Cartel leniency in South Africa: overview

A Q&A guide to cartel leniency law in South Africa.

The Q&A gives a succinct overview of leniency and immunity, the applicable procedure and the regulatory authorities. In particular, it covers the conditions to be satisfied, the method of making an application, availability of immunity from civil fines to individuals, the scope of leniency, circumstances when leniency may be withdrawn, leniency plus, confidentiality and disclosure, and proposals for reform.

To compare answers across multiple jurisdictions visit the Cartel leniency Country Q&A tool.

This Q&A is part of the global guide to competition and cartel leniency. For a full list of jurisdictional Cartel Leniency Q&As visit www.practicallaw.com/leniency-guide.

For a full list of jurisdictional Competition Q&As, which provide a high level overview of merger control, restrictive agreements and practices, monopolies and abuse of market power, and joint ventures in multiple jurisdictions, visit www.practicallaw.com/mergercontrol-guide and www.practicallaw.com/restraintsoftrade-guide.

John Oxenham and Mike Currie, Nortons Incorporated
Contents

Regulation

1. What laws provide for a leniency programme and which regulatory authority administers it? Is there any published guidance?

Applicable laws and guidance

The Competition Act No. 89 of 1998 (Competition Act) regulates competition in South Africa but makes no specific provision for a leniency policy. However, a Corporate Leniency Policy (CLP) was published in 2004 and it is the principal tool employed by the Competition Commission (Commission) in cartel investigations.

Regulatory authority

The regulatory authority responsible for South Africa's CLP is the Commission. The Commission can grant conditional immunity to a leniency applicant who has satisfied the requirements of the CLP. Formal immunity can only be granted by the Competition Tribunal (see box, The regulatory authority).

 

Scope of application

2. What infringements of competition law does the leniency programme cover?

South Africa's Corporate Leniency Policy (CLP) is only applicable to alleged cartel conduct. Cartel conduct is an agreement or concerted practice among competing firms, or a decision by an association of firms, to co-ordinate their competitive behaviour, for example through conduct such as (section 4(1)(b), Competition Act):

  • Price fixing.

  • Division or allocation of markets.

  • Collusive tendering.

These are per se prohibitions. This means that if these are infringed, no efficiency or other pro-competitive justification or defence will be accepted for their infringement.

For the CLP to apply cartel conduct that occurred outside South Africa, that conduct must have had or is likely to have an effect in South Africa. If a foreign competition authority grants immunity to a company for cartel conduct that occurred in another jurisdiction, this will not necessarily mean that the Competition Commission will grant immunity in the South African context.

 

Recent cases

3. What notable recent cases have applied the leniency programme?

In June 2016, the Competition Tribunal (Tribunal) confirmed the validity of a second leniency granted by the Competition Commission (Commission) to a respondent for an investigation into an alleged wheat and maize milling cartel.

Although the first leniency applicant complied with the requirements of the Corporate Leniency Policy (CLP) and was duly granted conditional immunity, the Commission argued that the cartel was complex and spanned across multiple geographic regions over a period of time and that the first leniency applicant was not present at all the relevant meetings. Accordingly, the Commission required evidence from both leniency applicants in order to prosecute all of the members of the cartel.

The Tribunal held that although the Commission departed from the CLP (which was its own policy), such departure was not irrational and therefore the granting of a second leniency, on the facts, was lawful (Blinkwater Mills (Pty) Ltd v Competition Commission CR087Mar10/DSM021May11).

The Commission received ten leniency applications during the 2015/2016 reporting period. Of the ten applications received, the Commission granted four. However, the Commission is still assessing the other six applications.

In August 2016, the Commission finalised a settlement agreement with steel manufacturing giant, ArcelorMittal South Africa (AMSA) in which AMSA agreed to pay a ZAR1.5 billion administrative penalty in addition to other behavioural remedies and capital expenditure (CAPEX) commitments.

