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Towards a free and fair economy for all Edition 16 • June 2004 Towards a free and fair economy for all IN THIS EDITION PAGES 1-2 Putting the Putting the Brakes on Toyota Brakes on Toyota PAGES 3-4 Commission Investigates The International Automobile Industry Competition Network and Fines Toyota R12 Million Conference PAGES 4-6 The Birth of Low-cost Carriers PAGES 7-9 Mergers and Acquisitions Activity PAGES 9-11 Potential Anti-competitive Effects of Mergers PAGES 12-13 Economists Debate Policy Issues PAGE 13 Executive Appointments he public outcry over the high investigation is to establish if there are at the Commission prices of new motor vehicles, any anti-competitive practices in the industry despite the strengthening rand, that may be contributing to the escalating T led to the Commission initiating car prices. a formal investigation into car prices. This PAGES 14-18 extended to a number of sales practices, The Commission’s preliminary investigation in which if established, would be violations of dealerships, major motor vehicle manufacturers Case Reviews the Competition Act. The primary aim of this and importers of new motor vehicles throughout 1 Putting the brakes on Toyota continued... the country suggests that that the practice purchase of a new Toyota Corolla, that a not refer the complaint against Toyota to of minimum resale price maintenance is number of Toyota dealerships offer the same the Competition Tribunal for adjudication. widespread within the car industry. There is discounts on the new Toyota Corolla range. also indication that this may be a standard In addition, he reported that salespersons The Commission is of the view that the practice amongst most manufacturers and advised him that failure to implement these penalty against Toyota, and other firm(s) such importers of new motor vehicles. discount structures, would expose them to a as International Healthcare Distributors stipulated fine. (R20 million) Federal Mogul (R3 million) Minimum resale price maintenance occurs South African Medical Association (R900 000) This complaint came at the opportune time when a manufacturer imposes a minimum and the Hospital Association of SA (R4.5 million), when the Commission was still considering resale price on a dealer, thereby limiting sends a loud and clear message that the the public outcry on high car prices and an or even excluding a dealer’s ability to Commission is determined to aggressively investigation was immediately launched. offer discounts. If this practice truly exists, and fearlessly pursue any violations of Various dealerships were contacted during it really is a grave concern to the Commission the Competition Act. the investigation and in the process the that a practice so anti-competitive and Commission obtained a copy of TSAM’s detrimental to consumers can be a norm in The information in the Commission’s pricing and discount structure document. an industry. This would be particularly so possession relating to various industries, This document was circulated to all Toyota in light of the fact that such a practice is suggests that firms that have been brought dealerships and was possible proof of outrightly prohibited by section 5(2) of the to book thus far are not the only ones that Resale Price Maintenance. Competition Act. have violated the Competition laws of South Africa. It seems that industry players have The Commission decided to summons five Various statements made by the National made it a norm to disregard the laws of the Toyota dealer principals to appear before the Association of Automobile Manufacturers country, but they will surely be dealt with, Commission to be interviewed and to submit of South Africa (NAAMSA), as well as a sooner or later. Therefore the Commission copies of the abovementioned document, pattern found to be generally used in is set to conduct a thorough investigation including all possible documentation relating conducting motor vehicle sales by most for the benefit of consumers. The to the determination of resale prices. TSAM manufacturers/importers, created the Commission thus appeals to the public to then submitted all the information that was impression that a practice calculated at assist by alerting them to these harmful requested from the dealerships in the maintaining motor vehicle prices at certain activities by industry players. summonses to the Commission. The evidence proportions or levels, has apparently been found indicated that a contravention of the agreed upon, thus going against the provisions The Commission also urges industry players Act had and was taking place, meaning that of the Competition Act. who find themselves in anti-competitive the matter must be referred to the Tribunal for arrangements with their competitors to take Toyota SA to be prosecuted. Furthermore, the Commission’s investigation advantage of the Corporate Leniency Policy, indicates possible collusion amongst most issued by the Commission in February this The Toyota case would not have been the dealers, as well as price co-ordination by a year. This Policy offers