The provisions of the South African Competition Act 89 of 1998 relating to small and medium-sized enterprises

Abstract

Small and medium-sized enterprises (SMEs) play a vital role in a country’s economy. While their contribution to the economy is widely recognised, such contribution depends on a number of factors. One of the factors is the SMEs’ ability to compete effectively and fairly participate in the market. This study critically analyses the provisions of the South African Competition Act 89 of 1998, as amended (the Competition Act or the Act), relating to SMEs to consider whether these provisions adequately ensure that SMEs have an equitable opportunity to participate in the economy. Prior to the 2018 amendments to the Competition Act, SMEs’ interests were only specifically mentioned in the purpose section of the Competition Act, the exemption provisions and the public interest grounds of merger consideration. There was no express mention of SMEs in the prohibited practice provisions. The 2018 Competition Amendment Act changed this position by reinforcing references to equal opportunity for SMEs. The existence of these provisions would, however, be meaningless unless properly interpreted. The objective of promoting SMEs has always been part of the South African competition law. However, this objective was not effectively realised, seemingly due to, among others, the influence of foreign law pursuing different competition law goals, the lack of clear prohibited practice provisions protecting SMEs, or the absence of a standard of competition harm that could fulfil the specific objective of promoting SMEs under the Act. In this regard, this study compared the treatment of SMEs under the South African competition law with that of the United States (US) and the European Union (EU), which have well-established competition law frameworks that significantly predate the current South African competition law framework. However, unlike South Africa, these jurisdictions do not expressly afford a special place for SMEs in their legislative framework. It is, therefore, submitted that a specific mention of promoting SMEs as a competition goal in the South African competition legislation has the effect of forcing the competition authorities to consider this objective in matters involving SMEs. It also compels competition authorities to accord SMEs a special place in competition considerations. Accordingly, an adequate competition law framework for SMEs in South Africa should be one that considers not only international best practices, but also the socio-economic realities of South Africa. This calls for an application of the law that promotes transformation and provides a purposive interpretation of the provisions related to SMEs. This thesis, accordingly, submits that the efficiency paradigm “protect competition and not competitors” should not apply rigidly, but it should consider the “transformative context” of the purpose of the Act, which includes the promotion of SMEs.