possible billion rand fines for cartels

The competition authorities appeared before the Parliamentary Committee for Trade and Industry ("Committee") this week and called for the Competition Act to be amended to allow fines to be imposed on cartel members' profits for every year in which a cartel is in operation, not only the previous financial year, as is currently provided for in the Competition Act.

Tiger Brands was recently fined R98 million for its participation in the bread cartel, and a fine of R53 million was imposed on its subsidiary, Adcock Ingram Critical Care ("AICC") for its participation in a pharmaceutical products cartel. However, according to the Commission, both cartels had been operating for 13 years, and Tiger Brands could have been required to pay an estimated R2.6 billion if the current proposal had been in place at the time Tiger Brands was prosecuted.

Both the Commission and the Tribunal appeared before the Committee this week arguing that the introduction of personal liability for directors and the new offence of "participating in a complex monopoly" would weaken the agencies rather than strengthen them. The competition authorities further agued that the proposed criminalisation of cartel behaviour by senior managers and executives would undermine the Commission's tools in fighting cartels such as consent order agreements and corporate leniency policy ("CLP") and that it is also open to a constitutional challenge.

The competition authorities argue that directors are less likely to apply for immunity for their company if their co-operation opens them up personally to criminal charges that would be lodged by the National Prosecuting Authority.

Finally, the competition authorities argued that the new chapter in the Competition Act that seeks to create a new offence for the behaviour of complex monopolies is unworkable. They have recommended that the chapter dealing with complex monopolies be deleted in its entirety.

Webber Wentzel, Newsletter, Friday 8th August 2008