Competition Law Part 2 Flashcards
Prohibited Practices
What is a vertical relationship?
Restrictive Vertical Practices
between parties involved in different but related levels of the supply chain.
Prohibited Practices
What are the 2 types of restrictive vertical practices?
Restrictive Vertical Practices
A.General and Conditional Prohibition: -General because it is NOT against any specifically defined conduct+ is conditional in the sense that prohibition is dependant on the agreement/practice not having any benefits (technological or economic) on the basis of which it can be justified
B.Specific and Per se (automatic) Prohibition – Specific in that it is against specifically defined conduct; and per ser/automatic/straightforward in that it does not accommodate any justification
Prohibited Practices
What does sec 5(1) of the Competition Act provide for regarding General prohibition?
Restrictive Vertical Practices
Section 5(1): Prohibits ANY AGREEMENT, between parties in a VERTICAL relationship, which substantially prevents, or lessen, competition , unless a party to it can prove any technological, efficiency or other procompetitive gain resulting from it and which outweighs its anticompetitive effect
-Sec5(1)(a) prohibition is teh same as that of sec 4(1)(a)
Prohibited Practices
What does sec 5(2) of the Competition Act provide for regarding specific prohibitions?
Restrictive Vertical Practices
- Section 5(2): the practice of minimum resale price maintenance is prohibited – manufacturer setting the price at which product may be resold
The way manufacturers get around this prohibition is by having a recommended price
Prohibited Practices
What does sec 5(3) provide for regarding a minimum resale price?
Restrictive Vertical Practices
Section 5(3): However, a supplier or producer may recommend a minimum resale price to the reseller, provided the recommendation is not binding and that where the product has its price stated on it, the words “recommended price” appear next to the stated price
Prohibited Practices
What does the Federal Mogul Aftermarket Southern Africa v Competion Commission case state regarding the minimum resale price?
Restrictive Vertical Practices
The Competition Tribunal held that the Appellant was guilty of resale price maintenance and had contravened section 5(2) of the Competition Act 89 of 1998. The firm appointed inspectors to enforce the minimum resale rice which was found to be an illegal practice
Prohibited Practices
What is market power?
Abuse of dominant position
: the power of a firm to control prices, to exclude competition or to behave to an appreciable extent independently of its competitors, customers or suppliers
Prohibited Practices
What are the facts of the Wholesale Chemists v Astra
Pharmaceuticals regarding restrictive vertical practices?*
Restrictive vertical practices
The 1st and 2nd respondents were both pharmaceutical manufacturers who “outsourced” their warehousing, distribution, order-generation and debt control functions to the third respondent by means of two distribution agreements which vested the 3rd respondent with the exclusive right to distribute the products of the two manufacturers.
Their reason for doing this was allegedly to divest themselves of activities which were not part of their core business.
The claimant was a middleman, a wholesaler, which purchased the products of the two manufacturers for on-selling to doctors, dentists and retailers.
The claimant contended that the agreements were vertical agreements which would have the effect of lessening competition in violation of section 5(1) of the Competition Act
Prohibited Practices
What did the court in the ***Natal
Wholesale Chemists (Pty) v Astra
Pharmaceuticals (Pty) Ltd case state regarding restrictive vertical practices?
Restrctive Vertical Practices
-the exclusive rights given to the third respondent interposed it into the marketing chain between the manufacturer and its customers, including the claimant.
-The claimant failed to convince the tribunal that the vertical agreement would raise barriers to entry on the part of competitors to the established participants in the pharmaceutical products market.
-There were no legal impediments in the agency agreements that precluded the third respondent from distributing the products of other pharmaceutical companies.
