Competition Act, 1998 (Act No. 89 of 1998)

Notices

Purchase

5.1	The legal framework for assessing agreements on collaboration among competitors is found in section 4(1) of the Act. Section 4(1) of the Act states as follows:

“4.	Restrictive horizontal practices prohibited

(1)	An agreement between, or concerted practice by, firms, or a decision by an association of firms, is prohibited if it is between parties in a horizontal relationship and if –

(a)	It has the effect of substantially preventing, or lessening, competition in a market, unless a party to the agreement, concerted practice, or decision can prove that any technological efficiency or other pro-competitive gain resulting from it outweighs that effect; or

(b)	it involves any of the following restrictive horizontal practices:

(i)	directly or indirectly fixing a purchase or selling price or any other trading condition;

(ii)	dividing markets by allocating customers, suppliers, territories, or specific types of goods or services; or

(iii)

collusive tendering.”

5.2	Section 4(1)(a) of the Act prohibits an agreement between competitors that has the effect of substantially preventing or lessening competition, unless from the information exchanged.

5.3	Section 4(1)(b) of the Act outright prohibits an agreement that involves:

5.3.1.

the direct or indirect fixing of a purchase or selling price or any other trading condition;

5.3.2.

the dividing of markets by allocating customers, suppliers, territories, or specific types of goods or services; and

5.3.3.

collusive tendering.

5.4	The main difference between section 4(1)(a) and section 4(1)(b) is the opportunity given to parties in terms of section 4(1)(a) to put up an efficiency justification.

5.5	Section 4(1)(b) provides for an outright prohibition when an agreement results in the conduct listed under section 4(1)(b) and there is no opportunity for raising efficiency, pro-competitive or technological gains as a defence to the alleged anti-competitive conduct.