Jailbird execs

South African executives will face up to 10 years in jail if they are found to be complicit in the collusive actions of the companies they lead.

The Draft Competition Amendment Bill includes a string of tough new powers and penalties for the competition authorities in the battle to combat collusion and cartels.

These amendments come hot on the heels of a number of price-fixing and collusion scandals, as the Competition Commission has flexed its muscle, busting a number of cartels in the bread, milk and pharmaceutical industries.

These collusion cases led to a public outcry and a groundswell of opinion calling for tougher punishment and for guilty executives to be held personally liable.

The Department of Trade and Industry’s competition policy review says there is a need to complement the penalty provisions of the Act by extending liability to individuals who cause firms to engage in price- fixing and other cartel activities.

The Draft Competition Amendment Bill states that a director or senior manager who is responsible “for causing the firm to be involved in a prohibited practice” or who “knowingly acquiesced in the firm engaging in a prohibited practice” can be fined up to R500 000 and/or be sentenced to 10 years in jail.

The Bill defines “knowingly acquiesced” as “having actual knowledge” or being in a position in which the person reasonably ought to have knowledge of the illegal acts.

However the verdict is still out as to whether the tough new legislature will aid or hinder the competition authorities.

A number of competition lawyers expressed concern about the ramifications of the new laws, arguing that criminalising anti-competitive practices could actually weaken the Competition Commission because it would have to prove guilt beyond a reasonable doubt, whereas currently it has to prove it only on the balance of probability.

Competition Tribunal chairperson David Lewis hinted at this during the Adcock Ingram Critical Care (AICC) consent hearing last week when he said that Tiger Brands, the parent company of AICC, was “almost single-handedly” going to be responsible for changes in the legislation that “paradoxically may appear to give us greater powers but may in fact limit our ability to do what we do”.

Lewis was referring to the fact that Tiger Brands had appeared before the Competition Tribunal twice in less than a year for participating in cartels in the bread and pharmaceutical industries, both highly emotive cases as they disproportionately affect the poorest of South Africans.

The commission emphasised the need to get tough on senior executives when it filed charges of perjury with the SAPS against AICC senior executive Arthur Barnett for lying to the commission under oath during its investigation into the pharmaceutical cartel.

Cliff Dekker’s Mondo Ntlha says the extra burden of proving beyond reasonable doubt could weaken the Competition Commission and diminish the number of cartels busted.

Ntlha says that currently a number of companies who have been investigated for collusion reach a settlement with the Competition Commission rather than going before the Competition Tribunal, but if the activities are criminalised they might take their chances with the tribunal because it is harder for the Commission to prove.

The draft Bill has a number of other additions aimed at strengthening the competition authorities, such as giving the Competition Commission powers to initiate and conduct formal investigations in markets where uncompetitive outcomes are not underpinned by any “immediately discernable anti-competitive conduct”.

The draft Bill also aims to incorporate the commission’s corporate leniency programme into the Act so that it is less likely to be subject to legal challenge.

It is this corporate leniency programme that was instrumental in busting a number of cartels in the past year, because companies are enticed to spill the beans on their fellow colluders to receive immunity from prosecution.

The Bill also raises the financial threshold, which requires companies to notify the competition authorities about mergers and acquisitions, because the DTI feels that the authorities’ resources are needlessly being tied up in the red tape of approving these transactions.

The National Assembly is considering the draft Bill.

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