South African Competition Commission charges furniture removal company with record number of charges

by Meghan Eurelle

The South African Competition Commission has charged Stuttaford Van Lines, a furniture removal company, with 649 counts of collusive tendering related to hundreds of tenders to transport government furniture. This the largest number of charges faced by a single company in the history of anti-cartel enforcement by the Commission.

The tenders include those issued by the Presidency, Parliament, the National Prosecuting Authority, the South African Secret Service, the South African Police Service, the South African Revenue Services and the Public Protector, among others.

It is likely that the case emanates from the 2010 complaint against the industry that uncovered widespread and deep rooted anti-competitive and collusive conduct in the furniture removal market. The Commission’s investigation revealed Stuttaford colluded with its competitors from at least 2007 through cover quotes.

All the companies alleged to have colluded with Stuttafords, such as JH Retief Transport, Cape Express Removals, Patrick Removals and De Lange Transport, have subsequently settled with the Commission but the case against Stuttaford has been referred to the Tribunal for adjudication.

The Commission is asking the Tribunal to fine the furniture removal company 10 percent of its annual turnover on each of the 649 charges. The Commission’s approach of seeking an administrative penalty in respect of each alleged contravention means that the 10% statutory cap will be applied, on the Commission’s version, for each contravention.

AFRICANANTITRUST UPDATE: Recent referrals and merger prohibitions by the South African Competition Commission

by Michael-James Currie

The mid-year months of June and July has been a particularly eventful one from the South African Competition Commission’s (SACC) perspective. Following the referrals of two separate abuse of dominance cases in the pharmaceutical and rooibos tea industries respectively, the South African Competition Commission has also referred a number of respondents to the Competition Tribunal for allegedly engaging in ‘cartel conduct’ and conducted a further set of dawn raids – this time on a number of feedlot and meat suppliers.

Most notably, however, the SACC has in a space of three weeks, prohibited four intermediate mergers outright and also recommended the outright prohibition of one large merger. Although it is not altogether uncommon that the SACC prohibits an intermediate merger, the SACC usually approves such mergers subject to suitable conditions in order to remedy any competition or public interest concerns. Typically only a nominal number of intermediate mergers are outright prohibited during any given year. It is, therefore, particularly noteworthy that four intermediate mergers have been prohibited in such a short space of time.

Cartels

Referral of the ‘Brick Cartel’

The South African Competition Commission (SACC) has decided to refer its investigation in respect of the ‘brick cartel’ to the Competition Tribunal for adjudication.

The SACC’s referral includes the following brick manufacturing companies: Corobrik, Era Bricks (Pty) Ltd (Era Bricks), Eston Brick and Tile (Pty) Ltd (Eston Brick), De Hoop Brickfields (Pty) Ltd (De Hoop), Clay Industry CC (Clay Industry) and Kopano Brickworks Ltd (Kopano). It is alleged that Corobrick has entered into separate bilaterial agreements with each of the respondents the terms of which amounts to price fixing or market allocation in contravention section 4(1)(b) of the Competition Act, a per se prohibition.

Corobrick has expressed its surprise that the SACC has referred the matter and has indicated that the SACC has misconstrued the nature of the various agreements.

The SACC appears to have concluded its investigation particularly expeditiously given that the investigation commenced in April 2017 and was referred to the Competition Tribunal three months later. Furthermore, it appears as if the SACC has based its case purely on the SACC’s interpretation of the wording of the relevant agreements. The per se nature of a ‘section 4(1)(b)’ contravention necessitates that firms are particularly cognisant of the wording and terms used in any agreement. Particularly if there is conceivably a horizontal relationship between the contracting parties.

Collusive tendering referrals

The SACC also investigated and referred two separate cases to the Competition Tribunal for alleged collusive tendering.

The first was in relation to the stationary industry. The SACC referred eight respondents to the Competition tribunal for allegedly engaging in collusive conduct in relation to the supply of certain stationary products. The SACC found that the respondents colluded in respect of a tender issued by the Free State Provincial Government based on the respondents quoting the same price for the various products as per their respective bill of quantities.

