Cartel law-enforcement in South Africa

Abstract

A cartel is formed when competing firms agree to collude and act together instead of competing, all there while maintaining the illusion of competition. In South Africa, cartels are regulated by Competition Act 89 of 1998 (hereinafter the Act). These activities are specifically provided for in section 4(1)(b) of the Act and are per se prohibited. The section specifically lists the following activities as cartels practices: price fixing, bid rigging and market allocation. 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. 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. Generally, an investigation process is employed by competition authorities to detect and prosecute cartel activities. The investigation process is usually preceded by a validly initiated complaint. The said complaint may be initiated by either, a private person or the Commissioner of the Competition Commission (hereinafter the Commission) in his or her capacity as the Commissioner acting on behalf the Commission. This form of investigation is commonly known as the “traditional investigation process”. The traditional investigative process has been less effective in exposing and prosecuting cartel activities. South African competition authorities therefore decided to adopt Corporate Leniency Policy (hereinafter the CLP) to enhance its cartel detection and prosecution powers. The CLP is not contained in the Act but in a separate policy document. The CLP incentivizes cartel members to voluntarily disclose their involvement in cartel activity in exchange for immunity or leniency from prosecution and applicable fines. In terms of the CLP, the first cartel member, to bring cartel existence to the attention of the authorities is exempt from prosecution and prescribed sanctions for their involvement to the cartel activity provided they qualify with the prescribed requirements under the CLP. Cartel activity trigger financial fines for firms involved in such an activity or criminal liability for natural persons responsible for the firm’s involvement into such an activity. In this dissertation, I discuss cartels and effectiveness of the CLP, administrative penalties, private damages and criminal fines as key instruments available to competition authorities against cartels.