Competition Law – Superheroes & Super Dominance
10/06/2009

It does not happen very often, but sometimes, in the enforcement of competition law, complex jargon is used to describe particular anti competitive conduct or a particular approach to the interpretation and application of competition law.

First, it was the concept of “bright lines” used in the context of mergers and acquisitions which had competition law practitioners and clients alike slightly confused as to the exact meaning thereof.

Just recently, the term “super dominance” was used in relation to excessive pricing in the matter of Mittal Steel South Africa and others v Harmony Gold Mining Company Limited and others. Prior to the use of the term “super dominance” the writer was under the impression that once a firm was dominant it was dominant - no “super powers” were attributable to the firm.

In the Competition Tribunal’s decision that Mittal Steel was guilty of excessive pricing the term super dominance was introduced into a test to determine excessive pricing which the Competition Appeal Court has recently found (29 May 2009) not to be supported by the Competition Act.

As the first part of the Competition Tribunal’s excessive pricing test, called the “structural test” it was stated that the market share of the firm concerned would have to be approaching 100 per cent and the market would have to be uncontested and incontestable. For this to happen a firm did not have to be merely dominant, it had to be super dominant. Upon satisfaction of this part of the test, one would then have to engage in the “conduct test” requiring one to determine whether the super dominant firm engaged in conduct abusing the structural opportunities by imposing excessive prices.

The Competition Tribunal, using its test, found that Mittal’s conduct of reducing the supply of steel products in South Africa by imposing resale conditions resulted in the charging of an excessive price.

Like all superheroes having a nemesis, so too does “super dominance” in the context of South African competition law – a proper construction of the Competition Act. The Competition Appeal Court held that the concept of “super dominance” did not find support in the Competition Act and that the relevant sections of the Competition Act call for the making of certain distinct enquiries which did not include the Competition Tribunal’s test.

Whether or not Mittal is guilty of excessive pricing remains to be seen, since the Competition Tribunal has now been tasked in determining the existence of excessive pricing in accordance with the interpretation and steps set out by the Competition Appeal Court. What can be said with some certainty is that South African competition law now has a fairly clear guide on how to go about establishing whether a price charged by a dominant firm is excessive or not.
Alexis Apostolidis
Partner
Alexis-a@adamsadams.co.za