On 22 April 2016, the President of the Republic of South Africa officially approved the entry into force of the criminalisation provisions for cartel conduct in South Africa.
South Africa now joins many other jurisdictions around the world which have criminal enforcement as part of their antitrust enforcement toolbox. Global corporations need to factor this new South African criminal regime into their antitrust compliance and defence strategies.
The new criminal provisions
The Competition Amendment Act was enacted in 2009, but involved a phased implementation. Section 73A of the Competition Amendment Act, which governs the criminalisation of cartel conduct, has been in the draft rulebook for over 8 years, but was only finally published in South Africa's official government gazette on 22 April 2016 with an entry into force set for 1 May 2016.
As of 1 May 2016, company directors and managers can face fines of up to 500,000 Rand (Euro 40,000) and up to 10 years' imprisonment if they cause their companies to take part in cartel conduct. Cartel conduct includes price fixing, dividing markets, and collusive tendering/bid rigging. The offence also applies to directors and managers who have "knowingly acquiesced" in a company's involvement in the cartel activity while having "actual knowledge" of it.
Section 73A(4) and (5) of the Competition Amendment Act have not been commenced. These provisions state (i) that a finding by the Competition Tribunal or the Competition Appeal Court that a company has engaged in cartel conduct is prima facie proof that the company has engaged in that conduct; and (ii) that companies are not permitted directly or indirectly to pay the fines or legal costs of employees charged with cartel offences. These provisions had raised constitutional concerns, including questions of whether they undermined the right to a fair trial or the right of an accused to be considered innocent until proven guilty.
The criminal prosecution of individuals will not be conducted by the Competition Commission, but by the National Prosecuting Authority. The final decision on whether or not to prosecute individuals will lie with the National Prosecuting Authority, although the Competition Commission may make submissions to the National Prosecuting Authority in respect of individuals that it considers to be "deserving of leniency". As a result of this dual process, going forward, considerable cooperation and alignment between the National Prosecuting Authority and the Commission will be required, and it is to be hoped that negotiations to sign a MOU are well underway.
Criminal sanctions are increasingly a core part of the antitrust enforcement toolbox across the world.
The US has a long track record of criminal prosecution, incarceration, and criminal fines for cartel conduct. In the 2015 Yates memorandum, the Department of Justice formally announced a policy that it will vigorously pursue the prosecution of culpable individuals responsible for corporate wrongdoing. In the UK, changes to the criminal cartel offence were recently introduced to make it easier to bring prosecutions, and the UK Competition and Markets Authority has been building its capacity and skills to pursue criminal cases.
Global corporations need to factor in individual criminal liability into their strategies for antitrust investigations. A key issue is that, in relation to conduct relating to countries with a criminal regime, individuals may be less willing to co-operate with their employers in the investigation process as a result of their interest in defending their personal position. South Africa is now an additional jurisdiction where these considerations must be taken into account.