- A-Z Publications
- Journal of Economic and Financial Sciences
- Previous Issues
- Volume 4, Issue si-1, 2011
Journal of Economic and Financial Sciences - Special issue 1, August 2011
Special issue 1, August 2011
Source: Journal of Economic and Financial Sciences 4, pp 111 –112 (2011)More Less
The field of competition economics has grown rapidly around the world over the past two decades. While its roots are in industrial organisation theory, the growth has been driven by application to cases examined by competition authorities. Such cases provide economists with access to detailed data on firm conduct, the analysis of which in turn stimulates developments in economic theory.
Source: Journal of Economic and Financial Sciences 4, pp 113 –132 (2011)More Less
The creation of 'buying power' through joint purchasing agreements is often seen as positive, with direct benefits for consumers in the form of lower prices. Even where joint purchasing agreements lead to the creation of a monopsonist, economic theory suggests that the welfare effects of monopsony power depend greatly on the market context, with some economists proposing that the probability of harm in cases involving monopsony power is considerably lower than in cases of a monopoly.
Despite this view, section 4(1)(b) of the South African Competition Act classifies the 'fixing of a purchase or selling price or any other trading condition' by competitors as a per se prohibition. This implies that from a legal perspective purchasing agreements may be afforded the same draconian treatment as selling cartels. This paper considers whether this potentially punitive treatment of joint buying arrangements under section 4(1)(b) is warranted and indeed whether the equivalent treatment of joint buying and selling agreements under this section of the Act is appropriate.
Source: Journal of Economic and Financial Sciences 4, pp 133 –146 (2011)More Less
Administrative penalties are imposed in South Africa for a specified set of prohibited practices. These are typically the most egregious anti-competitive acts, and therefore the main purpose of administrative penalties is to act as a deterrent, both to the offending firm and to other firms that may consider engaging in similar behaviour. With a spate of high-profile cases resulting in fines, there has been much discussion over fines and their ultimate impact on businesses and consumers. We discuss three arguments that have been raised. Firstly, we consider whether companies simply pass the cost of their fine through to consumers in the form of higher prices. Secondly, we look at the validity of the complaint that high fines could lead to poorer competitive outcomes due to firm exit. Thirdly, we assess suggested alternative mechanisms for disbursing the fine such as paying the fine in the form of lower prices.
Source: Journal of Economic and Financial Sciences 4, pp 147 –166 (2011)More Less
When assessing whether a merger is likely to substantially prevent or lessen competition, the Competition Act, No. 89 of 1998, as amended, specifies that the Commission should assess the strength of competition by taking into account the degree of countervailing power in a market. We highlight the importance of understanding this in terms of the factors underlying bargaining power, such as the alternative sources of supply available to buyers, the alternative sources of demand to sellers, cost structures, and information asymmetries. To do this we critically compare the approach adopted by the Competition Tribunal in evaluating two mergers: Sasol/Engen and Chlor-Alkali Holdings/Botash. We find that in both cases an analysis of bargaining power should play an important part in the assessment of the effects on competition, including the identification of competitive constraints that fall within market definition.
Does import parity pricing constitute evidence of excessive pricing and what are the consequences of attempting to remedy it?Source: Journal of Economic and Financial Sciences 4, pp 167 –182 (2011)More Less
Although provisions prohibiting abuses of dominance through the setting of excessive prices have long been present under many competition jurisdictions, prohibitions have been seldom applied in practice. This is most likely due to the profound conceptual and practical difficulties in differentiating between pricing conduct that is neutral from a competition law perspective and conduct that genuinely constitutes excessive pricing, and then further problems in remedying genuine abuses. However, recent developments in South African competition policy have focussed on use of import parity pricing as a possible indicator of excessive pricing, although in our view the mere existence of import parity pricing is unlikely to be a reliable indicator of such conduct. This paper draws upon economic theory and relevant jurisprudence to provide clarity as to the circumstances under which import parity pricing might reflect excessive pricing. It then considers the prospects for effective remedies if an abuse is identified.
Source: Journal of Economic and Financial Sciences 4, pp 183 –202 (2011)More Less
The concept of a two-sided market has received increased attention in the academic literature of late. In this paper we argue that the market for call termination is an example of a two-sided market. We apply the concepts of a two-sided termination market to the current attempts by ICASA to reduce mobile termination rates through regulation. We also deal with the concepts of significant market power (SMP) and established significant market power (ESMP), and show that the traditional thinking around market power has to be adapted when one deals with two-sided markets. More specifically, we analyse these concepts by looking at the position of Cell C, a smaller player in the mobile market in SA. We show that market power (and appropriate pro-competitive remedies) in call termination markets cannot be established without considering the origination (retail) market - the other side of the two-sided market.
Source: Journal of Economic and Financial Sciences 4, pp 203 –220 (2011)More Less
There has been considerable debate internationally around the relative advantages and disadvantages of structural and behavioural remedies. In mergers which raise competition concerns, prohibition or divestiture may prevent merger efficiencies from being realised, and therefore behavioural remedies may seem attractive. However, these can prove difficult or impossible to enforce in practice. The merger approval rates of the South African competition authorities are in line with the practice of international agencies, but the number of behavioural remedies imposed is relatively high. This paper briefly considers the international literature on merger remedies before analysing South African merger decisions and making a comparison with other jurisdictions. It then presents a review of a decision made by the Tribunal in the merger between Astral Foods and National Chick in 2001, which was approved with both structural and behavioural conditions. Finally, the paper draws conclusions for the design of remedies in future.