Welcome to the next edition of, what has become, a broad based commercial law newsletter. Today’s newsletter focuses on two matters in the field of Competition Law.
Private Healthcare Sector
The Competition Commission has recently announced that Former Chief Justice Sandile Ngcobo will chair a five-member panel leading the market inquiry into the private healthcare sector in South Africa.
According to a Money web report, this inquiry is the first of its kind, after amendments that came into effect on April 1 2013 were made to the Competition Act, granting the commission formal powers to conduct market inquiries.
For instance, it now has powers to summon people to testify or provide documents. The panel’s mandate is to prove the likely causes of “price increases and expenditures that tend to be above inflation in the private healthcare sector”. It believes that the inquiry will assist in understanding how it can promote competition in the healthcare sector. The deadline for completion of the inquiry is November 30 2015.
There is a large amount of public interest in this process and whilst the various stakeholders are to still meet to decide the process, it is possible that there may be a public consultation process.
Interesting enough, it is reported that Netcare had applied for an interdict against KPMG earlier this month to prevent it from performing any work for the commission. The hospital group is concerned that there is a conflict of interest, since the professional services firm has done strategic and consulting work for it since 2011.
Mweb, Internet Solutions, and other Internet service providers (ISPs) have called on the Competition Commission to scrutinise Telkom’s recent moves in the uncapped ADSL market.
MWeb has threatened to take on Telkom for margin squeeze tactics. In essence, ISPs have expressed anger at Telkom Internet for reducing the cost of its uncapped ADSL accounts shortly after the announcement that Telkom would be upgrading the line speeds of ADSL subscribers for free. What has caused this is Telkom’s increase in line speed and generally free doubling of clients’ line speeds.
The trouble with this is that for other ISPs to match the Telkom Internet offer and remain competitive in the market, they would all have to buy a lot more capacity on Telkom’s wholesale ADSL product, IP Connect (IPC).
Others, including Afrihost, Cybersmart, and Openweb are also calling into question whether Telkom was sacrificing profits in its Telkom Internet retail division to boost Telkom Wholesale for an overall gain for the group, while squeezing competitors out of the market. The ISPs also expressed concern that they would not be able to maintain the current quality levels of their uncapped ADSL offerings.
To make matters worse Telkom rejected a request for a 50% reduction in IPC costs, citing a number of reasons why they believe that this is not margin squeeze. He said that they have asked the Commission to investigate the matter within the context of the principles and framework set out in the settlement agreement reached between the Commission and Telkom in 2013.
Among the terms of the agreement was that Telkom had to reduce prices (particularly its wholesale rates), and functionally separate its retail and wholesale divisions.
Telkom has six months from July 2013 to implement the principles in the settlement agreement with the Competition Commission, after which an independent audit will be conducted.
Clearly there is a long road to go in this matter and one is certain that consumers as well as ISP providers will be watching this space keenly.