Comparative Analysis of the Corporate Leniency Policy of the South African Competition Commission

Abstract

Cartels are regarded as the most egregious of competition violations and are a top priority in competition enforcement globally. Detection and prosecution of cartels are however notoriously complicated in view thereof that cartels are operated in secretive collusive circumstances. Competition authorities in developed international jurisdictions have in the last few decades supplemented their enforcement tools by means of so-called ‘leniency programs’ in order to enhance their ability to detect, prosecute and deter cartel activities. Leniency programs are based on a game theory known as the prisoner’s dilemma which incentivizes cartelists to self–report in exchange for immunity from fines or reduction of fines. Although no global standard leniency program exists and each competition jurisdiction has crafted a leniency program to suit its particular competition needs these programs however exhibit many common characteristics. The Organization for Economic Development (OECD) and the International Competition Network (ICN) has set out features of efficient leniency programs which can be used to benchmark the adequacy and efficiency of particular leniency programs. South Africa has, in line with prominent international competition jurisdictions, adopted a leniency program, known as the Corporate Leniency Policy (CLP) in 2004, which program was substantially revised in 2008. The CLP has been largely instrumental in various high profile cartel prosecutions in recent years and has also withstood challenges to its validity before the High Court and Supreme Court of Appeal. Currently however it is likely to face a severe challenge should the cartel offence as envisaged in the Competition Amendment Act 1 of 2009 which introduces the extremely controversial section 73A to the Competition Act, be put into effect. This dissertation explores the rationale behind leniency programs and the features that are common to efficient leniency programs. Its specific focus is the South African Corporate Leniency Policy (CLP) which it discusses in detail in order to ascertain whether the said leniency program requires any further reform in order to enhance its efficiency. During this investigation regard is also had to the challenges to the validity of the policy as well as future developments regarding the controversial introduction of a cartel offence into South African which may severely compromise the efficiency of the CLP. The purpose of the latter investigation is not to bring out a vote on the acceptability or not of the said cartel offence but merely to pre-empt problems that could arise as a result of the impact of the cartel offence and the manner in which it is envisaged to be dealt with in practice – and to suggest a possible solution so as the ensure the continued efficiency of the CLP. During this investigation the CLP is also comparatively benchmarked against the leniency regimes in Australia and the EU and its compliance with international best practices is evaluated in order to eventually make recommendations as to its future reform and the interaction between the CLP and the cartel offence.