Schoolyard sense of fair play not applicable to collusion cases

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Article by: Terence Creamer

Published: 12 Feb 2010

Schoolyard sense of fair play not applicable to collusion cases

The lingering schoolboy sense of justice in me (and in many others, I suspect) makes it hard to accept a logic whereby a company walks away scot-free, after effectively "telling tales" on its supposed competitors - despite the fact that the company in question is as guilty of the alleged offence as are those rivals being fingered.

But, in the pernicious world of corporate collusion, it is important that South Africans set aside juvenile notions of fairness and embrace, rather than eschew, corporate leniency for those willing to make the uncomfortable disclosures necessary to blow the lid off such criminal conduct.

The notion that the ‘splitters' are the bad guys, while those who cling unflinchingly to their harmful practices, but remain ‘honourable' in the schoolyard sense, is false. There is simply nothing honourable about collusion nor should ‘honour' among such thieves be encouraged.

To be sure, the cost of anticompetitive conduct, in general, and cartel behaviour, in particular, is material and well documented. Naturally, such practices inflate the price paid for the final product, hurting all con- sumers, but especially poor consumers. Cartels also undermine the economic growth propensity that is fostered by firm-level rivalry, while narrowing the base of beneficiaries.

In other words, the cost/benefit balances associated with the economic activity in question are thrown out of kilter, which, in a developing country, potentially exacerbates the scourge and impact of income inequality.

It should also not be forgotten that this country's competition authorities, which are now widely respected, have really only been able to make the progress that they have in identifying and prosecuting cartels in industries as diverse as bakeries and healthcare, through to fertilisers and metals, because of the corporate leniency policy (CLP).

For this reason, some of the statements made following recent revelations that the Competition Commission is investigating the possibility of collusion among airlines in the setting of World Cup ticket prices that served to question and/or undermine CLP were unfortunate.

Now one can understand the sense of injustice that some executives might have felt on hearing that the notoriously anti-competitive national carrier, South African Airways, was the so-called whistle blower.

But some of the injudicious language used by those seeking to deflect the accusations (as well as by some media commentators) went beyond normal legal defence to effectively attack the CLP and, by extension, the com-petition authorities.

Such misguided reactions could have unintended consequences. For instance, it could serve to undermine the credibility of the competition bodies in the eyes of the public, which, in turn, might lead to less rigorous enforcement - which, in the context of a highly concentrated economy, is the last thing we need.

Without question, CLP is an important instrument that has been well used.

Its efficacy is already threatened by the fact that the Competition Amendment Act has effectively "criminalised" cartel behaviour - many commentators believe that this will initially lead to a spate of leniency applications, but this will cool after the law comes into effect.

But its efficacy could be undermined even further should it continue to be portrayed as unfair by opinion leaders - as it will eventually be deemed as such by the public at large.