Abstract
Determining whether a firm is selling below costs is not an easy task. The difficulty arises in determining the point at which low pricing becomes a predatory practice. Several competition authorities worldwide, including South Africa, have grappled with the enforcement of this conduct. Unlike many other international jurisdictions such as the European Union (EU) and the United States of America (U.S.), South Africa has had little opportunity to deal with such practice. It was not until September 2015, that the South African Competition Tribunal (Tribunal) made a finding of predatory pricing in the case against Media 24 (Pty) Ltd (Media 24), for the first time in the country’s history. However, the decision of the Tribunal was overturned by the South African Competition Appeal Court (CAC). In certain competition law jurisdictions like the EU and the U.S., predatory pricing rules and guidelines have evolved to reflect the new economic thinking, with consideration given to the recent international case laws.
This research study critically assesses the appropriate economic tests for predatory pricing in South Africa through an in-depth evaluation of the precedent setting Media 24 case. It further reviews the approach followed by the Tribunal and the CAC in the evaluation of the Media 24 case, in terms of whether their approach and findings were consistent with the international predatory pricing cases. The research question was answered through a review of economic evidence and analysis presented before the Tribunal and the CAC in the Media 24 case. Furthermore, the research examines and compares how international jurisdictions have approached predatory pricing by drawing on the EU and U.S. international case laws. The research demonstrates that the framework for assessing predatory conduct in South Africa is open to subjectivity and highly contentious. This research also demonstrates the complexities involved, particularly where a fighting brand is used to target a specific customer segment as demonstrated in the Media 24 case.
The study found that countries have not necessarily adopted the same approach to predatory pricing, with no fixed international guidelines in respect of which tests should be applied to assess the allegations against predatory pricing. The study also found that several price cost tests have been proposed. Nonetheless, as case laws have evolved, the adoption of the average avoidable cost (AAC) benchmark as the appropriate price cost test has gained momentum across several jurisdictions, including in the EU and U.S. It is important for the South African competition authorities to consider the nature of the market and South Africa’s economic history when examining predatory pricing conduct. This should also be considered on a case-by-case basis. Whatever test is chosen, it should suit the facts of the case.