In a separate investigation, the SACC referred four companies for coordinating their bids in relation to a tender issued by the City of Cape Town for the provision of padlocks for high, medium and low voltage access.

Merger control

The SACC has recently decided to prohibit three intermediate mergers based on concerns relating to coordinated effects and one intermediate mergers on the grounds that the merger would likely lead to a substantial lessening of competition in the market. In addition to these intermediate mergers, the SACC also recommended the prohibition of a large merger in its referral to the Competition Tribunal.

Coordinated conduct

The first was in relation to the Jasco Electronic Holdings (Jasco) and Cross Fire Management (Cross Fire) merger. Notably, the SACC prohibited this merger principally on the basis that the merger was likely to reduce the number of firms operating in the relevant markets which would lead to increased coordinated effects. Importantly, a number of respondents in the fire protection sector, including Cross Fire, are embroiled in an investigation by the SACC in respect of alleged cartel conduct. The investigation follows dawn raids which were conducted on the premises of five fire control and protection services companies in March 2015. Two years later, the SACC referred seven respondents to the Competition Tribunal seeking the imposition of an administrative penalty of 10% of each of the respondent’s respective annual turnover.

Two of the respondents settled their case with the SACC by way of a consent order in in June 2017.

In assessing the merger, the SACC noted that Jasco was not implicated in the cartel but concluded nevertheless that “Jasco Fire will be incorporated into the cartel and the consolidation of the market will enhance or strengthen coordinated effects post-merger”.

The prohibition of the Jasco/Fire Cross merger follows soon after the SACC also prohibited the proposed joint venture between Nippon Yusen Kabushiki Kaisha (NYK), Mitsui O.S.K. Lines Ltd (MOL) and Kawasaki Kisen Kaisha Ltd (KL). In June 2017, the SACC found that the joint venture would likely create a platform for collusion and increase co-ordinated conduct in an industry which is being investigated by a number of competition agencies across the globe. The SACC itself is investigating the shipping line industry and NYK were one of two respondents who settled their case with the SACC by way of a consent order in 2015 for approximately R100 million (US$ 8.3 million).

The third merger which the SACC prohibited was the Timrite and Tuffbag intermediate merger. The SACC found that the proposed transaction in polypropylene-mining based support bags industry would facilitate and enhance potential co-ordinated effects and market allocation arrangements in the manufacturing and distribution of PBMS bags.

Andreas Stargard of Primerio states that “firms looking to merge in a sector which has previously or currently been subject to an investigation for collusion, may already be on the ‘back foot’ and will need to be proactive in assuaging the SACC that the transaction will not increase levels for potential coordination”.

Substantial lessening of competition in the market

The first of the two intermediate mergers prohibited on the grounds that they are likely, from the SACC’s perspective, to lessening competition in the market, was the Greif International BV (Greif) and Rheem South Africa (Pty) Ltd (Rheem) merger in the steel drum manufacturing sector. The SACC found that the merger would effectively be a merger to monopoly and that the pro-competitive efficiencies did not outweigh the likely anticompetitive effects.

In addition to the prohibition of the two intermediate mergers (which may be submitted to the Competition Tribunal for re-consideration), the SACC has also recommended that the proposed large merger between Mediclinic and Matlosana Medical Health Services be prohibited by the Competition Tribunal. The SACC is of the view that the proposed transaction would lead to a substantial lessening of competition in the provision of private healthcare services in the relevant geographic region.

In each of the three mergers, the SACC considered potential remedies but concluded that none of the remedies proposed by the merging parties were suitable.

Stargard points out that the “assessment of mergers in terms of both traditional competition tests as well as from a public interest aspect requires, at times, robust and innovative remedies in order to get the deal through in South Africa”.

[AAT is indebted to the continuous support and assistance of Primerio and its directors in sharing their insights and expertise on various African antitrust matters. To contact a Primerio representative, please see the Primerio brochure for contact details. Alternatively, please visit Primerio’s website]

Beyond the DOJ: Criminal liability for cartel conduct in Africa

South Africa: Driving Force behind Enforcement of Criminal Sanctions for Cartelists?