The investigation against AMSA was as a result of a leniency application by another respondent (Scaw Metals South Africa) in the steel cartel, which received conditional immunity.

The Supreme Court of Appeal (SCA) overturned the North Gauteng High Court's decision and held that the Tribunal is not authorised to issue what is known as a section 65 certificate against a non-cited respondent (Premier Foods v Manoim NO (20147/2014) [2015] ZASCA 159; 2016 (1) SA 445 (SCA); [2016] 1 All SA 40 (SCA) (4 November 2015)).

A section 65 certificate, which is essentially a finding by the Tribunal that a respondent had engaged in a prohibited practice, is a prerequisite to a third party starting a claim for civil damages. The section 65 certificate serves as prima facie proof of wrongfulness before a civil court.

The case before the SCA was brought as a result of a leniency applicant (Premier Foods) in the bread cartel, deliberately not being cited as a respondent in the Commission's referral to the Tribunal.

The SCA confirmed that without a respondent being validly referred to the Tribunal, the Tribunal can make no finding against that respondent, and therefore the Tribunal cannot issue a section 65 certificate for such a respondent.

The Commission has discretion as to whether or not to refer a respondent to the Tribunal. The Commission has subsequently changed its policy and now, as a matter of course, cites all leniency applicants in its subsequent referral to the Tribunal.

 

Availability of leniency

Administrative liability

4. Is full immunity from administrative penalties available? What conditions must be met for immunity to be granted?

A successful leniency applicant can avoid the imposition of an administrative penalty for its participation in a cartel by providing information to the Competition Commission (Commission) about the cartel and co-operating with the Commission to prosecute the other cartel members.

Subject to Question 3, the Corporate Leniency Policy (CLP) does not provide for a "leniency plus" and the point of departure is that only the respondent who is first through the door is entitled to full immunity.

The Supreme Court of Appeal recently confirmed that a provisional, and ultimately a final, granting of immunity by the Competition Commission (Commission) in terms of the leniency policy is not subject to the discretion of the Competition Tribunal. The reason being, as the court put it, that businessmen "will generally want a more secure undertaking of a tangible benefit, before furnishing the co-operation the Commission seeks from them" (Agri Wire (Pty) Ltd v The Competition Commissioner [2012] ZASCA 134 (660/2011) (27 September 2012)).

The CLP does not, however, include immunity from private actions for damages or protect individuals from criminal liability.

There are several conditions that must all be met for immunity to be granted. The applicant must:

  • Be the first cartel member to approach the Commission with information and evidence.

  • Make a truthful and complete disclosure.

  • Fully co-operate with the Commission for the duration of the investigation and prosecution of the cartel and its members.

  • Have ceased the conduct in question or act as directed by the Commission.

  • Not alert other cartel members or any third party that it has applied for leniency under the CLP.

  • Not destroy, falsify or conceal information, evidence or documents relevant to any cartel activity.

 
5. Is there a sliding scale of available leniency from administrative penalties?

TThere is no formal sliding scale for leniency in South Africa. The general approach is that the first successful applicant will obtain full immunity in relation to the anti-competitive conduct in question. However, for certain exceptions, see Question 3.

Applicants who approach the Competition Commission (Commission) afterwards, however, who co-operate and provide information may negotiate certain discounts with the Commission. These will ordinarily result in the reduction of the administrative penalty. Discounts are only applicable to the quantum of administrative penalties and not civil claims for damages.

The Commission has recently published Guidelines for the "Determination of the Calculation of Administrative Penalties".

 
6. Is immunity or leniency for administrative penalties available to individuals? If so, what conditions apply?

Although the Corporate Leniency Policy (CLP) provides that all persons (including natural persons) can apply for leniency, only undertakings or firms are currently liable to pay administrative penalties.

The CLP does not offer immunity to employees for criminal liability.

 

Criminal liability

7. Is immunity or leniency available for companies and/or its employees in relation to criminal prosecution? What are the implications for employees when an undertaking has been granted immunity or leniency?

