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- Volume 11, Issue 3, 2008
South African Journal of Economic and Management Sciences - Volume 11, Issue 3, 2008
Volumes & issues
Volume 11, Issue 3, 2008
Source: South African Journal of Economic and Management Sciences 11, pp 247 –248 (2008)More Less
The new competition policy regime ushered in by the Competition Act of 1998 has stimulated a great deal of intellectual activity. We are pleased to present here selected articles reflecting on questions that have been subject to the rigorous analysis and argument that this new regime requires.
Vertical mergers - the European guidelines on non-horizontal mergers and their relevance for South AfricaAuthor Grant SaggersSource: South African Journal of Economic and Management Sciences 11, pp 249 –263 (2008)More Less
There has been a long and heated debate in the world of antitrust about the likely effects of vertical integration on competition and welfare. The publication of the European Commission's Guidelines on the assessment of Non-horizontal mergers in November 2007 has again brought this debate into the spotlight. Competition authorities find themselves faced with the complex task of balancing the potential pro-competitive efficiencies of these mergers against the concerns that, in some circumstances, vertically-integrated firms could use their presence at multiple levels of the production chain to strategically soften competition. This paper outlines the current thinking on vertical mergers as presented in the Guidelines and examines, through an evaluation of a past Competition Tribunal decision, how the South African competition authorities have handled the complexities presented by vertical transactions.
Author Nicola TheronSource: South African Journal of Economic and Management Sciences 11, pp 264 –278 (2008)More Less
During October 2005, the Competition Tribunal heard evidence on the proposed merger between two large oil companies, Sasol Oil (Pty) Ltd and Engen Ltd. During the hearing it emerged that major aspects that would determine the outcome of the matter were :
- Potential foreclosure;
- Demand growth rates of white fuel; and
Measuring excessive pricing as an abuse of dominance - an assessment of the criteria used in the Harmony Gold / Mittal Steel complaintAuthor Reena Das NairSource: South African Journal of Economic and Management Sciences 11, pp 279 –291 (2008)More Less
The Competition Tribunal recently found Mittal Steel SA guilty of abusing its super-dominant position by charging excessive prices to the detriment of consumers of flat carbon steel products. This article assesses the economic tests to be used for excessive pricing in light of the case and reviews the lessons that can be learned from the evidence required for the different tests. It discusses issues related to using profitability as a test and points out problems and pitfalls in profitability measures.
Has the conduct-based approach to competition law in South Africa led to consistent interpretations of harm to competition?Author Ryan HawthorneSource: South African Journal of Economic and Management Sciences 11, pp 292 –305 (2008)More Less
The Competition Act and certain recent decisions by the competition authorities are examined here to assess the extent to which South Africa's conduct-based approach to competition law has led to consistent outcomes in the assessment of effects on competition. This has not been the case in the assessment of anti-competitive effects among customers or resellers when a supplier accused of an anti-competitive action does not compete with its customers. An anti-competitive effect among customers or resellers is treated as anti-competitive when it arises from some form of conduct, such as price discrimination. However, it is not seen as anti-competitive when it arises from a refusal to supply, for example. Possible reasons for South Africa's conduct-based approach and this inconsistent outcome in the assessment of competition among customers and resellers, including the economic foundations of the relevant approaches and their relationship with competition law in other jurisdictions, are assessed.
Source: South African Journal of Economic and Management Sciences 11, pp 306 –321 (2008)More Less
If a financial institution (A) advances funding to another company (B) in return for non-voting preference shares in company B at par value, does that constitute a merger for the purposes of s 12 of the Competition Act, 89 of 1998 (the Act), if those preference shares comprise more than 50 per cent of the issued shares (ordinary and preference) of company B? And what if company B's articles of association provide that the holder of the preference shares may obtain a right to vote at shareholders' meetings if any preference dividend is not paid timeously, or if the preference shares are not redeemed within the agreed time? Would a provision to that effect play any role in an assessment as to whether the initial transaction constituted a merger and / or requires a further merger notification upon the triggering of company A's right to vote?
Author Chris CharterSource: South African Journal of Economic and Management Sciences 11, pp 322 –336 (2008)More Less
There is a concentration of EU and US standards in the South African economy. In addition, a number of large industries have been undergoing consolidation. As a result, the phenomenon of cross-holdings, both within and across industries, is not unusual.
