access to learning materials in southern africa 25 jan 2005

Access to learning materials in Southern Africa 25 Jan 2005

Competition Policy and excessive pricing

Michelle Childs –The Consumer Project on Technology


• Key link between affordability and access• Pricing goods higher than most residents in developing

countries can afford is a common problem eg access to medicines

• Firms have a variety of motives for high prices. Not all high prices lead to a remedy

• If high prices are a substantial barrier to access to learning materials possibility that Comp Authority can investigate whether prices are‘excessive’

• Excessive pricing not just inefficient also unjust if in relation to essential goods.


• Section 8 (a) South African Competition Act:

• It is prohibited for a dominant firm to-

• A) charge an excessive price to the detriment of consumers;

• ‘excessive price’ means a price for a good or service which-

• (aa) bears no reasonable relation to the economic value of that good or service;and

• (bb) is higher than the value referred to in subparagraph (aa)

Excessive Pricing of Essential IP goods- a

new approach. • Step 1: Divide goods into matrix of essential, non essential

& luxury goods

• Rationale: Special treatment for essential goods . Widely accepted e.g access to medicines,India’s Essential Commodities Act.

• Step 2 : Define goods as IP goods or physical goods and services.

• Rationale: IP goods can be cheaply copied to expand access and, prices based on value to customer rather than cost.

Matrix: Essential, Non-Essential / IP, Physical Goods or Services

Ability to Copy

Sector Essential Not-Essential

Intellectual property

Medicine Drugs to treat diseases that have significant morbidity and mortality

Hair loss remedies

Journals and textbooks

Essential Reference materials for primary and secondary education

Publications for industry

Software Operating systems, word processors, etc for educational purposes

Video games

Software for industry

Physical goods/

services

Physician / Dental services

Preventive and basic health services, treatment for diseases of significant morbidity and mortality, basic dental care

Cosmetic surgery, cosmetic dental work, health care that exceeds accepted standard of care

Housing Essential housing Better Housing

Standards for allocation of enforcement resources

Ability to copy

Essential Non-Essential

Luxury

Intellectual Property

More enforcement resources

Standard Enforcement

Less enforcement resources

Physical Goods / Services

More enforcement resources

Standard Enforcement

Less enforcement resources

Standards for evaluation of excessive pricing

Ability to Copy

Essential Non-Essential

Intellectual Property

Goods not affordable to most people

Or

Goods priced excessive relative to benchmarks


Physical Goods / Services



Excessive pricing of essential IP goods

• Step 3: Presumption: Prices that are not affordable for essential IP goods are presumed excessive unless one of 3 conditions apply:

• a)Owner of the IP has licensed the technology to competitors on a non discriminatory basis, or

• b) If the competitive provision of the good is not economically feasible, the prices are reasonable in the light of the cost of making the good available, or

• C) The given prices are necessary to generate the income needed for the development of the good, where there is no substantial market for the good in countries defines by the World Bank as high income countries.

Can it be applied to learning materials?

EP can create ‘access gap’which could be evidence of abusive commercial practices. 5 key questions:

1) Is it an essential IP product?2) Does the no. of people who need access to learning

materials significantly exceed those with access?3) Is price is a substantial barrier to access?4) Are prices affordable when compared to countries where

prices are universally available adjusted for relative GDP and other special factors.?

5) Can the IP owner use any of the 3 defences?.

Theoretical worked example for learning materials.

• Eg academic journal available globally- access deemed essential for education in SA. In UK sells for £50 in SA sells for 500 rand

• 5% people have access 95% do not. Price main barrier to access. Best evidence: the fact of lack of access. Can be supplemented by looking at benchmark:

• Is price affordable when compared with UK?– For example, in 2002, the RSA per capita income was 9 percent of the UK per

capita income. Are prices 9 percent of the UK prices?

• Presumption excessive• Has publisher got a defence ? The competitive provision of the good is

feasible, several SA firms could publish.• There is a substantial market for the products in high income countries• The firms have refused to issue non- discriminatory licences in return for

reasonable royalties.• No defence. Excessive pricing established.

Theoretical worked model for learning tools (2)

• Remedies:

• Voluntarily lower prices

• Fine

• Compulsory licence on non discriminatory terms.

Excessive pricing - Issues

• New Model so need to convince Comp Auth. to use.

• Showing dominant position –market definition key.

• Defining list of essential learning tools

• Global v national learning tools

Contact information for CPTech

• Michelle Childs, UK– +44 20 7226 6663 ext 252– [email protected]– http://www.cptech.org

• Manon Ress, USA– [email protected]– +1.202.387.8030

access to learning materials in southern africa 25 jan 2005

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