Moves are afoot to beef up competition policy, says Trade and Industry Minister Trevor Manuel. Reg Rumney reports
LEGISLATION in terms of the Competition Act is unbelievably weak, says Trade and Industry Minister Trevor Manuel. The Competition Board has never been taken seriously as an instrument of policy, he adds.
However, the Trade and Industry standing committee in parliament has made competition policy the top priority for 1995.
Manuel refers to the huge fines imposed recently by the European Union on cement firms involved in collusion. Those who fall foul of anti-trust laws in the United States pay damages, apart from any fines imposed. In South Africa, the cement cartel, sanctioned by the government for years, will be disbanded within two years, though Manuel’s department hoped it would disappear sooner. If the cartel is not disbanded, he says, the existing legislation means nothing.
In the past, recommendations by the Competition Board have been overruled by the relevant minister, says Manuel. From October 1 the Competition Board has reverted to the control of the Department of Trade and Industry from the Department of Public Enterprises.
Manuel’s comments come after the supreme court ruling overturning the Competition Board’s temporary order stopping Ster-Kinekor opening of its Musgrave Centre in Durban.
After investigating at Trade and Industry’s request, the board recommended the Musgrave Centre cinemas should not be allowed to open on December 2. This was overturned by the supreme court.
“We knew the relief could only be temporary,” says Manuel.
The kind of problems encountered in the Musgrave Centre saga will, it seems, crop up again. He likens it to a large supermarket chain opening in Soweto. It could be argued that the Group Areas Act kept such chains out and that the entry of a big competitor would damage existing corner shops and spaza shops.
So one issue was that Avalon cinema owner Moosa Moosa had been disadvantaged by apartheid and the opening of the Ster-Kinekor complex in the Musgrave Centre would further disadvantage him. Manuel points out the law would not allow the Musgrave cinemas’ opening to be stopped permanently.
The other issue was the vertical integration of Ster- Kinekor which imports and distributes films as well as showing those films in its own cinemas.
Ster-Kinekor MD Mike Ross has been quoted as saying that until the board completed its investigation it had undertaken to provide any films in its stable to Avalon on terms even more favourable than those on which they are screened in Ster-Kinekor cinemas.
Turning to the future, Manuel says the standing committee will have public hearings and commission research.
“We want sound competition law but we don’t want to act in a way that could be interpreted as rancour or bad for business. The monopolies and mergers commission in the UK has destroyed the competitiveness of many industries because a number of global issues have come to the fore.
“You may require large corporations on the local market to ensure you are globally competitive.”
Key issues the trade and industry standing committee will look at are the structure of pyramid companies on the Johannesburg Stock Exchange, cross-holdings between companies, board representation, and the nature of integration.
On integration the most often used example is that of building materials, Manuel says.
One company might own quarry, cement works, and the major brick fields. Also a parent company might own the main timber plantation, and own the companies that make PVC ducts. One conglomerate owns the sole manufacturer of flat glass.
“You can have effective collusion all the way through the system,” Manuel says.
“That begins to bite very deeply, especially at a time of accelerated house building programme. We need the legislative competence to deal with this.”
There are good intentions but insufficient legal power.
The programme of the standing comittee, he says, will open South Africans’ minds to what competition really is.
Some hopes have been pinned on the entry of foreign multinationals bringing with it increased competition.
But the entry of foreign competition is hampered, Manuel considers, by the perception that the market is sewn up.
“We’ve been challenged with this (by foreign investors) time and again.” It was one of the key issues in the meeting of the South Africa-US Business Committee.
Foreign investors are deterred by collusion, says Manuel, and the lack of an effective anti-trust policy does not provide the signal that there are new market opportunities.