance to section 8A of the Competition Act. Appeals Court Judge Dennis Davis repeatedly hammered the need to read the ruling against the specifications of the act.
The section relates to excessive pricing and states that a firm is prohibited from "charg(ing) an excessive price to the detriment of consumers". In chapter 1 of the act, excessive price is defined as a price that does not bear a reasonable relation to the economic value of a product .
The a ct's definition of excessive pricing is deceptively simple. From a legal perspective an independent submission by a friend of the court (amici curiae) reduced the test for excessive price to three steps: whether the price charged was higher than the economic value of the product; whether the extent of the difference between price and value was unreasonable; and whether the price was detrimental to consumers. Because the tribunal had not followed these steps, its ruling was untenable, the amici said.
But while the legal application of section 8A of the a ct made sense, attempts to interpret the section economically would appear near impossible, Harmony Gold's senior counsel David Unterhalter complained.
Already at the amici's proposed second step -- to establish the value of "unreasonable" -- the economics of the legislation falters.
It is this quagmire that the tribunal clearly tried to avoid when it made its ruling. But it is exactly its circumvention of the woolly legalese which now threatens the antitrust body's very ruling.
Significantly, the independent submission states explicitly that the amici curiae are not economists by training but relied on standard economic texts to draft the submission.
And the amici's derision of the tribunal's interpretation of the law seems to be matched only by economists' exasperation at the requirement for a test that the law does not clearly define. At best the act leaves the interpretation of economic value and reasonable price -- or reasonable rate of return -- to the imagination of whoever interprets the law.
The opposing counsels' contempt of each other's economic expert witnesses' testimonies seemed to indicate that a multiplicity of meanings could be attached to those terms.
Unterhalter expressed some of the exasperation felt when he defended the tribunal's ruling, saying the act was "an absolute ball and chain" and in trying to say what Parliament had meant by excessive pricing "you may as well take a red pen and draw a line through (the section)".
The proceedings exposed what would appear to be fatal flaws in the legislation rather than holes in the tribunal's finding, one observer suggested.
Be the first to Write a Comment!
Copyright © 2008 Business Day. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.
AllAfrica aggregates and indexes content from over 125 African news organizations, plus more than 200 other sources, who are responsible for their own reporting and views. Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica.
