South Africa: Competition Regulation And The 4th Industrial Revolution – Finding Some Middle Ground

Last Updated: 21 August 2019
Article by Katherine Woodhouse

The advent of the 4th industrial revolution poses a dilemma for a number of regulatory bodies in South Africa and abroad.

Profanity to some and the embodiment of progress to others, the 4th industrial revolution is making its presence known, in regulatory spheres with the question now being faced by the regulatory bodies being the extent to which they should be regulating the 4th industrial revolution and the companies and markets that come from it. Recently, the Competition Commission, in partnership with the National Research Foundation, held a seminar in which its members, competition law practitioners and the general public were invited to attend panel discussions dealing with this difficult question.

Previous industrial revolutions have brought with them great societal change and accompanying legal regulations. The 4th industrial revolution is no different. The rise of technology and the internet has brought about the 4th industrial revolution which sees the fusion of technology with various sectors such as transport, medicine and financial services etc. The difficulty faced by the Competition Commission is how to regulate this wave of technology without quashing innovation. This is not an easy task, but the seminar did shed some positive light on the direction the Competition Commission wishes to take.

Composed of two panels, the seminar first engaged with a number of CEOs and management officials from various "tech start-ups" such as Recomed and Bolt SA as well as established "tech-companies" such as Microsoft. This panel provided good insight as to how different innovators viewed competition regulation. There were arguments for next-to-no regulation based on the need to facilitate growth, whilst others called for regulation in order to quell plagiarism of ideas. What was clear from all members of the panel, however, was that regulation should be minimal and efficient in order to provide tech start-ups with an opportunity to grow without having to deal with endless regulatory hurdles.

The second panel consisted of various members from different competition law regulators as well as competition law professionals. Building on what had been said by the first panel, the second panel brought into focus the international and local stance competition regulators are taking on tech-companies. In Europe, for example, there have been steps taken by the European Competition Commission to gently, but effectively, regulate tech-companies. Despite this approach, the technology sector is where the European Competition Commission is imposing the most fines. This is not surprising when considering the growth in the sector. Currently, in South Africa, there is space for tech-companies to grow and innovate. Indeed, the panellists determined that there is scope for the introduction of pro-competitive regulations.

This being said, the Competition Commission is arguably behind the curve. Technology changes quickly and regulators need to ensure that they keep up. But, encouragingly, the space in which technology related regulation currently sits fosters innovation. What the Competition Commission does need to address is the position of the established tech-companies which, depending on leadership, have the potential to either assist tech start-ups or squash them. The notion of creating a regulatory environment which fosters communal economic growth in the technology sector is one that seems to appeal to Competition Commission. However, whether they will be able to implement regulations that see competitors working together in such a manner remains to be seen.

A particularly important point for the Competition Commission to understand is that personal data held by companies is an asset. Discussions were had on the importance of the data held by many companies. Data is a commodity, an asset, quantifiable in a number of ways. From the arguments presented, it would seem that the Competition Commission has begun to appreciate just what an asset data is and what ramifications this has on the practicalities of competition regulation such as merger filings. There is now the potential for a change in the way in which mergers are measured, triggered and reviewed given the value of data.

More pertinent, perhaps, for the current social and economic realities of South Africa is the impact that technology and digitisation has on employment. In light of the recent amendments to the Competition Act 89 of 1998, which elevate the importance of public interest considerations, the effect of the 4th industrial revolution on employment cannot be ignored. These employment concerns are not new and have cropped up with the advent of every preceding industrial revolution. This particular revolution and the rise of artificial technology seems to have caused the greatest concern as many believe that jobs will disappear as machines are developed to fulfil those same jobs. This is where the Competition Commission has the potential to quash innovation by refusing a merger of a tech-company because of job loss. As with the other industrial revolutions, people will have to be upskilled and education regimes changed in order to fit the new jobs that will be created in the wake of such technological developments. Perhaps such "re-education" can be imposed as a condition of approval of a merger rather than an outright refusal. However, whether or not the Competition Commission is best placed to impose such employment policy related conditions is debatable. It is likely to be here that competition regulators face the most challenges in creating regulations which encourage tech-companies. Presently, there is uncertainty as to whether our legislation is an enabler and whether there is space for it to be.

The seminar did not answer questions so much as raise many new ones which the competition authorities must take into account moving forward. What is certainly very encouraging is the direction that the competition regulator appears to be leaning towards. There seems to be an understanding that technology and digitisation is the future the world, South Africa included, faces. With this in mind, there appears to be a drive from the competition authorities, for now at least, to promulgate regulations that give tech start-ups and tech-companies space to innovate. Encouragingly, our legislation and competition regulation framework is adaptable to allow for such regulations. This remains an exciting part of the law and certainly one to watch in the coming years.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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