Lesotho has taken a significant step towards enhancing market fairness with the publication of the Competition Act, 2022. Although not promulgated, the Act seeks to regulate market dynamics effectively, ensuring fair competition and addressing the abuse of market dominance, though, among other, unfair pricing strategies. This proactive measure is expected to transform the competitive landscape by curbing anti-competitive practices and promoting economic justice.
What constitutes market dominance?
According to the forthcoming Act, an enterprise is considered dominant if it controls 30% of specific goods and services. The collective market dominance threshold is set at 60% for three or fewer enterprises. Establishing these thresholds is relevant for identifying and scrutinising potentially abusive practices that could stifle competition and negatively impact consumers.
Defining abuse of dominance
The Act outlines several factors that signify abuse of dominance. These include:
- directly or indirectly imposing unfair purchase or excessive pricing;
- limiting production, market outlets or market access thereby disadvantaging competitors; and
- engaging in discriminating dealings that disadvantage trading parties.
A relevant case study is the Sasol Oil vs. Nationwide Poles [2006] 1 CPLR 37 (CAC) (13 December 2005), a South Africa case, where Sasol was found to have abused its dominance by engaging in price discrimination. This case serves as a guidance for how such issues might be addressed in Lesotho once the Act is in force.
Exemptions and public interest considerations
The Act recognises that under certain circumstances, practices that might otherwise be deemed abusive could have compensating benefits for the public. These include promoting trade, employment, or technical or economic progress. Such exemptions are critical for ensuring that the law does not stifle legitimate business activities that are beneficial to the economy and the public.
Regulatory framework and enforcement
The enforcement of these regulations will be managed by the Competition Commission, an independent body to be established under the Act. This Commission will be tasked with investigating complaints, enforcing regulations, and ensuring that market conditions reflect healthy competition.
Conclusion
The forthcoming Act is a robust framework designed to foster a competitive market. However, the success of this framework will largely depend on the diligent enforcement of the law and the precedents set by judicial decisions. As these processes evolve, they will undoubtedly contribute to a fairer and more dynamic market environment in Lesotho.
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