Administrative Penalties in South African Competition Law

Abstract

Competition law has been defined as the rules or provisions which aim to ensure and sustain a market where vigorous, but fair competition will result in the most efficient allocation of economic resources and production of goods and services at the lowest price. The goal, which competition law wishes to attain, is to level the playing field where both small and large firms can compete with one another, fairly and competitively, which in turn leads to a greater benefit for the consumer. South African competition authorities consider cartels as the most egregious of all competition law contraventions because of their harmful impact upon consumers, economic development and the market. Cartel activities are formed in secret and this renders these activities more dangerous, because it is difficult for competition authorities to detect and prosecute them. In South Africa, cartels are regulated in terms of section 4(1)(b) of the Competition Act 89 of 1998, which practices are per se prohibited. Section 4(1)(b) specifically lists the following activities as cartel practices: price fixing, bid rigging and market allocation.

Administrative penalties are a common retributive and preventative tool in numerous jurisdictions, including South Africa, which are imposed on firms which participate in cartel activities. Section 59 of the Competition Act postulates that an administrative penalty may be imposed by the Tribunal on a contravening firm, should it be found that such firm has engaged in such prohibited practices. The penalty may be determined and enforced in one of two ways, either unilaterally by the Competition Tribunal in terms of section 59 of the Competition Act, or in terms of a consent agreement concluded between the contravening firms and the Competition Commission, which agreement needs to be approved and enforced by the Tribunal in terms of Section 58 of the Competition Act.

The primary objective of the imposition of administrative penalties on cartelists is to both prevent and deter cartel behaviour. It is not a perfect system and has faced its challenges over time. The issues which the competition authorities have had with the imposition of administrative penalties relates to, inter alia, the quantification thereof, the enforcement thereof and the economic and social impact that such penalties have on the contravening firms, its employees and the consumers in general. This dissertation will interrogate the manner in which the competition authorities have approached the imposition of administrative fines. The focus will be on fines imposed for cartel conduct as set out in section 4(1)(b) of the Competition Act. The objective is to determine whether South Africa’s approach to the imposition of administrative fines is in need of reform, and if so, to make suitable recommendations.