https://www.polity.org.za
Deepening Democracy through Access to Information
Home / Press Office / Norton Rose Fulbright South Africa Inc RSS ← Back
Close

Email this article

separate emails by commas, maximum limit of 4 addresses

Verification Image. Please refresh the page if you cannot see this image.

Sponsored by

Close

Embed Video

Cartels face hefty fines and prison sentences worldwide

18th January 2013

SAVE THIS ARTICLE      EMAIL THIS ARTICLE

Font size: -+

A glance back at 2012 suggests that companies and executives who engage in price fixing, market allocation and bid rigging can expect to face substantial financial penalties, and potentially also harsh prison sentences, in a growing number of jurisdictions worldwide.

Last year was a record penalty year for global competition law authorities, with companies worldwide being fined more than US$ 5 billion, double the total fines levied in 2011. The European Commission imposed its largest total penalty in a single case last year, when it fined seven companies including Philips, LG Electronics <http://www.reuters.com/sectors/industries/overview?industryCode=104&lc=int_mb_1001>  and Panasonic a total of approximately $1.92 billion for operating two cartels which fixed the price of cathode ray tubes for nearly a decade. The US Department of Justice imposed total fines of approximately US$1.13 million last year.

Advertisement

Globally, the personal risk to individuals who participate in cartels is also increasing. Although individual employees are not currently at risk of criminal prosecution by the European Commission or in some European countries like Spain and Portugal, cartels are criminalised in France and the United Kingdom, as well as Ireland, Greece, Norway, Slovakia and Slovenia. Recent developments in the United States and Canada in particular highlight that individuals are likely to face even harsher prison sentences in future. For example, the length of the prison sentences served by executives convicted of cartel conduct in the United States has increased steadily since the 1990s from an average of approximately 8 months, to nearly 17 months (according to the website of the the US Department of Justice).

The DOJ has consistently emphasised that it will ensure that foreigners, as well as American citizens, who participate in cartels impacting on the American economy serve out harsh jail sentences. In March last year, for example, a federal jury in San Francisco sentenced two Taiwanese executives of AU Optronics (AUO) to a fine of $200 000 each and 36 months in prison for participating in a cartel which fixed the price of the LCD screens and panels used in phones, laptops and televisions. This was substantially less than the 10 year prison term which was requested by the Department of Justice (DOJ), which argued that this “offense was no regulatory violation, nor a momentary lapse soon regretted.  Rather, fully conscious of the wrongfulness of their actions, AUO and its executives conspired with the other major makers of TFT-LCD panels to systematically fix prices.”  To date, 22 executives have been charged in the United States in connection with this LCD case, and 12 have been jailed for a total of 160 months.

Advertisement

The Canadian competition legislation was amended in 2009 in order to increase prison terms for cartel executives to up to 14 years, and fines up to C$25 million. Several executives have been convicted in Canada, but they all served most, or part, of their sentences as community service, or under house arrest.  In November last year, however, this legislation was amended in order to make prison sentences mandatory for individuals found guilty of participating in a cartel in Canada. 

The global trend towards harsher penalties is also evident in South Africa. In 2012, administrative fines of approximately R934 million were paid by companies for violations of the Competition Act. The vast majority of these fines (approximately R482 million) were paid by companies who engaged in price-fixing, market allocation and collusive tendering in a cartel. For example, Lafarge Industries South Africa paid R148.7 million for its participation in a cement cartel, Foodcorp paid R88.5 for its involvement in a white maize milling and wheat milling cartel, and Oceana Brands paid R34.7 for its role in fixing prices in the pelagic fishing market.

This trend is set to continue in 2013. The Commission has yet to finalise a number of existing cartel cases, including a settlement process relating to bid-rigging in the construction industry which goes back to February 2011. The Commission created a dedicated cartel unit last year to enhance its ability to detect and prosecute cartels, and it referred several new complaints about price fixing to the Tribunal for adjudication last year (including in the steel and oil industries). It is likely that the Commission will increasingly work with other African competition regulators, including in Namibia, Botswana and Zambia, to prosecute cross-border cartels, particularly in key industries impacting on poor consumers like agriculture, food retail, construction and chemicals.

Although the Competition Amendment Act introducing criminal liability for directors and managers who participate in cartels has not yet been signed into effect by the President (despite the fact that it was passed by Parliament in August 2009), the global trend towards more aggressive competition law enforcement and harsher individual sanctions suggests that the risks for South African companies and their executives who contravene competition law are high, and likely to increase in future. The sooner businesses put in place a comprehensive global competition law training and compliance programme, the better.

Written by Heather Irvine, a director at Norton Rose in South Africa.

EMAIL THIS ARTICLE      SAVE THIS ARTICLE

To subscribe email subscriptions@creamermedia.co.za or click here
To advertise email advertising@creamermedia.co.za or click here

Comment Guidelines

About

Polity.org.za is a product of Creamer Media.
www.creamermedia.co.za

Other Creamer Media Products include:
Engineering News
Mining Weekly
Research Channel Africa

Read more

Subscriptions

We offer a variety of subscriptions to our Magazine, Website, PDF Reports and our photo library.

Subscriptions are available via the Creamer Media Store.

View store

Advertise

Advertising on Polity.org.za is an effective way to build and consolidate a company's profile among clients and prospective clients. Email advertising@creamermedia.co.za

View options
Free daily email newsletter Register Now