Challenges of the New Competition Law

• Jurisdiction: South Africa
• Date: 25 May 2019
• Author: Kenneth Creamer
• Citation: (1999) 11 SA Merc LJ 342
• Published date: 25 May 2019
• Pages: 342-362

Challenges of the New Competition Law

KENNETH CREAMER*

Member of the Competition Board**

1 Background and Purpose

With the recent finalisation of the new competition legislation in

Parliament in the form of the Competition Act 89 of 1998, this article

reflects upon the detail of the new legislation with an eye on the following

two seminal questions:

•

How do various economic theories inform the new competition

legislation and how will these guide practices under the new law,

including the regulation of market structure, coherence with industrial

and development policy and mechanisms for effective enforcement?

•

Given the participation of various interest groups in the formulation of

the new legislation, what projections can be made as to how these

groups will attempt to advance their positions through the new

competition legislation?

The

main substance

of this article is a broad overview of the theoretical

issues at play in the legislation and an outline of the kinds of pressures

from social actors which the new competition authorities are likely to

face.

Its main value,

it is hoped, is to be found in its attempt to outline some

of the challenges which the new authorities will face during the

'implementation phase' of the legislation. But, it may also be of some

use for those who wish to get a feel for the policy considerations, and

lobbying pressures, which informed the choices reflected in the

legislation.

Its main challenge

is to reside in the nexus between law and economics

and as such it challenges both lawyers and economists to engage in

interdisciplinary discourse. Just as competition law requires economists

to consider how the law can be used more efficiently and appropriately in

regulating economic behaviour for optimal social outcomes, it requires

that lawyers engage with economic concepts.

2 Theoretical Frameworks for Competition Policy

In order to develop a theoretical understanding of the role of

competition legislation, it is useful to begin with a brief outline of the

intellectual streams and currents which can be found threading their way

* BA (Econ Hons) LLB LLM (Wits). Advocate of the High Court of South Africa.

** At the time of writing this article, the author was Research Co-ordinator in COSATU's

Parliamentary Office.

342

(1999) 11 SA Merc LJ 342

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NEW COMPETITION LAW



343

through most debates on competition and anti-trust policy. The following

schools are identifiable:

1

•

the Structuralist School;

•

the Industrial Policy/Evolutionary School;

•

Critical Legal Studies School;

•

the Chicago School;

•

the Nihilist School; and

•

Game Theory analysis.

The

Structuralist School

places emphasis on the interaction between

market structure and collusive business practices of firms which enables

them to exercise market power and persistently earn excess profits. This is

based on the postulate that firms operating in oligopolisitc industries with

large market share are more likely to agree or have greater latitude in co-

ordinating their output-pricing policies. The Structuralists view allocative

efficiency as being important but also hold income distribution and

decentralisation of aggregate concentration as valid objectives of

competition policy. This could include an interventionist policy directed

towards pursuing multiple objectives and eliminating business practices

which create 'artificial' barriers to competition.

The

Industrial Policy/Evolutionary School

argues that, as an economic

institution, the competitive market system is founded in and has evolved

away from the nineteenth century view of capitalism. The competitive

market is no longer viewed as the most efficient institution domestically,

and even less so in the light of global competition. The experience of

twentieth-century development is that in order to assure social economic

welfare, the state must play a developmental role and guide improved

performance by the market. It is argued that a closer integration of

business and government is required given the technological inevitability

of massive firm size. Competition policy should be implemented with

caution as it has the potential to hinder domestic firms' ability to compete

against foreign firms and ascend from operating in national to

international markets.

The

Critical Legal Studies School,

whose arguments are often Marxist

in origin, view competition policy in terms of class interests, requiring

that the economic calculus should explicitly included an analysis of who

wins and who loses as a result of the operation of competition policy. A

difference between the stated and real objectives of competition policy is

perceived as competition policy operates to legitimise the exploitation of

the powerless. Even where it is acknowledged that competition laws are

enacted in the broad public interest, the frequent failure to implement

these laws is questioned. This failure is perceived to be in the interest of

This material is drawn from a technical paper prepared by Shyam Khemani for the OECD

Secretariat entitled

Objectives of Competition Policy

(Saffe/CLP (92) 2) and dated March 1992, at

6. This paper draws from D Audretsch's work

The Four Schools of Thought in Anti-trust

Economics

(1985).

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