In cases where the level of cross-holding falls short of joint control, the competition authorities have at times sought to apply the co-ordinated effects doctrine or some variation thereof hoping to lessen potential competition. More recently, the Tribunal has also considered the possible unilateral effects of the acquisition of a minority stake in a rival.
A number of cases has emerged that to a greater or lesser degree explores the impact of cross-holdings and cross-directorships on the competitive behaviour of the firms concerned. This paper includes a review of some of these decisions with a view to determining whether any clear policy seems likely to emerge from the competition authorities.
The authorities' approach to date, reveals an evolution from reflex suspicion to a more reasoned, fact-based outlook. Cross-holdings and directorships are treated in the same way as any other evidence relevant to an analysis of a given merger.
However, despite the Tribunal's willingness to wrestle with various economic theories, the most recent decision suggests that the acquisition of a non-controlling cross-holding in a company may not fall under the analysis of South African merger regulation at all. Should that position change, following clarification by the Tribunal or an unequivocal ruling of the Competition Appeal Court, the body of case law goes some way to indicating the type and manner of analysis the authorities will employ.
Source: South African Journal of Economic and Management Sciences 11, pp 337 –353 (2008)More Less
In February 2005 the Supreme Court of Appeal of South Africa ruled that in deciding whether firms have contravened section 4(1)(b) of the Competition Act 89 of 1998, as amended, by engaging in, for example, 'per se' illegal price fixing, the Competition Tribunal must admit evidence relating to the nature, purpose and effect of the horizontal agreement or practice in question. This article examines the economic and legal rationale, as well as the implications, for allowing an appropriate characterisation of conduct to determine whether such conduct falls within the per se prohibition. Firstly, we comment on the rationale behind the per se rule as a standard for the adjudication of certain types of conduct. We analyse a number of cases in the United States, which, post 1979, revolutionised the approach to the strict per se rule. Secondly, we examine how the per se standard is reflected in the particular structure found in section 4(1) of the Competition Act and evaluate whether it makes for a sufficiently robust application of the per se rule. Thirdly, the content of the Supreme Court decision regarding characterisation is critically examined with a view to assessing whether such characterisation is consistent with the policy objective of achieving maximum deterrence of hard core cartel behaviour like price fixing and market division. Finally, we explore and suggest (in the absence of a Tribunal decision) a possible framework, based on decision theory, for determining a method of characterisation that is consistent with the robust application of the per se standard and is in line with the Supreme Court ruling.
Source: South African Journal of Economic and Management Sciences 11, pp 354 –371 (2008)More Less
This study provides a baseline measurement for annual tax compliance costs for small businesses. An empirical study performed amongst tax practitioners to identify and measure the annual tax compliance costs for small businesses throughout South Africa revealed that R7 030 per annum is the average fee that tax practitioners charge their small business clients to ensure that their tax returns (for four key taxes - income tax, provisional tax, value added tax and employees' tax) are prepared, completed and submitted as SARS requires. From the perspective of time and cost, preparing, completing and submitting VAT returns takes the longest and costs the most. It is evident that, overall, the compliance costs are regressive : the smaller the business, the heavier the burden.
Source: South African Journal of Economic and Management Sciences 11, pp 372 –387 (2008)More Less
This study investigates the economic impact of a land tax implemented under the Local Government Municipal Property Rates Act No. 6 of 2004 on commercial farms using five case studies with five-year data sets in the Mtonjaneni and Umgeni municipal districts of KwaZulu-Natal. The case of farms' ability to pay annual rates between 0.25 per cent and 1 per cent of the value of improved land using real annual economic profit with and without rebates of up to 70 per cent proposed by the Department : Provincial and Local Government ranged from zero to five out of five years, with a mean of two out of five years. A 2 per cent land tax rate with such rebates could also be financed only in two out of five years on average. These results suggest that proposed annual land tax rates of 1.5 per cent (Mtonjaneni) or 1 per cent (Umgeni) on these specific farms would markedly reduce the incentive to invest in farm improvements.
Source: South African Journal of Economic and Management Sciences 11, pp 388 –389 (2008)More Less
Special Issue : New frontiers in strategy
A central focus of strategic management research and practice has been the development of concepts, models and tools to guide effective market-based, competitive strategies. Today, however, strategists face mounting external pressures from increasingly mobile, influential, new media savvy and demanding stakeholders.