Prior to the enactment of the Competition Act 2022, Lesotho had no competition law or overall competition regulator. Article 40 of the SACU Agreement provides for the adoption of competition legislation by every member state and cooperation between member states in competition law enforcement. Lesotho thus, enacted the Competition Bill with the objective of improving the regulation of investments and meeting the SACU requirements. The Competition Act prohibits anti-competitive behaviour such as price-fixing and collusion between competitors and the abuse of dominance. The Act also provides for a merger control regime in terms of which the prior approval of the competition commission must be obtained for certain mergers.
Competition policies are about applying rules to make sure that companies and/or businesses compete fairly with each other. It encourages enterprise and efficiency, creates a wider choice for consumers and helps reduce prices and improve quality. Lesotho passed the Competition Bill in September 2022. The South African competition law differs from it in that the focus is not purely on competition issues, but also on certain public interest and social goals, such as the promotion of small businesses, the interests of employees and black economic empowerment.
Objectives and main operative provisions of the Competition Act
The purpose of the Act is to promote and maintain competition in the marketplace in order to: promote the efficiency, adaptability and development of the economy; provide consumers with competitive prices and product choices; curb anti- competitive practices and promote transparency in domestic markets.
Prohibited practices
Generally speaking, the Act prohibits any agreements, decisions and concerted practices restricting competition between undertakings. The competition principles also include control of mergers over certain thresholds. The Act prohibits outright any agreement or concerted practice between competitors which results in direct or indirect price fixing, allocation of markets between competitors or collusive tendering. Also prohibited is the setting or maintenance of minimum resale prices. To continue with these practices, parties must apply for an exemption.
Abuse of Dominance
In competition law, a dominant position refers to a position of economic strength that an entity holds, making it capable of controlling the relevant market independently from any or a combination of the following: competitors, customers, suppliers, or consumers. According to the Act such dominance is determined and exists if; 30% or more of goods and/or services are supplied or acquired by one enterprise and 60% or more of the said goods and/or services are supplied by three or fewer enterprises or are acquired by three or fewer enterprises.
A dominant enterprise may not engage in the following practices: predatory pricing by directly or indirectly charging excessive prices or other unfair trading conditions; refuse access to an essential facility; limiting or restricting production, market outlet or access, investment, technological progress and technical development;
engage in exclusionary acts, such as: applying dissimilar conditions to equivalent transactions with other traders.
Horizontal agreements
These agreements are agreements between actual or potential competitors who operate at the same level of production or distribution in the market. They are prohibited to the extent that they directly or indirectly fix a purchase or selling price and other trading conditions; divide markets by allocating customers, suppliers and territories, or specific types of goods and services; bid rigging. Bid rigging is allowable if and when any party interested in the tender is informed of the horizontal agreement beforehand.
In the transport sector however, the board sets the fare price and price setting of commuter fares in passenger transport inhibits competition. Price regulation is anti-competitive and limits the workings of the market to establish a fair price.
Vertical agreement
A term used in competition law to denote agreements between enterprises at different levels of a supply chain. For instance, a manufacturer of consumer electronics might have a vertical agreement with a retailer according to which the latter would promote their products in return for lower prices. Such agreements are prohibited to the extent that they involve resale price maintenance. An exception is if the supplier recommends a price and clearly stipulates that it is a recommended price and not binding.
Enforcement
The Competition Commission must investigate complaints of prohibited practices as provided for in the Competition Act and adjudicate. Enterprises may appeal and refer their disputes in the Competition Tribunal for final adjudication. If the said enterprise is still aggrieved by the decision of the Tribunal, they may, within thirty (30) days of the decision or order lodge and appeal at the Commercial Court.
Mergers
The Act stipulates that the Commission shall review and must be notified of all mergers and acquisitions. A merger typically occurs where one or more enterprises directly or indirectly acquire or establish direct or indirect control over the whole or part of the business of another enterprise.
The most common types of merger transactions include the sale or acquisition of assets or shares in an enterprise and the amalgamation of two or more enterprises. In terms of the Act, Parties must notify the Commission at any time before the implementation of the transaction. In its analysis of merger transactions the Commission evaluates the competitive impact (whether the transaction substantially prevents or lessens competition in the market), efficiency gains and public interest issues that arise from the merger. The public interest issues that the Commission takes into consideration are the effect of the merger on a particular industrial sector or region; employment; and the ability of national industries to compete internationally.
Since the privatization and deregulation of public enterprises and some SOEs in Lesotho, economic activity will be stimulated because restrictions for new businesses will be eliminated in order for them to enter the market, which will increase competition. Since there is more competition in the market, it improves innovation and increases market growth as businesses compete with each other.
An effective competition law is critical to ensuring that the benefits of deregulation are not undermined by private anti-competitive conduct, and anything less than strong enforcement of that law by an independent competition law enforcement authority can leave significant scope for anti-competitive behaviour to flourish, thereby seriously impeding the shift to competition.
Competition is meant to ensure smooth functioning of the markets, guaranteeing a fair and transparent system for all enterprises. Which is the main objective of the Competition Act.