With effect from 1 May 2016, price fixing (both buying and selling prices), market division and tender collusion between competitors will be criminal offences in terms of section 73A(1) to (4) of the Competition Act (amended by section 12 of the Competition Amendment Act, 1 of 2009).  Section 73A of the Competition Act applies to directors of firms or anyone "engaged by a firm in a position having management authority". The cartel crimes are committed if the director or manager causes the firm to engage in cartel activity or "knowingly acquiesced" in the firm's participation in cartel offences.  Section 73A(2) makes it clear that a director or manager who knowingly acquiesces in the firm's participation in a cartel offence may be found guilty of the offence by acquiescing to the cartel conduct without "having actual knowledge of the relevant conduct by the firm". The days of turning a blind eye to a firm culture which allows tacitly encourages cooperation with competitors giving rise to cartel offences are over.

What remains to be seen is what effect this section of the Competition Act will have on the Competition Commission's corporate leniency policy.  After all, why should a firm cooperate with the Competition Commission in exchange for leniency if the cooperating directors and managers face criminal conviction for the firm's cartel behavior, even if the firm is granted leniency? Section 73A(4) prohibits the Competition Commission from seeking or requesting prosecution of any person whom it certifies "deserving of leniency". Presumably the Competition Commission intends to issue such certification to directors and managers who support leniency applications.  That still does not overcome the fundamental difficulty that (as demonstrated by the construction cases) criminal offences are prosecuted by the National Prosecuting Authority. As the ultimate decision about whether or not to prosecute a director or manager for a cartel offence is that of the NPA and not the Competition Commission, obtaining certification that you are "deserving of leniency" from the Commission may well be cold comfort to any director or manager whom the NPA decides to prosecute. Section 73A(4)(b) permits the Competition Commission to make submissions to the NPA supporting leniency for someone prosecuted in terms of the section, those submissions are not conclusive.  The bottom line is that any firm which applies for leniency exposes its directors and managers to criminal charges for cartel conduct.

What is particularly interesting about today’s proclamation is that it only applies to subsections 1 to 4 of section 73A. The controversial presumption in section 73A(5) that a consent order or finding by the Competition Tribunal or Competition Appeal Court that a firm has committed a cartel offence is proof on the face of it of that cartel conduct, has not commenced. Neither has the prohibition against a firm paying any fine imposed on a director or manager found guilty of a cartel offence or the legal expenses incurred by a firm’s director or manager in defending charges of a cartel offence.  Section 74(a) of the Competition Amendment Act which sets out the R500 000 fine or 10 year imprisonment penalties for cartel offences has also not commenced.  The current section 74(1)(b) of the Competition Act presumably applies to cartel offences until the new section 74(a) begins. While the fine that can be imposed in terms of that section is limited to R2000, a prison term of up to 6 months can be imposed and the real issue is that a director or manager will have a criminal record.

Irrespective of the details, what is absolutely clear is that the stakes for cartels have just gone up.