By AAT Senior Contributor, Michael-James Currie

In May 2016, precisely a year ago, criminal liability for directors or persons with management authority who cause a firm to engage in cartel conduct was introduced in South Africa by way of amendments to the Competition Act.

The introduction of criminal liability caught most of the South African competition law community off-guard, including the competition authorities, despite the relevant legislative provisions having been drafted and presented to Parliament for approval in 2009.

A major reason why there was such a delay in the enactment of the relevant legislation were concerns raised about the practicality and legality in enforcing the criminal liability provisions, at least in the manner currently drafted. These concerns, however, were never addressed and the Minister of Economic Development, Minister Patel, proceeded to bring into effect the criminalising provisions. The Minister has openly taken a view that current administrative penalties, which to date have been the most prominent form of sanctions imposed on firms for engaging in cartel conduct, do not provide a sufficient deterrent.

Criminal sanctions are, however, by nature a rather retributive liability, and there have been limited instances in which firms that have previously found to have contravened the Competition Act are repeat offenders. Administrative penalties coupled with reputational damage would appear to be a substantial deterrent.

Regardless, the sentiments of Minister Patel were recently echoed by the head of the National Prosecuting Authority, Shaun Abrahams, who recently indicated that anti-corruption task team (ACTT) has been briefed to treat ‘collusion’ in the same vein as corruption. The ACTT was formulated in 2010 to target high profile cases of corruption.

While it is understood that the Competition Commission (SACC) and the National Prosecuting Authority (NPA) having been working on a memorandum of understanding between the two enforcement agencies for over a year, it appears that such a MoU is still some way off from being finalised.

It is not yet clear whether the NPA envisages a more active role in cartel investigations with a view to institute criminal proceedings in terms of the Competition Act, or whether Mr Abrahams envisages holding those accountable by other pieces of anti-corruption legislation such as the Prevention and Combatting of Corrupt Activities Act (PACCA).

Mr Abrahams has indicated that he has been trying to set up a meeting with the Commissioner of the South Africa Competition Commission, Tembinkosi Bonakele, in order to discuss recent investigations by the SACC, most notably in the banking sector.

Of particular interest is that the Black Empowerment Forum (BEF) had laid criminal charges at the South African Police against Citibank following Citibank’s R69 million settlement agreement with the SACC. The BEF had indicated that they would write to the President and the NPA in an effort to elevate and expedite this case.

The recent banking referrals have been politically charged with many of the view that there has been political interference in the manner in which the banking investigation has been handled. A number of reports have linked the BEF which was allegedly only established in April 2017, to the President’s son, Edward Zuma.

This does raise queries as to the motivation behind the BEF’s criminal complaint and also whether it was the BEF’s criminal complaint that has sparked Mr Abrahams’ recent comments.

The timing of the BEF criminal complaint and Mr Abrahams’ expressed interest in pursuing cartelists for criminal liability, the allegations of political interference in the banking referrals and the lack of any formal arrangement between the SACC and the NPA regarding the enforcement of the criminal sanctions (as far as we are aware) may all be unrelated issues. This, however, seems doubtful.

The risks of seeking antitrust leniency

‘Excusing yourself from the dinner table’ – the risk in applying for immunity in terms of the Competition Act

By Mitchell Brooks, AAT guest author

cutlery (1).jpg

After reading David Lewis’ ‘Thieves at the Dinner Table’, a must read for any aspiring competition lawyer, Lewis refers to his negotiations with various cartel members as the head of the Competition Commission. Highlighting that anticompetitive conduct essentially robs the consumer of competitive pricing, hence the reference to thieves, and often this is done during informal dinners between top execs.

The question begs, what are some of the inherent risks in applying for immunity for contravening the Competition Act (“the Act”) and, in essence, excusing yourself from the dinner table.

In Brief

For purposes of this discussion, the composition of the Competition process can be described as follows:

  • The Competition Commission (“the Commission”) investigates anticompetitive conduct in contravention of the Act
  • The Commission then refers the potential perpetrator to the Competition Tribunal (“the Tribunal”);
  • The Tribunal adjudicates the matter and determines whether the Act is contravened and whether a fine is imposed.
  • In order for the Commission to investigate a potential perpetrator, either an outside party (like you and I) must submit a complaint to the Commission or the Commission must initiate a complaint itself.

