On 1 May 2016 sections 73A (1), (2), (3) and (4) of the Competition Act 89 of 1998 (the “Act”) came into effect. These sections introduce criminal sanctions whereby directors and managers of firms engaging in cartel activities may be held liable for a fine and/or imprisonment. Cartel activities or, as referred to in the Act, prohibited restrictive horizontal practices involve competing firms co-ordinating their competitive behaviour, through price fixing, division or allocation of markets, and/or collusive tendering.
The amendments to the Act provide that a director, or manager, of a firm commits an offence if he/she:
- caused the firm to engage in a prohibited restrictive horizontal practice; or
- knowingly acquiesced (ie having actual knowledge) in the firm engaging in such restrictive horizontal practice.
Such director or manager may only be criminally prosecuted if the firm acknowledges that it engaged in such prohibited practice in a consent order (ie a settlement agreement between the firm and the Competition Commission, which is made an order by the Competition Tribunal) or if there is a finding by the competition authorities that the firm engaged in such prohibited practice.
The Act further provides that if the director or manager of the firm is found to be deserving of leniency, then the Competition Commission may not seek or request for him or her to be prosecuted under the Act. However, the competition authorities have no power to grant immunity from criminal sanctions, which power lies with the National Prosecuting Authority.
The main criticism against the introduction of criminal sanctions is that it will most likely deter firms, engaged in cartel activity, from applying for immunity under the Competition Commission’s Corporate Leniency Policy as well as dissuade directors from entering into consent orders on behalf of their firms, as the firm’s admission may be used as the basis for securing a later criminal conviction against the very same directors.
Please note that sub-sections (5) and (6) of section 73A have not yet come into operation. Sub-sections (5) and (6) may be summarised as follows:
- section 73A(5) provides that in the criminal proceedings of a director or manager of a firm, a consent order or a finding by the competition authorities that his or her firm engaged in a prohibited restrictive horizontal practice may be used as prima facie proof that such firm did in fact engage in such conduct. The onus would then lie with the relevant director or manager to prove the contrary; and
- section 73A(6) prohibits a firm from paying the fine imposed on a convicted director or manager as well as the costs incurred defending criminal charges.
Seapei Melamu – Candidate Attorney