THE GUNSTONS BLOG

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Do companies really agree to drive prices up? And what is price fixing anyway?

The US Department of Justice recently published a statement in which it detailed that 29 companies had been involved in price fixing and bid rigging in relation to the supply of automotive airbags and steering wheels to the automotive industry in the US. A fine of $ 26 million dollars was imposed.

Price Fixing – international ripple effects

What is interesting about this case is that most of the guilty suppliers were based outside the US but were supplying parts for the assembly of motor vehicles in the US and thereby driving up the cost of motor vehicles in the US, which in turn impacted a large number of US consumers. The South African Competition Commission, last week, joined its US counterparts and announced its own investigation into the same companies found guilty in the US and supplying the same parts to South African automotive industry.

Price Fixing

South Africa is also no stranger to price fixing and collusion by cartels (just think of the recent price fixing cases against bread and construction companies). Due to South Africa’s particular history our economy is concentrated in the hands of a few large companies and individuals. State owned companies as well as some privatised state entities like Sasol, South African Airways, Telkom, Mittal Steel, Postnet and Transnet still have dominant market shares in their particular industries.

Price Fixing – understanding abuse of dominance

There is nothing wrong in terms of South African competition law with a company being dominant but it is the abuse of that dominance that is prohibited.

It is important for businesses of all sizes to know what rights and obligations exist under the abuse of dominance provisions of the Competition Act and over the next couple of weeks we will be publishing a series of short articles explaining the practical application of these provisions.

Image Courtesy this website.

Janine Nainkin - Guest Blogger

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