Mercantile Law

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Browsing Mercantile Law by Author "Brits, Pieter"

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    The efficiency defence in South African competition law: application and recommendations
    (University of the Free State, 2012) Marais, Adam Johannes; Kitching, Karlien; Brits, Pieter
    English: Economic efficiency is used as a proxy for the social welfare of a country's citizens and therefore it is held that if the efficiency of a country improves, so will the social welfare of its citizens. The efficiency of markets determine a country's overall efficiency and social welfare and as a result, the purpose of Competition Law has generally been to increase the efficiency of a county's markets. The efficiency of markets in turn, is increased by competition and therefore, Competition Law is generally aimed at maintaining and promoting competition, which is also the case in South Africa. Stated differently, efficiency is the purpose of Competition Law and competition the vehicle by which efficiency is enhanced. Central to Competition Law is the concept of the “efficiency defence.” In terms of the efficiency defence, efficiencies are used to justify conduct that limits competition within a relevant market (anti-competitive conduct). The general presumption is that anticompetitive conduct is detrimental to efficiency. This is not always true and in some instances anti-competitive conduct may in fact result in increased economic efficiency. The efficiency defence is the tool used to justify anti-competitive conduct in circumstances where limiting competition will result in increased economic efficiency. Despite the obvious flexibility the efficiency defence provides to competition authorities in their quest to enhance the efficiency of an economy, most jurisdictions have been reluctant to accept efficiencies as a defence against anti-competitive conduct. The South African Competition Act is still in its infancy and as a result, there are a number of grey areas pertaining to its interpretation and application. One of these areas of uncertainty pertains to the interpretation and application of the efficiency defence in South African competition matters. To date, the competition authorities have only once interpreted the efficiency defence and that was in the merger between Trident Steel (Pty) Ltd and Dorbyl (Pty) Ltd, more than 11 years ago.1174 This study contributes to the legal certainty pertaining to the interpretation and application of the efficiency defence in South African competition matters by making certain recommendations on its interpretation and application. These recommendations are based upon a comparison between South African, US and EU Competition Law jurisprudence. In addition, all recommendations are in line with contemporary economic theory, which functions as the validating criterion. The principle recommendation of this study is the recommendation that the consumer welfare standard should be employed in South African competition matters instead of the total welfare standard currently employed. This recommendation is based upon the South African economic environment which includes high levels of market concentration and high price mark-ups in the manufacturing industry. The implications of using the consumer welfare standard will be that the burden of proof to discharge in the efficiency defence is much higher than it is under the total welfare standard. The reason being that under the consumer welfare standard consumers have to benefit from efficiencies for them to be able to justify anti-competitive conduct whereas it is not the case under the total welfare standard.