Pressure is on to admit to collusion
Competition Commission’s leniency policy has proved effective
LENIENCY policies allow a cartel member to secure immunity from prosecution, or significantly reduced fines, if they come forward and confess collusion to the competition authority. By significantly incentivising companies to come forward and report contraventions of competition law such as price-fixing, market division and bidrigging, these policies improve the effectiveness of competition regulation and reduce the cost of enforcement.
SA led the way by introducing a leniency policy in 2004. It has proven to be a highly effective weapon in the arsenal of the Competition Commission: to date, fines of more than R3bn have been imposed in cases involving leniency applications. This includes fines paid by cartels in the cement, bread, grain and tyre industries. Penalties were paid by construction firms as part of an innovative fast-track leniency and settlement process relating to price-fixing and market allocation ahead of the 2010 Soccer World Cup. Nine South African construction firms were granted immunity from prosecution for 26 instances of price-fixing, market allocation and collusive tendering but had to pay fines of more than R1.4bn in total. This constitutes almost half the total rand value of fines imposed by the Competition Tribunal since inception of the South African competition legislation in 1999.
In Mauritius, the Competition Commission recently recommended the imposition of substantial financial penalties on two beverage companies pursuant to the first application for leniency since the inception of the authority in 2009. Phoenix Beverages applied for leniency in relation to the agreement it concluded with Stag Beverages, in which they agreed that Stag would exit the Mauritian beer market and Phoenix Beverages would not sell beer in Madagascar. The commission recommended financial penalties of 20-million Mauritian rupees (R7m) and 6-million rupees (R2.3m) be imposed on Phoenix Beverages and Stag Beverages respectively.
Other African competition authorities look set to introduce corporate leniency policies soon. The Namibian competition authority adopted a draft leniency policy in March 2012 and it is currently under review by the trade and industry minister. The Competition Authority of Botswana prepared a draft policy in 2013, but it has not yet been formally adopted. In Zambia, the Competition and Consumer Protection Commission is working with the ministry of justice and their prosecution authority to implement a policy for granting immunity from criminal prosecution to individuals and companies engaged in cartel activity in exchange for information. The Tanzania Fair Competition Commission is similarly finalising its policy, which will require an amendment of the Competition Act before it can come into effect.
As more competition authorities in Africa adopt leniency policies, the pressure on cartel members to come forward and report collusive agreements will intensify. The risk of prosecution for contraventions of competition law is rising. Companies operating in Africa need to assess the extent to which they are compliant with different competition laws in various jurisdictions, and to implement comprehensive competition law training programmes. This will place them in a position to avoid contravening competition law, as well as to identify if there is an opportunity to avoid huge fines by applying for corporate leniency. Companies need to consider the co-ordination of leniency applications to various African com- petition authorities, as well as the impact of these applications on both follow-on damages claims and the potential for criminal liability for the companies and individuals involved. Advice from external competition law counsel should be sought at an early stage of any cartel investigation to ensure legal privilege is maintained.
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