Sasol - Nationwide Poles
21 April 2005
In April 2003, Nationwide Poles, a small pole producer based in the Eastern Cape and customer of Sasol Carbo Tar, submitted a complaint to the Competition Commission alleging that Sasol Carbo Tar was a dominant supplier of creosote and that its pricing policy was discriminatory.
In November 2003, following its investigation of the complaint, the Competition Commission found in Sasol Carbo Tar`s favour and issued a notice of non-referral in respect of the complaint.
Nationwide Poles then referred its complaint to the Competition Tribunal. Early in April 2005, the Tribunal concluded that the relevant market was the creosote market and not the broader wood preservative market. It found that Sasol Carbo Tar was dominant in the creosote market and that it had discriminated on the basis of price between large and smaller customers such as Nationwide Poles. In interpreting the Competition Act, the Tribunal found that it was not a requirement that Nationwide Poles prove that this price discrimination had an anti-competitive effect in the relevant market. The effect of this judgment is accordingly that prohibited price discrimination may be found to exist even in the absence of proof that volume based discounts adversely affect competition in the relevant market.
Sasol has studied the ruling of the Competition Tribunal and has carefully considered the implications which flow from its finding that volume discounts by large firms are not permissible, even if such discounts do not have an anti-competitive effect in the relevant market.
There are potential repercussions if large firms, particularly firms with world-scale domestic production facilities, are unable to offer a reasonable volume discount to customers which do not have an anti-competitive effect in the relative market. This is a common global business practice. Consequently, it is anticipated that the ruling of the Tribunal could have unintended negative effects on the trading relationships between companies throughout the country. It is also probable that outlawing pricing approaches which incorporate fair and reasonable trade and settlement discounts, that encourage growth and economies of scale, will run counter to common international pricing norms. Over time, it is possible that this could adversely impact investment decisions by local companies, where the achievement of scale is critical for adequate financial returns. Foreign direct investment could also be affected.
Sasol is cognisant of the need to foster the development of small businesses to address challenges such as job creation and economic transformation. It is submitted, however, that it is essential that a suitable balance is maintained in the pricing practices and trading dynamics between suppliers and customers, particularly where large capital investments are required at an upstream level to enable downstream activity and expansion.
As a result, Sasol wishes to announce that it has decided to appeal against the ruling of the Competition Tribunal. By doing so, Sasol wishes to establish clarity with regards to the future of pricing and related matters that could have a significant impact on how business is conducted in South Africa.
The Group Communications Manager of Sasol, Mrs Marina Bidoli, emphasised that `this appeal is not aimed at Nationwide Poles, which is one of our many valued customers. It is aimed at obtaining clarity on how firms such as Sasol should interpret competition legislation and conduct their businesses in the best interests of all stakeholders.`
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