This blog was co-authored by Adriaan Lourens, candidate attorney.
In response to President Donald Trump’s recent imposition of steep tariffs on South African imports into the United States, local exporters may be exploring ways to mitigate the negative impact on their businesses. One appealing strategy might be for local businesses to collaborate, by sharing costs, agreeing selling prices or otherwise coordinating efforts to lessen the financial burden of these tariffs. However, such arrangements are likely to be scrutinised as anti-competitive conduct under the Competition Act.
The Competition Act prohibits agreements or concerted practices between competitors that substantially prevent or lessen competition in a market, unless the pro-competitive benefits outweigh the anti-competitive effects. More significantly, the Act outright prohibits agreements between competitors that involve directly or indirectly fixing prices or trading conditions, dividing markets by allocating customers, suppliers, territories, or types of goods or services or collusive tendering.
The Competition Commission has consistently taken the position that import and export cartels, arrangements where competing firms coordinate their import or export activities, are unlawful under the Act, even where they have little or no impact on the domestic market. In fact, in ANSAC v Competition Commission, the American Natural Soda Ash Corporation (ANSAC), a consortium of US soda ash producers, coordinated export sales to various countries, including South Africa. Although ANSAC argued that its arrangement generated cost savings and allowed it to offer lower prices to South African customers than independent conduct would have, it was held by our Competition Authorities that, under the South African Act, such conduct is per se prohibited and cannot be defended based on pro-competitive or efficiency gains.
South African exporters should be aware that ANSAC continues to be the position in South African law and that any conduct falling within the ambit of prohibited conduct will be considered a contravention of the Act, potentially attracting high penalties and even criminal liability, irrelevant of impact on local markets. This stands in stark contrast to the American Webb-Pomerine Act, which specifically does allow USA exporters to form associations to coordinate their activities in foreign markets, with the justification being that USA based firms need mutual support to counter the economic power of dominant foreign buyers.
Despite this, the South African Competition Act does provide a potential avenue for relief. It allows firms to apply for an exemption from the application of the section in the Act regulating agreements between competitors. An exemption can be obtained if such firms can demonstrate that the agreement contributes to one or more of the following objectives:
- the maintenance or promotion of exports;
- the promotion of competitiveness for small businesses or firms controlled or owned by historically disadvantaged persons;
- a necessary change in productive capacity to prevent industry decline;
- the development, growth, transformation, or stability of an industry designated by the Minister of Trade, Industry and Competition; or
- competitiveness and efficiency gains that promote employment or industrial expansion.
Importantly, it can be seen from this list that the Act specifically allows for the consideration of maintenance or promotion of exports. Obtaining such an exemption requires a rigorous application process, and the onus is on the applicant to show that the agreement does not unduly harm competition while delivering meaningful economic or public interest benefits. In the current economic climate, South African exporters may have a strong case that certain forms of collaboration are necessary to maintain access to key export markets, safeguard jobs, and stabilise industries that are particularly exposed to the new US tariffs. The Minister has also signalled the government’s willingness to support affected industries, which may also weigh in favour of granting exemptions in appropriate cases.
Firms interested in understanding this legal position better can reach out to Marianne Wagener at Norton Rose Fulbright.
Link to case law: