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Competition Tribunal looking beyond fines to deal with transgressors

Competition Tribunal chairperson Norman Manoim

Competition Tribunal chairperson Norman Manoim

11th November 2013

By: Terence Creamer

Creamer Media Editor

  

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South Africa’s Competition Tribunal reports that it will increasingly explore “creative remedies” for contraventions of the Competition Act in an effort to demonstrate more immediate and tangible market benefits as a result of determinations, or settlement agreements.

Hitherto, remedies have typically taken the form of fines paid to the National Treasury for use in the general Budget. In 2012/13, fines relating to prohibited practices rose to R731.5-million from R548.5-million in the previous year, despite a decline in the number of consent orders from 149 to 124.

However, chairperson Norman Manoim believes more innovation is required to improve rivalry in markets afflicted by anticompetitive behaviour and, in turn, bolster the credibility of the competition system by showing a more direct link between tribunal rulings and the market experience following the adjudication process.

He acknowledges that the issue of remedies will always be controversial, with some wanting heavier punishments and others warning that companies will not be able to bear more robust penalties.

But the tribunal – which Manoim says is “all about remedies”, given that it acts as the court of first instance in competition matters, while the commission plays a policing and prosecutorial role – is hoping to strike a balance between redressing past transgressions and regulating future behaviour.

“It’s time that we thought more innovatively about remedies,” Manoim says, particularly as there are instances where cartel behaviour, such as the division of markets, can quite feasibly continue informally even after an adverse ruling is made against the culprits.

Therefore, remedies should be created that “allow people to actually attack the other markets . . . or the other customers”.

A recent Competition Commission study offers an economic basis for such interventions. It shows that the breaking up of the concrete-products cartel resulted in increased product and territorial competition, lower prices and higher employment.

Full-time tribunal member Yasmin Carrim says that, despite being limited to prospective rather that retrospective remedies, progress has been made in several instances, whereby fines have been lowered in favour of innovations designed to improve market conditions.

She points to the recent imposition of a R449-million fine of Telkom, which was reduced in favour of discounts worth R800-million for the market. It has also insisted on divestitures in certain cases, most notably a fertiliser case involving Sasol.

“Those kind of remedies show that the system is working and people can see an immediate impact through the restoration of competition in the market,” Carrim argues, adding that such remedies can build confidence in the system and lower the threat of yet further regulation.

That said, the amendment to the Competition Act making cartel behaviour a criminal offence remains a possibility, despite the misgivings of competition law practitioners and the tribunal itself.

The amendment, which has been passed by lawmakers and approved by President Jacob Zuma, has not yet been proclaimed, with some warning that it might be unconstitutional.

Manoim stresses that, while he cannot fault the proposal on ethical grounds, he remains concerned about the practicalities, particularly as it will raise the legal threshold from a ‘balance of probabilities’ to ‘beyond a reasonable doubt’.

He says the current corporate leniency framework has offered the certainty required for companies and company boards to take the step of dealing with transgressions. “What you want to do, from an enforcement perspective, is advance the case of those advising people to comply with the law and not to take their chances. But unless they can give advice that is based on certainty . . . boards may be more willing to take a chance.”

But he stressed that the final decision on how to proceed rested with the executive and the tribunal would have to adapt to whatever changes might arise.

In the meantime, it will be seeking to improve the turnaround times of cases and settlement agreements, while also using its authority to craft remedies that it hopes will raise the credibility of the competition system as it stands.

One of the instruments being explored is the granting of interim-relief orders, which would be granted for six months alongside a Competition Commission investigation.

“These have not been popular in the past . . . But because cases are taking so long, it may be important to start relooking at the considerations of interim relief, so that relief doesn’t become academic when it eventually happens.”

Edited by Creamer Media Reporter

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