IT’S A FINE MESS: THE APPROACH TO ADMINISTRATIVE PENALTIES UNDER THE COMPETITION ACT

South Africa is inconsistent in its approach towards penalties for cartel conduct.
Section 59 of the Competition Act, 89 of 1998 provides that the Competition Tribunal may impose an administrative penalty not exceeding 10% of a firm’s annual turnover in, and its exports from, South Africa during the firm’s preceding financial year. Section 59 also provides that the Tribunal must consider certain specified factors when determining an appropriate penalty.

Past decisions have differed both in terms of the appropriate turnover to be used as the basis for the penalty as well as the way in which ‘preceding financial year’ has been regarded as, inter alia, the year preceding the initiation of the complaint or the referral of the complaint, or the year preceding the contravention.

In 2010 in Southern Pipeline Contractors and Conrite Walls (Proprietary) Limited vs The Competition Commission (“Southern Pipelines case”), the Tribunal applied penalties of R16,882,597 and R6,192,457 on Southern Pipeline Contractors (“SPC”) and Conrite Walls (Proprietary) Limited (“Conrite”), respectively, for their participation in cartel conduct in the pre-cast concrete industry. However, in August this year, the Competition Appeal Court (“CAC”) overruled the Tribunal’s decision, criticising the Tribunal for disregarding the legislative framework when determining the penalties.

The CAC’s decision provides greater guidance to the approach to be followed but offers little predictability in relation to penalties likely to be imposed, leaving scope for vastly different penalties in future cases.