This week, the South African Competition Commission and Minister Patel explained to the country’s National Assembly why they decided not to take any enforcement action against alleged collusion in the fisheries industry.

Andreas Stargard, an attorney with Pr1merio commercial advisors, explains:

If that answer does not suffice, let’s unpack this legal doctrine, founded upon the eponymous U.S. Supreme Court precedent from 1984.  Continues Stargard:

Until the Supreme Court’s decision in Copperweld Corp. v. Independence Tube Corp., 467 U.S. 752 (1984), related corporations were generally perceived as separate entities capable of concerted activity, a view which came to be known as the “intra-enterprise conspiracy” doctrine.  Since Copperweld, this doctrine is no longer valid law.  Today, antitrust courts recognize the inherent unity of economic interest and purpose characterizing the relationship between a corporation and its wholly-owned subsidiary entities or business units, thus precludes any finding of illegal conspiracy between a corporation and its subs.

This theory is, evidently, whole-heartedly embraced by the SACC and Minister Patel, whose own short answer to “parliamentary inquiry #1995” from 23 September 2016 was simply: “All firms suspected of collusive conduct constituent firms within a single economic entity, so Act does not apply.”  Not so fast, however, says Mr. Stargard, who admonishes that the “single economic entity” principle must be proven and cannot simply be assumed — substance always wins over form:

Copperweld teaches us to analyze the substance, not the form, of economic arrangements – it is therefore important that the “wholly-owned” character of the fisheries units by Sekunjalo not merely be a sham corporate construct to hide the truly competitively separate and distinct character of the entities; rather, it must be true ownership and control by the parent entity.  This is particularly important here, where the parent is apparently a highly diversified PE-type entity.

At issue in the present SA case was Sekunjalo Investments Limited, Sekunjalo Marine Services Consortium, Premier Fishing SA (Pty) Ltd, and Premier Fishing Consortium.  They were alleged to have entered into an agreement to collude by discussing and coordinating the preparation of their respective bids to the Department of Agriculture, Forestry and Fisheries  in respect of a tender to supply marine patrol services to DAFF.  In light of their nature as a single economic entity, no further investigation or enforcement is recommended.