Willemien Viljoen, tralac Researcher, comments on the competition-trade policy nexus and recent institutional developments in South Africa

The Competition Commission of South Africa aims to promote and maintain competition in South Africa, while the International Trade Administration Commission (ITAC) is tasked with administering international trade. Although the Competition Commission and ITAC are both focused on optimising the market outcomes and achieving an effective economy, there can be fundamental disparities in the policies adopted by each authority. The Competition Act guards against conduct which limits competition and harms consumers, while trade policies adopted by ITAC are often aimed at creating import tariff barriers to protect domestically produced products, at the expense of foreign imports.

This interaction between competition and trade policy is complex and may be seen to be at odds with each other. Competition policy aims to reduce the power of domestic producers by maintaining competition in the market through the investigation and evaluation of restrictive vertical and horizontal practices, abuse of a dominant position, monopoly conduct and mergers and acquisitions. Trade policy tries to ensure the market power of domestic producers (through measures to address dumping, subsidies and a surge in imports and the adjustment of customs duties) by shifting economic rents from foreign firms to the domestic governments, consumers and producers. Trade policy measures, like tariff increases can have highly uncompetitive effects due to the reduction of competition in the domestic market. Trade policy redistributes income among the different segments in the market by protecting specific industries and factors of production employed in these sectors; often protecting inefficient firms contrary to the objectives of competition policy. However, there is a progressive realisation that a degree of complementarity exists between trade and competition policy – they are built on a similar theoretical foundation, i.e. common objectives to eliminate barriers to and distortions of domestic markets. Trade policy aims to remove government created barriers to international trade, while competition policy aims to eliminate barriers created by private businesses in the market which can affect market access conditions underlying trade liberalisation.

To ensure competition and trade policy function in a complementary rather than conflicting manner a mechanism is needed to enable the regulatory authorities to consider the impact of decisions made under any of these policies on one another. Towards the end of 2015 the Competition Commission and ITAC established such a mechanism through a Memorandum of Agreement (MOA) to ensure cooperation between the authorities in areas of common interest and function, including joint education programmes, complaints and applications and merger transactions. Specifically, the Competition Commission and ITAC have agreed to:

• co-sponsor joint workshops on competition and international trade matters and to conduct joint sector research or impact study assessments on topics of mutual interest;

• make representation to each other when necessary, refer complaints or applications to one another and advise or receive advice from one another; and

• obtain input from ITAC when merger transactions involve international trade regulatory issues subject to the jurisdiction of ITAC.

However, cooperation is not always guaranteed. The MOA states that information sharing or exchanges can be denied if compliance will result in a violation of the law, there is an imminent risk to national security or compliance will interfere with an ongoing investigation with prejudice outweighing the adverse effects of a lack of access to information.

There is little detail in the MOA which relates to the practicalities regarding the cooperation, including how the exchange of information will take place, whether cooperation has to take place in each and every case related to competition or trade matters, whether the comments or advice of one authority is binding on the other, to what extent these comments or advice have to be reflected in the final determination and what weight (if any) do these comments or advice carry when all factors are evaluated. Although it remains to be seen how and to what extent effect will be given to this arrangement, the idea behind the MOA shows that authorities are becoming aware of the fact that competition and trade policy do not function in isolation.

Tell us what you think.

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Sources:

Government Gazette 11 September 2015 (Economic Development Department Notice 904 of 2015);

Cliffe Dekker Hofmeyr Competition Matters 7 December 2015 (www.cliffedekkerhofmeyr.com)