What is the Corporate Leniency Policy “CLP”?

The CLP is a mechanism utilised by the Commission to uncover cartel practices, the most notorious form being price fixing. The CLP is a policy developed by the Commission and possesses no legal status. Rather, it is an expression of how the Commission will handle leniency applications. In brief, the CLP provides for the granting of “immunity” by the Commission to perpetrators who contravene the Competition Act. However, the CLP operates on a “first to the door” principle meaning that only the first member of the cartel to come clean will qualify for immunity. However, in my humble opinion this principle might not find much support in the context of hub-and-spoke collusion whereby the supplier in the upstream market facilitates collusion between competitors in the downstream market (an increasing phenomenon globally). In other words, is it acceptable that the facilitator qualifies for immunity despite being the orchestrator of the collusion?

What does immunity entail?

According to the CLP, “immunity” means that a successful applicant (otherwise a perpetrator) will not be subject to adjudication or a fine. In turn, “adjudication” entails a referral of a contravention of a chapter two provision (cartel conduct for example) by the Commission. However, Wallace JA in AgriWire (Agri Wire (Pty) Ltd and Another v Commissioner of the Competition Commission and Others (660/2011) [2012] ZASCA 134) stressed that immunity is a much broader concept insofar as the successful applicant would not be referred to the Tribunal along with the other cartel members. In essence, an agreement is concluded between the Commission and the applicant to not refer the applicant to the Tribunal. In other words, the Tribunal has no discretion to impose a fine and the Tribunal does not grant a consent order in terms of the Act (my emphasis added).

What are the risks involved?

Higher fines

First, the applicant is still exposed to adjudication despite not being subject to the discretion of the Tribunal. If the Commission decides against referring a complaint brought by an outside party, the outside party may refer the complaint to the Tribunal itself and bypass the requirement that the Commission make a referral.

Furthermore, if the Commission decides against taking a self-initiated complaint further, nothing in the Competition Act prevents an outside party from submitting a new complaint and referring the matter themselves. This means that there is still a risk of a higher fine being imposed on the perpetrator. In order to achieve greater certainty, the applicant should seek a Consent Order by the Tribunal, which will ensure no outside party may refer the matter for adjudication. This Consent Order should reduce the risk of a fine, greater than the agreed amount as per the immunity agreement, being imposed.

Civil damages

Second, the CLP does not provide leniency against civil damages, however the process as explained in Agriwire creates the perception that immunity is granted against civil claims as well. This perception is apparent in Premier Foods v NormanManoim 2015 (SCA).

In brief, Premier Foods received immunity for its involvement in the notorious bread cartel. Subsequently, private parties sought civil damages. However, section 65(6) of the Competition Act only allows civil damages claims if the party is found in contravention of the Act. A certificate was issued by the Tribunal on the basis that Premier Foods’ conduct had been referred to the Tribunal and thus a finding was made. However, the SCA in Premier Foods disagreed with this finding, instead the SCA held that Premier Foods was not a party to proceedings in the Tribunal, it had not been referred and therefore the certificate was unlawful. As a result, the private parties were barred from a civil claim.

Therefore, according to Premier Foods, a successful applicant would not be exposed to civil damages because there can be no finding against a perpetrator who is not referred to the Tribunal. In summary, the granting of immunity guards the perpetrator against a civil damages claim, even though the CLP’s objective is not to prevent civil damages.

Contrary to the perception created by this unfortunate precedent, successful applicants are arguably still exposed to civil damages by means of a section 58(1)(a)(v) declaration by the Tribunal that the Act was contravened despite the granting of leniency. Nothing in the Act suggests that a complaint procedure be followed in order to obtain a declaration. A private party should be able to approach the Tribunal to ask for a declaration that the Act was contravened based on the immunity agreement, which will not amount to an adjudication as per Judge Wallace’s interpretation but will still amount to a finding. Although there have been no cases relying on 58(1)(a)(v) since Premier Foods, nothing suggests that this avenue cannot be re-opened.

