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State acts against abusive practices – but does not walk-the-walk

State acts against abusive practices – but does not walk-the-walk

The Department of Trade, Industry and Competition (dti) recently invited public comment on draft regulations aimed at protecting small business against abusive practices by either dominant suppliers or customers.

According to Minister Ebrahim Patel, the provisions would provide small business with remedies against price discrimination by dominant firms; or when dominant buyers abuse their power by imposing unfair prices and other trading conditions.

A good starting point for the dti may be to look at the protection the monopolistic steel producer AMSA enjoys, with the approval of the dti/ITAC (International Trade Administration Commission). Protecting AMSA by means of customs- and safeguard duties, at the expense of the steel downstream, is simply a form of institusionalised price discrimination.

AMSA’s pricing policy discriminates against small business and does not correspond with the global norm. AMSA’s asking price for steel is pegged at the maximum and, whereas large corporations are able to negotiate a discount on bulk purchases of up to 15 percent, small business does not have that advantage. Whereas corporations potentially have the luxury, notwithstanding the duties, to import steel, small businesses cannot take advantage of that opportunity. This arrangement, in its entirety, discriminates against small business.

The dti can also amend the scope of the Competition Act, 89 of 1998, to include the activities of bargaining councils. The activities of bargaining councils - as far as the extension of agreements between big business and trade unions to mainly SMMEs are concerned - are cartel-like and anti-competitive. It is for this reason that these activities are specifically excluded from the scope of the Competition Act. 

This is a case of extreme institutionalised inconsistency, or, at the very least, of the state undermining its own principles.

This is a press release by Gerhard Papenfus, Chief Executive of the National Employers’ Association of South Africa (NEASA).

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