6 months ago
65
More often than not, I get asked questions by a range of stakeholders on the essence of market inquiries in addressing the inefficiencies and anti-competitive market behaviours that may exist in certain markets.
In these inevitable conversations, I have always observed that there is an array of different interpretations of what a market inquiry is and what it seeks to achieve, of course in the context of competition regulation in SA.
This week, I have elected to share some insights on what our readers need to know about market inquiries, with a few case studies.
It is important to highlight that the Competition Commission has several tools in its toolkit that it uses to address competition concerns in local markets. These include investigations, merger reviews, advocacy initiatives, guidelines and market inquiries. Market inquiries are a powerful tool to analyse markets and gain insight into barriers that prohibit new entrants, and the competition challenges that small to medium enterprises (SMEs) and historically disadvantaged persons (HDPs) might encounter in particular industries.
The competition law empowers the commission to analyse the structure, competitive interaction, and firm conduct within a market to determine whether any features distort or restrict competition in that market. On a case-by-case basis, this exercise may not necessitate an initiation of an investigation against individual firms.
Market inquiries are different from investigations in that, while investigations target specified firms engaged in specified anti-competitive conduct, market inquiries look into any feature or combination of features in a market, which may have the effect of distorting or restricting competition without targeting anyone firm.
These features include structural features such as levels and trends of concentration and outcomes observed in those markets such as prices, customer choice, the quality of goods or services, and the conduct by any firm in a particular market. When compared to investigations, market inquiries are less litigious, inexpensive and less time-consuming.
The fundamental objectives of inquiries are to promote competition and economic transformation by addressing the concentration of markets and analysing the structure of markets. Consequently, between 2008 and 2023, the commission completed seven market inquiries that sought to address competition concerns in industries that included banking, data, grocery retail and online intermediation platforms.
In 2013, the commission initiated its first formal market inquiry under the newly promulgated amendments of the Competition Act. The inquiry into private healthcare was initiated after the reveal of cost and pricing issues in our country’s private healthcare sector.
It was found that the market is characterised by highly concentrated funders and facilities markets, disempowered and uninformed consumers, a general absence of value-based purchasing, practitioners who are subject to little regulation and failures of accountability at many levels.
It was recommended by the inquiry that a healthcare regulatory authority be established to focus on healthcare facility planning which includes licensing, economic value assessments, health services monitoring and health services pricing.
In 2015, the commission initiated another market inquiry, the Grocery Retail Market Inquiry (GRMI). This follows most of the complaints received by the commission in the retail sector relating to long-term exclusive lease agreements concluded between landlords of various shopping centres and malls.
Following the successful completion of the GRMI, we have been able to conclude settlement agreements with the major retail groups, Shoprite-Checkers, Spar and Pick n Pay, to eliminate exclusive lease agreements in shopping centres, with the hope to eliminate barriers and allow for inclusive participation by small businesses.
In 2017, the commission at the request of the ministry undertook a market inquiry into data prices, the Data Services Market Inquiry. The purpose of the inquiry was to understand the factors of the market that were the cause of high prices for data services.
To remedy these, the commission reached settlements with the major mobile network firms which resulted in prices of prepaid data bundles coming down, in some cases by more than 30%, resulting in reported savings of more than R5bn annually to customers. The settlements we have reached include reductions in tariffs by 35%-50% and extensive zero-rating of educational and government websites along with some daily free data.
In SA, all the market inquiries initiated before July 2019 produced non-binding recommendations. In response to the lack of authority by the commission to enforce recommendations of the inquiry, the Competition Act was amended to empower the commission to “take action” to remedy, mitigate or prevent an adverse effect on competition identified during the market inquiry process.
This legislative evolution has strengthened the commission's ability to bridge the economic divide that may exist in various industries while ensuring consumer welfare.
Market inquiries are an important tool through which the commission can engage with market dynamics of different industries and understand where the competition concerns are and how we can work together with other government agencies and businesses to address competition concerns in markets that will foster an environment where SMEs and HDPs can grow and expand their business whilst consumers will have fair prices and access to different suppliers.
- Makunga is spokesperson for the Competition Commission of SA.
