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Business Day - Business Law and Tax Review - - BUSINESS LAW & TAX REVIEW -

are se­cre­tive and con­ducted through a con­spir­acy among a num­ber of firms. As a re­sult, de­tect­ing a car­tel is a daunt­ing task for com­pe­ti­tion au­thor­i­ties with­out co-op­er­a­tion from a mem­ber within the car­tel it­self.

Con­se­quently, the le­niency pol­icy sets out to do ex­actly that: gain co­op­er­a­tion from a car­tel mem­ber. Its strat­egy is sim­ple: if a firm is found guilty of par­tic­i­pat­ing in a car­tel they may be li­able for an ad­min­is­tra­tive penalty of up to 10% of the firm’s an­nual turnover. Thus, the le­niency pol­icy pro­vides im­mu­nity to the first car­tel mem­ber who con­fesses that they are a mem­ber of a car­tel and hence dis­sem­i­nates dis­trust among all mem­bers of the car­tel. This dis­sem­i­na­tion of dis­trust in con­junc­tion with grant­ing im­mu­nity from the penalty has made the le­niency pol­icy the most ef­fec­tive tool for de­tect­ing and pros­e­cut­ing car­tels. Nev­er­the­less, it must be em­pha­sised that a firm may only likely ap­ply for the pol­icy where the as­so­ci­ated un­cer­tainty is min­i­mal.

The prob­lem is that sec­tion 73A poses a risk of erod­ing the ef­fec­tive­ness of the le­niency pol­icy due to the un­cer­tainty it cre­ates. Al­though the Com­pe­ti­tion Com­mis­sion may grant im­mu­nity to a car­tel mem­ber, the Na­tional Pros­e­cut­ing Au­thor­ity (NPA) has the fi­nal dis­cre­tion to grant crim­i­nal im­mu­nity to di­rec­tors and/or man­agers. The com­mis­sion can only rec­om­mend that a car­tel mem­ber is “de­serv­ing of im­mu­nity”. As there is un­cer­tainty whether the NPA will grant im­mu­nity to di­rec­tors, the pro­vi­sion will in­evitably de­ter firms from us­ing the le­niency pol­icy to blow the whis­tle on fel­low car­tel mem­bers.

It is not dif­fi­cult to imag­ine that the un­cer­tainty around the risk of in­car­cer­a­tion for di­rec­tors and/or man­agers will dra­mat­i­cally de­crease

Pic­ture: iS­TOCK

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