Category SMMEs

South Africa: SMMEs set to benefit from the Draft Block Exemption Regulations for Small, Micro and Medium-Sized Businesses

07 September 2022 Clara Hansen, Candidate Attorney, and Angelo Tzarevski, Director Designate, Antitrust & Competition Practice at Baker McKenzie Johannesburg

At the South African Competition Commission's 16th Annual Competition Law, Economics and Policy Conference, the Minister of Trade, Industry and Competition, Ebrahim Patel, mentioned in his keynote address on 31 August 2022 that the Competition Commission intended to publish new competition regulations over the final months of 2022.

On the same day, Minister Patel published the Draft Block Exemption Regulations ("Regulations") for Small, Micro and Medium-Sized Businesses (SMMEs), after consultation with the Competition Commission. The Regulations make note of the negative impact the COVID-19 pandemic on SMMEs and highlight that the share of thriving SMMEs in the country is comparatively low and declining.

The purpose of the newly published Regulations is to exempt categories of agreements or practices relating to SMMEs from the application of sections 4(1) and 5(1) of the Competition Act 89 of 1998 ("Act"). This is to enable collaboration between SMMEs and promote the growth and participation of SMMEs in the economy.

The Regulations list the agreements and practices that will be exempt from the provisions of the Act. These include research and development agreements; production agreements for goods or for provision of services; joint purchasing agreements; joint selling prices to business customers; commercialisation agreements; standardisation agreements on technical or quality issues; collective negotiations with large buyers and suppliers; and other specified types of conduct. The list of practices includes activities that are prohibited in terms of the Competition Act, but excludes the fixing of selling prices of goods or services to end-consumers.

SMMEs that wish to implement the exemptions must notify the Competition Commission and the DTIC of the agreement or practice within 30 business days of their implementation. The SMMEs are also under an obligation to keep a record of meetings held with regards to any agreements or practices that fall within the scope of the exemptions.

The Regulations may be beneficial for SMMEs who previously had to apply for an exemption to engage in this type of conduct. Such exemption applications are generally onerous on applicants and may consume considerable time to finalise. The proposed Regulations require a less onerous obligation on SMMEs to simply notify the Competition Commission and the DTIC of the implementation of collaborative agreements or practices. The DTIC intends for these changes to impact SMMEs in a positive way by making it easier for them to compete against larger businesses in the local market.

The public now has 30 days from the date of publication of the Regulations to submit comments on the draft Regulations, by sending them to the Acting Director-General: Department of Trade, Industry and Competition (DTIC). Once finalised, the Regulations will be published in the Government Gazette, after which time they will become effective for a period of five years.

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