The Competition Commission has issued the Price Discrimination and Buyer Power Guidelines, which are aimed at achieving more fairness for emerging entrepreneurs and small businesses.
The objective of the buyer power provisions is to enhance the participation of small and medium-sized enterprises (SMEs) and the firms of historically disadvantaged persons (HDP) in the economy by protecting these firms from unfair exploitation by dominant buyers of their products.
The publication of the final guidelines on the Buyer Power Provisions provides clarity to both dominant buyers and suppliers as to how the new legislation will be enforced by the commission.
This includes not only unfair pricing and trading condition provisions, but also avoidance provisions, whereby it is a contravention to avoid buying from designated suppliers in order to avoid the application of fair treatment under the buyer power provisions.
The guidelines are likely to evolve as the commission gains experience in the enforcement of the provisions, but also as precedent is set within the Competition Tribunal and Appeal Court.
The regulations deal with buyer power and price discrimination in terms of Section 8(4) and Section 9, respectively. following the Amendments to the Competition Act.
The new buyer power provisions prohibit a dominant buyer in designated sectors from imposing unfair prices or trading conditions on SMEs or HDP firms.
The new Section 8(4) of the Act came into operation on January 6, 2020, and Ministerial Regulations were gazetted on February 13, 2020, setting out the factors and benchmarks for determining whether a price or trading condition is unfair.
The Ministerial Regulations also designated the sectors to which the new buyer power provisions will apply, namely the agroprocessing, grocery wholesale and retail, e-commerce and online services sectors.
According to competition commissioner Tembinkosi Bonakele, who welcomed the release of the guidelines, “the buyer power provisions present an opportunity for SMEs or HDP firms to effectively participate in the economy without undue hindrances as a result of abuse of market power by dominant buyers”.
He explains that this is an important step towards the realisation of a growing and inclusive economy in South Africa and adds that these guidelines “also come at an important time when the commission is seeing such participation in the economy under threat from the Covid-19 crisis”.