full immunity from first case the Commission has referred to number of manufacturers. The Commission prosecution to a firm that has participated the Tribunal on minimum resale price is determined to uncover these practices in price fixing, market allocation or collusive maintenance. A similar case against Federal and eradicate them if they do indeed exist. tendering if such a firm is ‘first to the door’ in Mogal Aftermath in respect of spare parts Also, connected to this is the issue of blowing the whistle on other members of was referred to the Tribunal and a fine of manufacturers/importers of new motor the ‘cartel’ and co-operates with Commission R3 million, was subsequently imposed. vehicles, possibly charging excessive in a manner outlined in the Policy. The policy prices. If enough evidence surfaces on this is available on the Commission’s website However, before the case against Toyota issue, the Commission will move to nail the and at the Government Printers. alleged perpetrators. The investigation could be referred to the Tribunal, the parties entered into negotiations with the Commission could ultimately cover the entire motor The Commission is not witch-hunting, but it to settle the case without referring. A vehicle market in South Africa. is considering various other sectors for possible consent agreement was therefore concluded investigation. Relevant evidence on alleged with Toyota, in terms of which Toyota agreed The Commission’s seriousness in eradicating anti-competitive conduct will be gathered and to discontinue the practice and pay an anti-competitive practices in this industry is once uncovered, the Commission will have no administrative penalty of R12 million. The evident in the amount of administrative penalty mercy and will deal with the perpetrators consent agreement has been referred to the imposed on Toyota South Africa Motors severely. Industry players have a choice, they Tribunal for confirmation as a consent order (Pty) Ltd (TSAM). The Commission was alerted either come out themselves and change their in terms of section 58(1)(b) of the Competition by a member of the public who discovered ways or face the penalties if the Commission Act. This means that the Commission will while in the process of negotiating the uncovers them first. 2 The International Competition Network (ICN) Conference he Commissioner, Adv. Menzi staff had immediate access to some of the Simelane, recently attended best expertise available within the anti-trust the Seoul Competition Forum community. With this approach, the T and the 3rd ICN Annual Commission has been able to build technical Conference in Korea, held from 20 to 22 capacity not only at a junior staff level, but April 2004. The ICN is the international also at senior management level. network of competition authorities. It provides anti-trust agencies from developed and developing countries with a focus Role of Multi-lateral network for addressing practical anti-trust enforcement and policy issues Institutions of common concern. At this conference Adv. Simelane presented a speech entitled: The second element of technical assistance “Benefits of technical assistance, the South has been the role of multi-lateral institutions. African experience”. The following are Over time, the OECD and UNCTAD have also highlights of the speech. sent experts to South Africa to hold workshops and seminars on various key topics identified Adv. Simelane’s address reflected on by the Commission. The OECD in particular South Africa’s experience over the last has one of the best programmes in the world. five years and the critical role that The case study seminars are the single most technical assistance has played in the important form of technical assistance that creation of what, the Commission believes, can be offered, whether as a matured or young is an efficient competition law enforcement authority. General seminars on policy issues regime in South Africa. ADV. MENZI SIMELANE have also proved to be extremely popular. Commissioner Competition Commission Together with the OECD and UNCTAD, the Since inception in September 1999, and sub-Saharan region have also been Commission holds at least three of these the South African competition authorities exchanged. seminars in Pretoria every year. have received a lot of technical assistance from various agencies, on both a bilateral and multi-lateral level. Adv. Simelane Exchange Programmes Interaction with Other in particular acknowledged the following agencies for their work with the Authorities The Commission has consistently benefited Commission over the years: the ACCC, US from exchange of staff programmes with the DOJ and FTC; the Italian Competition The Commission has also benefited from FTC, DOJ, ACCC and the Norwegian Authority, Norwegian Competition Authority, general high-level interaction between its Competition Authority. Consultants from these European Union, Office of Fair Trading, staff and senior staff of other authorities, authorities stayed with the Commission for up NMA and Swedish Competition Authority.

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