2014/15 Annual Report

Competition Commission
28
Case Study 2: Hearing of the predatory pricing case against
Media 24 (continued)
In prosecuting this matter the Commission hopes to establish that
section 8(d)(iv) of the Act includes within its scope an incremental
cost standard. This requires interpreting the words “average variable
cost” (“AVC”) in section 8(d)(iv) to include incremental costs. AVC
has historically been interpreted in competition law as a short-run
measure, and is generally distinguished from incremental cost and
avoidable cost measures in literature. Media 24 is arguing that
the legislation intended AVC to have a similarly narrow meaning
in section 8(d)(iv), especially having regard to the dangers of
prohibiting pro-competitive pricing conduct. The Tribunal’s decision
on the matter was still awaited at the end of the financial year.
9.1.3. Exemption applications
The Commission received a total of four (4) exemption applications in this
financial year. Three of the applications received are in the built environment
and one in the airline sector. Four (4) exemptions were granted during the
financial year, one (1) in the healthcare sector (Case Study 3), one (1) in the
airline industry and two (2) in the finishing industry (Case Study 4).
In terms of the Act, an exemption is a tool that provides protection or immunity
for firms from enforcement action by the Commission. It also precludes third
parties from lodging a complaint in relation to the exempted conduct. There
are three broader categories of exemptions provided for in the Act:
single or category exemption (section 10(1));
exemption for Intellectual Property Rights (section 10(4)); and
exemption for professional rules by professional associations (Schedule 1).
The first step in assessing an exemption application is to establish whether the
conduct sought to be exempted constitutes a prohibited practice. If the answer
is in the affirmative, the next step of the analysis is to establish whether the
conduct is justifiable on the grounds provided for in the Act. The grounds for
single or category exemption are set out in section 10(3)(b) of the Act, which
provides for a firm to apply for an exemption if the objective of the agreement
or practice that forms the subject of the application is to:
maintain or promote exports;
promote the ability of small businesses, or firms controlled or owned by
historically disadvantaged persons, to become competitive;
change in productive capacity necessary to stop decline in an industry;
and
economic stability of any industry designated by the Minister.
The grounds for exemption for Intellectual Property Rights are contained
in section 10(4) of the Act, whereby firms may apply for an agreement or
practice, or category of agreements or practices, that relates to the exercise
of intellectual property rights acquired or protected in terms of:
the Performers’ Protection Act, 1967;
the Plant Breeder’s Rights, 1976;
the Patents Act, 1978;
the Copyright Act, 1978;
the Trade Marks Act, 1993; and
the Designs Act, 1993.
The grounds for exemption by professional associations are contained in
Schedule 1 Part A of the Act. It provides that the Commission may exempt all
(or part) of the rules of a professional association any restriction in those rules
that has the effect of substantially preventing or lessening competition in a
market that is reasonably required to maintain professional standards and the
ordinary function of the profession.
Table 3: Exemption Applications Received and Granted
Exemptions 2012-2013 2013-2014 2014-2015
Exemption applications 4 11 4
received
Exemptions granted 1 0 4