Criminal prosecution

Lastly, a new amendment to the Companies Act provides for criminal liability against directors who engage in cartel conduct. The CLP and the Competition Act are completely silent on the impact of the CLP on criminal liability. It might well be possible for a managing director to be exposed to criminal prosecution despite the granting of immunity to the perpetrating company. Therefore, the directors would need to communicate with the National Prosecuting Authority and coordinate accordingly.

Conclusion

In light of the above, the CLP will be less effective until the above uncertainties are addressed and it is advisable that when one is faced with cartel conduct, it is important that one seek professional legal advice due to the complexity of the immunity application process.

Pan-African Antitrust Round-Up: Mauritius to Egypt & Tunisia (in)to COMESA

A spring smorgasbord of African competition-law developments

As AAT reported in late February, it is not only the COMESA Competition Commission (CCC), but also the the Egyptian antitrust authorities, which now have referred the heads of the Confederation of African Football (CAF) to the Egyptian Economic Court for competition-law violations relating to certain exclusive marketing & broadcasting rights.  In addition, it has been reported that the Egyptian Competition Authority (ECA) has also initiated prosecution of seven companies engaged in alleged government-contract bid rigging in the medical supply field, relating to hospital supplies.

Nigeria remains, for now, one of the few powerhouse African economies without any antitrust legislation (as AAT has reported on here, here, here and here).

But, notes Andreas Stargard, an antitrust attorney with Primerio Ltd., “this status quo is possibly about to change: still waiting for the country’s Senate approval and presidential sign-off, the so-called Federal Competition and Consumer Protection Bill of 2016 recently made it past the initial hurdle of receiving sufficient votes in the lower House of Representatives.  Especially in light of the Nigerian economy’s importance to trade in the West African sphere, swift enactment of the bill would be a welcome step in the right direction.”

The global trend in competition law towards granting immunity to cartel whistleblowers has now been embraced by the Competition Commission of Mauritius (CCM), but with a twist: in a departure from U.S. and EU models, which usually do not afford amnesty to the lead perpetrators of hard-core antitrust violations, the CCM will also grant temporary immunity (during the half-year period from March 1 until the end of August 2017) not only to repentant participants but also to lead initiators of cartels, under the country’s Leniency Programme.

The Executive Director of the CCM, Deshmuk Kowlessur, is quoted in the official agency statement as follows:

‘The policy worldwide including Mauritius, regarding leniency for cartel is that the initiators of cartel cannot benefit from leniency programmes and get immunity from or reduction in fines. The amnesty for cartel initiatorsis a one-off opportunity for cartel initiators to benefit from immunity or up to 100% reduction in fines as provided for under the CCM’s leniency programme. The amnesty is a real incentive for any enterprise to end its participation in a cartel. In many cases it is not clear for the cartel participant itself as to which participant is the initiator. The participants being unsure whether they are an initiator finds it too risky to disclose the cartel and apply for leniency. The amnesty provides this unique window of 6 months where such a cartel participant can apply and benefit from leniency without the risk of seeing its application rejected on ground of it being an initiator.’

 

COMESA Competition Commission logoFinally, COMESA will grow from 19 to 20 member states, welcoming Tunisia at the upcoming October 2017 summit: the official statement notes that “Tunisia first applied for observer status in COMESA in 2005 but the matter was not concluded. In February, 2016 the country formally wrote to the Secretary General making inquiries on joining COMESA. This set in motion the current process towards its admission. once successfully concluded, Tunisia will become the 20[th] member of COMESA.”

This means that within 6 months of accession to the Common Market, Tunisia’s business community will be bound by the competition regulations (including merger control) enforced by the CCC.  Speaking of the CCC, the agency also recently entered into a Memorandum of Understanding with the Mauritian CCM on March 24, facilitating inter-agency coordination.  In addition, the Zimbabwean Competition and Tariff Commission (CTC) will host a national sensitisation workshop on COMESA competition policy on May 16, 2017 in Harare, purportedly as a result of “over 50 transactions involving cross-border mergers notified” to the CCC involving the Zimbabwean market.  “The main objective of the national workshop is to raise awareness among the key stakeholders and business community in Zimbabwe with regards to the provisions and implementation of COMEA competition law,” the CTC noted in a statement.

