South Africa: competition exemptions for banking and retail property sectors to support the Coronavirus fallout
On 23 and 24 March 2020, the Minister of Trade, Industry and Competition (the “Minister”) published Regulations under section 78(1) of the Competition Act, 1998 exempting the banking and retail property sectors respectively from certain provisions of the Competition Act in order to limit the impact of the ongoing national state of disaster announced on 15 March 2020.
The Banking Sector and Retail Property Sector Regulations follow from the regulations, also published in terms section 78(1) of the Competition Act last week, granting exemption to the Healthcare Sector and introducing additional consumer and customer protections in relation to the supply of certain goods and services. All four sets of regulations have been enacted to prevent the escalation of and minimise the effects of the national state of disaster. This is especially relevant in light of the 21-day national lockdown that will occur from 26 March 2020.
We set out further detail in respect of the Banking Sector and Retail Property Sector Regulations below.
Block exemption for the Banking Sector
The Banking Sector Regulations aim to minimise the economic effects of the national state of disaster by enabling the banking sector to continue to manage the banking infrastructure and to ensure that South Africans have continued access to funds in the form of cash and credit, during the national state of disaster.
In terms of the Banking Sector Regulations, the banking sector is granted a block exemption from the enforcement of sections 4 and 5 of the Competition Act in respect of agreements or practices that are undertaken at the request of, or in coordination with the Minister or the Minister of Finance for the sole purpose of responding to the coronavirus (COVID-19) pandemic. In other words, conduct that would ordinarily be caught by the cartel or vertical restrictive practice prohibitions of the Competition Act will now be exempt for the duration of the national state of disaster.
In particular, the Regulations exempt the following categories of agreements and practices:
- Payment systems: conduct with the sole purpose of ensuring the continued operation of essential payment systems, including the availability of bank notes, essential banking services, and electronic payment services; and
- Debtor and credit management: conduct with the sole purpose of ensuring the management of debtors and extension of credit in respect of individuals and businesses subject to financial stress, including payment holidays and debt relief, limitations on asset repossession, and the extension of credit lines.
The scope of such exempted conduct must be subjected to industry monitoring, operational policies and contingency plans. In addition, the banks, along with the Banking Association of South Africa and the Payments Association of South Africa, will need to minute all meetings held between them, which must include details of any agreements or concerted practices reached for purposes of the exempted collaboration.
Block exemption for the Retail Property Sector
The Retail Property Sector Regulations aim to minimise the economic and social effects of the National State of Disaster by enabling the retail property sector to minimise the negative impact on the ability of identified retail tenants to manage their finances during and be able to continue normal operations following the national state of disaster.
In terms of the Retail Property Sector Regulations, Retail Property Landlords (including REITs, developers and letting intermediaries) and Designated Retail Tenants (effectively only South African clothing, footwear and home textile retailers, personal care service providers such as hairdressers and salons and restaurants) (as defined in the Retail Property Sector Regulations) are granted a block exemption from the enforcement of sections 4 and 5 of the Competition Act in respect of agreements or practices that are undertaken at the request of, or in coordination with the Department of Trade, Industry and Competition, for the sole purpose of responding to the COVID-19 pandemic. In other words, similarly to the banking sector exemption, conduct that would ordinarily be caught by the cartel or vertical restrictive practice prohibitions of the Competition Act will now be exempt for the duration of the national state of disaster.
In particular, the Retail Property Sector Regulations exempt agreements or practices that have the sole purpose of ensuring the survival of tenants and retail properties during the national state of disaster, limited to agreements or practices in respect of:
- payment holidays and/or rental discounts for tenants;
- limitations on the eviction of tenants; and
- the suspension or adjustment to lease agreement clauses that restrict the Designated Retail Tenants from undertaking reasonable measures required to protect viability during the national state of disaster.
The Retail Property Landlords and Designated Retail Tenants who participate in any relevant agreements or practices must keep minutes of meetings held and written records of such agreements or practices.
Both sets of Regulations further cater for the unpredictability of the current situation and provide for the Minister to expand or reduce the scope of the exemption. The relevant sectors may also make a request to the Minister to expand the scope of the exemption where additional agreements or practices necessary to achieve the purpose of the regulations are identified.
Both sets of Regulations are effective immediately. However, any person may make written submissions to the Department of Trade and Industry in respect of the Regulations, within 14 days of the date of publishing (ie, by 6 April 2020 in respect of the Banking Sector Regulations and by 7 April 2020 in respect of the Retail Property Sector Regulations).
For further information, please contact ENSafrica’s anti-trust/competition team.
COVID-19, also known as the Coronavirus, is an infectious disease caused by severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2) that was declared a pandemic by the World Health Organization on 11 March 2020. The disease has since been reported in over 190 countries.
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