Circumstances

From 1 May 2016, the Competition Act criminalised cartel conduct. Directors and persons with management authority who cause or knowingly acquiesce in cartel conduct may be held criminally liable and subjected to a maximum of a ZAR500,000 fine and/or imprisonment of up to ten years (section 73A, Competition Act).

The decision whether to criminally prosecute an individual rests solely with the National Prosecuting Authority (NPA) and the Competition Commission (Commission) is only permitted to recommend to the NPA whether a particular individual should be prosecuted and held criminally liable.

Proceedings against employees

The recent introduction of criminal liability for directors or persons with management authority creates a significant risk to companies considering applying for leniency in terms of the Corporate Leniency Policy (CLP).

The CLP does not provide for, nor does the Commission have the authority to, offer immunity from criminal prosecution to an employee.

The Commission can recommend to the NPA that a particular employee is deserving of leniency. The discretion whether to prosecute an individual for criminal liability remains vested with the NPA.

Employees' interests

Under the current CLP, there is no provision for the protection of employees' interests following a leniency application. Where an employee who was not authorised by the company approaches the Commission with information relating to the company's cartel activity, that employee is regarded as a whistleblower and stands to benefit from legislation that offers specific protection to whistleblowers, for example the Companies Act No. 71 of 2008. The Commission encourages whistleblowers to come forward as they can be of assistance to the Commission.

 

Application proceedings

8. When should an application for leniency be made?

An application for leniency under the Corporate Leniency Policy must be made as soon as the undertaking becomes aware of the anti-competitive conduct, to ensure that the applicant approaches the Competition Commission (Commission) first and benefits from leniency (see Question 4).

An applicant is entitled to submit a marker application to protect its "place in the queue" and then provide the Commission with the relevant evidence at a later date. There is no specific time period and unless the Commission specifies a timeframe by which to gather and provide all the relevant evidence, the relevant evidence must be provided to the Commission as soon as reasonably possible after submitting the marker application.

 
9. What are the procedural rules for leniency applications?

Relevant authority

The Corporate Leniency Policy provides that the leniency application must be directed to the Manager of the Enforcement and Exemptions Division of the Competition Commission (Commission), by facsimile, e-mail or hand delivery (see box, The regulatory authority).

Applicant

An application for leniency can be made by the company acting through an individual or external law firm authorised to act in this regard. Where an employee provides information to the Commission on the company's cartel activity without authority to do so, the employee will be regarded as a whistleblower and the company is not treated as having made a leniency application (see Question 7, Employee's interests).

Informal/confidential guidance

The Commission allows applicants to approach it for guidance on a hypothetical basis. However, an applicant that chooses to disclose its identity or any information at this stage must remember that the Commission could use that information in subsequent proceedings. An informal inquiry can be made by telephone or in writing. In order to preserve your place in the queue, a formal marker application must be submitted.

Form of application

The Commission allows applicants to approach it for guidance on a hypothetical basis. However, an applicant that chooses to disclose its identity or any information at this stage must remember that the Commission could use that information in subsequent proceedings. An informal inquiry can be made by telephone or in writing. In order to preserve your "place in the queue", a formal marker application must be submitted (see Question 8).

Markers

An applicant can file a marker in relation to a prospective leniency application. The marker secures the applicant's position in the queue pending its submission of a leniency application. If granted a marker, the applicant will be directed to submit an application within a specified period of time. Submission of a marker is useful to ensure that the conduct is brought to the Commission without delay (see Question 4). However, a marker does not necessarily guarantee the granting of immunity to the applicant as another cartel member may have applied for immunity before the marker application.

Information/evidence

Applicants must submit all relevant evidence available that proves the existence of the cartel, including copies of minutes, agendas and agreements(see above, Form of application) which is within their possession or control.

Oral statements

Where the applicant prefers not to file written statements, the applicant can make an oral submission to the Commission. An oral submission will be recorded and transcribed at the Commission's premises, which allows the applicant to verify the technical accuracy of the statement. An applicant must, however, still provide written evidence and documents in written form or hard copy if such evidence exists.

