Scielo RSS <![CDATA[South African Journal of Economic and Management Sciences ]]> http://www.scielo.org.za/rss.php?pid=2222-343620080003&lang=en vol. 11 num. 3 lang. en <![CDATA[SciELO Logo]]> http://www.scielo.org.za/img/en/fbpelogp.gif http://www.scielo.org.za <![CDATA[<b>Introduction to special section on competition law and economics</b>]]> http://www.scielo.org.za/scielo.php?script=sci_arttext&pid=S2222-34362008000300001&lng=en&nrm=iso&tlng=en <![CDATA[<b>Vertical mergers - the European guidelines on non-horizontal mergers and their relevance for South Africa</b>]]> http://www.scielo.org.za/scielo.php?script=sci_arttext&pid=S2222-34362008000300002&lng=en&nrm=iso&tlng=en There has been a long and heated debate in the world of antitrust about the likely effects of vertical integration on competition and welfare. The publication of the European Commission's Guidelines on the assessment of Non-horizontal mergers in November 2007 has again brought this debate into the spotlight. Competition authorities find themselves faced with the complex task of balancing the potential pro-competitive efficiencies of these mergers against the concerns that, in some circumstances, vertically-integrated firms could use their presence at multiple levels of the production chain to strategically soften competition. This paper outlines the current thinking on vertical mergers as presented in the Guidelines and examines, through an evaluation of a past Competition Tribunal decision, how the South African competition authorities have handled the complexities presented by vertical transactions. <![CDATA[<b>The Sasol/Engen (Uhambo) merger-foreclosure and white fuel demand growth rates</b>]]> http://www.scielo.org.za/scielo.php?script=sci_arttext&pid=S2222-34362008000300003&lng=en&nrm=iso&tlng=en During October 2005, the Competition Tribunal heard evidence on the proposed merger between two large oil companies, Sasol Oil (Pty) Ltd and Engen Ltd. During the hearing it emerged that major aspects that would determine the outcome of the matter were: • Potential foreclosure; • Demand growth rates of white fuel; and • Logistics. The aim of this paper is to examine how the Tribunal dealt with the issue of potential foreclosure, by examining the expected growth rates of white fuels. The Tribunal had to consider the extent to which foreclosure in the oil industry would be profitable. This depended partly on expected growth rates in the demand for petrol and diesel. It will be argued that although there was conflicting evidence on this point, a proper analysis of economic variables such as expected economic growth rates, petrol demand elasticities and income elasticities, provided sound reasons for the Tribunal to prohibit the merger. <![CDATA[<b>Measuring excessive pricing as an abuse of dominance - an assessment of the criteria used in the Harmony Gold/Mittal Steel complaint</b>]]> http://www.scielo.org.za/scielo.php?script=sci_arttext&pid=S2222-34362008000300004&lng=en&nrm=iso&tlng=en The Competition Tribunal recently found Mittal Steel SA guilty of abusing its super-dominant position by charging excessive prices to the detriment of consumers of flat carbon steel products. This article assesses the economic tests to be used for excessive pricing in light of the case and reviews the lessons that can be learned from the evidence required for the different tests. It discusses issues related to using profitability as a test and points out problems and pitfalls in profitability measures. <![CDATA[<b>Has the conduct-based approach to competition law in South Africa led to consistent interpretations of harm to competition?</b>]]> http://www.scielo.org.za/scielo.php?script=sci_arttext&pid=S2222-34362008000300005&lng=en&nrm=iso&tlng=en The Competition Act and certain recent decisions by the competition authorities are examined here to assess the extent to which South Africa's conduct-based approach to competition law has led to consistent outcomes in the assessment of effects on competition. This has not been the case in the assessment of anti-competitive effects among customers or resellers when a supplier accused of an anti-competitive action does not compete with its customers. An anti-competitive effect among customers or resellers is treated as anti-competitive when it arises from some form of conduct, such as price discrimination. However, it is not seen as anti-competitive when it arises from a refusal to supply, for example. Possible reasons for South Africa's conduct-based approach and this inconsistent outcome in the assessment of competition among customers and resellers, including the economic foundations of the relevant approaches and their relationship with competition law in other jurisdictions, are assessed. <![CDATA[<b>The battle for truth: Control and non-voting preference shares</b>]]> http://www.scielo.org.za/scielo.php?script=sci_arttext&pid=S2222-34362008000300006&lng=en&nrm=iso&tlng=en The Competition Act and certain recent decisions by the competition authorities are examined here to assess the extent to which South Africa's conduct-based approach to competition law has led to consistent outcomes in the assessment of effects on competition. This has not been the case in the assessment of anti-competitive effects among customers or resellers when a supplier accused of an anti-competitive action does not compete with its customers. An anti-competitive effect among customers or resellers is treated as anti-competitive when it arises from some form of conduct, such as price discrimination. However, it is