IF IT is true that collusion between South African companies is always to increase prices at the expense of the consumer, why do they never seem to do the only thing guaranteed to increase prices and make their products scarce?

The so-called bread colluders never made bread scarce. The construction cartel never looked like missing its deadlines on 2010 soccer stadiums. The furniture removals companies fall over themselves to offer quotes if you want to move from Johannesburg to Cape Town, and if the car component manufacturers are colluding it just has to be with the tacit approval of car manufacturers.

Leave the car components aside. Many of the companies involved in this latest probe are Japanese, and Japanese industry after the Second World War was rebuilt on the backs of officially sanctioned cartels. Old habits may die hard. According to a paper (Cartels and Competition: Neither Markets nor Hierarchies) by one of the world’s most eminent business historians, Jeffrey Fear, when he taught at Harvard, Japan had about 1,000 authorised cartels in the mid-1960s.

But there is something deeply creepy about the way our government and its competition authorities go about chasing domestic collusion. It is a one-punishment-fits-all approach, the successes of which we have yet to enjoy.

Suspicion of collusion is now routinely followed by an old-fashioned shakedown. Pay an admission of guilt now, or we’ll chase you through the courts forever. The businesses, easily terrified, grovel and pay up. The bakers did. The builders did. The movers will.

The idea behind this is a jumble of politically correct ideas, the consequences of which are never really tested.

There’s the “we must introduce more competition into the economy” idea, which assumes competition is a question of numbers. There’s the “opening access for black entrepreneurs into the sector” idea, which sounds good but never happens. There’s the “need to protect consumers” idea, which doesn’t happen either.

The only thing that is happening is that business is getting bashed. But while we could survive with less government and while we could survive with less trade unionism, we can’t survive with less business.

Yet precisely that may be one of the results of the assumption in the state that all business is fundamentally crooked.

No one ever bothers to explain what rational strategy would persuade a business to conclude that the best way to sustain itself would be to cheat its customers.

Suspicion of collusion is now routinely followed by an old-fashioned shakedown. Pay an admission of guilt now, or we’ll chase you through the courts forever. The businesses, easily terrified, grovel and pay up. The bakers did. The builders did. The movers will.

There is a great danger in hounding productive companies without careful consideration of what it might lead to. Perhaps particularly in a small economy. Here is what we can deduce, for example, from the R300-million or so in fines paid by members of the so-called bread cartel a few years ago:

• No one knows anything about the bread industry anymore. The millers left the industry association for fear of being branded colluders again. Sharing information is considered the essence of collusion.

• The price of bread rose more than 50% in two years. While other factors may have played a role, the price increase suggests collusion, South African style, may be more about stabilising prices than raising them.

• No new millers or bakers of any consequence have emerged since the end of the bread probe.

• A three-year class action that tried to prove in court just how much the bread cartel had cost the consumer, ended up with a total damage calculation of R2.1-million — just 6% of the fines.

The same will probably happen in construction. People assume the construction groups pocketed hundreds of millions as they “gouged” the public purse. But not a cent has yet been proven to have been lost to anyone. And how will any court be able to say how much money, if any, was lost to the public, in the construction of, say, the Cape Town Stadium?

Economic Development Minister Ebrahim Patel insisted a few months ago the state could now proceed with its infrastructure programme as it had been given a “degree of comfort” by the fact that the construction cartel had been “dismantled”. That just has to be wrong.

In the minister’s mind, the fact that the construction companies don’t dare talk to each other anymore will force them to submit the cheapest possible bids, so desperate are they for work.

And, all the big firms will bid for all the big projects, thus maximising competition.

What may actually happen is that the big, experienced firms will be reluctant to tender for big and urgent projects.

If they do, they will err on the side of caution and rather bid high, not low, so as not to get stuck with a difficult client and no margin.

This is not to say competition law should be softened. But there is a pressing need for nuance in the way it is used and implemented. The fact is our antitrust regime is not serving the purpose for which it was intended. A little like the municipal police, it is a revenue collector rather than a public protector.

If you’re in business in SA now, and you’re secretly colluding, you’re insane. But do the punishments being meted out suitably encourage the firms to better serve the public in the future?

French economist Jean Tirole has won the 2014 Nobel economics prize for his work on applying game theory to the regulation of large companies. As John Cassidy writes in a profile of Tirole in The New Yorker, the Frenchman asks a compelling core question: “Can you design a regulatory system that offers incentives to both sides — the regulators and the firms — to do things in the public interest?”

That is absolutely the question our competition authorities need to ask themselves, but do not. Or they don’t in public. That may be because Patel does not want that conversation happening on his watch.

But happen it must. Different industries face different demons, and the regulations that apply to them can only be genuinely effective if they are designed to fit specific industries.

Construction firms may have to collude when one client (the state) has a ton of work to be done at the same time. That certainly was why former CEO of PPC Ketso Gordhan wanted what he called a construction Codesa — he wanted the work shared out, with the state’s approval.

That must be the future of good regulators here: that they ensure transparency and incentivise the companies they regulate to serve the public interest, by innovation, as well as their own interest.

We are a small economy with some really big companies. We are better off with them than without them.

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