The Competition Commission recently granted an association of squid export firms exemption to share information on the export of Loligo Reynaudi, locally known as Chokka squid. The exemption is positive news for squid exporters and the local fishing industry which has fallen on hard times.
South African squid is not intended for local consumption and is exported mainly to Europe. Even though year-on-year, the entire catch of squid is exported, South African squid still makes up a negligible portion of this global resource.
In recent years, squid catches in South Africa have been at an all-time low. In an already depressed environment, exporters were faced with challenging market circumstances where, amongst others, customers would challenge exporters on their quoted price based on claimed market information. Due to an absence of credible and current market information, exporters were unable to make informed business decisions.
Whilst the Commission found that exemption is necessary to promote and maintain squid exports and that exemption would lead to pro-competitive outcomes, it set stringent conditions which need to be met before information can be shared. These conditions relate amongst others, to the types of information shared, time periods for sharing and the method of sharing. Information shared between competing exporters will thus be on a strict basis only and up-to-date records of any exchanges will need to be kept.
The granting of exemption under the Competition Act, No 89 of 1998 (Act) can be difficult to achieve, as it can only be considered on four public interest grounds, in line with the purpose of the Act. It is also one of the corner stones of the Act to guard against collusive conduct which essentially results in collusive outcomes. Agreements to collude are prohibited outright in terms of the Act and firms engaged in anti- competitive conduct may not offer any justification for their conduct, however well-intended it may be.
An agreement could facilitate express or tacit collusion through the sharing of competition sensitive information. These situations typically arise where information shared increases transparency and firms could become better acquainted with the market strategies of their competitors. A collusive environment could be fostered through the exchange of relevant information.
However, information sharing can also generate a number of pro-competitive results. It solves problems of information asymmetry from a supply and demand perspective, helps firms to manage inventories and is helpful in dealing with unstable markets. Information sharing of aggregated data is unlikely to be problematic from a competition perspective, as they have a limited coordinating effect, but can still be usefully employed to benchmark performance. Similarly exchanges of historical information or publicly available information and information dissemination on legal and regulatory requirements are generally not viewed as problematic.
In granting the exemption to squid firms, the Commission was cognisant that the exemption would generate pro-competitive effects for South Africa in a global market and demonstrates that competition policy in a complex area of information exchange needs to be considered carefully so as not to discourage pro-competitive information sharing.