 

New Zambian Settlement Guidelines: A Risky Reprieve

By AAT Senior Contributor, Michael-James Currie & Mweshi Mutuna, Pr1merio competition advocate (Zambia)

The Zambian Competition and Consumer Protection Commission (‘CCPC’) has recently published draft settlement guidelines (‘Draft Guidelines’) for respondents who have allegedly engaged in conduct in contravention of the domestic Competition and Consumer Protection Act (‘Act’).

zambiaThe Draft Guidelines have been published in addition to the ‘Leniency Programme’ as well as the ‘Fines Guidelines’ published earlier this year (as well as the 2015 Merger Guidelines), and essentially sets out a framework within which respondent parties may engage the CCPC for purposes of reaching a settlement agreement for alleged contraventions of the Act.

Notably, the Draft Guidelines will be binding on the CCPC which is an important aspect of ensuring a transparent and objective approach to settlement negotiations. Furthermore, the Draft Guidelines emphasise that respondents should be fully informed of the case against them prior to settling. In this regard, the Draft Guidelines provide for an initial stage of the settlement negotiations (essentially an expression of interest) which follows from a formal request by a firm expressing an interest to settle.

Should the CCPC decide to proceed with settlement negotiations, the CCPC must, within 21 days, provide the respondent party with information as to the nature of the case against the respondent. This includes disclosing the alleged facts and the classification of those facts, the gravity and duration of the alleged conduct, the attribution of liability (which we discuss further below) and the evidence relied on by the CCPC to support the complaint.

currie2

The authors, Mr. Currie & Ms. Mutuna

The purpose of disclosing these facts to a respondent is to afford a respondent the opportunity to meaningfully consider and evaluate the case against it in order to make an informed decision whether to settle or not.

Assuming that an expression of interest in settling the matter is established by both parties, the CCPC will then proceed by requesting that the respondent provide a formal “settlement submission” within 15 days of the CCPC’s request. Included in the settlement submission, must be a clear and unequivocal acknowledgement of liability (which includes a summary of the pertinent facts, duration and the respondent’s participation in the anticompetitive conduct) and the maximum settlement quantum which the respondent is prepared to pay by way of an administrative penalty.

Should the CCPC accept the settlement submission, the CCPC will then commence with drafting and ultimately publishing a statement of objections (‘SO’) which essentially captures the material terms of the settlement submission. This is largely a necessary procedural step although the respondent party may object to the SO should it not correctly record the terms of the settlement agreement.

Following the publication of the SO, the CCPC will, subject to any challenges to the SO, proceed formally to make the settlement agreement a final decision as required by the Act.

Risky Business?

The above framework appears to be relatively straightforward and balanced, assuming that the parties in fact do reach a settlement agreement. The position is somewhat different in the event that settlement negotiations breakdown, particularly if the negotiations are already at a relatively advanced stage.

Most notably, settlement negotiations in terms of the Draft Guidelines are not conduced on a “without prejudice” basis. To the contrary, the Draft Guidelines states that the CCPC has the right to adopt a SO which does not reflect the parties’ settlement submission. In this event, the normal procedures for investigating and prosecuting a complaint as set out in the Act will apply.

In the event that the CCPC elects not to accept a settlement submission submitted by a respondent, the Draft Guidelines specifically state that “the acknowledgements provided by the parties in the settlement submission shall not be withdrawn and the Commission reserves the right to use the information submitted for its investigation”.

This paragraph is controversial as it places a substantial risk on a party making a settlement submission with no guarantee that the settlement proffer will be accepted by the CCPC, while at the same time, the respondent party exposes itself by making admissions which may be used against it in the course of a normal complaint investigation and determination by the CCPC.

