Opinionista Trudi Makhaya 21 April 2014

Political consensus on constraining economic power, within constraints

The problem of economic power: its concentration, its abuse and its regulation features strongly in the economic visions of the main political parties contesting the 2014 election. For the parties clustered around the centre of economic policy – the ANC, DA and Agang – there is agreement that many key sectors in the economy are dominated by too few players, and that many of these players are engaged in anti-competitive behaviour.

The regulation of the exercise of market power was pioneered by American reformers of the trust-busting era. These reformers sought to limit the negative effects of ‘concentration and combination’ as American parlance goes by instituting laws to govern collusion, abuse of dominance and mergers. Back then, the concentration of market power was condemned not only for its effect on prices, but also as a threat to democracy itself.

The EFF, naturally, does not have much to say about competition regulation. Making markets more competitive is beside the point in the face of mass nationalisation. The fighters once called on the Commission to block the acquisition of land by a Chinese company. This had more to do with its views on land ownership and not a position on merger control.

Remedying the distortions that arise from market power is, in the current South African political configuration, a centre/right project. This is not unusual. In the early days of American anti-trust law, advocacy for competition regulation came from what British politician Stewart Wood calls the progressive conservative tradition, with a Republican president, Roosevelt, declaring himself a ‘trust-buster’. This conservative enthusiasm for competition regulation is partly motivated by the fear of radicalisation of citizens, especially during periods of rapid wealth accumulation that is not shared. Better competition regulation than socialism, the reasoning goes.

But as the American economy developed along more competitive lines, and the spectre of monopolisation faded, competition enforcement loosened. It also took a more partisan approach, with Republicans showing little appetite for challenging corporate power. It’s come full circle, with the Tea Party signalling that it views competition law as a potential ally in some of its anti-establishment posturing.

The DA and Agang do not fault the core mandate given to the competition authorities by the ruling party in the competition regime it instituted from 1998. Agang’s support for competition policy derives from its desire to open up the economy be removing barriers to entry and removing limits to competition and constraints on new investment. The party would like to see lower prices for services such as mobile telecommunications, broadband and banking. The DA presents the essence of the economic problem facing South Africa today as the exclusion of outsiders by insiders with power and vested interests. Thus it sees strong competition regulation as a way to bring the outsiders into the economic mainstream by challenging anti-competitive behaviour by insiders.

The DA would like to give the Competition Commission greater powers and a bigger budget. Dr Ramphele, Agang’s leader, never tires of calling for a strong Commission. Probed by CNBC Africa on how she would do so, she suggests providing the Commission with better skilled employees and ‘teeth’.

All this might mean that competition policy is a good candidate for multi-partisan collaboration in the next five years. With new voices in Parliament, this is a good opportunity to revitalise this area of economic policy and to give it the prominence it requires. Come budget time, one expects that members of Parliament will argue for more resources to be directed to the competition authorities, in line with their manifesto promises.

It will also be important for MPs to provide sustained scrutiny and engagement with competition issues. Opposition MPs will also have to walk a fine line between their stated support for competition policy and the amendments that are likely to be proposed in the coming term, some of which might test the opposition’s tolerance for regulatory intervention. Fissures will also arise when competition policy is considered in a holistic fashion, beyond the enforcement of the law against offending firms. The DA, for instance, would like to enhance competition by breaking up and privatising certain state monopolies. This will test the ANC’s tolerance for free enterprise. DM

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