The Competition Commission's Corporate Leniency Policy ("CLP") has been validated. The North Gauteng High Court has ruled that the Competition Commission does have authority to enter into an immunity agreement with an immunity applicant under the CLP. The CLP provides that an immunity applicant who is involved in a cartel and acts as a "whistleblower" will not be prosecuted by the Commission if it exposes and testifies against the other cartel members.

The application to the High Court was brought by Agriwire and Agriwire Upington, which are two competitors in the manufacture and distribution of wire and wire-related products in South Africa. The Commission had previously referred a case to the Competition Tribunal alleging that 12 competitors within the market for the manufacture and distribution of wire and wire-related products in South Africa were involved in price-fixing, allocation of markets and collusive tendering. The Commission became aware of the existence of the cartel after receiving an immunity application from Consolidated Wire Industries during 2008.

Agriwire and Agriwire Upington's view that the Commission does not have the authority in terms of the Competition Act to grant conditional immunity to a cartel participant was rejected by the Court.

"Immunity" in terms of the CLP has two elements, namely that the Commission will not subject the party concerned to adjudication before the Tribunal for its involvement in the cartel and that the Commission will not seek any fines to be imposed by the Tribunal on such party. In other words, conditional immunity amounts to a promise or an undertaking by the Commission that it will not prosecute the whistleblower.

The Court stated that in the same way in which the Commission can enter into a settlement agreement with a cartel offender in terms of which the offender agrees to pay a fine, the Commission can enter into an agreement to grant a cartel offender conditional immunity. Thus, the Commission's actions pursuant to the CLP are lawful and within its powers.

What is also noteworthy is that the Court rejected the allegations that the Commission's CLP leads to the Commission engaging in "selective prosecution". The Court recognised that the granting of immunity is conditional and does not result in the applicant not being cited as a respondent in proceedings before the Tribunal. It is simply that no relief will be sought by the Commission against that respondent for as long as it has complied with the terms of its immunity agreement (which usually requires that it co-operate with the Commission and provide evidence implicating the remaining respondents).

Interestingly, the Court seemed to invite Agriwire and Agriwire Upington to make representations to the Tribunal if they believed that Consolidated Wire Industries (the immunity applicant) should also receive a fine to the extent that the remaining respondents are fined. This possibly introduces a new aspect to proceedings before the Tribunal arising out of a CLP application. The Tribunal has never before in a reported decision been called upon to consider whether the immunity applicant is deserving of complete immunity. The High Court has in this case emphasised that the ultimate decision lies with the Tribunal and that, notwithstanding the Commission's recommendations regarding immunity applicants, the Tribunal has the discretion to impose a fine against an immunity applicant.

The international experience suggests that corporate leniency policies are one of the most effective tools in the fight against cartels by competition authorities. The recent successes of the Commission in prosecuting cartels suggest that the CLP provides for good results by the Commission in detecting and destroying cartels.

Contact:
Paul Cleland, Director
Direct line: +27 11 535 8239
Email: pcleland@werksmans.com

Paul Coetser, Director
Direct line: +27 11 535 8290
Email: pcoetser@werksmans.com

Ahmore Burger-Smidt
Director, Werksmans Advisory Services
Direct line: +27 11 535 8462
Email: aburgersmidt@werksmans.com