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Directors will soon be on the hook for collusion

| Crime and security

Directors face going to jail for collusion from next month, when new competition laws come into effect. "Competition law compliance will, and indeed should be, ranked as the highest regulatory risk by all company boards and executives. This also raises the importance of dawn raid preparedness," Werksmans Attorneys says.

With effect from May 1, it will be a criminal offence in SA for directors or managers of a company to collude with their competitors to fix prices, divide markets among themselves or collude in relation to the award of tenders, Werksmans Attorneys directors Ahmore Burger-Smidt and Paul Coetser say.

It will also be a criminal offence to acquiesce in collusion — in other words, having actual knowledge of the collusive conduct and failing to take any action to prevent it.

Cliffe Dekker Hofmeyr competition law experts Albert Aukema and George Miller say that since Competition Tribunal proceedings are less formal than criminal proceedings, care will have to be taken to safeguard the rights of individuals during the investigation and hearing of collusion complaints.

Although individuals may be prosecuted under the new provision only where a company has acknowledged in a consent order that it has engaged in cartel conduct, or where the Competition Tribunal or the Competition Appeal Court has made a finding to this effect, critics have raised concern about the rights of implicated individuals.

"It also remains to be seen whether the risk of criminal liability for individuals will chill the effectiveness of the Competition Commission’s corporate leniency programme, which has been widely lauded as an effective mechanism for the detection and prosecution of cartels.

"The amendment act does not allow for automatic immunity to be granted to individuals in firms that make use of the leniency programme," Cliffe Dekker Hofmeyr says.

Economic Development Minister Ebrahim Patel told Parliament last week: "We are confident that because our work on cartels over the past five years has given clarity in the market on what collusion entails and what kind of acts fall within prohibited practices, we can now step up our efforts to the next level in our endeavour to combat corruption, cartels and anticompetitive conduct that raise prices and keep businesses and new entrants out of local markets."

In terms of the amendment that comes into effect next month, company directors and those with management authority will not only commit a criminal offence if they cause the company to engage in price-fixing, market division or collusive tendering, but will also be at risk if they "knowingly acquiesced" to the company engaging in collusive conduct.

According to the amendment, "knowingly acquiesced" means "having acquiesced while having actual knowledge" of the collusive conduct.

However, it is expected that the courts will have to give further meaning to this concept given the gravity of a finding of criminal conduct against a person, Cliffe Dekker Hofmeyr says.

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