Whether or not the financial incentive to respondents would entice a respondent to, nonetheless, engage in settlement discussions in terms of the Draft Guidelines is sufficient, only time will tell. In this regard, however, the Draft Guidelines state that a firm who settles with the CCPC prior to the matter being referred to the Board will be limited to a maximum penalty of up to 4% of the firm’s annual turnover. Should the firm settle after the matter has been referred to the Board, the maximum penalty will be capped at 7% of the firm’s annual turnover.

Multi-Party Settlements: the More the Better?

A further interesting and rather novel aspect to the Draft Guidelines is the provision made for tripartite settlement negotiations. In this regard, the Draft Guidelines cater for a rather unusual mechanism by which multiple respondents in relation to the same investigation may approach the CCPC for purposes of reaching a settlement agreement.

Although referred to as “tripartite” negotiations, the Draft Guidelines state that when the CCPC initiates proceedings against two or more respondents, the CCPC will inform a respondent of the other respondents to the complaint. Should the respondent parties collectively wish to enter into settlement negotiations, the respondents should jointly appoint a duly authorised representative to act on their behalf. In the event that the respondent parties do settle with the CCPC, the fact that the respondents were represented by a jointly appointed representative will not prejudice them insofar as the CCPC making any finding as to the attribution of liability between the respondents is concerned.

While joint representation may be suitable in the case of merger-related offences (which may have been what was envisaged by the drafters hence the reference to “tripartite” negotiations), we believe that it is hard to imagine that the drafters anticipated that, should respondents to a cartel be invited to settle the complaint against them, the cartelists would then be required to embark on further collaborative efforts: this time to engage collectively in formulating a settlement strategy and decide how they are ultimately going to ‘split the bill’ should a settlement agreement be reached.

The issue of a multi-party settlement submission is further complicated in the event that a settlement proffer is not accepted by the CCPC following a multiparty settlement submission. As mentioned above, the settlement submission must contain an admission of liability which, in the case of cartel conduct, would invariably amount to the parties to the settlement proposal admitting to engaging in cartel conduct by fixing prices or allocating markets, by way of example, between each other.

Although, the Draft Guidelines is a welcome endeavour to provide respondents with a transparent and objective framework to utilise when engaging with the CCPC for purposes of reaching a settlement, the uncertainty and risk which flows from a rejection of the settlement proffer may prove to be an impediment in achieving the very objectives of the Draft Guidelines.

In this regard, we understand that the CCPC is currently considering revised guidelines which hopefully address the concerns raised above.

 

Don’t wait for leniency… Lipimile signals delays

COMESA Chief Warns of Delayed Implementation of Leniency Policy

George Lipimile, CEO, COMESA Competition Commission

George Lipimile, Director, COMESA Competition Commission

In an interview with Concurrences, CCC Director George Lipimile stated cautiously that, while the agency had engaged a consultant to help it craft a regional leniency programme, it still had to “be discussed in detail with Member States. Given the different legal systems and the feedback coming from the consultations with Member States so far, this may take some time.”

Thus, “while there is no amnesty programme visible on the near-term horizon, the CCC’s novel cartel enforcement push poses particular concerns for undertakings operating in the COMESA region,” says Andreas Stargard, attorney with Africa advisory firm Pr1merio.  “Director Lipimile has expressed his agency’s plan — jointly with the World Bank organisation — to launch a project designed to combat cartel activity.  They propose to do so first, it seems, by piggy-backing off of other enforcers’ previous investigations, such as the South African Competition Commission’s cartel cases, and analysing whether those instances of foreign collusion could have harmful effects on the COMESA economies.”

Copperweld elsewhere: Why SA is not pursuing fisheries “cartel”

The concept of single economic entities and intra-company conspiracies

 

Competition forum highlights antitrust enforcement, international cooperation

South Africa signs cooperation agreements with Russia and Kenya

Leading government officials presented their respective countries’ accomplishments in the antitrust arena at the 10th annual Competition Law, Economics & Policy Conference in Cape Town yesterday.

south_africaThe attendees ranged from the SA Minister of Economic Development, Ebrahim Patel, and the Commissioner of the Competition Commission, Tembinkosi Bonakele, to their Russian and Kenyan counterparts.  Kenya Competition Authority director general Francis Kariuki emphasised the officials’ desire to remove barriers to trade.  He was quoted as saying he looked forward to exchanging information on cross-border cartels, which affect both the South African and Kenyan economies: tsar_200“We have regional economic communities and regional trade. There are some infractions in South Africa which are affecting Kenya and vice versa. We want to join hands to do market enquiries and do research. This will inform our governments when they come up with policies.”

