In December 2024, the South African Competition Commission (the 'Commission') published draft guidelines on the calculation of price-cost margins. RBB responded to the Commission’s call for public comments on the draft guidelines in February 2025. In March 2025, the Commission published the final version of the price-cost margin guidelines, which set out “how the Commission intends to undertake … calculations for the price-cost test” in the context of excessive pricing investigations.
An RBB team, consisting of Patrick Smith, Ricky Mann, Simon Lee and Niyam Harribhai, has prepared a paper summarising the views contained in the RBB response to the Commission’s call for public comments, which also expands on the topics that continue to be relevant following the publication of the final guidelines.
We welcome and support several aspects of the guidelines, recognising their potential to enhance transparency and certainty in the enforcement of excessive pricing provisions under the Amendment Act. Indeed, increased transparency and certainty regarding how the Commission intends to approach excessive pricing investigations can be expected to contribute to encouraging procompetitive behaviour, investment, job creation, and economic growth.
We particularly support the guidelines’ emphasis on using economic (rather than accounting) costs, the inclusion of considerations for a fair return on capital, and the Commission’s intention to assess cases individually rather than applying rigid rules. These features are likely, in our view, to contribute to more accurate and economically meaningful applications of the price-cost test.
However, we also raise concerns about certain omissions and ambiguities apparent in the guidelines. These could lead to inconsistent or unreliable outcomes if not addressed, with potentially negative implications for businesses, consumers, and the broader economy.
In practice, assessments of excessive pricing allegations are highly complex, and the outcomes of such assessments can have significant implications, both for the firms and markets that are subject to ongoing inquiries, and for other firms that might anticipate future investigations. RBB is grateful for the opportunity provided by the Commission to contribute to this important and evolving discourse.
