The Competition Commision’s corporate leniency policy (CLP) is making good progress in obtaining information regard- ing cartels, says law firm Shepstone & Wylie competition law specialist Jennifer Finnigan.
The CLP, which is aimed at eradicating cartel activity, was introduced by the commission to tackle cartel price fixing, market division and tender collusion by any business in South Africa or any business that has an eco-nomic effect in South Africa.
The policy offers a cartel member the opportunity to disclose information on a cartel to the commission in return for immunity from prosecution and fines.
“Many collusion cases in the engineering and construction industries countrywide have been investigated after applications were made by cartel members in terms of the policy,” notes Finnigan.
However, she notes that it will be important to track the effectiveness of the CLP follow- ing the implementation of the Competition Amendment Act, which has been passed into law but has not yet been implemented, as this could have severe consequences.
Finnigan explains that the Act contains provisions for directors, or those in managerial positions, to be found criminally liable for participating in or ignoring cartel activity in their respective companies. Guilty parties could face hefty fines and may even be given a jail sentence.
She points out that, because of the Act, there is a possibility that directors and managers may not be concerned about approaching the commission for immunity and admitting the company’s involvement in a cartel, as this may implicate them in the confessed cartel activity, leaving them at risk of being personally charged criminally and, if convicted, receiving hefty fines or even jail time.
“The relationship between companies and the Competition Commission could well change, as I think that the level of cooperation from businesses is likely to decline once the Amendment Act is implemented,” warns Finnigan.
Meanwhile, South Africa has seen a great deal of activity in law enforcement relating to price fixing and cartels.
However, there is still more to be done in improving legal awareness and Finnigan believes that the commission’s priority still lies in dealing with mergers and prohibited practices, while its challenges lie in using some of its limited resources and meeting time constraints for its advocacy and educational functions.
She points out that companies need to understand the law and what it permits and prohibits to limit the risk of investigation. She highlights that South Africa’s competition law is still relatively new and that a lot is still unknown, which makes it very difficult for companies to know what is and is not legal.
“The need for certainty about the scope of our competition law and its do’s and don’ts is compelling because of the severe penalties being imposed by the Competition Tribunal. It may fine a company up to 10% of its turnover during the preceding financial year. The message behind the fines is clear: Run cartels at your own risk,” she emphasises.
Finnigan notes, too, that there is an important need for the commission to publish guidelines highlighting the limits of the law. There is still a lot of confusion about the scope of some provisions of the Act and guidelines will ensure that companies do not unintentionally contravene the Act.