Johannesburg - The criminalisation of price fixing, cartels, tender collusion and market division from May 1 is likely to threaten the enforcement of competition law, according to legal experts.
The amendments, which were published in the Government Gazette on Friday, could also undermine the success of the Competition Commission’s corporate leniency programme.
Directors and managers could on conviction be fined up to R500 000 or jailed for a maximum of 10 years, or both.
The corporate leniency programme encourages members to disclose information about any activity and has helped the commission to dismantle cartels in other closely-related sectors of the economy.
Jenny Finnigan, partner at Shepstone & Wylie, said yesterday that making price fixing, market division and tender collusion between competitors a criminal offence would have a significant negative effect on the commission’s corporate leniency programme.
Finnigan questioned why a director of a firm would vote in favour of applying to the commission for corporate leniency if they could be held criminally liable, particularly when the decision to prosecute would be in the hands of the National Prosecuting Authority (NPA) and not the commission.
“It’s now no longer just a business decision. For a director it’s a decision which may have serious personal consequences,” she said.
Subject to certain conditions in the Companies Act, a director convicted of the cartel criminal offence could be disqualified from being a director.
In terms of the Companies Act, a person can be disqualified from being a director of a company if they had been convicted in South Africa or elsewhere and imprisoned without the option of a fine, or fined more than the “prescribed amount”, for theft, fraud, forgery, perjury or an offence involving fraud, misrepresentation or dishonesty in connection with the promotion, formation of a company under the Competition Act, among others.
The prescribed minimum value of a fine upon conviction that would result in automatic disqualification as a director was R1 000.
Finnigan added that a lot of cartel cases were settled on a consent basis but the amendments were likely to make it more difficult for the commission to get offending firms to agree to settlement agreements and could lead to cases taking longer to finalise because they had to be referred to the Competition Tribunal for a full hearing.
Lara Granville, a director at Norton Rose Fulbright, agreed the amendments to the Competition Act posed a significant risk to the commission’s corporate leniency programme, adding there were some incentives for firms to settle with the commission but it was uncertain how leniency on an individual level would play out.
“Individuals will be able to seek leniency from the competition authorities in the same way that companies can at present. However, enforcement will be handled by the Department of Public Prosecutions and the criminal courts so immunity from the competition authorities may not be enough to shield managers from prosecutions,” she said.
Ahmore Burger-Smidt, a director at Werksmans Attorneys, said competition law compliance should now be ranked as the highest regulatory risks by all company boards and executives.
“Without a solid foundation of competition compliance in companies that addresses the potential risk issue relating to competitor interactions, value for the company shareholders will be eroded,” he said.
Economic Development Minister Ebrahim Patel said last week during his budget vote speech in Parliament that to power up the economy, the country needed improved competition with increased jobs, small business opportunities and industrialisation as the targeted outcomes.
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