Competition watchdog on track of cartels

The commission is conducting an investigation into steel traders and polymers industries.

“These are still under investigation and no conclusion has yet been reached,” says Nandi Mokoena, manager of strategy and stakeholder relations at the commission.

“The Competition Commission is increasing its capacity to crack down on cartels and is intensifying efforts in this area. Accordingly, business can expect a heightened focus on cartels, which is likely to result in increased detection and prosecution of cartels,” Mokoena says.

“Firms would do well to apply for leniency before they are caught and in this way eradicate cartel behaviour, minimise reputational damage and potentially avoid prosecution.” Mokoena says cartels are considered the most serious of competition law contraventions.

“As such, the commission considers cartel investigations to be a high priority.”

A cartel is a group of businesses that aims to fix prices and limit supply and competition. Some of this conduct includes price-fixing, excluding competitors, collusive tendering, rigging of bids and carving up markets.

In SA, the Competition Act allows for a maximum penalty of 10% of total turnover.

The level of fines has increased significantly over the past few years, coming close to 10% of the offending companies' “turnover in the line of business” in which the cartel conduct took place.

Mokoena says that in the past three years the commission has prioritised specific sectors and stepped up efforts to eradicate cartels in these industries.

As a result of the proactive work undertaken by the commission in these sectors and the complaints the commission has received, the most notable cartel cases have taken place in the food and agro-processing sector. These include the bread and milk cartel cases, which were finalised by the commission and referred to the Competition Tribunal for prosecution.

She says the commission also has uncovered cartels in the PVC and HDPE plastic piping industry, and in the manufacture of concrete pipes, culverts and manholes. “The commission also uncovered a cartel operating in the scrap-metal industry.”

She says the commission is conducting an investigation into the bicycle sector and is obtaining further information on certain allegations.

Mokoena says the corporate leniency policy of the commission has been instrumental in offering companies a way to admit transgressions without incurring liability. From 2007 to date, the commission has received 19 leniency applications.

“The commission considers the leniency policy to be a great success, but without thorough investigations and the resultant prosecutions or settlements of the cases, the policy would soon become ineffective.”

Jean Meijer, a competition lawyer at commercial law firm Bowman Gilfillan, says the Competition Commission has become more active and aggressive, carrying out about six dawn raids in the past year.

The commission has adopted a policy of requiring admission of liability before granting leniency or entering into settlement agreements, even though this is not a requirement of the Competition Act.

It is also constantly pushing up the level of administrative penalties, says Meijer. “This is in keeping with international trends.”

She says that although the leniency policy has been a significant factor in the commission's recent successes, firms should not rush to make use of the policy without fully understanding its implications.

Source: Business Day

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