The 10th anniversary of our country`s democracy has given us much to look back on and celebrate; however, looking forward there is still much that requires serious contemplation - particularly in the telecommunications sector.
Within a broad spectrum of issues, deregulation or protection of monopolies in many sectors of business is a hot topic; the result of our current actions will determine how we reflect on this in five years to come. It goes without saying that this impact within the business community will influence many lives and the general consumer. These are precious and defining moments that will either leave industries in a state of ongoing turmoil - to the detriment of consumers - or will be looked upon by companies, entrepreneurs and consumers alike as a positive milestone.
It`s an accepted fact that telecommunications plays a key role in enabling business. It therefore follows that by lowering the cost of telecommunications, the cost of doing business will also come down, thereby stimulating industry.
Not only do we need to challenge the prevailing environment but we must also work hard at improving the system which protects our rights to freedom of choice, the mainstay of democracy, allowing people to make their own decisions to run their lives.
Anti-competitive behaviour takes away this vital democratic right that we have worked so hard to define, hurting the economy and consumers alike. Specifically in the telecommunications industry, anti-competitive practices restrict innovation, limit access to more affordable services or even prevent the introduction of better services.
Illegal in SA and most of the world, anti-competitive behaviour can be loosely defined as a business practice which prevents consumers from receiving the benefits of a competitive market.
Such behaviour includes dumping, the act of selling a product at a loss in order to drive competitors out of business, exclusionary tactics - prohibiting businesses from entering a market, price fixing - collusion between companies to ensure optimal returns, market division - collusion between companies to cut competition geographically or otherwise, tying - bundling products in such a way as to prevent opportunities for other companies selling elements of the package, competitor buy outs - buying out of competitors in order to prevent competition, and position abuse - the use of dominant market share to drive competitors out of business.
Another anti-competitive behaviour that deserves special mention is margin squeezing, in which a principle supplier forces lower margins into defined distribution channels - a practice that has been manifest in the telecommunications industry in SA. The benefits are not passed onto the consumer, yet the principle increases its profits. This results in a breakdown of markets which could result in the formation of a monopoly. The more dominant the company is in any particular industry, the more the responsibility and burden placed on it.
Competition is the pillar of capitalism providing individuals and businesses with an equal opportunity to benefit from innovation as well as providing consumers with access to competitive prices and a variety of products from which to choose. However, anti-competitive behaviour hurts the economy by artificially driving up prices - and hits consumers where it hurts the most, in the back pocket.
Of particular concern is the effect of anti-competitive behaviour on small to medium businesses (SMBs). Said to be the hope of our economy`s future and the answer to unemployment, SMBs are more vulnerable to anti-competitive behaviour and less likely to have the resources to defend against companies employing such tactics.
While preventative steps have and are being taken through SA`s Competition Act, updated in 2001, the secretive nature of such dealings often prevents any hope of the truth emerging. In those cases where evidence is available to support allegations, the process has proven to be so tedious as to present a barrier to reporting in itself. Similarly, bigger companies are able to support legal costs for the protracted process whereas SMBs - often still struggling with the effects of the behaviour - are sometimes unable to invest in appropriate action.
The general complacency of the South African population means that monopolies are allowed to exist within our economy. The end result is excessive or unfair pricing, which in turn raises inflation rates, drives up the cost of doing business and drives up the cost of living while an environment of lower levels of innovation persists.
The pressure that anti-competitive behaviour places on economies has been recognised worldwide. However, recognition without appropriate action is more damaging as it leads consumers to believe that there is no freedom of choice and therefore no effective democracy.
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