Every few months, in an innocuous gazette notice, the Competition Commission announces a new market inquiry into an industry in which it says it believes there might be factors that distort, restrict or impede competition.
On the other side of these dull bureaucratic notices is an industry about to be subpoenaed, investigated and made to spend millions explaining its business practices.
The latest announcement of a market inquiry into the poultry industry left Chris Schutte, the CEO of SA’s biggest chicken producer, Astral, “flabbergasted”.
The poultry industry has been loss-making or recording minuscule profit margins. But despite pressures of load-shedding and water-shedding it ensured there were no shortages of chicken during the bird flu outbreak by importing hatchable eggs at great cost. It must now shell out more money to explain itself in an inquiry.
Market inquiries, while costing the industries that are being scrutinised millions, also cost taxpayers money.
The inquiries probably contributed to the legal fees of the commission, which rose 37% to R80m in 2023. Consultants cost it R16m last year, up from R11m the year before. However, that is not why the market inquiries have become more concerning.
Since 2019, the commission has possessed the ability to make binding recommendations on any industry it hauls before it.
The question being asked by some lawyers is whether the commission is usurping the role of parliament by regulating industries through inquiries.
In terms of the constitution, law making is the prerogative of parliament, which holds public hearings and is staffed by elected representatives.
But a handful of economists and lawyers at the commission now have the power to tell any industry it chooses to investigate on vague grounds how to do business, especially regarding small and black suppliers.
Sell shares
Without having to prove firms have a monopoly or broke the law by abusing their dominance — a previous bar for serious intervention — the commission can hold an inquiry on suspicion of competition issues. It can then conclude by asking shareholders to divest of their business interests.
The commission instructed a group of estate agents to sell their shares in the website privateproperty.com after the online platforms inquiry, the first with binding powers.
In the same inquiry it told Google how to label sponsored content and forced it give away free advertising to small players. It also told Apple how to display SA apps on its app store and directed Takealot to split divisions.
This ironically leaves the local loss-making e-commerce retailer more vulnerable to giant Amazon as it enters SA.
At least two firms are appealing the findings of the online intermediation platforms inquiry. They could suggest that the commission is regulating sectors of the economy by proxy.
Surely, it cannot be left to administrators, including trade, industry & competition minister Ebrahim Patel’s staff and overeager economists, to dictate how varied industries should run and who can own what?
The commission is investigating the ailing steel sector, the ailing newspaper and online media sector, fruit and vegetable suppliers and now the poultry industry. Most of these industries can ill afford witch-hunts.
Market inquiries are not about breaking up a monopoly or ensuring good competition, which is great for consumers. They appear to be about extracting concessions for small business from big business — even if it is loss-making.
The poultry industry better hope the commission doesn’t force it to divest from operations, change contracts or give away intellectual property free because it can.
Anyone interested in democracy should also be concerned about the poultry inquiry. An administrative body has gathered enormous power to make rules for large parts of the economy, despite not being elected representatives.
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