Commercial Law Index

The Competition Appeal Court considered whether the appellant’s pricing on polypropylene (PP) constituted excessive pricing and hence contravened section 8(a) of Competition Act 89 of 1998 (the act). 

In establishing the proper interpretation of excessive pricing, the court looked at s 8(a) read with s1(1)(ix), placing more emphasis on the phrase ‘economic value.’ It considered domestic and foreign decisions and arrived at the determination that the pricing standard to be assessed should be the actual sale price and not a hypothetical price.

Regarding the economic value costing assessment, the court underscored the need to take into consideration costs that include depreciated insurance values related to capital costs; the tax effects, capital reward charges and common costs.

The court also looked at the reasonableness of the sale price when taken in relation to the economic value. It held that for s 8(a) to apply the price should be higher than economic value and should bear no reasonable relation thereto.

Acknowledging that the evaluation is a value judgement, the court rejected the Competition Tribunal’s assessment arguing that prices above economic value are not per se unreasonable. Instead, it held that conscious of the low nature of the price mark-up, there was no justification for judicial interference as this did not constitute a substantial increase.

The court thus concluded that the price did not constitute excessive pricing as required by the act. The appeal was therefore upheld.