Competition Tribunal chairperson Norman Manoim has urged chartered secretaries and compliance officers to exercise caution during their governance of a company’s corporate activity, telling the Chartered Secretaries Southern Africa’s seventh yearly Corporate Governance Conference, on Wednesday, that merger transactions, industry association meetings and interactions with tender bid competitors presented particular compliance risks.

“You need to look for certain dangers that may exist in the company in terms of contravention of the Competition Act.

“Competition law is not an irrational intruder into your home, but is rather out there to help you and deal with a failure in markets. We try to make the markets better so that you can compete with one another. We are there not to give you fake alarm bells, but to keep the market safe,” he told delegates attending the second day of the conference, in Illovo, Johannesburg.

Citing situations in which companies were most likely – albeit not always intentionally – inclined to contravene competition law, Manoim said company secretaries and risk and compliance officers should be aware of transactions that could be interpreted by legislation as being mergers.

All mergers were required to first be approved by South African competition authorities.

“You need to check whether the transaction will result in a change of management or business control, which is essential for the deal to qualify as a merger.

“Even if you don’t think the transaction is a merger, it could be, and your competitors could inform the competition authorities,” he noted.

Manoim recommended that compliance officers take advice from the Competition Commission on transactions before the company board that could qualify as a merger activity.

He further advised the industry to remain hyper-aware of corporate activity that could be construed as collusive, or of engaging in any form of cartel activity.

Business associations, while performing an important function, were a particular danger, he said.

“The industry association is a great danger. They are not illegal, but a lot of the activity of cartels that we’ve covered has happened at an industry association level.

“Be careful of the subjects of the meetings and if the topics that come up at the meeting seem suspicious, then leave the meeting. If you want to be cautious, write to the Competition Commission or to the association to say that you’re not part of the agreement,” he commented.

If found guilty of collusion by the Competition Tribunal, companies faced hefty fines of up to 10% of their revenue, as well as potential class action lawsuits from customers.

Collusion could also take the form of unusual relationships with industry competitors on a particular tender bid.

Manoim advised compliance officers to investigate the accounts of the company following it being awarded a tender, and observing whether any payments had been made to rival firms bidding for the same contract.

This could point to collusive activity where the “losing” firm agrees to submit an inflated tender price to ensure that the other firm is selected as the successful bidder, based on its lower price point. The winning firm then pays the other for its price inflation.

“If you’re doing due diligence, do cartel due diligence as well. If you find your firm was involved in cartel behaviour, approach the commission and take advantage of the leniency clause, which allows leniency for the first admitter of the collusion.

“Changing the company’s corporate behaviour immediately after discovery will also mitigate a fine,” he said.

Companies should also remain aware of potential abuse of their position as a dominant firm in their respective industries. Companies were considered dominant if they controlled more than 45% of the market and could, thus, be found guilty of predatory pricing.

“If you’re a dominant firm, there are things that you can’t do that other firms can do,” he held.