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The Color Blue

In:

Submitted By SHawwtyglo09
Words 1160
Pages 5
The South African Competition Act of 1998, implemented on 1 September

1999, establishes a range of criteria for evaluating mergers and company

practices that are deemed to harm economic efficiency, among other

objectives. In particular, the Act prohibits a range of practices if the firm is

‘dominant’, including charging an ‘excessive price’, engaging in an

‘exclusionary act’, or price discrimination (Sections 8 and 9). ‘Dominance’ is

defined as having at least a 45 percent market share, or less than 45 percent if

the firm has market power (Section 7). A range of horizontal and vertical

restrictive practices are also prohibited (Sections 4 and 5). For the

implementation of the Act the links between structure and behaviour are

therefore extremely important. This paper seeks to explore these relationships in

a particular industrial sector, that of plastics, and in so doing to highlight issues in

the implementation of competition policy.

Plastics manufacture covers a supply chain or filière which runs from polymers

to finished plastic products.

a range of industries such as motor vehicles, packaging, textiles and clothing,

construction and furniture. This implies that plastic products are more important

in the development of manufacturing than their share of manufacturing

production of 2.8 percent would suggest.

The levels in the supply chain differ greatly in their production characteristics.

Polymer manufacture is relatively capital intensive and is broadly characterised

by economies of scale, significant transport costs and a corresponding

concentration of production. Downstream plastics manufacture, by contrast, is

characterised by low or negligible scale economies. While many firms in some

of

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