Mittal Steel South Africa Limited and Others v Harmony Gold Mining Company Limited and Another

Harmony Gold and Durban Roodepoort Deep lodged a complaint with the Competition Commission against Mittal Steel South Africa (Mittal) alleging contraventions of sections 8(a) and 8(d)(i) of the Competition Act 89 of 1998. The Commission issued a notice of non-referral and the complainants referred the matter to the Competition Tribunal. The Tribunal found that Mittal had contravened section 8(a) (charging an excessive price) by reducing the supply of flat steel products available in the domestic market through the imposition of resale conditions on steel merchants and certain customers. The Tribunal found that Mittal's practice of using import parity pricing (IPP) and withholding supply from the domestic market through a joint venture agreement with Macsteel International BV (which handled Mittal's exports exclusively) constituted an abuse of dominance. The Tribunal imposed an administrative penalty of R691,800,000 and various other orders. Mittal, along with Macsteel International BV and Macsteel Holdings (Pty) Limited, appealed to the Competition Appeal Court against both the merits decision and the remedies decision.

• Whether the Competition Tribunal correctly interpreted and applied section 8(a) of the Competition Act 89 of 1998, which prohibits a dominant firm from charging an excessive price to the detriment of consumers
• Whether the Tribunal's introduction of the concept of 'super-dominance' as a prerequisite for a section 8(a) contravention was legally justified
• Whether the Tribunal's 'structural test' and 'conduct test' approach was consistent with the Act
• Whether the Tribunal was correct in finding that excessive pricing could be established without determining actual price levels or comparing price to economic value
• Whether the Tribunal's findings regarding the joint venture agreement and resale conditions were procedurally fair to the second and third appellants
• Whether further evidence should be admitted on appeal

The decision and orders of the Competition Tribunal dated 27 March 2007 and 6 September 2007 were set aside. The matter was remitted to the Tribunal for: (a) hearing of viva voce evidence regarding matters in Leon William Price's affidavit; and (b) determination, by assessment of evidence already heard, whether Mittal contravened section 8(a) regarding prices charged for flat steel products and any consequent relief. The respondents were ordered to pay the costs of the application to adduce further evidence jointly and severally. No order as to costs was made regarding the merits hearing.

Section 8(a) of the Competition Act prohibits a dominant firm from charging an excessive price to the detriment of consumers. An 'excessive price' is defined in section 1(i)(ix) as a price that (aa) bears no reasonable relation to the economic value of the good or service; and (bb) is higher than that economic value. To establish a contravention of section 8(a), the following distinct enquiries must be made: (1) determination of the actual price charged; (2) determination of the 'economic value' of the good or service (the notional price that would result from long-run competitive equilibrium conditions); (3) a value judgment whether the actual price bears 'no reasonable relation' to the economic value; and (4) whether charging the excessive price was to the detriment of consumers. The concept of 'super-dominance' as a prerequisite for section 8(a) contraventions has no basis in the Act, which applies to all dominant firms as defined in section 7. The Tribunal's approach of deeming a price excessive based solely on market structure and ancillary conduct, without empirical determination of price levels and economic value, is inconsistent with the clear language of section 8(a) and its definition. While determining economic value and assessing excessiveness may involve difficult economic analysis, this difficulty does not permit a competition authority to avoid the statutorily mandated enquiry. Import parity pricing is not per se excessive; what matters is whether the actual price charged (however formulated) bears a reasonable relation to economic value. Where a dominant firm with overwhelming market power charges prices substantially higher than comparable competitive benchmarks (such as its own export prices or prices in competitive markets), a prima facie case of excessive pricing may be established, shifting the evidential burden to the dominant firm to justify the differential.

The court made several important observations beyond the strict ratio: (1) It acknowledged the 'substantial conceptual and practical difficulties' in assessing excessive pricing and the risk of incorrect predictions, but noted these difficulties do not permit disregarding statutory provisions. (2) The court recognized Mittal's history as a state-owned enterprise that received government support even after privatization, and noted that the Act's preamble reflects concern with excessive concentrations of ownership and control - suggesting that market power inherited from state enterprise status should not be exercised with impunity. (3) The court observed that while competition authorities should not act as price regulators in the general sense, determining whether a specific price is excessive as required by section 8(a) is different from ongoing price regulation. (4) The court noted that various methodologies may be employed to determine economic value, including: cost-based analysis; comparison with the firm's prices in other markets; comparison with competitors' prices in competitive markets; and analysis of profitability relative to competitive norms. (5) A 'fairly robust approach' may be adopted given that 'long run normal profit' is a notional concept that cannot be applied with scientific precision in adjudication. (6) The court suggested that where a price appears facially exorbitant compared to normal prices for similar products, or where a dominant firm raises prices substantially without corresponding cost increases, prima facie excessive pricing may be shown without precise quantification of economic value. (7) The court emphasized the importance of proper pleadings and notice in competition proceedings to ensure procedural fairness, particularly where remedies may affect third party contractual rights.

This is the first South African case comprehensively addressing the interpretation and application of section 8(a) of the Competition Act dealing with excessive pricing by dominant firms. The judgment provides critical guidance on: (1) the proper methodology for determining whether a price is 'excessive' under South African competition law; (2) the relationship between the statutory text and economic theory in competition law interpretation; (3) the rejection of concepts like 'super-dominance' not found in the legislative text; (4) the necessity of empirical price analysis and comparison with economic value, despite practical difficulties; (5) the caution required when importing concepts from foreign competition law (particularly EU law) without regard to different statutory language; (6) the proper role of competition authorities as distinct from price regulators; (7) procedural fairness requirements in competition proceedings. The judgment emphasizes that South African courts and tribunals must interpret the Act according to its own language and structure, not according to preferred policy approaches that lack statutory foundation. It represents an important application of purposive statutory interpretation principles while maintaining fidelity to legislative text.