By Hilary Mare
THE Namibia Competition Commission (NaCC) has dismissed a complaint filed by NamWater against Areva Resources Namibia in which the water authority alleged that Areva’s price for the supply of water was excessive and constitutes an abuse of dominance as envisaged in terms of section 26(1) read with section 26(2)(a) of the Competition Act.
A notice of decision not to conduct an investigation penned to Areva’s Managing Director Hilifa Mbako by the Competition Commissioner Mihe Gaomab II stated that Areva’s conduct does not amount to the imposing of unfair purchases or selling prices.
“In terms of the competition law, assessing whether an excessive price has been charged involves making comparison between the selling price of the product in question and its costs of production in order to determine whether the profit margins exceed a reasonable return. The difference between the costs incurred by Areva in supplying water does not reveal an unreasonable variation between costs incurred and the selling price. Areva’s profit margin therefore does not constitute an unreasonable return,” reads part of the notice.
With further affirmation that there is no evidence that the price that Areva charges constitutes an abuse of a dominant position, the commissioner highlighted that the price charged reflects the costs incurred by the company in supplying water and the capital expenditure for the constructing the desalination plant. is no evidence that indicates
“Where a firm engages in activities with significant ex ante risks or investment in research and development, the difference between the price and the cost of production may be a reflection of the upfront investment. An investor entitled to charge for the capital cost of an investment. Furthermore, even if the cost of the project has been consolidated at a group level, it is a normal accounting practice that the cost of financing is included in the pricing of the product or service at subsidiary level.
“In light of the fact that the difference between the production cost and the selling price does not indicate an excessive price variation, there is in fact no need to consider the fairness of the price charged by Areva. Be as it may, the commission finds that the price is fair since it reflects the cost Areva incurs in supplying water and capital expenditure for the construction of the desalination plant with a fairly small margin,” Gaomab extended.
NamWater had filed a complaint on February 1 2016.
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