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Constitutional difficulties could arise with new competition laws

Constitutional difficulties could arise with new competition laws

22nd April 2016

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Proposed amendments to the Competition Act are well-intentioned but could lead to constitutional and procedural difficulties in investigating and prosecuting competition irregularities in South Africa.

This is according to Nick Altini, Partner at Baker & McKenzie, who says that media reports suggest that there are two major proposed amendments to the Act likely to come into effect this year – namely the criminalisation of cartel conduct (now announced to become effective on 1 May 2016) and greater power for the Competition Commission to investigate complex monopolies. Both were promulgated into law in the Competition Amendment Act of 2008, but up to now neither has yet been brought into effect by commencement date.

“Certain issues, which have not yet been tested through our legal system, may arise through the criminalisation of cartel conduct for individuals involved, those at director and managerial level. For example, judgments in civil or administrative cases before the Competition Tribunal regarding competition laws could then be used as the prima facie basis for a criminal prosecution,” says Altini.

“This could create constitutional difficulties because the judgment in a civil or administrative matter is based on the balance of probability while in a criminal matter, the case must be proved beyond a reasonable doubt. The use of a guilty judgment in a civil case would create a reverse onus on the accused in a criminal trial to prove his or her innocence, rather than on the State to prove their case.”

The provisions relating to the investigations of complex monopolies will relate to markets where 75% of goods or services are provided to or by five or fewer firms, and may give the Competition Commission the power to investigate markets without a complaint of specific alleged conduct having been lodged.

The complex monopoly provisions seek to empower the Commission to explore the conduct of two or more firms who appear to be acting in a “consciously parallel way”, which suggests a failure of competition, and tacit coordination but without explicit agreements having been made between the companies involved.

“This could be quite invasive and could create a series of investigations based on suspicions as opposed to the current system of formal complaints based on at least some degree of evidence of anticompetitive behaviour. It is also extremely difficult to determine if conscious parallelism has taken place, as the very definition of the theory states there has been no explicit agreements made to collude or otherwise to dampen competition between the firms concerned.”

Altini says that while it is commendable to strengthen the provisions of the Competition Act, what is really needed, is to boost the efficiency of the existing legal structures, at least in parallel. He believes competition laws would be more effective if the levels of caseloads and a lack of resources were fixed to address the current backlog in the system first.

Altini concludes, “Swift and decisive investigation and prosecution by a Commission, that deserves to be better resourced than it is, would be a greater deterrent and would have a greater ameliorating effect on markets where there is failure of the competition process. This would be more effective than introducing new mechanisms which, initially at least, are likely to lead to years of contestation as the authorities get to grips with them.”

Submitted by Baker & McKenzie

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