Author: Nkonzo Hlatshwayo – Director & Disebo Leokaoke – Candidate Attorney
In the wake of the declaration of COVID-19 as a National Disaster, Government has taken several steps to limit and mitigate the impact of the coronavirus pandemic not only on people infected with the virus but also on communities, consumers and corporate South Africa. Numerous regulations relating to various sectors have been put in place to protect the general public and consumers and to allow for much-needed resources such as those offered by the healthcare sector, the hotel industry and the banking sector to be readily available. In particular, the regulations are aimed at ensuring that participants in these sectors can coordinate their conduct in order to have a unified approach to the delivery of services without the fear of contravening the Competition Act 89 of 1998 (as amended)(the Act).
The hotel industry and the banking sector, amongst others, have been granted some flexibility in an endeavor to enable them to participate effectively in combating the pandemic. This was done by granting them exemptions from certain provisions of the Act, enabling them to engage in conduct that would otherwise be in contravention of the Act, particularly sections 4 and 5.
COVID-19 Block Exemptions: Hotel Industry
The hotel industry is defined in the Regulations published on 27 March 2020 to include all forms of businesses providing short-term accommodation and other services to the public. The Regulations are designed to exempt a category of agreements or practices in the hotel industry from the application of sections 4 and 5 of the Act in order to:
Promote concerted conduct by players in this industry in order to prevent an escalation of the national disaster and to alleviate, contain and minimise the effects of the national disaster; and
Enable the hotel industry to collectively engage with the Department of Health and the Department of Tourism in respect of identifying and providing appropriate facilities for persons placed under quarantine, as determined by the Department of Health.
It is important to note, however, that the exemptions apply only if the conduct in question is undertaken at the request of, and in coordination with, the Department of Health and the Department of Tourism for the sole purpose of responding to the national disaster. This excludes communication and agreements in respect of prices unless specifically authorised by the Minister of Health and the Minister of Tourism.
The scope of the exemption is therefore limited to agreements or practices in the hotel industry aimed at identifying and providing appropriate facilities for the accommodation of persons placed under quarantine. It also includes cost reduction measures within the industry in collaboration with the Department of Health and the Department of Tourism.
COVID-19 Block Exemptions: Banking Sector
In essence, agreements or practices that are contemplated in the Regulations would ordinarily be prohibited in terms of section 4 and section 5 of the Act. However, these are now permitted within the limited confines of Government’s response to COVID-19. The purpose of the Regulation is to:
Promote concerted conduct to prevent an escalation of the national disaster and to alleviate, contain and minimise the effects of the national disaster;
Enable the banking sector to minimise the negative impact on the ability of customers, including both business and private individuals, to manage their finances during the national disaster, and be in a position to continue normal operations beyond the national disaster; and
Enable the banking sector to manage the banking infrastructure, including the payment infrastructure, ATMs and branches.
The Regulations exempt only agreements or practices pursued with the sole purpose of ensuring that essential payment systems continue to operate during the COVID-19 national disaster. The agreements or practices must be limited to the development of industry monitoring, operational policies and contingency plans. Other agreements or practices aimed at facilitating the management of debtors and extension of credit are also exempted. These too must be limited to the development of industry policies designed to harmonise practices around payment holidays for businesses and individual debtors in financial distress.
The Regulations also provide that parties in the hotel industry and the banking sector participating in any agreements or practices falling within the scope of these exemptions must keep minutes of meetings held and written records of such agreements or practices.
These regulations will remain effective until the national disaster status is rescinded. They are in fact unprecedented. It is important that participants in the hotel industry as well as the banking sector understand that their scope is extremely limited and does not provide licence for other practices that are prohibited in sections 4 and 5 of the Act.
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