Market division: the penalties and remedies

Aug 20, 2015 | 2015, News

The Competition Act prohibits agreements that divide markets by allocating customers, suppliers, territories, or specific types of goods or services. For 30 years, two locksmith companies had agreed to restrict their business to the Free State and Northern Cape respectively so that neither would face competition from the other in these provinces.

In July 2015, the Competition Tribunal (Tribunal) published its reasons for prohibiting this agreement and applied the new formulae prescribed in the Guidelines for Administrative Penalties for Prohibited Practices, which took effect on 1 May 2015, to determine the appropriate penalty for their contravention. Despite the potential market division, no profits were actually derived from the conduct and the Competition Commission could not provide any proof that the conduct had an exclusionary effect. Observing that the locksmith market is also largely based on trust and customers will usually use the same locksmith, the Tribunal reduced the penalty amount by 90% and provided that if the companies placed weekly advertisements of their businesses in newspapers which circulate both in the Free State and Northern Provinces, a further 50% would be taken off the penalty amount. This was a practical means of remedying the exclusionary effect of the market division.

Read the judgment here: