On 23 October 2015, the Minister of Economic Development, Mr Ebrahim Patel, responded in writing to various questions posed by opposition parliamentary members in regard to South African competition enforcement.  The Minister’s responses indicate that the Department of Economic Development is seeking to extend the Competition Commission’s role and influence in the South African economy.

INTRODUCTION

It was stated by the Minister, in his response to the questions, that technical work on the phased introduction of the Competition Amendment Act (No 1 of 2009) was continuing and that announcements in regard to the implementation (or part implementation) of the Amendment Act can be expected within the next 6 months.

There are several contentious provisions proposed in the Competition Amendment Act, but two provisions of particular importance deal with the concept of “complex monopolies” (also referred to as “conscious parallelism”) and the criminalisation of cartel conduct.  Without going into detail, the section relating to “complex monopolies” intends to prohibit a situation where two or more firms in a concentrated market, who are aware of each other’s actions, conduct their business affairs in a cooperative manner without discussion or agreement between them.

In the South African economy, where various concentrated sectors exist with a limited number of competitors, for instance telecommunications, private hospitals, banking, oil /gas, to name a few, it could be expected that competitors are aware of each other’s actions. The question to be considered would be whether businesses in these sectors conduct their business affairs in a cooperative manner.  Any introduction of statutory powers, such as those pertaining to complex monopolies, would require enormous emphasis to be placed on compliance with the newly amended competition legislation and would require businesses to apply a greater degree of scrutiny to how they conduct their affairs.

The Minister’s Response

The answers provided by Minister Patel more importantly, again brings to the fore the debate in relation to the criminalisation of cartel conduct.  In terms of the Amendment Act it is a criminal offence for any director or person having management authority to cause a company to engage in or knowingly acquiesce to cartel conduct on behalf of the company in contravention of the Competition Act. Furthermore, if found guilty of an offence, a director or person having management authority may face a fine of up to R500 000 and/or imprisonment for up to ten years.

Besides the constitutional concerns relating to the criminalisation provisions of the Amendment Act raised since 2009 and specifically with regard to the burden of proof placed on any defendant with respect to subsequent criminal proceedings, concerns have been raised as to the ability of the National Prosecuting Authority to deal with prosecutions which are likely to be difficult and time consuming. Criminal sanctions will definitely bring to the fore a significant shift in competition law enforcement.

The Minister furthermore stated that his department would be exploring the possibility of consolidating regulators in order to balance the specialist expertise located within sector regulators with the broader economic and legal capacity that the competition authorities have built up over the years.

It was made clear that the Minister intends to introduce legislation to further strengthen efforts to tackle anti‑competitive practices which impose unnecessary costs on consumers, undermine industrial policy objectives and reduce the competiveness of the economy.  He indicated that his Department had undertaken work on the scope of the amendments required to the Competition Act, using the jurisprudence and experience of the competition authorities to identify weaknesses or gaps in the existing legal framework.  In this regard, discussions and consultations with relevant parties to enable the drafting process to be completed is underway and it is foreseen that a new Bill will be published shortly.

Considering these statements, it appears that during the course of 2016 there should be further clarity from the Department of Economic Development in regard to the implementation of the Competition Amendment Act (either in whole or in part).  In addition, it appears that more changes to the Competition Act, through the introduction of a new Competition Amendment Bill, may be on the horizon.

CONCLUSION

Maybe the new calendar year will bring with it the genesis of a new competition regulator with deep-rooted industry expertise across several sectors.  Companies would be well advised to reconsider competition and sector specific risks should such a super regulator come into existence during or after 2016, even more so if such super regulator has the ability to impose criminal sanctions.

Written by Ahmore Burger-Smidt, Director, Werksmans Advisory Services; Graeme Wickins, Senior Associate, Werksmans Attorneys