Short-form applications

Not applicable.

 
10. What are the applicable procedures and timetable?

The applicant must make a written application to the Competition Commission (Commission) as soon as possible. Under the marker system, if there is another pending application, the Commission must advise the applicant (within five days, orally or in writing) that another undertaking has made an application (see Question 9, Markers). Otherwise, the Commission must advise (within five days, orally or in writing) the applicant that immunity is available.

Within five days of being informed, the applicant must arrange the first meeting with the Commission. The purpose of this meeting is to determine whether the case qualifies for immunity under the Corporate Leniency Policy. At the first meeting, the applicant must:

  • Disclose its full identity.

  • Submit all relevant information and documents under its control and possession in relation to the cartel conduct.

If the Commission is satisfied that the applicant qualifies for immunity on the basis of the information submitted at the first meeting, a second meeting must be arranged. The purpose of the second meeting is to discuss the granting of conditional immunity to the applicant. The Commission and the applicant then conclude a written conditional immunity agreement.

The Commission may arrange a final meeting when its investigation is concluded and it is ready to institute proceedings. The purpose of this meeting is to:

  • Advise the applicant of the Commission's intention to institute proceedings against the other members of the cartel.

  • Remind the applicant that its continued co-operation will be required in the proceedings.

After the initial meetings, the timing is relatively flexible.

 

Withdrawal of leniency

11. In what circumstances and at what stage of the proceedings can leniency be withdrawn? What implications does the withdrawal of leniency from one company have for other applicants?

The Competition Commission (Commission) can withdraw conditional immunity granted to an applicant at any time, where the applicant has failed to meet the conditions set out in the written conditional immunity agreement (see Question 10). In particular, the Commission can revoke conditional immunity if it considers that the applicant either:

  • Did not co-operate as required.

  • Provided the Commission with false or insufficient information.

  • Was dishonest in its submissions.

  • Misrepresented the facts.

If the Commission withdraws the conditional immunity, it can bring administrative proceedings against the cartel members, including the applicant.

Criminal proceedings can also be started against any person who provided false information to the Commission in the context of a leniency application. A convicted individual can be subject to either or both (section 74(1)(b), Competition Act):

  • A prison term not exceeding six months.

  • A penalty not exceeding ZAR2,000.

In theory, it is possible that if conditional immunity is revoked it may be available to another applicant. In practice, however, this is difficult unless the new applicant provides new information to the Commission. A party may also have already undermined their ability to claim leniency by denying its participation in a cartel, when it is involved in parallel proceedings.

In a stay application before the Competition Tribunal (Tribunal) a peculiar situation occurred whereby, in one forum, before the Tribunal, a party adopted a position on oath that it was not part of cartel activity, and in another, in the High Court, that the Commission must reconsider giving it corporate leniency thereby indicating that it is a self-confessed participant in cartel activity. As a result the party both undermined its right to claim leniency (by swearing to innocence) and implied its own guilt by asking for an order declaring it "first through the door" in terms of the Corporate Leniency Policy (Allens Meshco (Pty) Ltd. v The Competition Commission Case No: 020552 (2015)).

The Commission cannot revoke immunity after the Tribunal has granted final immunity.

 

Scope of protection

12. What is the scope of leniency protection after it has been granted?

Once immunity is granted, it is limited to the contraventions disclosed in the application, information and evidence submitted by the applicant. If the Competition Commission uncovers other contraventions and other information or evidence, it can prosecute the applicant together with other cartel members for these additional contraventions.

 
13. Does the competition authority offer any further reduction in fines for an undertaking's activities in one market if it is the first to disclose restrictive agreements and practices in another market (leniency plus)?

No reduction of penalties is available to a leniency applicant if a specific application does not cover the conduct in question. However, an applicant can obtain a penalty reduction if it:

  • Offers full co-operation and disclosure to the Competition Commission.

