The head of the Competition Commission says he believes that anti-competitive practices are rife in South African business and need to be dealt with. The Competition Commission has hit the headlines in the past few weeks with its investigation into the fixing of bread prices. Commissioner Shan Ramburuth says for the first time there is a public perception that price fixing is not a victimless crime.
“I think that one of the things that I am happy with about this bread saga is that in most cases we work on these kinds of behaviour by business people are seen as victimless crimes,” says Ramburuth. “I want to make the point that they are not.
“If criminalising it is going to make people pay attention and make sure it doesn’t happen again, then that is something we need to consider,” he says. “All the moral outrage over this is completely appropriate,” he says. “I certainly feel strongly that this law must demonstrate its usefulness to the development agenda in South Africa.
“I think a lot of it [anti-competitive practices] is a hangover from the old mode of operating,” says Ramburuth. “Especially in food where there were banana boards and wheat boards, which were essentially cartels and even though we have dismantled a lot of those structures, the practices continue through old-boy networks and a lot of it happens on golf courses.”
When the Mail & Guardian puts it to Ramburuth that the bread price fixing may just be the tip of the iceberg, he insists that it would be unfair for him as commissioner to speculate or make accusations, but he does admit that it is reasonable to ask the questions.
“I can tell you what cases we have,” says Ramburuth. “We have the bread case, a milk case, a milling case and a case being heard at the tribunal right now about grain silos, so there is a certain amount of emphasis that we are putting on issues that affect the masses of this country.”
Ramburuth says the corporate leniency policy, whereby a cartel member who comes forward to spill the beans on its fellow colluders gets immunity, is a controversial yet highly effective tool for the commission.
“Cartels are secret organisations, and how do you break a secret organisation? The best way is to provide an incentive for one of the parties to break ranks and tell on the others — that is why it is useful,” he says.
Ramburuth says during a recent visit to Parliament he was interrogated by MPs who felt that it was unacceptable that “someone could do things wrong for years and then walk in our door to tell us what has been going on and get away scot-free”.
“The question I was asked was, ‘Aren’t you being too soft on these people?’ and I had to point out that if we didn’t know about them it would have just carried on,” says Ramburuth. “If the choice is to let one guy go free and stop the cartel, then that is what we choose. We have fixed the problem and going forward we have a more competitive market.”
Ramburuth says that punishment meted out to companies should act as a deterrent to others thinking about anti-competitive practices.
“That is how we will be successful,” he says. “If we can get people to comply through deterrence and disincentives it will be a far better way to achieve what we want.
“The best disincentive is when a CEO knows he will spend time in jail, which happens in the United States and Europe. There will be quite an uproar in South Africa if that becomes a serious proposal for consideration, but I think that is something we should consider when making an evaluation of whether we are achieving anything.” Ramburuth says it is a bit early to assess the effectiveness of the commission as it has only been in existence for seven years.
He says if the commission is seen as not having an impact on anti-competitive prices in the future, it can look at raising fines or criminalising practices in order to get executives and boards to take personal liability.
“In the end we must have an impact on consumers, on the way business is being done, on the ethics of business and the way that businesses operate,” says Ramburuth. “Those are the things by which to measure our work, but they are very difficult to measure.
“A South African firm is not going to become internationally competitive if it is not subject to the disciplines of competition in its own market,” says Ramburuth. “It is only when you put the screws on them and they become competitive in their own country that they will become competitive internationally.”