CA Removes Barrier to Entry in the Machining/Line Boring Services Market

The Competition Authority has removed a barrier to entry in the machining/line boring services market following an intervention it initiated upon receipt of information that Komatsu Botswana (Pty) Ltd) and Barloworld Equipment Botswana (Pty) Ltd were engaged in the conduct of abuse of dominance, by refusing to register or list suppliers on their vendors list database for the provision of machining/line boring services.

Line boring services is a term used for enlarging a hole that has already been drilled or cast, using one or more cutting tools held within a boring head. It is a specialised small component of the larger process of servicing /repairing/replacing machines or equipment used in mines.

The competition issue identified in the case was abuse of dominance through refusal to deal. Abuse of dominant position is prohibited under section 30 (1) of the Competition Act which states  that “Any conduct on the part of one or more enterprises is subject to prohibition by the Authority if, following an investigation by the Authority, such conduct is determined to amount to an abuse of a dominant position in any market.”

According to the Competition Regulations,an enterprise is considered to be dominant if it supplies or acquires at least 25 percent of the goods or services in the market; or three or fewer enterprises supply or acquire at least 50 percent of the goods or services in the market. Barloworld Equipment constitutes an estimated 39% of the market while Komatsu Botswana constitutes 61% and therefore are considered dominant players in the local market.

An investigation was conducted to establish if indeed Barloworld Equipment Botswana (Pty) Ltd and Komatsu Botswana (Pty) Ltd might have abused their dominance. It was established that Barloworld Equipment Botswana (Pty) Ltd and Komatsu Botswana (Pty) Ltd are the only two enterprises responsible for the supply of heavy plant equipment for the Botswana market and utilisation of line boring services. 

The Authority’s investigators engaged both respondents to establish their listing process and to establish if it was open for competition. It was revealed that since its inception in the 1980s, Komatsu Botswana has never changed its contracted suppliers.  Barloworld Equipment Botswana, on the other hand, revealed that listing was done by one site manager who recommended toits headquarters in Gaborone, where an appointment was made. The company acknowledged possible disregard of other players.

The conduct by both enterprises showed that they engaged in refused to deal as their vendor listing processes were not open for competition. 

The conduct of refusal to deal had the effect of reducing the level of competition in the market sincethe machining/line boring services was controlled by the two enterprises, whichcreated a barrier to entry into the mining market.

Following the investigation against Komatsu Botswana and Barloworld Equipment Botswana, both parties were sensitised of the anti-competitive conduct, and they acknowledged that their supplier appointment processes were flawed. Both Komatsu Botswana and Barloworld Equipment Botswana made a declaration through a submission that will see both enterprises reviewing their supplier appointment and listing policies processes to be transparent, and to allow more opportunities for potential entrants.

Since the Authority’s intervention, Barloworld Equipment Botswana has committed to improve its recruitment and communication strategy to allow for more potential suppliers in the machining/line boring mining market and also evaluate its vendor opening and contracting process to make it all inclusive and transparent.  Komatsu Botswana has undertaken to amend its machining/ line boring supplier requirementin order to allow for more machining/line boring suppliers and has also committed to develop a new policy of appointing potential contractors. 

This will allow for equal opportunity for potential new market entrants in the machining/line boring market.