not seen as anti-competitive when it arises from a refusal to supply, for example. Possible reasons for South Africa's conduct-based approach and this inconsistent outcome in the assessment of competition among customers and resellers, including the economic foundations of the relevant approaches and their relationship with competition law in other jurisdictions, are assessed. <![CDATA[<b>The impact of post-merger cross-shareholdings on South African merger control policy</b>]]> http://www.scielo.org.za/scielo.php?script=sci_arttext&pid=S2222-34362008000300007&lng=en&nrm=iso&tlng=en The Competition Act and certain recent decisions by the competition authorities are examined here to assess the extent to which South Africa's conduct-based approach to competition law has led to consistent outcomes in the assessment of effects on competition. This has not been the case in the assessment of anti-competitive effects among customers or resellers when a supplier accused of an anti-competitive action does not compete with its customers. An anti-competitive effect among customers or resellers is treated as anti-competitive when it arises from some form of conduct, such as price discrimination. However, it is not seen as anti-competitive when it arises from a refusal to supply, for example. Possible reasons for South Africa's conduct-based approach and this inconsistent outcome in the assessment of competition among customers and resellers, including the economic foundations of the relevant approaches and their relationship with competition law in other jurisdictions, are assessed. <![CDATA[<b>Characterising price fixing: A journey through the looking glass with <i>ANSAC</i></b>]]> http://www.scielo.org.za/scielo.php?script=sci_arttext&pid=S2222-34362008000300008&lng=en&nrm=iso&tlng=en In February 2005 the Supreme Court of Appeal of South Africa ruled that in deciding whether firms have contravened section 4(1)(b) of the Competition Act 89 of 1998, as amended, by engaging in, for example, 'per se' illegal price fixing, the Competition Tribunal must admit evidence relating to the nature, purpose and effect of the horizontal agreement or practice in question. This article examines the economic and legal rationale, as well as the implications, for allowing an appropriate characterisation of conduct to determine whether such conduct falls within the per se prohibition. Firstly, we comment on the rationale behind the per se rule as a standard for the adjudication of certain types of conduct. We analyse a number of cases in the United States, which, post 1979, revolutionised the approach to the strict per se rule. Secondly, we examine how the per se standard is reflected in the particular structure found in section 4(1) of the Competition Act and evaluate whether it makes for a sufficiently robust application of the per se rule. Thirdly, the content of the Supreme Court decision regarding characterisation is critically examined with a view to assessing whether such characterisation is consistent with the policy objective of achieving maximum deterrence of hard core cartel behaviour like price fixing and market division. Finally, we explore and suggest (in the absence of a Tribunal decision) a possible framework, based on decision theory, for determining a method of characterisation that is consistent with the robust application of the per se standard and is in line with the Supreme Court ruling. <![CDATA[<b>Annual tax compliance costs for small businesses: A survey of tax practitioners in South Africa</b>]]> http://www.scielo.org.za/scielo.php?script=sci_arttext&pid=S2222-34362008000300009&lng=en&nrm=iso&tlng=en This study provides a baseline measurement for annual tax compliance costs for small businesses. An empirical study performed amongst tax practitioners to identify and measure the annual tax compliance costs for small businesses throughout South Africa revealed that R7 030 per annum is the average fee that tax practitioners charge their small business clients to ensure that their tax returns (for four key taxes - income tax, provisional tax, value added tax and employees' tax) are prepared, completed and submitted as SARS requires. From the perspective of time and cost, preparing, completing and submitting VAT returns takes the longest and costs the most. It is evident that, overall, the compliance costs are regressive: the smaller the business, the heavier the burden. <![CDATA[<b>The economic impact of a rural land tax on selected commercial farms in KwaZulu-Natal, South Africa</b>]]> http://www.scielo.org.za/scielo.php?script=sci_arttext&pid=S2222-34362008000300010&lng=en&nrm=iso&tlng=en This study investigates the economic impact of a land tax implemented under the Local Government Municipal Property Rates Act No. 6 of 2004 on commercial farms using five case studies with five-year data sets in the Mtonjaneni and Umgeni municipal districts of KwaZulu-Natal. The case of farms' ability to pay annual rates between 0.25 per cent and 1 per cent of the value of improved land using real annual economic profit with and without rebates of up to 70 per cent proposed by the Department: Provincial and Local Government ranged from zero to five out of five years, with a mean of two out of five years. A 2 per cent land tax rate with such rebates could also be financed only in two out of five years on average. These results suggest that proposed annual land tax rates of 1.5 per cent (Mtonjaneni) or 1 per cent (Umgeni) on these specific farms would markedly reduce the incentive to invest in farm improvements.