On the inside-BRICS front, the SA Commission signed an MoU with Russia, adding to Russia’s “rich and diverse bilateral agreements portfolio.”  The MoU is described as focussing particularly on pharmaceutical and automotive sectors, in which pending or future sectoral inquiries would see information-sharing between the Federal Antimonopoly Service (FAS) of Russia and the SACC, according to the FAS deputy chief Andrey Tsarikovskiy.

Patel talksMister Patel’s keynote address showed the glass half-full and half-empty, focussing in part on the need to “scale” the South African agency activity up to the level of the “success story” of domestic competition enforcement and its large caseload (quoting 133 new cartel cases initiated in the past year).

Never one to omit politicisation, Mr. Patel noted the perceived parallels he saw between South African history of concentrating economic power in the hands of a minority, raising indirectly the issue of public-interest concessions made in antitrust investigations, including M&A matters.  Mr. Patel clearly sees the SACC’s role as including a reduction in economic inequality among the populace, rather than being a neutral competition enforcer guided solely by internationally recognised legal antitrust & economic principles.  Both he and Commissioner Bonakele drew parallels between their anti-cartel enforcement and a purported reduction in the SA poverty rate of a whopping four tenths of a percent.

 

 

South African Competition Commission… More Dawn Raids!

By AAT Senior Contributor, Michael-James Currie.

On 28 September 2016, the South African Competition Commission (SACC) conducted a further set of dawn raids. This time, on various cargo shipping liners based in the provinces of Kwa-Zulu Natal and the Western Cape.

The SACC indicated that “Hamburg Sud South Africa (Pty) Ltd, Maersk South Africa (Pty) Ltd, Safmarine (Pty) Ltd, Mediterranean Shipping Company (Pty) Ltd, Pacific International Line South Africa (Pty) Ltd and CMA CGM Shipping Agencies South Africa (Pty) Ltd have engaged in collusive practices to, inter alia, fix the incremental rates for the shipment of cargo from Asia to South Africa in contravention of the Competition Act”.

The investigation is allegedly a result of a complaint received from a member of public.

south_africaThe SACC has not provided an indication of the period over which conduct took place and whether this investigation relates to historical or on-going conduct. This is an important consideration in light of the introduction of criminalisation of cartel conduct, which came into effect as of 1 May 2016. In terms of the Section 73A of the Competition Amendment Act, any director or person with management authority may be held criminally liable for ‘causing’ or ‘knowingly acquiescing’ in cartel conduct.

Since the notion of criminal liability was put raised as far back as 2008, there have been substantial concerns raised about the effectiveness of the SACC’s corporate leniency policy which in effect, offers immunity to a company who whistle blows, from an administrative penalty only. The CLP does not offer immunity to any individual from criminal prosecution, as the discretion to prosecute an individual under Section 73A, rests solely with the National Prosecuting Authority.

The interplay between the introduction of criminal liability and dawn raids will, in our view, be quite significant as there have been a number of respondents who have thought to approach the SACC for leniency, off the back of a dawn raid. A decision which a company may think twice about if its directors may potentially be held criminally liable.

Regardless of the impact which the criminalisation of cartel conduct may have on the whistleblowing regime, the SACC remains committed to utilising dawn raids as one of its most powerful investigative tools.

The SACC has been strong proponent of dawn raids and despite having conducted its first dawn raids in the early 2000’s, the past 18 months has seen a marked spike in the number of dawn raids conducted across a broad range of sectors.

The shipping industry in particular has been the subject of significant attention from the South African Competition Authorities and last year saw substantial administrative penalties, of over R95 million, levied by way of a settlement agreement on WWL and NYK Shipping Liners respectively for having engaged cartel conduct in relation to certain shipping routes. This investigation, however, remains on-going.