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Racing into the future: Competition
law and its impact on your business
Marianne Wagener
Director
Norton Rose South Africa
March 2012
Outline
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What is competition law?
Impact on your business
International trends
South African trends
Overview of SA legislation and interesting recent cases
– Prohibited practices
– Upcoming amendments to the Competition Act
– Mergers
• Corporate risks going forward
• Compliance
• Q&A
What is competition law?
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Government regulation of business
Promotes free, competitive markets
Prohibits anti-competitive behaviour that skews market outcomes
Crime on society
In SA it also involves public interest concerns
Broadly regulates:
– Prohibited practices
– Conduct between competitors, different parties in same supply chain
and abuse of a dominant position
– Mergers
What is competition law?
According to business…
Impact on your business
• Impact of non-compliance your business
– High fines and other conditions
– Higher percentages, higher turnover basis, multiple jurisdiction fining
– Reputational damage
– Costly and protracted litigation
– Waste of management and employee time
– Civil action (and potentially class actions)
– Amendment act will introduce personal liability (fines and jail time)
International trends
• Competition law / anti-trust well established internationally
• Increased global focus on competition law enforcement - especial cartel
activity
• Huge fines
– EU 2010 – 2011 €3.5bn
– US >$1bn
– Brazil fines up to 30% of total turnover
– Japanese auto parts just agreed to pay $500mil
• Competition Authorities have more and more tools available
– Leniency, dawn raids, specialized software, international co-operation
etc
• Civil action - Internationally larger payments than fines
• Criminalization (US over 50 000 days jail time)
South African trends
• SA authorities increasingly in contact with international counterparts
– EU, Korea, Japan, US, Brazil and other African Jurisdictions
• Commission focuses on sectors that impact poor consumers:
– Food and agro-processing
– Construction
– Telecommunication
– Financial services
– And now 2012: Healthcare
South African trends
• Focus on cartel conduct
– Aggressive enforcement
– Made easy through leniency / raids / IT
– Large fines and innovative conditions:
– Pioneer: R500 mil and pricing condition
– Sasol: R259 mil and divestiture of retail operations
– 2011: In difficult times almost R500 million in fines (for example
AfriSam R125million, Telkom?)
• BUT
– High settlement rate = very little case law for guidance
– Commission constraints: Discounts for cooperation
– Many people still do not understand competition law
Overview of SA legislation and interesting recent cases
Prohibited Practices – what can you expect going forward?
• 24 of 26 consent agreements during 2011 related to cartel conduct
– Price fixing
– Market allocation
– Collusive tendering
• Many not aware of broad scope of the Act
– Definition of agreement / concerted practice
– Implementation not necessary
– What does price fixing really mean?
Overview of SA legislation and interesting recent cases
Prohibited Practices – what can you expect going forward?
• Not just hardcore price fixing – tacit collusion
– Increased focus on mere information exchange
– Cement investigation
– Agro processing
– Motor vehicles
• Constitutional court cases – broader investigative powers to
Commission?
– SAB / Omnia and Yara / Loungefoam
Overview of SA legislation and interesting recent cases
Upcoming amendments to the Competition Act
• Amendment Act has been signed – not in force yet
• Will come in one way or the other
• Most NB:
– Market Inquiries (Banking inquiry)
– Personal and criminal liability for collusion
– 10 years jail time and / or R500 000 fine
– Management authority
– Participate or “knowingly acquiesce”
– No insurance
– Separate representation
– Individual leniency – only “deserving of”
Overview of SA legislation and interesting recent cases
Mergers – what can you expect going forward?
• More and more prohibitions / conditional approvals
– Last 12 years – 31 prohibited mergers
– Since Dec 2011 – 5 prohibited mergers
• Detailed analysis required (cost to business?)
• Timing - African filings?
• Public Interest - Retrenchments:
– Momentum / Metropolitan – Conditional approval
– No retrenchments for a period of two years (except in senior management)
– Despite offer to provide support / training to employees affected by the
merger
– Glenrand / AON
Overview of SA legislation and interesting recent cases
Mergers – what can you expect going forward?
• Public Interest: Recently more than just retrenchments:
• Massmart / Wal-mart
– No retrenchments based on operational requirements for 2 years
– Merged entity to reinstate 503 employees
– Local procurement:
– The merging parties must commission and pay for a study on how local
suppliers can respond to threat of effect of the merger
– The Court will then formulate the mandate and conditions by which a fund or
similar proposal will operate
– What does this mean for foreign investment?
Corporate risks going forward
What does all of this mean to you, going forward?
• Mergers
– More careful analysis will be required to obtain approval
– Careful thought to timing (African jurisdictions)
– Focus on public interest
• Prohibited practices
– Higher risk
– Personal liability
– Civil action
– Africa
– Bigger chance of being caught out
– Stronger enforcement
Compliance
• What to do?
• Prevention is better than cure
• Compliance programs essential
– Consideration when filing a merger
– Compliance manuals
– Compliance policies
– Signed undertakings by employees
– Annual compliance training
– Online training
– Reporting structures
– Dawn raid training
Questions?
Marianne Wagener
011 685 8653
[email protected]
Disclaimer
The purpose of this presentation is to provide information as to developments in the law. It does not contain a full analysis of the law nor does it constitute an opinion
of Norton Rose South Africa on the points of law discussed.
No individual who is a member, partner, shareholder, director, employee or consultant of, in or to any constituent part of Norton Rose Group (whether or not such
individual is described as a “partner”) accepts or assumes responsibility, or has any liability, to any person in respect of this presentation. Any reference to a partner or
director is to a member, employee or consultant with equivalent standing and qualifications of, as the case may be, Norton Rose LLP or Norton Rose Australia or
Norton Rose OR LLP or Norton Rose South Africa (incorporated as Deneys Reitz Inc) or of one of their respective affiliates.