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27 November 2008

The Competition Amendment Bill

The purpose of the Competition Amendment Bill is to strengthen the existing provisions of the Competition Act in fighting collusion (complex monopolies) and cartels which undermine competitiveness of downstream industries and rob consumers.

This Bill introduces a criminal sanction regime against individuals found guilty of causing a firm to engage in price fixing, output restriction, market allocation and collusive tendering. An individual may face up to ten year imprisonment or pay a fine of R500 000 or both. This severe penalty serves as a signal that cartel activities will not be tolerated, and those involved in this harmful practice will be severely punished.

The Bill improves on market inquiry provisions which allow the Competition Commission to proactively investigate markets and increase market transparency by enquiring on impediments to competition which results in consumer harm. The Bill also improves the interface between competition law and policy and sector regulation by demarcating distinct responsibilities and providing framework for sound cooperation. This will remove unnecessary regulatory burden and uncertainty whilst ensuring better functioning of our markets.

The measures adopted herein show government commitment in promoting effective competition policy as part of its overall economic and regulatory framework which should work along with other policies such as industrial policy and trade policy.

Furthermore, this Bill seeks to promote better private sector market governance through promoting greater compliance with the law and adoption of sound business ethics. For effective implementation of policy and law, it is critically important to continuously monitor compliance and provide adequate resources for enforcement.

Consumer Protection Bill

The Consumer Protection Bill seeks to create and promote an economic environment that supports and strengthens a culture of consumer rights and responsibilities, whilst through the measures adopted herein, it seeks to promote fair, efficient and transparent market place for consumers and business. The primary purpose of the Bill is to prevent consumer harm and enhance economic welfare of consumers in South Africa. To achieve this, the Bill adopts a rights based approach aimed at asserting consumer rights when transacting with suppliers. This approach is internationally recognised and is based on the UN adopted consumer rights.

These include the right to product safety and quality, right to fair and just contract terms, right to cancel consumer agreements and long-term contracts, right to buy bundled goods separately, right to receive documents that are written in plain and understandable language, enhancing consumer choice by requiring disclosure and information with regards to prices, as well as the right to refund and warranties.

The Bill provides for a system of product liability, where any producer, distributor or supplier will be liable for any damage in the form of death, injury, loss or damage to property and economic loss to the consumer or third party. The Bill promotes consumer activism by providing for accreditation of consumer groups for lodging complaints on behalf of consumers and provide for possible financial support for activities such as consumer advice, education, publications, research and alternative dispute resolution through mediation or conciliation.

The Bill provides for the establishment of the National Consumer Commission to investigate consumer complaints whilst the National Consumer Tribunal will adjudicate over violations of Consumer Protection Act. The courts will adjudicate on all contractual matters and confirm consent orders concluded with suppliers.

Consumers drive competitiveness and economic growth. Well informed consumers stimulate innovation, better quality product and service, and competitive prices. As we embark on a campaign to educate consumers about the rights afforded by this Bill, it is important that we equally raise awareness on the responsibilities that consumers have for effective implementation of this Bill. This aspect complements the principles of the competition policy, which is also concerned with promoting efficiency, and competitiveness of our markets.

The Companies Bill

The Companies Bill is aimed at overhauling the current Companies Act, 1973. The Bill is a result of consultations with various stakeholders and that lasted a period of five years. The Bill is a complete departure to the philosophy that informed the Companies Act, 1973 and is a complete overhaul of the old regime in this area of the law.

The need for a review of the existing company law regime was necessitated, by amongst others, outdated company legislation, globalisation and advent of democracy, scourge of company scandals, developments in the field of financial reporting standards, need to ease regulatory burden especially for small businesses, increasing market transparency and simplification of company registration and maintenance.

Major provisions of the Bill are as follows:
* Corporate finance and corporate governance
* Transparency and accountability
* Business rescue
* Institutions and agencies

The Bill emphasises simplification of registration of companies and alleviates overregulation on companies.

Corporate Governance and Financial Governance

Companies, large and small, will be required to prepare annual financial statements. This should be so to encourage sound financial management, to ensure sustainability of companies of all sizes, and to comply with other regulatory requirements. However, regulatory burden will be reduced by exempting certain categories of companies from having annual financial audited or reviewed and there would be differential reporting standards, namely, small companies will comply with less onerous standards. The Financial Reporting Standards Council (Council) responsible for the formulation of financial standards will consult nationally and internationally on financial reporting standards and advise the Minister for issuance.

The Bill encourages shareholder activism, for instance, shareholders will appoint audit committee as a subcommittee of the board. The Bill also provides that demand for a meeting must be supported by 10% of the voting rights. This will therefore enhance minority protection as they will be able to demand convening of meetings with ease when they are aggrieved.

To ensure sound corporate governance, common law duties of directors are incorporated in this Bill and courts are given powers to further develop jurisprudence based on the common law and the tenets of this Bill. Companies will not be allowed to indemnify directors should they be found to be in breach of their duties.

Access to information

Access to information as enshrined in our Constitution Act and the Bill of Rights is also the cornerstone of this Bill. In interpreting and applying the Bill, the Bill must seek to promote the spirit and purpose of the Bill of Rights of our Constitution. In this regard, trade unions will have the right to access of financial statements of a company, but only for the purposes of exercising their right for business rescue process. However, such access to information will be given by the Commission under stricter conditions in order to respect business secrecy and confidential information. Members of the public will have access to company records. In cases of disputes, the tribunal will facilitate access to these records without going to the pains of going to courts.

Business Rescue Process

The Bill introduces the concept of "business rescue" process, which is a departure from the judicial management currently existing. There is no doubt that rescuing the company that is in financial distress is in the best interest of a company, the workers, creditors and the economy as a whole. The purpose therefore is to be able to rescue a company before it gets to liquidation stage. This Bill will also result in a crop of new professionals in the area of business rescue. It is hoped that business rescue process will be a success as various stakeholders are involved during the consultation process.

Creation of institutions and coming into force of the Act
Laws are judged to be good when the implementation strategy is in place and effective. In this regard, regulations will be drafted and relevant stakeholders will be consulted, proper institutions such as the Commission of Companies and Intellectual Property, Companies Tribunal and the Financial Reporting Standards Council will be formed before the Bill comes into legal force.

Issued by: Department of Trade and Industry
27 November 20083