bosses must pay fines themselves 
11 August 2008

Firms will soon be prohibited from paying the fines and legal costs of their managers and directors convicted of anticompetitive behaviour. The clause has been added to enhance the deterrent force of the competition regime and to prevent companies from covering officials by taking out indemnity insurance, for example.  Another amendment to the bill is the introduction of a new offence of obstructing the course of justice by creating obstacles to an investigation by the Competition Commission.

The bill finally adopted by the committee was substantially altered but retained the controversial provisions for the personal liability of company officials as well as the new concept of a complex monopoly.   Amendments were introduced by the trade and industry department to address concerns raised at public hearings.  The final result was a “considerable improvement” on the original bill, Competition Commission CEO Shan Ramburuth said. Under the adopted bill, the commission will have the power to grant leniency to individuals and firms that co-operate with an investigation of a prohibited practice and to make submissions to the National Prosecuting Authority (NPA) to hold off from a criminal prosecution of these individuals.

The commission expressed fears at the public hearings that criminalising individual participation in anticompetitive behaviour would undermine its corporate leniency policy as it would discourage collaborators from spilling the beans on their cartel partners.  Ramburuth said the amended version was an improvement but the possibility of a prosecution would still be an unknown risk and could act as a disincentive. The kind of working relationship that developed over time between the commission and the NPA would be critical for the future functioning of the leniency policy, he said.

The bill provides that a grant of leniency will not preclude an award of civil damages.   The clause on complex monopolies has been reworked.   In the adopted version, a complex monopoly exists in a market in which at least 75% of goods or services is supplied to, or by, no more than five firms, two or more of which conduct affairs in “a parallel conscious or co-ordinated manner” without explicit agreement. The effect of this conduct is to substantially prevent or lessen competition.  The commission will have the power of subpoena for its investigations into such markets and can apply to the Competition Tribunal for a declaratory order against two or more firms if at least one of them has a minimum share of 20% in the relevant market.

Linda Ensor, www.businessday.co.za