The Basic Principle of Competition Policy

In certain cases, telecom markets are not usually competitive: they are often dominated by big suppliers who use their sheer market power to determine the forms of the market; this has adverse and detrimental consequences on the consumers. Market can be defined as either a product market or a geographic market. Market power can be abused in the product market as well as the geographic market. Because of imperfect competition in the market, national governments around the world intervene in the market economy by drafting and implementing competition policy. Some of the reasons and objectives for government interventions are:

1. To respond to market failures.
2. To limit abuse of market power
3. To preserve and stimulates the operations of competitive market
4. In certain situation, to limit foreign participation of foreign capital in order to create and cultivate domestic industry (Intven et al 2000: 5-2)

1. Behavioural intervention is when the government through a public authority attempts to transform the behaviour of one firm or group of firms through effective regulation of their activities. Examples of this are interconnection deals, price regulation or the prohibition of collusive practices.
2. Structural intervention focuses on the market structure of the industry. Examples are the intervention to prevent a merger of two major telecom companies; a network operator may be required to separate its operations into distinct corporate entities.

Two of the ways to do this is to set up an economy wide competition regulator and/or create an industry specific regulator that implements policies and manages competition in a particular sector. An economy wide competition authority uses competition law to regulate all sectors in an economy or country. A sector-specific regulator regulates one sector of the economy. While some countries such as New Zealand has long had economy-wide competition law with no sector specific regulator, others like South Africa has the two structures: a telecommunications regulator and a competition commission.

• Promote the efficiency, adaptability, and development of the economy.
• Provide consumers with competitive prices and products choices
• Promote employment and advance the social and economic welfare of South Africa
• Expand opportunities for South African participation in world markets and recognise the role of foreign competition in South Africa
• Ensure the small and medium-sized enterprises have an equal opportunity to participate in the economy
• Promote a greater spread of ownership. In particular, to increase the ownership stakes of historically disadvantaged persons and corporations owned by those persons
  (Kopel, 2000: 346-347)

The issues of competition policy in South Africa go as far back as 1955 with the Regulation of Monopolistic Conditions Act, 1955. It was reviewed in the 1970’s culminating in the Maintenance and Promotion of Competition Act, 1979. The 1979 Act was amended in 1986 to give the Competition Board further powers, including the ability to act not only against new concentrations of economic power but also existing monopolies and oligopolies. The new Competition Act was passed in 1998. The need for a new competition policy in South Africa could be located within many peculiar socio-economic and political issues. The policy and specifically the Competition Act
must be seen in the context of a historical legacy of excessive economic concentration and ownership, collusive practices by enterprises and the abuse of economic power by firms in dominant positions. It was also recognized, however, that the South African economy and society was in a state of transition, in terms of a broader restructuring of the economy, the effects of globalization and trade liberalization and the need to redress past inequality and non-participation in the national economy. A fundamental principle of competition policy and law in South Africa thus is the need to balance economic efficiency with socio-economic equity and development.  (Competition Commission South Africa, 2002)