Officials’ no-nonsense approach to competition
A number of recent decisions support efforts by authorities to ensure that the provisions of the Competition Act are protected and preserved
FROM the inception of the Competition Act, the South African competition authorities have been charged with the task of maintaining and promoting competition in SA.
The Competition Act dictates that this task would, among other things, facilitate the equitable participation of small and medium-sized enterprises in the economy, the promotion of employment, the provision of competitive prices and product choices for consumers and the promotion of efficiency, adaptability and development of the economy.
While these aspirations are admirable, it may appear implausible to some that the competition authorities are capable of wielding such influence over the South African economic terrain. However, several recent decisions emanating from the offices of the authorities seem to display the adoption of a formidable “no-nonsense” stance to ensure that these provisions of the Competition Act are protected and preserved.
While the competition authorities have historically only imposed administrative penalties for conduct that is found to have contravened the provisions of the Competition Act, it would appear as if the authorities now prefer to craft innovative sentences (which may or may not include administrative penalties) to account for the retributive needs of each offender and achieve its mandate stipulated in the Competition Act.
By way of example, in the settlement agreements concluded between the Competition Commission and Sasol Chemical Industries Limited (“Sasol”) during 2009 and 2010, an administrative penalty of about R250m was payable by Sasol. Further, it was agreed that Sasol would comply with several extensive undertakings including the restructure of certain of its divisions, its withdrawal from various downstream operations, as well as a divestiture of five of its fertiliser blending facilities, which would presumably allow small and medium-sized enterprises a more equitable opportunity to participate in the economy.
In addition, Sasol is prohibited from imposing any form of restriction on its customers as regards the resale of certain of its fertiliser products, engaging in differential pricing and is obliged to conduct itself in a particular prescribed manner as regards its activities relating to ammonia.
Similarly, while the consent and settlement agreement concluded
The authorities prefer to craft innovative sentences to account for the retributive needs of each offender
to the attention of the competition authorities, tainting almost 70 construction projects worth an estimated R29bn. In February this year, the commission developed a fast-track procedure in which it invited firms that were involved in such collusive conduct to engage in settlement negotiations with it.
It is anticipated that this process will incentivise firms to admit to instances of collusive conduct in which they were involved in a costeffective and efficient manner thereby placing the construction industry on a new competitive trajectory to promote efficiency, adaptability and development of the construction sector and the economy as a whole.
The commission has cautioned that failure by a cartelist to take advantage of this opportunity will result in the imposition of maximum penalties, which for a company such as Group Five Limited could amount to about R1,2bn in administrative penalties alone.
Considering the expansive nature of the penalties being imposed for collusive conduct, it remains to be seen what kind of retribution faces those firms failing to accept the commission’s invitation.
In this same vein, in reporting back on preliminary findings in the retail industry investigation, the commission advocated the preemptive development of an effective competition law compliance programme by firms in order to eradicate competition law infringements in the workplace and achieve the aforementioned aspirations. The commission therefore seems to be advocating that firms engage in a more proactive approach in order to shift the competitive paradigm in certain key industries.
Firms in the South African economy would do well to heed this when considering the recent spate of unpredictable and far-reaching penalties imposed by the South African competition authorities — ultimately a little preventive action may well result in a big saving on the bottom line.
Natalia Lopes is a director and Amy van Buuren is a candidate attorney in the competition law department at ENS.