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More needs to be done to flush collusion from economy, says Patel

Despite the criminalisation of collusion coming into effect in May as part of the Competition Amendment Act, more resolute action is needed to address collusion, says Economic Development Minister Ebrahim Patel.

Speaking at a competition law conference hosted by law firm Bowmans, in Johannesburg, on Thursday, Patel pointed out that commentators, including from the World Bank and International Monetary Fund, have noted that collusion in South Africa is still extensive and that it imposes enormous costs on downstream businesses and consumers.

“Penalties do not seem to be a sufficient deterrent . . . and it may be discounted into the price of doing business. The cost on the economy is unbearably large,” he said.

Patel added that a recent World Bank study on competition in South Africa noted the enormous costs of cartel behaviour and development on the economy.

“The study stated that, in the case of four cartels in the maize, wheat, poultry and pharmaceuticals industries – productsthat make up 15.6% of the consumption basket of the poorest 10% of the population – conservative estimates indicate that 200 000 people stood to be lifted above the poverty line by tackling cartel overcharges,” he said.

As part of the effort to combat collusion, Competition Commission authorities used corporate leniency, coupled with the fast-tracking of investigations.

“This has resulted in a number of successes in flushing cartels into the open and imposing significant penalties on them.”

Patel mentioned that criminalisation, if properly managed, could be a powerful incentive for errant company officials to be whistleblowers, prompting them to seek immunity from prosecution in return for providing information and evidence to the authorities.

“Parliament criminalised collusion, and the task of the executive is to ensure that the laws are given effect as soon as possible. In short, we have a constitutional duty to give effect to some of the wishes of the legislature on this,” he said.

Patel added that there had been an unusually long period between the passing of the legislation and its implementation, enabling institutional issues to be addressed.

“The Competition Commission is aware of the levels of cooperation required between the different law enforcement agencies and they engaged with their counterparts prior to the announcement of criminalisation of collusion,” he said.

He noted that, in the intervening period between 2008 and this year, government sought to get greater public and corporate awareness about the practices of collusion and what constitutes collusion.

Meanwhile, Patel mentioned that he had been struck by the extent to which some commentators have been strident in their criticism of government’s involvement in competition matters.

“As government, we need to walk a careful balance. If we are too inclusive it could have a negative effect on the economy and on investment. If we are not involved enough, we lose public support and seem to be captured by corporate interest as a State,” he noted.

He added that, to balance these complex matters, the Competition Amendment Act needed to be reviewed and utilised better.

 

Source: Engineering News