The role of Competition Law on economic growth



Co-authored by Mmadika Moloi (a Partner in the Competition Practice at Webber Wentzel) and  Elisha Bhugwandeen (a Professional Support Lawyer in the Competition Practice at Webber Wentzel)

Last week, the South African Competition Commission held its 10th Annual Competition Law, Economics and Policy Conference in Cape Town. The theme of this year’s conference was “the role of competition policy on economic growth”. While much of the conference was focussed on drawing from international expertise in this regard, it also provided a public platform to discuss the need to develop legal frameworks to address uncertainties in a rapidly evolving area of law. For businesses though, the warning was crystal clear – the South African competition authorities remain aggressively steadfast in advancing their objectives. As a consequence, in an era of amplified enforcement, competition law compliance is more important than ever before.

Throughout the conference, the Commission highlighted the “rampant culture of collusion”in South Africa, with as many as 133 cartels cases initiated in the past 12 months. The need to focus on the successful prosecution of abuse of dominance cases was also persistently stressed.

As anticipated though, the topic that sparked the most interest was the status quo of the recently enacted criminalisation provisions of the Competition Act. Key stakeholders and prominent figures in the field of South African competition law made very insightful statements on the subject which perpetuated the on-going debate on the effect of the new provisions. In this regard, the Competition Commissioner, Tembinkosi Bonakele, remarked that criminal sanctions are needed to complement the fines being issued given the large number of cartels uncovered. The Commissioner also stated that he recognised the need for co-operation with institutions such as the National Prosecuting Authority to remove legal and practical impediments in effectively enforcing the criminalisation provisions.

One of the most powerful statements made over the three days was that of the Minister of Economic Development, Ebrahim Patel. The Minister remarked that our laws, procedures and institutions (if necessary) need to be refined to deal with the large number of cartel cases, and that competition frameworks need to be developed to address our specific challenges. Minister Patel also recognised the need to increase the investigative and prosecutorial capacity of the competition authorities and warned that further legislative changes are being discussed.

Other commentators, such as the Judge President of the Competition Appeal Court, Dennis Davis, said that while he has no sympathy for cartelists, he was concerned about the effect of criminalisation on the Commission’s successful corporate leniency policy. Judge Davis questioned the efficacy of criminal prosecutions and observed that there was a lack of the necessary skills needed in order to successfully prosecute cartels.

David Lewis, the current head of Corruption Watch, also expressed scepticism on how criminalisation will be managed and said that the competition authorities should explore other forms of penalties, such as black-listing, as effective means of deterrence. Advocate David Unterhalter SC stressed that there is an urgent need to amend the Competition Act to distinguish “hard core” cartels that are deserving of criminalisation, from other types of co-operations in order to avoid legal challenges.

Overall the conference sparked interesting discussions on topics such as the increased need for co-operation between competition authorities around the world when dealing with the same clients in prohibited practices and merger investigations, the need to monitor industries post cartels and the adoption of innovative approaches to deal with new issues in competition law enforcement.

David Lewis summed it up best when he remarked that core business decisions are subject to the rule of law, reiterating the need for competition law awareness and changes in the structure of markets in South Africa. Although no substantive legal solutions have been finalised at this stage to address some of the fundamental areas of concern, it is evident that businesses across South Africa need to exercise vigilance in a climate of increased risk, where the levels of exposure are constantly rising.

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