Last week the Competition Commission announced an investigation into high new car prices. In February it recommended a R3,7-billion fine for Telkom’s anti-competitive bandwidth policies.
It has stopped price-fixing in the health industry and also helped reduce the cost of patented anti-Aids drugs, finding that GlaxoSmithKline and Boehringer Ingelheim had been charging excessive prices and had prevented patented drugs getting to those who needed them.
It’s been quite a year. Do we finally have a watchdog with teeth?
I would say we’ve always had teeth.
Let’s talk car prices first. What prompted the investigation into what is an old problem — that car prices don’t come down when the rand strengthens?
There was a public outcry, especially after a Sunday Times story, and a lot of people started calling the commission asking if we could do something.
An attorney lodged a complaint against Toyota and we investigated. But it’s not only Toyota — we’re going to look at the whole of the industry and see what’s happening there, and what might be affecting prices.
Does it take an individual to catalyse an investigation?
If the public knows what companies should not do, it will be able to pick up the problems. It should update itself on competition law and report anti-competitive practices. Otherwise it’s unlikely we will pick it up. We look at the implications of the Act — if the market’s competitive, it benefits the consumer even more.
You’re investigating “retail price maintenance” — how does this affect consumers?
In simple terms, if that practice exists, a manufacturer of a car would sell the car to a dealer, but say to the dealer you can’t sell it below this amount. It doesn’t matter how efficient you are as a dealer and whether you can offer larger discounts — retail price maintenance means you can’t do it. We have no problem with manufacturers recommending prices, but they cannot impose them.
In the Toyota case, dealers were fined. If you’re a consumer, it means you can’t negotiate a discount larger than those set by manufacturers. This means it’s not the market that makes a price, but individuals. The price, therefore, is not a reflection of costs.
Toyota paid R12-million. Is that an admission of guilt? Who does the money go to and what guarantee is there that future Toyota buyers will pay a more reasonable price?
The R12-million is an administrative penalty — the company says “we understand what we have done and we will no longer do it”. They decided to cooperate and paid R12-million — the fees go to the National Revenue Fund.
The Minister of Finance must be happy!
[Laughs]
This month, Telkom launched a High Court action against the commission, saying it did not have the capacity to fine the company R3,7-billion for anti-competitive bandwith policies. Telkom argued that the only regulator who can do so is the Independent Communications Authority of South Africa (Icasa). Your response?
We will wait to hear what the High Court says. Icasa has jurisdiction to deal with competition matters, but the Competition Act creates concurrent jurisdiction — it means we can look at competition matters across all sectors and that we can investigate any matter that relates to competition. We’ll continue doing that and we will investigate any sector.
The Competition Act created a new framework, which means we can investigate, the Competition Tribunal is the only court that can decide on the merits of competition issues. Any decision that people are not satisfied with can only be appealed to the Competition Appeal Court — another specialised court.
Sometimes your findings can have unintended consequences. For example, the decision to stop medical aid schemes, doctors and hospitals from setting reference price lists means that there are now no benchmarks. This means that nobody knows what to charge and this has resulted in some confusion.
That’s only in the short term. The point is that medical practioners should not coordinate their pricing, though there may be a reference list on how much can be charged. We’ve encouraged the associations to commission independent people and entities to do the research and produce a guideline. An independent person doing that and practitioners using that is fine. We have a problem with them as competitors sitting together and deciding prices — that amounts to collusion, where consumers do not have a choice in terms of prices.
What’s next on your investigation check-lists: the banks, the cellphone companies? Where are the weak links in the chain of competitiveness?
We are not witch-hunting, but we are looking at all industries. We don’t want uncompetitive practices to become the norm in industry.
Is there a danger of the commission becoming a victim of its own success — that the better you do, the more malfeasance comes to light? Do you have the resources for large-scale investigations?
We are improving our skills. If the market operates the way it should, we should not need huge resources. Where resources are short, we’ll ask the minister for more.