Most Read Contributor in South Africa, September 2016
South African Minister of Economic
Development, Ebrahim Patel, has announced that, from 1 May 2016,
cartel conduct (price fixing, market allocation and collusive
tendering) comprises criminal activity.
Directors or persons with management
responsibility who participate in cartel conduct or who are aware
of cartel conduct and fail to take appropriate action can be
The maximum penalty for cartel
conduct is imprisonment for up to 10 years and/or a fine not
exceeding R500 000.
Tension may well arise between a
firm's desire to "come clean" under the Competition
Commission's ("the Commission's") Corporate
Leniency Policy and an individual's desire not to
From 1 May 2016, section 73A (1), (2), (3) and (4) of the South
African Competition Act ("Competition Act"), 1998, as
amended, comes into effect. Section 73A criminalises participation
by directors or persons with management authority in any price
fixing, market allocation or collusive tendering with competitors.
This personal criminal liability extends to directors and managers
who have knowledge of cartel activities, but who do nothing about
In his budget speech to Parliament on 21 April 2016, Minister
Patel, stated that cartels result in "high prices to the
disadvantage of ordinary citizens and of economic efficiency and
they create quasi-monopoly practices in the economy" and that
"we are taking firm steps to end cartels."
This criminalisation of cartel conduct is a firm step indeed. A
person convicted of a section 73A offence is liable for
imprisonment not exceeding 10 years and/or a fine not exceeding
Since section 73A comprises criminal conduct, prosecution of the
directors or managers of a firm will be conducted by the National
Prosecuting Authority ("NPA"), rather than the
competition authorities. The NPA's prosecution can only proceed
after a finding by the Competition Tribunal (the
"Tribunal") or the Competition Appeal Court
("CAC") that the firm has engaged in cartel conduct or
after the firm has admitted to having engaged in cartel conduct by
virtue of a consent agreement.
The prosecution of the firm before the Tribunal or the CAC and
the individual in the criminal courts gives rise to an interesting
dilemma. The Competition Commission can offer indemnity to a firm
in terms of its Corporate Leniency Policy, but not to an
individual. While the Commission can make submissions to the NPA in
support of leniency for the director or manager, these submissions
are not binding and the NPA has the ultimate say. This may result
in a director or manager being unwilling to provide a complete and
truthful disclosure to the competition authorities in pursuit of
indemnity for the company, in fear of a criminal sanction.
The constitutionality of section 73A has been a contentious
topic of discussion since the amendment was promulgated in August
2009. The omission of sub-sections 73A(5) and 73A(6) in the
proclamation bringing section 73A(1), (2), (3) and (4) into effect
may well be an attempt to address these concerns.
The Competition Act and its prohibition of cartel conduct has
been in force since 1999. The introduction of personal, criminal
liability introduces a new level of punishment for cartel conduct
in South Africa. Firms and individuals should take heed that the
competition authorities have a new weapon in their arsenal to use
in the war against cartels.
Originally published on 25 Apr 2016
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