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Small things and the bigger picture


Feb 5th, 15:05

Commentary on the fledgling tuk-tuk taxi services launched in Johannesburg recently raises some relevant topics under the Competition Act. 

Commentary on the fledgling tuk-tuk taxi services launched in Johannesburg recently raises some relevant topics under the Competition Act.

The tuk-tuk issue is centered on innovative transport services which offer the consumer a cheap ride on call to destinations at R5/km and at no more than 40km/hour in a tiny, partially uncovered vehicle. Tuk-tuks are used prolifically in many cities throughout the world.

Regulatory strictures aside, reportedly tuk-tuk operators have experienced a positive consumer response to their services, with the result that some operators have increased their vehicle fleet by some 400% in less than a year and have more expansion plans in the coming months which include extending the service to other cities and towns.   The idea must deserve accolades on several counts, for innovation, for small business establishment, for creating  employment and for offering the consumer a safe and cheap taxi service.

All of these good things are in line with the purpose of the Competition Act.  But the tuk-tuk taxi service has been labeled "unhealthy competition" for other transport services, such as mini busses, metered taxis and buses on the basis that tuk-tuks "encroach" on the "legal routes" of the other taxis.  It turns out that only the routes used by busses are regulated, whilst the minibus routes reportedly have been developed and demarcated by competing operators and rival mini bus taxi associations.

Clearly, known taxi routes must have efficient consequences, also a pro-competitive ideal, as customers know where they can catch a ride without calling a taxi, public transport has been made available to more customers as new routes are carved out and vehicles can be filled effectively.  It is expected that profitable markets will attract new competitors to share in the good fortunes, and, in the normal course, successful initiatives can only be protected by upped performance to outshine competition. Incumbents should not rely on intimidation, political influence, exclusionary conduct or concerted action to beat opponents.  For example, to establish and maintain exclusivity on taxi routes through arrangements between competitors or their associations in the absence of regulation could be collusive market allocation under the Competition Act, unless such conduct is exempt under or excluded from the ambit of Competition Act, and to require of competitors to stick to industry practices could exclude competitors and limit competition.

When may competitors take a legitimate collective stand under the Competition Act?  Collective bargaining under the Labour Relations Act is allowed as is collective action for a non-commercial socio-economic purpose.  Exemption may be granted by the Competition Commission if the competitor collaboration promotes exports, allows small businesses to become competitive, stays a decline in an industry due to capacity changes, an industry deserving exemption as may be designated by the Minister of Trade and Industry, or if related to the exercise of IP rights.  Regulated conduct under other statutes could also fall outside the scope of the Competition Act.  The bases for exemption under the Competition Act are few and it is not often that competitor collaboration has been shown to meet the statutory measures.

Important is that the Competition Act whilst promoting small businesses to become competitive, does not exempt any small business from compliance. Any competing firms that seek to work together in a way that could transgress the Competition Act, must first apply for and obtain exemption, before doing so.



at Cliffe Dekker Hofmeyr

Petra Krusche is a director in Cliffe Dekker Hofmeyr's Competition practice. She is involved in all aspects of that field of law and has gained a good understanding of the FMCG sector through work for firms in FMCG retail and supply....