  • Is prepared to enter into consent or settlement negotiations to resolve the other issues concerning the other market. These consent or settlement negotiations will, however, still result in the imposition of administrative penalties.

 
14. Does the grant of leniency affect a third party's ability to bring a follow-on damages action against a leniency applicant?

The Corporate Leniency Policy expressly permits civil claims to be brought against a leniency applicant, if the leniency applicant is a cited respondent in the Competition Tribunal's decision.

 

Confidentiality and disclosure

15. What are the rules relating to confidentiality during a leniency application?

Identity disclosure

There are no formal rules regarding identity disclosure and disclosure of a leniency applicant's identity appears to be decided on a case-by-case basis, and is dependent on both:

  • The size and reputation of the applicant.

  • Whether the conduct occurred in a high priority sector as identified by the Commission.

In some cases, the Competition Commission (Commission) issued a press release immediately after the conclusion of the conditional immunity agreement that disclosed the leniency application and the identity of the applicant. However, in other cases the Commission maintained the application's confidentiality until it was ready to refer the matter to the Competition Tribunal (Tribunal) (see Question 3).

Information disclosure

The Commission protects confidentiality in relation to all information and evidence provided by the applicant. The Corporate Leniency Policy (CLP), however, specifically states that disclosure of this information to the Tribunal does not amount to a breach of confidentiality.

Confidentiality requests

The CLP specifically requires the applicant to disclose its identity in the first meeting with the Commission (see Question 10). Although the Commission should have no reason to disclose the applicant's name during the investigation, it may be unable to protect the applicant's identity when other cartel members are being prosecuted. The applicant is entitled to claim confidentiality for information that meets the definition of confidential information set out in the Competition Act. Confidential information relates to any "trade, business or industrial information that belongs to a firm, has a particular economic value and is not generally available to or known by others" (section 1, Competition Act).

 
16. What are the rules concerning disclosure of statements made in support of a leniency application?

Domestic submissions and domestic discovery

All information submitted to the Competition Commission (Commission) can be subject to discovery orders under the ordinary discovery requirements in the relevant courts in South Africa. This is to facilitate the use of this information in civil claims related to the cartel conduct.

Domestic submissions and foreign discovery

South African law does not protect documents submitted under the Corporate Leniency Policy (CLP) from discovery orders from foreign courts. The Commission allows leniency applicants to make oral submissions to protect their applications from discovery in other jurisdictions. However, documents and information submitted in support of an oral submission may still be subject to discovery orders from foreign courts.

Foreign submissions and domestic discovery

Information submitted in foreign jurisdictions is not subject to discovery in South Africa under either the Competition Act or the CLP.

 

Inter-agency co-operation

17. Does the regulatory authority in your jurisdiction co-operate with regulatory authorities from other jurisdictions in relation to leniency? If so, what is the legal basis for and extent of co-operation?

The Competition Commission (Commission) is not permitted to disclose confidential information submitted to it to other agencies outside South Africa. However, the President of South Africa can assign a national duty to the Commission to exchange information with a similar agency under an international agreement, which might involve sharing information on leniency applications. However, no such duty has as yet been assigned to the Commission.

The Commission has recently concluded a Memorandum of Understanding (MoU) with a number of African jurisdictions, the BRICS member states, and the EU. It is envisaged that the MoU will provide greater co-operation for common investigations as well as greater information sharing between the respective agencies.

 

Proposals for reform

18. Are there any proposals for reform?

There is currently a Memorandum of Understanding being negotiated between the National Prosecuting Authority and the Competition Commission in relation to the enforcement regarding the criminal liability provisions.

Section 73A of the Competition Amendment Act, came into effect in May 2016. However, the sub-provisions contained in section 73A(5) to (6) which preclude a firm from providing any financial or legal assistance to individuals who are subjected to criminal investigations, have not yet been brought into effect.

