What is the penalty for cartel conduct?

The Competition Act now states that it is a criminal offence to engage in a cartel, but the question of penalties remains

Confusion remains around the implications of the criminalisation of cartel conduct, which came into effect at the beginning of the month.

An amendment to the Competition Act that makes it a crime for bosses to engage in, or acquiesce to, cartel offences was enacted.

The part creating prescribed maximum penalties of up to 10 years in jail was left unenacted.

“I think they forgot,” says Daryl Dingley, a partner at law firm Webber Wentzel’s competition law department.

“There is no other explanation. They made such a big thing about it in Parliament, but then there is no guidance on penalties.”

If a criminal case against a company director went to court now, the dormant prescription of fines up to R500 000 and 10 years in jail would probably still get used as a guide by the court, says Dingley.

Even though it wasn’t enacted, the penalty clause “shows it must have been the legislature’s intent to make the penalty more severe”.

“It will likely be left to the court,” he says.

Economic Development Minister Ebrahim Patel announced the criminalisation in his budget vote last month.

His department has not answered City Press’ questions over the past two weeks about the penalties.

It did, however, send a response saying that “it is important ... to move beyond simply financial penalties that companies may factor into their prices and which, on their own, may not always be a sufficient deterrent”.

Several parts of the amendment were left dormant for now – including a potentially unconstitutional rule that would make it easy to prosecute bosses in criminal court after their companies have been found guilty of cartel conduct by the competition authorities.

According to Patel’s department, “provisions not yet enacted will either be done in further phases or will be amended by Parliament based on the experience the competition authorities have gained through implementing their anti-cartel actions”.

Dingley says that any criminal sanction against a company director would be a major deterrent for the mere reason that it would bar that person from being a director again.

He says the amendments will probably cause a headache for the authorities as cases get tied up in court.

“Deciding if a thing is a cartel or not is kind of touch and go, meaning that criminal prosecution will be an uphill battle,” he says.