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There has been a feeling amongst the public and government that competition laws are inadequate as they fail to target the individuals that orchestrate the contravening practices, particularly cartel activity, Adams & Adams competition law attorney Jac Marais tells Engineering News.

He says that the perception seems to be that monetary penalties have not been effective in changing the behaviour of firms and individuals, and that the financial gains achieved from cartel activity often outweigh the risk of sanction.

He explains that the introduction of criminal sanctions seeks to resolve these issues. Whether the amendments, specifically the introduction of criminal liability for individuals that participate in cartel offences, will effectively resolve the public and government’s concerns is contentious at this stage.

In August 2009, it was recommended that a new provision, which aims to hold individuals, such as directors or managers, personally accountable for engaging in cartel activity be introduced to the Competition Amendment Act No 1 of 2009.

Further, Marais says that the introduction of criminal sanctions has caused a significant mind shift among business owners and managers and will affect the way business is conducted in future. Corporate clients have predictably and understandably expressed their concern regarding the criminal sanctions as there are several interpretational issues surrounding these provisions, he says.

However, he adds that there are a number of issues that may undermine the success of the legislation, such as the possible litigation regarding the scope and interpretation of several provisions. “There will also be challenges regarding the con-stitutionality of some of the provisions. The litigation could continue for years and stifle the Competition Commission’s activities in the interim period.”

Individuals will also be less willing to enter into consent orders with the Competition Commission, if such an order could facilitate prosecution at a later stage. The Act provides that a finding which states that a firm engaged in cartel conduct, or such an acknowledgement by a firm in a consent order, will serve as prima facie evidence of the fact that the firm engaged in cartel conduct in a subsequent criminal case against a director or manager.

“The provision also imposes a responsibility on the accused to prove that the firm has not engaged in cartel conduct, which, in our view, will not survive constitutional scrutiny,” Marais says.

Meanwhile, he explains that with the implementation of the revised Corporate Leniency Policy (CLP) in 2008, the Competition Commission has seen some significant successes. The Act incorporates the CLP and provides the Commission with statutory powers to grant immunity to a cartel member.

The CLP is further extended to individual directors and managers to the extent that the Commission may certify such an individual as being deserving of leniency. Although the Commission may not seek or request criminal prosecution of such individuals, it does not preclude the National Prosecuting Authority from pursuing a criminal case.

This has significant implications as the extension of the CLP to individuals creates an incentive for managers and directors to blow the whistle on their own companies, ensuring that they are deserving of leniency. Directors and managers may accordingly find their personal interests to be in conflict with that of the company in ensuring a case for immunity.

 

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