Competition Commission helps exporters navigate US tariffs with new Block Exemption

The Department of Trade, Industry and Competition (the dtic) has announced a significant regulatory measure aimed at aiding exporters as they grapple with new tariffs imposed by the United States.

This is as the US additional tariffs require exporters to coordinate their activities in developing joint infrastructure for exports, sharing of market information and coordination of activities to achieve economies of scale and efficiencies that enable them to be competitive, which may have contravened the Competition Act.

During the 19th Annual Conference on Competition Law, Economics and Policy on Tuesday, deputy minister of the dtic, Zuko Godlimpi, revealed that the newly introduced Block Exemption for Exporters will allow businesses to collaborate effectively, without contravening the Competition Act.

Godlimpi said the Competition Commission has contributed to policy changes in response to significant challenges facing the economy, from structural constraints such as energy insecurity, skills shortages, and outdated infrastructure, all of which hinder productivity and investment. 

"At the same time, businesses are forced to navigate increasingly complex and concentrated global and local markets dominated by a few powerful players, where shifting regulations and limited access to opportunities make it difficult for emerging markets to compete," he said.

Godlimpi said there continued to be deeply entrenched patterns of market dominance across sectors, where a small number of firms exert considerable control over key inputs, supply chains, as well as consumer markets. 

He said this concentration limits innovation, raises the cost of doing business, and solidifies barriers to entry - particularly for new enterprises, black-owned businesses, and SMMEs. 

"As we confront persistent challenges such as high levels of economic concentration, inequality, as well as unemployment, the Commission must remain responsive and innovative," he said.

"This includes investigating mergers and acquisitions with a lens not only in competition, but also on public interest considerations such as employment, transformation, and increasing ownership for historically disadvantaged people." 

He said part of the Commission's achievements thus far included the implementation of its Employee Share Ownership Plans (ESOPs), through which employees receive shares in the company, and which can lead to financial rewards such as dividends or capital gains. 

"In the previous administration, 75% of all ESOPs were the result of merger conditions. Other initiatives the Commission is involved in include the creation of Development Funds for increased enterprise development and market competitiveness of SMMEs and firms owned by historically disadvantaged people (HDP)," he said.

The competition body has also established Development Funds aimed at enhancing the market competitiveness of small, medium, and micro enterprises (SMMEs) owned by HDP.

A study conducted by the Commission between 2015 and 2020 highlighted the profound effects of these funds.

Four Development Funds associated with major mergers—such as Mondi, AB-InBev, PepsiCo, and Coca-Cola—were assessed. The results were promising, with a total of R1.3 billion disbursed to 1 009 beneficiaries, generating 7 797 jobs and supporting 331 SMMEs.

Godlimpi said enforcement has been an effective tool to de-concentrate and transform a sector. 

He said one of the Commission’s notable interventions involved the case against Johnson & Johnson for excessive pricing and exclusionary conduct in relation to Bedaquiline (trading as Sirturo), a drug used to treat tuberculosis.

The case was concluded with Johnson & Johnson agreeing not to enforce its patent for Sirturo, facilitating the entry of generic manufacturers. Notably, the patent was also removed in 133 other low and middle-income countries. 

"The agreement also resulted in significant savings to the fiscus, with Johnson & Johnson agreeing to reduce the Bedaquiline price it charged the state by approximately 40%," he said.

Godlimpi said the Commission's market inquiries exemplify its commitment to fostering inclusivity and competitiveness in various markets.

For instance, he said the recommendations of the market inquiry into online intermediation platforms (OIPMI) published in July 2023 achieved notable gains for small and black-owned businesses by advocating for greater visibility for smaller South African platforms to acquire customers through Google Search. 

Other gains Godlimpi mentioned included providing a more inclusive digital economy by enabling more intense competition between platforms, including through the removal of wide and narrow price parity provisions.

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