South Africa's Competition Commission, which has expressed misgivings about some aspects of the proposed changes to the competition legislation, said that it was preparing itself for the likelihood that the amendments would be signed into law unaltered.

Commissioner Shan Ramburuth stressed recently that the organisation's anxieties had never related to the principles governing the amendments, including the desire to strengthen the competition authorities and the creation of larger disincentives.

Instead, it had been concerned about the constitutionality of certain technical provisions. This, it feared, could lead to legal challenges, which would "frustrate" and distract the commission from enforcing competition legislation.

Particular concern had been expressed about the constitutionality of Section 12(5), which sought to introduce criminal liability against senior management who presided over companies that engaged in anticompetitive behaviour.

Having similar reservations, President Kgalema Motlanthe referred the Bill back to the National Assembly for reconsideration earlier in the year. But Parliament immediately rebuffed the President and redirected the proposed legislation back to his office for signing.

The Department of Trade and Industry, which drafted the amendments, was also satisfied that the Competition Act Amendment Bill would not contravene the Constitution.

In fact, Trade and Industry Minister Mandisi Mpahlwa said last month it would strengthen the hand of the competition authorities, by extending to them "additional tools" to deal with anticompetitive behaviour and complex monopolies.

Mpahlwa stressed, too, that these extended powers would be backed with the necessary budgetary resources to ensure implementation.

Ramburuth said that they would assess the new tools, but would only apply these where it felt such application was in the interests of resolving a case.

He was concerned, however, about the possible undermining of its corporate leniency policy (CLP), which had prove successful in destabilising and unearthing a number of cartels.

In fact, deputy commissioner Tembinkosi Bonakele noted that the commission was currently receiving a record number of CLP applications.

"The number keeps increasing, and we would never have anticipated the numbers that we are seeing," Bonakele said, warning that cartel participants would ignore the CLP at their peril.

"But we are concerned about certain things [in the new Act] and we want to make sure there is certainty around corporate leniency when the Act comes into effect," Bonakele added, noting that it was in communication with other affected institutions, such as the National Prosecuting Authority and the South African Police Service.

Bid Rigging in Focus
The commission says it is receiving approaches "every week" from construction-related and other companies seeking either leniency for bid rigging, or requesting a "marker" to effectively secure a slot in the queue should they decide to pursue an application for leniency.

Under the CLP, a company that was "first through the door" with its application received immunity from prosecution, provided it also showed evidence of cartel behaviour and made an undertaking to cooperate with the investigation. In one recent case, the time margin between the first and second CLP applicant was a little more than one minute.

The policy has already proved highly successful in unearthing anticompetitive behaviour in the food, chemicals and construction materials sectors, and the commission's policy and research head Dr Simon Roberts said on Thursday that it was also proving useful in unearthing bid rigging in the infrastructure milieu.

Roberts, who is also acting head of enforcement, said recently that many of the initial approaches were for "markers" - an innovation adopted by the commission in May 2008, to allow cartel participants to effectively reserve a leniency slot while hard evidence was gathered. This reservation was restricted to a few weeks, whereafter it fell away.

Two principle categories of bid-rigging cases were emerging. The first, related to the direct rigging of contracts in order to achieve agreed market-share positions, while the second related to what was known as "cover pricing".

Through cover pricing, bidders were able to give the appearance of competition, while in fact tender prices had been fashioned in such a way as to ensure that only one of the bidding firms was successful.

Under section 4 of the Competition Act companies are prohibited from entering into agreements that had the effect of allocating customers and setting prices.

But because these agreements are generally forged on a contract-by-contract basis, it had led to a proliferation of cases in other jurisdictions. It is understood that competition authorities in the UK and the Netherlands were pursuing thousands of separate bid-rigging cases involving hundreds of separate companies.

Ramburuth stressed that the infrastructure sector was increasingly in the spotlight, given that anticompetitive behaviour in the sector would undermine the country's infrastructure programme and make its R787-billion public investment programme more expensive.

"There is a definite history of collusion in this sector and given that scale of the current infrastructure spend any anticompetitive behaviour could be very costly," Ramburuth averred.

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