South African Journal of Economic and Management Sciences
versión On-line ISSN 2222-3436
versión impresa ISSN 1015-8812
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.