Cartel conduct will now land you in jail for 10 years
14 June 2016
Cape Town – Provisions in new laws that will see people found guilty of cartel conduct being fined up to R500 000 or imprisoned for up to 10 years came into effect on June 9, 2016.
This was revealed in a written response in Parliament on Tuesday, after Democratic Alliance MP Michael Cardo asked Economic Development Minister Ebrahim Patel when this provision under the new Competition Act would take effect.
Patel said the implementation of “Section 13 of the Competition Amendment Act, 2009 (Act No1 of 2009) came into effect on the publication of the Proclamation in the Government Gazette on 9 June 2016”.
That means those guilty of market allocation, collusive tendering and price fixing between competitors could get face severe penalties or jail time.
Patel said in his budget speech in 2016 that the act will make "it a criminal offence for directors or managers of a firm to collude with their competitors to fix prices, divide markets among themselves or collude in tenders or to acquiesce in collusion and they expose themselves to time in jail if convicted".
"Cartels and abuse of market dominance results in high prices to the disadvantage of ordinary citizens and of economic efficiency and they create quasi-monopoly practices in the economy," he said.
Unintended consequences - DA
Cardo told Fin24 on Tuesday that he doesn't believe the provision was properly thought through. "It's implementation could have several unintended consequences," he said.
"For one thing, the new criminalisation provisions run the risk of turning the Competition Commission into a toothless watchdog," he said. "In the past, companies have come forward to the competition authorities with information in exchange for leniency. "There is now a major disincentive for them to continue doing that because individuals will carry the can for whatever information is offered up," he said. "Any firm that applies for leniency now exposes its directors and managers to criminal charges for cartel conduct," he said. "The upshot is that cartel activity is likely to be driven further underground."
Amendment will penalise people who assist - TGR
Maphanga Maseko, associate in competition law at TGR Attorneys, told Fin24 on Tuesday that the commencement of section 13 of the Competition Amendment Act 1 of 2009 on 9 June 2016 effectively means that a director or a manager who is aware of cartel conduct (price fixing, dividing of markets or collusive tendering) that their firm is involved in, could face up to 10 years in jail and/or a fine of up to R500 000.
"Regrettably the amendment does not make a distinction between those directors or managers that disclose the cartel conduct to the Competition Commission in terms of the Corporate Leniency Policy (CLP) and those directors or managers that do not disclose such cartel conduct," said Maseko.
"The effect thereof is that the amendment will penalise those directors or managers who assist the commission to uncover cartels through the CLP and will de-incentivise directors or managers of companies from coming forward with information that will assist the Commission to uncover cartels as such directors or managers risk going to jail owing to this amendment.
"It is concerning that this amendment was brought into effect as it may undermine the effectiveness of the CLP and lead to less cartels being uncovered in the future.
"The fact that the commission can issue a certificate to the National Prosecuting Authority (NPA) stating that a director or manager is deserving of leniency, does not offer much comfort to those directors or managers that disclose the cartel conduct to the commission in terms of the CLP, as the discretion whether or not to prosecute a criminal case, lies with the NPA. "It is also not clear if this certificate can be used to institute a criminal case against that director or manager or if that certificate by the Commission would be used in the mitigation of sentence.
"Therefore the amendment could have adverse consequences for one of the success stories of competition policy in South Africa, being the CLP. The CLP has been an effective and useful tool to uncover and prosecute cartel conduct that would otherwise have gone undetected," he said.
This article first appeared on Fin24, see here.
