Introduction
In my previous article of 8 September 2022 titled “Competition Act and implications on mergers and acquisitions” I covered how the Competition Act (Chapter 14:28) (“the Competition Act” or “the Act”) applies in the case of mergers as they are defined in the Act. In this article I cover how the Act applies to restrictive practices.
Definition of restrictive practices
Section 2(1) of the Competition Act defines restrictive practice to mean (a) any agreement, arrangement or understanding, whether enforceable or not, between two or more persons, or (b) any business practice or method of trading, or (c) any deliberate act or omission on the part of any person, whether acting independently or in concert with any other person, or (d) any situation arising out of the activities of any person or class of persons, which restricts competition directly or indirectly to a material degree, in that it has or is likely to have any one or more of the following effects:
- restricting the production or distribution of any commodity or service,
- limiting the facilities available for the production or distribution of any commodity or service,
- enhancing or maintaining the price of any commodity or service,
- preventing the production or distribution of any commodity or service by the most efficient or economical means,
- preventing or retarding the development or introduction of technical improvements in regard to any commodity or service,
- preventing or restricting the entry into any market of persons producing or distributing any commodity or service,
- preventing or retarding the expansion of the existing market for any commodity or service or the development of new markets therefore,
- Limiting the commodity or service available due to tied or conditional selling.
Application to Commission for authorization on restrictive practices
- This is covered in section 35 of the Act. Section 35(1) requires that any person who proposes to enter into, carry out or otherwise give effect to any agreement or arrangement or engage in any practice or conduct which he considers may be prohibited, restricted or otherwise affected by this Act shall apply to the Commission for its authorization of such agreement, arrangement, practice or conduct.
- There is a penalty in terms of section 35(3) for making a wilful false statement.
Power of Commission to investigate restrictive practice
According to section 28 (1) of the Act the Competition and Tariff Commission may make such investigation as it considers necessary:
- into any restrictive practice which the Commission has reason to believe exists or may come into existence,
- in order to ascertain into any type of business agreement, arrangement, understanding or method of trading which, in the opinion of the Commission, is being or may be adopted for the purpose of or in connection with the creation or maintenance of a restrictive practice;
Orders by Commission on restrictive practices
According to section 31(1) of the Competition Act if the Commission is satisfied, having regard to the matters referred to in section 32, that any restrictive practice which exists or may come into existence is or will be contrary to the public interest, the Commission may make any one or more of the following orders in respect of that restrictive practice:
(a) Prohibiting any person named in the order, or any class of persons, from engaging in the restrictive practice or from pursuing any other course of conduct which is specified in the order and which, in the Commission’s opinion, is similar in form and effect to the restrictive practice;
(b) Requiring any party to the restrictive practice to terminate the restrictive practice, either wholly or to such extent as may be specified in the order, within such time as is specified therein;
(c) Requiring any person named in the order, or any class of persons, to notify prices to the Commission, with or without such further information as may be specified in the order;
(d) Regulating the price which any person named in the order may charge for any commodity or service:
Provided that the Commission shall not make any such order unless it is satisfied that the price being charged by the person concerned is essential to the maintenance of the restrictive practice to which the order relates;
(e) Prohibiting any person named in the order, or any class of persons, from notifying persons supplying any commodity or service of a price recommended or suggested as appropriate to be charged by those persons;
(f) Generally, making such provision as, in the opinion of the Commission, is reasonably necessary to terminate the restrictive practices or alleviate its effects.
Conclusion
It is advisable to approach the Commission for authorization in the event of restrictive practices.
Disclaimer
This simplified article is for general information purposes only and does not constitute the writer’s professional advice.
Godknows (GK) Hofisi, LLB(UNISA), B.Acc(UZ), CA(Z), MBA(EBS,UK) is a legal practitioner / conveyancer, chartered accountant, corporate rescue practitioner, registered tax accountant, consultant in deal structuring and business valuer. He is also a director with Investacare International (Private) Limited. He writes in his personal capacity. He can be contacted on +263 772 246 900 or gohofisi@gmail.com
