The only thing certain about the Competition Tribunal’s precedent-setting ruling against South Africa’s steel monolith, Arcelor Mittal SA, is that it’s going to have far-reaching consequences. But whether it is for Mittal or the tribunal itself, remains to be seen.
If the tribunal’s novel interpretation of the excessive-pricing law is vindicated at the appeal courts, the steel giant will pay not only the tribunal’s record-breaking R700million fine but also the price of a weakened grip on the market. The tribunal ordered Mittal to stop prescribing to its customers what to do with the flat steel they buy and to open up its complex pricing structures to scrutiny.
Apart from the possibility of softer flat steel prices, South Africa will have a clear guideline about what constitutes excessive pricing — legally a controversial concept — and other super-dominant firms will have to tread carefully in future.
But Nick Altini, who fought the case against Mittal for complainant Harmony Gold at the tribunal, says the war is far from over. Apart from an appeal to the Competition Appeal Court and, after that, possibly to the Supreme Court of Appeal, certain aspects of the case might even be contested in the Constitutional Court.
The Competition Appeal Court has overturned so many tribunal rulings in the past that its chair, David Lewis, has publicly criticised the appeal process as ”a lottery”.
A competition authority insider says the disagreement stems from a difference in approach between the tribunal, which tends to view cases through the lens of government economic policy objectives, and the Competition Appeal Court, which has a more legal-technical approach.
If the tribunal’s judgement in the Mittal case is struck down on appeal, it could well swing general criticism of the South African competition regulators from the current ”slow, expensive and under-resourced” to ”dysfunctional”.
Attempts by the department of trade and industry to improve the Competition Act and strengthen the authorities certainly will gain urgency.
The chances of the tribunal’s success against an appeal by Mittal are made difficult to predict by the novelty of its approach to the question of excessive pricing.
The approach by European regulators has been to compare contested prices with those in other countries.
”Our tribunal has, in their own words, taken a novel approach by not trying to define when a price becomes excessive, but [by looking] at a price and saying, ‘Could this price be charged for any reason other than a complete absence of competition?’ If there was a competitor they would have to lower their prices considerably,” says Altini.
As evidence, the tribunal cited Mittal’s ability to charge different prices to different customers and its complex system of rebates, which customers got only if they proved to Mittal that they added value to the steel and exported it, rather than reselling it on the local market.
If the tribunal’s reasoning survives the appeal process, other super-dominant firms that apply import parity pricing could come under scrutiny. Competition watchers mention Sasol first, then Telkom, although the telecoms giant contests the jurisdiction of the Competition Commission and Competition Tribunal over its affairs, arguing that it falls under communications authority Icasa.
South Africa’s paper giants, Mondi and Sappi, are also mentioned.
The competition commissioner, Shan Ramburuth, cautions that super-dominance is an important aspect of the tribunal’s reasoning. Many such cases should, therefore, not be expected for the simple reason that there are not many super-dominant firms in South Africa, although it is possible to apply the same reasoning to small, niche markets.
But even if Mittal loses the appeal, not everyone agrees that the tribunal’s ”behavioural remedies” will have the desired effect of lowering flat steel prices. The tribunal ordered that Mittal might no longer prohibit customers from on-selling on the local market the steel they buy from Mittal at discounted rates.
Dirk Kotzé, steel industry analyst at Coronation Fund Managers, doubts whether manufacturing companies will suddenly become steel traders. He also doubts whether Macsteel International — the steel trader through which Mittal exported its steel up till now, on condition that it did not sell on the local market — will start trading locally as enthusiastically as the tribunal wants it to.
Much more effective could be the government’s recently announced attempts to set up a serious competitor for Mittal in South Africa through talks with, among others, industrial conglomerate Tata and drawing in the Industrial Development Corporation. But getting a new steel plant up and running, says Kotzé, takes a long time, perhaps even longer than a Competition Act case.