Leniency policy effective in fighting cartel activity

THE corporate leniency policy devised by the US justice department’s antitrust division remains the single most effective tool in its fight against cartel activities, despite it having the Federal Bureau of Investigation at its disposal, says Scott Hammond, retired deputy attorneygeneral for criminal enforcement at the department.

Criminal sanctions against individuals in SA, as envisaged in the Competition Amendment Act, can be the single greatest accelerator to create an effective corporate leniency policy. They can also be the greatest disincentive when it provides no guarantees to individuals that they will not be prosecuted if they confess cartel activities to the competition authorities, Mr Hammond said at the annual Competition Law Committee breakfast in Johannesburg.

The biggest concern for SA’s Competition Commission is the threat that criminal sanctions and jail sentences for directors and managers will undermine the success it has achieved with its leniency policy, introduced in 2004.

The fast-track settlement process, introduced to rid the economy of construction cartel activities, was successful because of the corporate leniency carrot that was dangled in front of companies.

Deputy commissioner Trudi Makhaya said the US experience showed that a corporate leniency programme could be successful within a criminal sanction regime. “It is absolutely clear that corporate leniency is an important tool for cartel detection, and the commission and the Department of Economic Development remain mindful to preserve it,” she said.

The leniency policy offers leniency in prosecution to a company which is first through the door to expose the existence of a cartel.

The introduction of individual accountability in cartel conduct could undermine the success of the programme if directors coming forward are not given the assurance that they will not be prosecuted.

Mr Hammond told competition lawyers and representatives from the business community that the US justice department had the discretion to decide who it would prosecute and who not. That had insured the success of its corporate leniency programme, he said.

The US has increased its focus on international cartels, and at least 75 individuals from at least 12 countries who were involved in cartel activities in the US have been prosecuted and jailed in the US.

Mr Hammond said 50% of the department’s resources directed against global cartel activity, as that caused the most harm to US businesses and consumers.

Ms Makhaya said the commission was working on an internal framework, which it would present to the National Prosecuting Authority, on how the various local authorities can work together on the issue.

She said discussions between the two authorities were continuing.