Competition Commission announces inquiry into LPG sector

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"The Commission is concerned regarding what it believes to be the limited supply of LPG available in South Africa and the impact that this may have on competition in the sector," explains Albert Aukema, senior associate in the Competition Practice at Cliffe Dekker Hofmeyr.

He explains that, amongst other things, the Commission will consider the role of gas brokers in the LPG market and the impact of imports of LPG.

"In its terms of reference, the Commission also notes that there has been increased diversification of energy supply sources by consumers in light of power shortfalls and increases in electricity costs, with LPG likely to become a more important source of energy in future. According to the Commission, LPG is also identified as of strategic importance in the national development plan," Aukema says.

Aims of enquiry

The aims of the enquiry include analysing the price regulatory framework to determine whether it can be improved to avoid the abuse of market power; to assess the extent of barriers to entry and general competition dynamics at various levels of the LPG value chain; and assisting other regulators with policy formulation recommendations as well as making recommendations relating to necessary changes to competition policy and law.

Aukema notes that market enquiries are instituted into sectors as a whole and do not necessarily relate to the conduct of specific firms in the sector under scrutiny.

"According to the terms of reference, it is anticipated that the market enquiry will commence in June 2014 and conclude in October 2015. Although the relevant notice states that the market enquiry commences on 20 June 2014 (the same day as the publication of the terms of reference), the Competition Act requires that the terms of reference must be published at least 20 business days before the commencement of the enquiry," he adds.