Corporate South Africa is queuing outside the Competition Commission armed with its dirty laundry, hoping that if it comes clean it be will protected from prosecution.
According to the Competition Authorities 10-year review, a whopping 23 companies have applied for corporate leniency from January to July this year, with a further 19 having applied for leniency last year.
The queue outside the commission’s office is expected to get even longer: last week President Jacob Zuma promulgated the Competition Amendment Act, which will see company directors and managers face jail time for contraventions.
Under the commission’s Corporate Leniency Programme (CLP), companies can apply to be exempt from prosecution for contraventions of the Competition Act if they spill the beans on their fellow colluders and fully cooperate during the commission’s prosecution of their partners in crime.
The 10-year review shows a massive increase in corporate leniency applications to the commission in the past few years.
In 2005 the commission had just one CLP application and in 2006 it had only two. However, in 2007 these increased to nine. The construction sector appears to be the worst offender with 18 CLP applications since January 2007, while the industrial products sector comes in second with 10.
In third place is the transport and energy sector (eight applications) and in fourth place is the food sector (four).
‘In recent years, the commission has sharply stepped up its enforcement activities against cartels and has uncovered widespread collusive activity in the economy, beyond what might have been expected,†the review says.
High-profile cartels have been uncovered in South Africa’s construction, pharmaceutical, food and fertliser sectors in the past few years, and have involved some of South Africa’s largest companies.
The review says the high-profile cases that have been prosecuted have led to corporate South Africa getting more proactive about identifying such collusive activity itself and that members of the public who have become more familiar with the concept of price-fixing have acted as informants for the commission.
The review states that: ‘The CLP has played a major role here. The fact that leniency applications have risen dramatically in the past year indicates that firms are becoming more aware of competition law.â€
According to the review, the key driver of CLP applications is the fear that other cartel members may apply for leniency first and internal reviews, which uncover violations of the Competition Act.
CLP applications have also been triggered by existing commission investigations, other firms applying for leniency in a related product area, merger applications where concerns are raised and the appointment of new management at a company.