Using simultaneous criminal and civil processes to prosecute cartel or price fixing activities leads to improved recovery of money from offenders, says legal firm June Marks Attorneys founder June Marks. She says this is due to the threat of jail or large fines for senior managers and directors, which prompts directors to cooperate with investigations and settle-ments rather than run the risk of imprison- ment.

Marks cautions, however, that a Competition Tribunal determination is needed in South Africa to institute a civil case against cartel or collusion activities, whereas, in the UK, both civil and criminal cases can be launched quickly against offenders. In the UK, a damages claim can be brought before the Competitions Appeal Tribunal without the need to approach the High Court.

Price fixing is a systemic problem in most economies in the world because of the obvious temptation to fix prices with competitive companies to boost revenue for all companies in the industry, she explains.

Marks worked on the UK criminal prosecution of cartel activities in the pharmaceuticals sector by the Serious Fraud Office, dubbed Operation Holbein, following the promulgation of the Enter- prise Act of 2002, of the UK. This operation prosecuted the majority of pharmaceutical companies in the UK for conspiracy to defraud the UK National Health Service.

“Though the case was not successful, because the legislation had not been in force when the price fixing occurred, it did lead to much better civil recovery from the companies owing to the threat of a ten-year jail sentence for managers and directors if they were found guilty in the criminal case of price fixing,” she explains.

The Operation Holbein case involved all upper management and senior MDs but was badly executed and cost in excess of £40-million. However, the idea behind the legislation and prosecutions is sound, and there has since been a demonstrable effect on pharmaceutical prices in the UK, she notes. Prices and pricing structures in the pharma- ceuticals industry in the UK changed, eliminating the loopholes that led to possible price fixing.

“More importantly, though, is the fact that the UK Enterprise Act of 2002, which is matched in South Africa by the Competition Amendment Act of 2009, closed the loophole for companies to collude and then only pay a fine when caught. However, the South African counterpart, which criminalises cartel activity, was enacted but has not come into effect. The Act threatens prison sentences for directors and managers who are much less likely to collude for fear of being caught,” says Marks.

“South Africans need to be more aware of the costs of price fixing and the effectiveness of criminal implications of price fixing, and that charges can be laid against senior management and directors individually as well as civil and other effects on the companies,” she concludes.