The recent investigations into the construction and banking industry regarding collusion and cartel behaviour, has highlighted their consequences in terms of the Competition Act. As of 1 May 2016, competitors involved in price fixing, market division or tender collusion could, in addition to being fined 10% of such competitor’s annual turnover, now also face criminal sanctions.

Section 73A as amended by section 12 of the Competition Amendment Act 1 of 2009 applies to directors or persons in a position of having management authority, engaged in cartel activity or knowingly acquiesced in participation thereof, to be held liable in their personal capacity to a fine and/or imprisonment. Whilst the criminal sanctions do not have retrospective effect and the current investigation with the banks is for conduct prior to the Amendment, any future collusion amongst competitors could see directors facing criminal sanctions.

While the new Amendment comes into effect with the aim of preventing cartel behaviour, the lack of cohesion in implementation is somewhat of a concern. The National Prosecution Authority (NPA) is in charge of investigating and deciding whether to impose criminal sanctions against directors. The independence of the NPA and the Competition Commission has to some extent made the Corporate Leniency Policy redundant. The Corporate Leniency Policy is a policy created by the Competition Commission that allows a competitor involved in cartel behaviour to come forth and assist the Competition Commission with its investigation in exchange for immunity. This policy has been in place since 2008 and has assisted the Competition Commission in its high success rate of lessening cartel behaviour and imposing high monetary penalties on multi-million Rand firms within the construction, bread and banking industries.

The issue is that while the Corporate Leniency Policy can provide immunity to a firm, its directors and management, the sole discretion of criminal prosecution rests with the NPA. Thus, a firm that applies for leniency could expose its directors and management authority to criminal sanctions. To date, the NPA and Competition Commission have failed to address this loop hole, which begs the question going forward, will directors and management come forth on a firm’s cartel behaviour in terms the Corporate Leniency Policy knowing that such director or management authority will not be protected in terms of such Policy? Could this be the start of an increase in cartel behaviour without consequence?

Written by Anola Naidoo, Attorney, KISCH IP