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Last week Government announced in Presidential Proclamation Number 25 of 2016 that those sections of the Competition Amendment Act, 2009 that provide for criminal sanctions will come into effect on May 1 2016.
The thinking around competition law compliance and competition law risks has changed. Going forward competition law compliance will, and indeed should be, ranked as the highest regulatory risk by all company Boards and Executives. This also raises the importance of dawn raid preparedness.
With effect from 1 May 2016 it will be a criminal offence in South Africa for directors or managers of a firm to collude with their competitors to fix prices, divide markets amongst themselves or collude in relation to the award of tenders. It will also be a criminal offence to acquiesce in collusion, in other words having actual knowledge of the collusive conduct and failing to take any action to prevent it.
Any director or manager that involve themselves in these forms of collusion, inevitability expose themselves to jail time if found guilty.
Since the inception of the Competition Act in 1998 public awareness around cartel and collusion activities started peaking, with the authorities having made high profile inroads in breaking up cartels in a diversity of sectors.
As stated by Minister Patel in Parliament on 21 April 2016 during his budget vote for the Department of Economic Development, Government is confident that their work on cartels, especially over the past 5 years, has provided market participants with the necessary clarity as to what exactly prohibited practices are.
Therefore, he said, the efforts of the competition authorities can now be stepped up to the next level in the fight against corruption, cartels and anti-competitive practices.
The writing on the wall since 2009 has now become a reality. The implementation of criminal sanctions is deemed as an enabler to accelerate South Africa’s weak economic growth.
Economic growth is retarded by cartel activity, which is deemed the most harmful of all anti-competitive conduct, as it results in firms reducing output, charging higher prices to consumers, limited consumer choice and reducing incentives for firms to improve efficiencies and engage in innovation.
It is now evident that the term “compliance with competition law” has moved beyond its traditional narrow meaning in South Africa. Without a solid foundation of competition compliance in companies, that addresses the potential risk issues relating to competitor interactions, value for the company shareholders will be eroded.
Considering the above personal consequences a company director or manager might face due to a lack of compliance within an organisation, directors and managers should ask themselves the following question “How do I ensure that I will not be held criminally liable for my company’s actions?”
Certainly, if you are aware of suspicions conduct in your firm, now is the time to seek clarity.
