367. I will continue in my capacity as the representative of South Africa, and share some experiences from the viewpoint of South Africa.
368. South Africa has a proud history of robustly engaging with issues that concern the intersection between IPRs and public health. Indeed, the South African government's stance in the case between the Pharmaceutical Manufacturers Association versus the President of South Africa (the late President Nelson Mandela) in 1998, was a key factor leading to global dialogue around the potential negative impacts of intellectual property rights on public health, culminating in the Doha Declaration on TRIPS and Public Health.
369. South African law reflects the principles embodied in the TRIPS Agreement and the Doha Declaration in particular with regards to the measures that Members may implement in domestic legislation to protect the public against the abuse of patent rights and monopolies. However, the practical implementation of the provisions that give effect to the TRIPS Agreement, have not been effective in protecting the public against patent monopolies and ensuring that the public has access to essential medicines, at affordable prices.
370. Competition policy in South Africa, as reflected in the preamble to the Competition Act 89 of 1998 (Competition Act) seeks to address, amongst other things, inadequate restraints against anticompetitive trade practices and unjust restrictions on full and free participation in the economy by all South Africans. It thus aims to open up the economy to greater ownership by a larger number of South Africans in order to attain an efficient, competitive, economic environment, one that balances the interests of workers, owners and consumers, and focuses on the development of all South Africans. This is accomplished by preventing cartels aimed at price-fixing, limiting output or otherwise restricting competition, by preventing firms from gaining market power in unjustified ways, including through anticompetitive mergers, thus raising barriers to market entry by new firms. Competition policy is also concerned with preventing firms with market power from abusing their dominant positions, including by charging excessive prices to the detriment of consumers. The role of competition authorities is therefore to ensure markets function efficiently and to the benefit of both consumers and producers.
371. South Africa has a well-developed competition regime based on best international practice. Even though our economic system is mainly based on free market principles, competition is regulated by statutory-created competition authorities, namely the Competition Commission, the Competition Tribunal and the Competition Appeal Court. The Competition Act became effective on 1 September 1999. It fundamentally transformed South Africa's competition legislation and substantially strengthened the powers of the competition authorities. Unlike some foreign jurisdictions, South African competition law focuses not only on pure competition law matters, but also addresses pertinent public interest and social objectives.
372. Both competition law and patent law together can be used to implement competition-related TRIPS flexibilities and advance consumer welfare. Chapter 2 of the Competition Act covers practices such as horizontal restrictions, vertical restrictions, and abuse of dominance, and various licensing provisions in the Patents Act. Horizontal agreements such as price fixing, market division and collusive tendering are prohibited per se, without requiring a showing of actual harmful effect or permitting a showing of net efficiency.
373. The Competition Act also prohibits price discrimination: in relation to prices broadly, discounts, rebates, allowances, credits, services, or payment terms, for products or services. Again, market power is a prerequisite – only a dominant firm acting as a seller can be liable. Liability is subject in all cases to a competitive effects test: is the discrimination likely to have the effect of substantially preventing or lessening competition?
374. In line with the general approach to South African competition law and policy, it is accepted that certain anti-competitive conduct may be required to achieve broader industrial and macro-economic goals which is set out in Section 10(3)(b) of the Competition Act. The Competition Act therefore provides a mechanism whereby a party or parties can apply for an exemption from prosecution in certain cases. What is inferred from section 10(4) is that the legislator intended for the current Competition Act to extend to the exercise of intellectual property rights and that an exemption is required for certain intellectual property rights in order to achieve these broad industrial goals.
375. The South African Competition Commission has not issued specific guidelines on the application of the Competition Act to IP. However, it has explained its general approach in that firms are not automatically exempted from the rules of the Competition Act as a result of the rights granted in terms of laws like the intellectual property laws. This means that firms cannot be allowed to automatically continue with a particular prohibited practice as outlined in the Competition Act because that practice is allowed by another Act. It has taken the view that conflicts between intellectual property rights and competition mandates should be resolved according to the extent to which the "long-term pro-competitive benefits" of a practice outweigh its "short-term 'anti-competitive' effects." The Competition Commission has thus analysed this conflict by considering the following factors:
a. Competition law should recognize the basic rights granted under intellectual property law. The creation and maintenance of innovation markets are necessary for economic progress and development.
b. Intellectual property does not necessarily create market power.
c. A practice involving intellectual property should not be prohibited if the practice leads to a less anti-competitive situation than without the said practice.
d. The long-term pro-competitive benefits should outweigh the short-term 'anti-competitive' effects of intellectual property rights.
376. I leave it at this and would invite other proponents to share their perspectives, as well as, other Members of this house.