There are 3 main terms of the law against companies or organizations that try to monopolize an industry. The first is the U.S. term which is called antitrust law; the second is the European version which is called the competition law (formerly trade practice law); and the third is the anti-monopoly law from Russia and China. These laws ensure that the vw polo for sale in Cape Town you’ve been eyeing out is at a free-market related price.
Historically, this type of law was in existence since the Roman Empire and with global competition, the law has become a standard part of international and local trade. Ideally, the law is to set the ground rules on business fair play. Without this law, larger companies would have the greater advantage because they will be in a position to dictate industry-related forces like pricing. Appropriate to the spirit of price competition, industries have developed to aid comsumers in price comparison. A good example of the latter is www.uPrice.co.za.
GATT and The Competition Law
The General Agreement on Tariffs and Trade (GATT) is the international application of fair competition. Its main aim is to “level the playing field” so there is a fair and predictable business environment that companies, local and foreign can work with. GATT was first implemented in 1945 and then amended in 1994.
Under the 1994 GATT rules, there are 4 main rules:
- Protection of the local industry through lower tariffs and prevents quantitative restrictions
- The tariffs should be protected against sudden increases or go beyond the established bound rates for multilateral trade negotiations
- The rule of Most Favored Nation (MFN) wherein a country that grants MFN can expect the same treatment from that specific country as a reciprocal trade agreement
- The National Treatment Rule states that prices and tariffs imposed on similar imported goods should be the same as that of the local counterpart
The 3 Elements of Competition Law
The Competition Law has 3 main elements. These 3 elements include the prevention and creation of cartels, abusive behavior, and the supervision of corporate movements on mergers and acquisitions so as to prevent the establishment of monopolies.
The law also aims to protect consumer interests since it is possible for the top players in an industry to come to an agreement on pricing and/or the creation of a false shortage, among others. For example, if wheat suppliers agree on increasing their prices, it could create a situation where the consumers are left with no option but to pay the higher price even if there is ample supply and no factor that could explain the price increase. The domino effect would be catastrophic in that any product that uses wheat or its by-products will have to increase their prices to keep their net revenue unchanged.
On the other hand, the Competition Law could create a situation where companies that produce inferior products are protected unfairly and litigation would cost too much to be worth the trouble.
In this respect, every country with an antitrust law or competition law should have a governing body that monitors the implementation of the law. Ideally, this agency should be independent, transparent, and free from corruption.
Competition Law in South Africa
In South Africa, the government abides by the best international practice of free market principle. The competition though is heavily controlled even with the Competition Act of 1998 which was amended in 2009. Some of the provisions under this law include prohibitions on price fixing, collusive tendering, predatory pricing, and prior approval before mergers of key corporations in the country.
Under the amended law, there are specific details on the penalties and sanctions against key corporate executives and officers who break the law as well as protection for whistleblowers. The implementing and governing bodies for the Competition Law are the Competition Commission and the Competition Tribunal for more serious cases. There is also a Competition Appeal Court that will entertain appeals on decisions made by the other 2 offices. These 3 agencies fall under the Department of Economic Development.