Who does competition law benefit?


The ‘public interest’ is a strong consideration made by courts when deciding a case in competition law internationally in jurisdictions such as the United States, or domestically. Yet when one looks at the actual cases themselves, one sees that the beneficiary in such litigation is mostly a competitor of one company who failed in the market and resorted to using legislative force.


Nowhere is this issue clearer than in the recent complaint lodged by Body Action Gym, against Discovery Health Group with Virgin Active South Africa and Planet Fitness. It was reported that the owner of Body Action Gym lodged a complaint with the Competition Commission. Discovery Health Group is accused by the CEO of Body Action Gym of unfair business practices which centre around Discovery’s rewards program. Through this program, discovery clients can have their membership fees subsidized by up to 100% at participating fitness centres such as Virgin Active or Planet Fitness.


Since Body Action Gym is not included in the group of fitness centres which Discovery clients can get a discount on, it is alleging ‘unfair business practices’. We ought to ask ourselves pertinent questions to better understand whether it is appropriate for such a serious charge to be levelled.


Can Body Action Gym still sign up members ? Yes. Can they operate without going to jail for running a gym? Yes. Are Virgin Active and Planet Fitness forcing people to sign up with them? No. Are there other medical schemes apart from Discovery? Yes. Is Discovery forcing its clients to be a member of their scheme? No.


These questions are important because they highlight the insidious nature with which competition law is deployed by those who cannot compete in the market, to try inhibit and punish those who do so better than them. Body Action Gym is finding it hard to provide the same value to customers as Virgin Active and Planet Fitness are. Competition Law is such that it incentivises businesses to try find reasons to pull each other down, using the law.


Body Action Gym instead chose the deployment of state force. They are calling on the Commission Competition to put back into line their pesky competitors who dared provide value for the public. Those consumers who benefit from this agreement between Discovery and Virgin Actie or Planet Fitness don’t matter according to the complainant. If they did, their choices would not be included as part of ‘unfair business practices’.


Virgin Active and Planet Fitness did not bar the CEO of Body Action Gym from opening their own gym. The fact that this happened ought to be the end of it. The fact that the business has a hard time finding customers due to market agreements – or indeed other market forces such as supply and demand – is not reason enough to have the force of the state dropped onto the heads of these enterprises. There is no legislation giving Virgin Active or Planet fitness preferential treatment over other gyms as a matter of law.


If these enterprises happen to enter into voluntary agreements with other private entities like Discovery – agreements that have the effect of improving their profitability – then that should be applauded instead of punished. Such an environment can only come about through an approach that allows commercial activity to happen, and to take whatever particular form as long as there is no force or harm to another person’s rights.


This case shows us in real time that when the decisions by competition authorities about the creation of freer markets are spoken of, their genesis is in the use of law to punish voluntary relationships. Voluntary relationships/agreements central to all market activity.


We live in a legal environment wherein a successful enterprise can have the authorities called on them by their competitors, should they decide to be innovative in their model or dare try to ‘induce customers from dealing with their competitors’ – an integral part of business!


The customers are clearly benefiting from the arrangement between Discovery Health and these gyms. That is why they are still members of Discovery and have not boycotted the company for not including Body Action Gym in its rewards program; such a voluntary decision (boycotting) is available to any and every customer of any business at any time. The fact that Body Action has a difficult time getting customers away from these gyms is not an ‘unfair business practice’. It is simply the manifestation of the preferences of individuals in that market.


Running a successful business is very difficult work. Being a new entrant in an established market, is even more difficult. Yet we must always remember that no business in the world, except State Owned Entities, was born big and established. They all started small and grew big. When we punish their success through legislative force, even when they aren’t violating any rights, we create an environment whereby our entrepreneurs will not aspire to be successful and grow big; this would be a major long-term disadvantage for our economy.


We should allow participants in a market to compete (but not allowing the use of force) and when one fails, they must not call on the state to intervene on their behalf as is the case with Body Action Gym. Competition law is always said to have been enforced in favour of ‘the public’ after the fact of its enforcement. This case study shows us exactly on whose behalf competition legislation is usually enacted and enforced most of the time.


Zakhele Mthembu BA Law LLB (Wits) is a legal researcher at the Free Market Foundation. The views expressed in the article are the author’s and not necessarily shared by the members of the Foundation.

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