 

Online resources

Competition Commission of South Africa

W www.compcom.co.za

Description. This is the official website of the Competition Commission of South Africa, which provides access to press statements, health market inquiry updates, liquefied petroleum gas market inquiry updates, the Corporate leniency Policy and the Competition Act. The information is up-to-date and available in English.

Competition Tribunal of South Africa

W www.comptrib.co.za

Description. This is the official website of the Competition Tribunal of South Africa, which provides access to Tribunal decisions, Competition Appeal Court judgments and media statements. During significant hearings, the website also gives access to the non-confidential pleadings, witness statements and expert reports. The information is up-to-date and available in English.



The regulatory authority

Competition Commission

Head. Tembinkosi Bonakele
Contact details. The DTI Campus
Block C
77 Meintjies street
Sunnyside
Pretoria, South Africa
T +27 12 394 3200
F +27 12 394 0166
E ccsa@compcom.co.za
W www.compcom.co.za

Responsibilities. The Commission is empowered to conduct market inquiries, investigate, control and evaluate restrictive business practices, abuse of dominant positions and mergers to achieve equity and efficiency in the South African economy.

Person/department to apply to. Manager of the Enforcement and Exemptions Division, Mr Junior Khumalo.

Procedure for obtaining application documents. Applications for immunity must be made to the manager in writing and delivered by hand or addressed to the following:

F +27 12 394 0166
E ccasa@compcom.co.za



Contributor profiles

John Oxenham, Director

Nortons Incorporated

T +27 11 666 7566
F +27 11 86 600 5529
E john@nortonsinc.com
W www.nortonsinc.com

Professional qualifications. South Africa, Attorney

Areas of practice. Competition law; merger control; competition and commercial litigation; regulatory; white collar crime; consumer protection.

Professional associations/memberships. Sole South African representative of Fraudnet, the International Chamber of Commerce's Anti-Crime arm; Regional team leader for the American Bar Association team on the section of Anti-trust Law: Procedural Transparency Task Force 2016 to 17; member of the International Competition Network’s Advocacy Project Group 2016 to 2017; Director of the South African Chamber of Commerce and Industry.

Publications

  • Global Competition Review: The African and Middle Eastern Antitrust Review, 2016.

  • Developments in South African Merger Control – Ministerial Interventionism and the Impact on Timing & Certainty (co-author).

  • South Africa Excessive Pricing: An Evaluation of the Sasol Chemical Industries Case – A New Dawn or the Continuation of the Status Quo?

  • Cartels - The South African Cartel Handbook (co-author).

  • Presented at the Annual ABA Antitrust Spring Meeting in Washington on merger control regimes in Africa, 2016.

  • Presented at the American Bar Associations Fall Meeting 2015.

  • Presented at the Eighth Annual Conference on Competition Law, Economics & Policy at the Gordon Institute of Business Science in 2014.

Mike Currie

Nortons Incorporated

T +27 11 666 7570
F +27 11 86 600 5529
E michael@nortonsinc.com
W www.nortonsinc.com

Professional qualifications. Lawyer

Professional associations/memberships. Part of the drafting team for the Internal Competition Network Advocacy Working Group’s Competition Benefits Project 2015 to 2016; Member of the American Bar Association Team on the section of Anti-trust Law: Procedural Transparency Task Force 2016 to 17.

Areas of practice. Competition law; merger control; consumer protection.

Languages. English, Afrikaans

Publications.

  • Global Competition Review: The African and Middle Eastern Antitrust Review, 2016

  • Developments in South African Merger Control – Ministerial Interventionism and the Impact on Timing & Certainty (co-author) presented at the Annual ABA Antitrust Spring Meeting in Washington, 2016.

  • South Africa Excessive Pricing: An Evaluation of the Sasol Chemical Industries Case – A New Dawn or the Continuation of the Status Quo? (co-author).

  • Predatory Pricing and the South African Competition Act: A False Positive?

  • Senior contributor to Africanantitrust.com


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