South Africa: Competition Law block exemptions nullified as National State of Disaster is terminated

Sphesihle Nxumalo, Associate, and Jarryd Hartley, Candidate Attorney, Antirust & Competition Practice, Baker McKenzie Johannesburg

In 2020, the South African Government declared a National State of Disaster in terms of the National Disaster Management Act, due to COVID-19. This declaration was followed with several interventions by government to maintain business viability and mitigate the worst of the pandemic’s effects on the economy. Amongst these interventions were various block exemptions issued by the Minister of Trade, Industry and Competition in South Africa (Minister) to aid government programmes designed to fight COVID-19. Importantly, these block exemptions applied for as long as the declaration of the COVID-19 pandemic as a national disaster subsisted, or until withdrawn by the Minister (whichever came earlier).

On 4 April 2022, President Cyril Ramaphosa announced that the National State of Disaster in response to the COVID-19 pandemic would be terminated, effective midnight, 5 April 2022. As such, regulations and directions that were made in terms of the Disaster Management Act following the declaration of the National State of Disaster are effectively repealed (with the exception of a few transitional measures). 

The 2020 block exemptions exempted agreements which were undertaken at the request of, or in coordination with, the relevant government department, for the sole purpose of responding to the COVID-19 national disaster, from the application of sections 4 and 5 of the Competition Act (excluding communications or agreements in respect of pricing (i.e. price-fixing) unless specifically authorised by the relevant minister). Parties in the relevant industries that participated in any agreements or practices falling within the scope of the block exemptions were also required to keep minutes of meetings held, and written records of such agreements or practices.

Specifically, these block exemptions comprised:

  • Block Exemption for the Healthcare Sector, effective 19 March 2020 and expanded 8 April 2020:  this exemption allowed players in the health care sector to cooperate to ensure that there was adequate capacity and stock at healthcare facilities, as well as to mitigate the effects of the disaster and ensure access to healthcare, reduction of prices and prevention of exploitation of patients. The exemption applied to a range of healthcare service providers and suppliers. 
  • Block Exemption for the Banking Sector, effective  23 March 2020: Commercial banks were granted exemption from the provisions of the Competition Act to allow them to develop common approaches to debt relief in order to mitigate the negative effect on consumers, and manage banking infrastructure and payment systems during the national disaster.
  • Block Exemption for the Retail Property Sector, effective 24 March 2020: This exemption was aimed at ensuring the survival and continuity, particularly of designated retail tenants, including small and independent retailers. The exemption enabled concerted conduct in the retail sector to minimise the negative impact on the ability of designated retail tenants, including small independent retailers, to manage their finances during the national disaster and be in a position to continue normal operations beyond the national disaster.
  • Block Exemptions for the Hotel Industry, effective 7 March 2020: This exemption was aimed at exempting parties in the hotel industry from the Act, to promote concerted conduct aimed at alleviating, containing and minimising the effects of the national disaster, and enabling the hotel industry to collectively engage with the Departments of Health and Tourism respectively to identify and provide appropriate facilities for individuals placed under quarantine, as determined by the Department of Health.

The termination of the National State of Disaster means that any agreements or concerted practices between parties in all these industries, which may contravene sections 4 and 5 of the Competition Act, will no longer be exempted from those provisions of the Competition Act, and may now attract investigation and/or penalties from the competition authorities. Parties in these industries should thus be careful to not engage in conduct which may contravene the Competition Act.

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