27 July 2009
editorial
Johannesburg — THE South African competition authorities enjoy a hard-earned and deserved reputation as no-nonsense champions of free enterprise -- the emphasis being on the "free" part.
This is important because although the end of the Cold War illustrated once and for all the superiority of the market system over central planning, the crisis that is currently afflicting world capitalism has also made clear that markets only work for the greater good when they are well regulated, transparent and open to all.
Eradicating collusive, monopolistic and other forms of behaviour that stifle competition is therefore an essential part of the battle to restore the credibility of free market system and avoid giving oxygen to regressive forces such as the myopic advocates of nationalisation and other forms of increased state control over the economy.
SA's authoritarian, state- dominated and inward-looking past, in part a response to apartheid isolation, meant there was much for the competition authorities to do when they were established after the advent of democracy.
They have not held back.
The Competition Commission, which investigates complaints of anticompetitive activity, and the Competition Tribunal, which is called in to rule on more serious cases or where the subjects of the commission's inquiries dispute its conclusions, have chalked up some notable victories over the years and thereby done much to help corporate SA shed nasty habits.
An investigation or inquiry instigated by the Competition Commission has become an event to be avoided if at all possible, and rightly so. The system works best when companies and individual managers are acutely aware of their responsibility to comply with the regulations governing anticompetitive behaviour, and that means the threatened sanctions must be meaningful.
A case in point is fuel and chemicals group Sasol , which has gone to some lengths in recent years to get its house in order after repeatedly falling foul of the competition authorities in SA and abroad. It is doubtful it would have subjected itself to what must at times have been an extremely uncomfortable process -- especially when having to effectively report itself to the authorities and take the punishment on the chin -- if it were not for the certainty that leaving the skeletons to be discovered by the Competition Commission would be far worse.
This is one welcome sign that SA's antitrust regime is working. Unfortunately, there are also signs that there are areas where it is not working, and the manner in which these are tackled could determine whether SA's economy is able to reach its growth potential during the coming decades.
Inflation "stickiness" has emerged as an obstacle to SA's recovery from recession, leading to political pressure on the competition authorities to intensify its efforts to find the parties responsible for profiting at the consumer's expense.
There is a danger, though, that a knee-jerk assumption that the private sector is to blame could lead to wild goose chases on the one hand, and business as usual for the real culprits on the other.
There are indications that the Competition Tribunal, for one, is aware that the easy victories in the war against anticompetitive behaviour in the private sector may already have been won.
Tribunal chairman David Lewis's recent argument that the competition authorities should be given unfettered authority to regulate the telecommunications sector is an implicit acknowledgment that state- sanctioned monopolies, ineffective regulation by state agencies, and administered prices in general, are the biggest threat to efficient pricing in the local economy.
Competition Commission investigations that have been launched in recent weeks -- such as those concerning the retail, cement, construction and engineering, and credit card sectors -- are an essential part of keeping companies on their toes and may well throw up practices that should be stamped out.
But they are unlikely to live up to public expectations by uncovering the kind of abuses that will result in dramatically lower prices. In fact, it is possible that overenthusiastic intervention -- limiting retailers' power over suppliers in the interests of reducing market dominance, for instance -- could even lead to higher prices in the short term.
It is vital that the competition authorities not only avoid over-reach, but be allowed to aim at the right targets.
After many important victories, competition authorities must avoid over-reach -- and must be allowed to aim at the right targets.
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