The criminalisation of cartel conduct remains untested territory in South Africa, leaving room for interpretation along with a period of major challenges ahead.
The new law’s promulgation under the Competition Act on May 1, introducing criminal and individual liability in cartel behaviour, added a “new dimension” to competition law enforcement for which no case had yet been tried, delegates at the eighth Premier Corporate Governance Conference, in Johannesburg, heard on Wednesday.
Competition lawyers were entering a new, extremely complicated playing field, with little experience in joint civil and criminal investigations, prosecutions and processes involving the Competition Commission and the National Prosecution Authority (NPA), said Nortons Inc director Anthony Norton.
“We haven’t had an actual case yet so no one knows how this will play out,” he told the Chartered Secretaries Southern Africa-hosted conference, noting the lack of clarity on the interplay between the NPA and the Competition Commission.
However, despite the uncertainty, companies need to start taking what is a “red-flagged risk” very seriously.
While the penalties for cartel conduct, such as price fixing, market division and collusive tendering, remain the same at 10% of a company’s annual turnover, the criminalisation clause will now see individuals facing criminal ramifications.
Directors or those with management authority that either caused the firm to engage in a prohibited act or knowingly acquiesced to the firm committing the prohibited practice can now be charged and prosecuted.
The attached individual liability means that directors and management can be slapped with a R500 000 penalty or face jail time of up to ten years – or both.
However, while companies and individuals can no longer turn a blind eye to cartel conduct, the higher risks attached to coming forward leave many reluctant to blow the whistle.
The corporate leniency policy (CLP) for self-confessing cartel members does not immunise individuals from civil or criminal liability for participation in the cartel.
“In today’s world, you are playing Russian roulette, effectively, [but the prohibited acts] will eventually come out,” he assured, pointing out that this created a “huge risk” for anyone in a management position.
Corporate companies considering making use of the CLP have to consider the risk that any directors or management involved in the cartel conduct may still face prosecution, particularly if it emerged that the company was not the first to step forward.
Criminal liability is now a “very important consideration” with severe personal ramifications and bleak implications, requiring companies to prioritise the risk.