South Africa – Combatting cartels and abuses of dominance high on the Competition Commission’s agenda
By Heather Irvine
Posted: 23rd July 2015 09:12Since the inception of the Competition Act in 1999, the South African Competition Commission has focussed intensively on detecting and prosecuting cartels and preventing abuses by dominant firms in South Africa. Billions of Rands in fines have been paid by global and South African companies involved in price-fixing, market allocation and bid-rigging to date, and the Commission has prosecuted several large South African companies alleged to have been involved in abusive practices such as excessive pricing. This focus is evident in the Commission’s work in the first half of 2015 and is likely to dominate the Commission’s agenda for the remainder of this year.
Since January 2015, the Commission has referred twelve cases involving allegations of collusion by competitors to the Competition Tribunal for adjudication. Nine of these complaints involve collusive tendering or bid-rigging by competitors in relation to construction projects, furniture removals, motor vehicle repairs and curio retailing in South Africa. One case involves market allocation by competitors in the plastic pipe industry and another involves a long-running complaint about price fixing in the cement industry. In each of these cases, the Commission has asked the South African Competition Tribunal, the adjudicatory body, to impose the maximum administrative penalty prescribed by the Competition Act, which is 10% of the company’s turnover in a single year. In March, the Commission raided the offices of six suppliers of fire control and protection systems, alleging that they had been involved in price-fixing and collusive tendering. In May, the Commission also announced a major investigation into alleged price-fixing of foreign exchange rates by South African and international banks. Both of these investigations are currently underway. Since the start of 2015, 18 companies have agreed to pay more than ZAR8 million in fines in relation to price-fixing, market allocation and collusive tendering in the construction, steel, brick, shipping, retail cycle and furniture removal industries.
The Commission has also pursued some high profile abuse of dominance cases against powerful South African companies. To date, dominant firms in South Africa have paid in excess of ZAR600 million in fines related to alleged abuses of dominance, including exclusionary rebate schemes and pricing practices that amounted to margin squeeze and excessive pricing. However, South African-headquartered global brewing company SAB won a protracted battle against a complaint in which the Commission alleged that SAB abused its dominance and engaged in price-fixing with a number of companies who distribute its beer in South Africa. The Competition Appeal Court dismissed the complaint, in a decision which has provided valuable guidance to large manufacturers who also chose to distribute their own products (commonly termed ‘dual distribution’).
The Commission is likely to be very busy in the second half of 2015. It is currently conducting an extensive market inquiry into the cost of private healthcare in South Africa, as well as a market inquiry into the pricing of liquid petroleum gas (LPG). The Commission has also announced that it will conduct an inquiry into grocery retailing in South Africa, which is likely to focus on barriers to entry for smaller retailers, which the Commission has indicated may include exclusivity clauses in retail lease agreements which restrict the landlord from leasing space in shopping centres to more than one grocery retailer. An important decision of the Tribunal on an excessive pricing complaint was overturned by the Competition Appeal Court in June 2015, and the Commission recently announced that it intends to appeal to the South African Constitutional Court. If the Constitutional Court agrees that this is an important case in the public interest, it may hear it in the second half of 2015. Legislation which introduces criminal liability for directors and managers who are involved in cartels has been on the statute books for more than three years, but has not yet been signed into force by the President. However, it seems likely that South Africa will eventually follow the global trend and introduce jail time for cartel ringleaders.
These developments highlight the South African Commission’s continued focus on detecting and prosecuting cartels and abusive practices by dominant companies in South Africa. It also flags the need for comprehensive competition law training and compliance programmes in order to minimise the risk of a contravention. Despite the fact that initiating and maintaining such a programme can be time-consuming, it is essential to protect a firm from the far-reaching consequences which may flow from investigation and prosecution by the South African Commission. These consequences can include not only substantial harsh monetary penalties, but also adverse publicity, high legal costs and wasted management time. Although consumer class actions and civil claims for damages consequent upon infringements of the Competition Act are still in their infancy in South Africa, these will also pose a significant risk in future.
Heather Irvine is the head of our African competition team based in Johannesburg. She is an experienced antitrust and regulatory lawyer who is highly recommended by various top international research publications, including Chambers Global who refer to her as an ‘excellent lawyer’ and Legal500 who call her ‘experienced and forthright’. She was been recognised as one of the world's Top 40 l competition law practitioners aged under 40 by Global Competition Review in a survey which is conducted every five years. Heather was the only lawyer from Africa to feature on the list. Heather was also recently listed by Global Competition Review as one of its 100 successful women in the field of competition law. She has been nominated in Euromoney’s Guide to the World’s Leading Women in Business Law, as one of the leading practitioners in the competition and anti-trust sector. Chambers Global states that Heather is “one of the most knowledgeable lawyers around – she has a way of getting a point across in an articulate manner”.
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