1. Competition Amendment Bill, 2008
RESPONSES TO STAKEHOLDER ORAL & WRITTEN SUBMISSIONS
DATE: 5 August 2008
Zodwa Ntuli – DDG: Consumer and Corporate Regulation Division (CCRD)
Fungai Sibanda – CD: Policy & Legislation (CCRD)
Nomfundo Maseti – D: Competition & Consumer Policy & Law (CCRD)
Segoane Monnye – DD: Competition & Consumer Policy and Law (CCRD)

2. Purpose
The purpose of this presentation is to provide the dti’s initial response to issues raised by stakeholders during public hearings

3. Introduction
Need for a focused review of the existing competition law regime
To strengthen the Act in order to deal effectively with cartels by introducing personal liability
To deal effectively with uncompetitive outcomes manifest through artificially high prices to the detriment of consumers especially in highly concentrated markets
To respond to Industrial Policy objectives such as competitiveness, and to amend the Act to give effect to the Industrial Policy Action Plan

4. Introduction
High barriers to entry and artificially prices in certain key sectors identified as binding constraints to growth in AsgiSA document
Competition Policy Review is part of Presidency’s Programme of Action, therefore a priority for government
Enabling the Competition Commission to play a more proactive role in investigating markets & taking measures to ensure market transparency

5. Scope of the Bill The Bill focuses on five broad areas:
Concurrent jurisdiction – Seeks to clarify roles between competition authorities and sector regulators when dealing with competition matters in regulated industries.
Complex Monopolies – It is intended to deal effectively with uncompetitive outcomes resulting from multi-firm conduct that restricts or distorts competition to the detriment of consumers.
Market Inquiry – It is exploratory in nature and intended to inquire on competition deficiencies. It serves as a tool to enable the Commission to play a more proactive role in investigating markets.
Personal Liability – It is intended to provide an effective deterrent on cartel activities by introducing criminal sanctions against individuals who cause firms to engage in illicit cartel activities.
Incorporation of Leniency Policy – It is a tool used to detect cartel activity by encouraging those involved in cartel activities to come forward and disclose information to the Competition Commission in return for leniency.

6. Concurrent jurisdiction
Comments:
Clarification of roles supported by regulators i.e. ex ante and ex post regulation
Concern in payments system that Commission may take away powers of regulator
Concern that default provision trumps other legislation
Status and publication of MOU’s
dti Response
The policy rationale was to provide clarity and certainty on overlapping jurisdiction on competition matters
Clarification of roles in legislation is important to avoid forum shopping and protracted legal challenges
Role of MOAs should purely be to provide a framework for cooperation
Default position to be deleted because it does not achieve the intended purpose
Concurrent jurisdiction

7. Threshold would apply to overwhelmingly majority of markets in SA
Complex monopolies
Comments:
Threshold would apply to overwhelmingly majority of markets in SA
Target structure of the market as opposed to behaviour of firms
Provides for “no fault offence” - involuntary conduct
Undefined terminology e.g. exploitative pricing
Complex monopolies repealed in established international jurisdictions
Remedies unclear
Delete the provision and deal with the problem under market inquiry

8. Terminology revised to maintain consistency
Complex monopolies
dti Response
The rationale is to deal proactively with uncompetitive outcomes arising from multi-firm conduct especially in highly concentrated markets
Text will be revised to deal with coordinated conduct by firms as opposed to structure
Terminology revised to maintain consistency
The provision is meant to deal with challenges in the SA economy
Provided remedies in form of declaratory order with conditions to correct ameliorate
Market inquiry is a tool to uncover why markets are not working to serve consumer’s needs, but would not deal with identified complex monopoly conduct

9. No legal test / trigger for market enquiry
Market enquiries
Comments:
No legal test / trigger for market enquiry
No powers to subpoena documents or require production of evidence under oath
Scope of the enquiry and time frame not clarified
Transparency: publication of the report & opportunity for the affected parties to comment on the report

10. The Bill already allows for evidence to be given under oath
Market enquiries
dti Response
The policy rationale was to amplify the existing provisions on market inquiry to enable the Commission to undertake market inquiry in a structured, effective and transparent manner
the dti’s position was not to include subpoena powers as such would require a legal test for initiation of a market inquiry
A legal test would be subject to legal challenge which would complicate the process
However, the dti is considering incorporating subpoena powers with the legal test consistent with the purpose of section 21(2)(b) of the Act
The Bill already allows for evidence to be given under oath
Scope and time frame will be incorporated in the terms of reference
Publication of the report will be incorporated in the Bill

11. Leniency Policy
Comments:
The Bill makes no reference to Leniency Policy of the Commission
Scope for excusal on “just and reasonable grounds” is broad
Leniency Policy applicable to firms but NOT directors for criminal prosecution
Bill does not extend leniency for civil liability
Application of Leniency Policy by Authorities problematic in that it does not take into account severity of damage suffered by complainants
No consultation with complainants before leniency is granted

12. Leniency Policy
dti response:
The rationale was to give legal backing to the leniency policy of the Commission despite the fact that the commission already has prosecutorial discretion
The terminology is revised to be consistent with the leniency policy
The grounds were broad to cover other tools the Commission may employ
The Bill will be revised to extend leniency to individuals
The intention is not to indemnify any person from civil liability as that would affect third party rights to redress
Leniency granted does not preclude the complainant or any person from pursuing civil claim for damages
The Commission may consider consulting with complainants in terms of the leniency policy

13. Creation of separate streams of jurisprudence
Personal Liability
Comments:
General
Lead to unintended consequences and weaken rather than strengthen competition authorities
Too early to determine whether administrative fines are an effective deterrent
Creation of separate streams of jurisprudence
Significant departure from the current regime decriminalising competition law
Constitutional challenges
Admissibility of Competition Tribunal’s finding in criminal courts due to different standards of proof
Violation of a right to a fair trial: Presumption of innocence until proven guilty
Introduction of negligence for criminal sanctions

14. Impact on consent order
Personal Liability
Impact on consent order
Serves as a disincentive for firms to enter into consent order
Directors will be loathe to conclude consent orders
Consent orders should not indemnify or be used as a plea bargain by directors to absolve them from further prosecution
Impact on Leniency Policy
Uncertainty on Leniency Policy as Commission lacks authority to offer leniency for criminal prosecutions
Undermine Commission’s ability to investigate and prosecute cartels
Directors will be loathe to volunteer information for fear of prosecution

15. dti response General comments
Personal Liability
dti response
General comments
The rationale was to sharpen the efforts on cartel enforcement by providing severe penalties
The intention is to introduce an element of punishment to serve as an effective deterrent and threat to personal freedom
Sanctioning individuals inevitably allows for two separate processes since individuals can be dealt with through criminal courts
The Bill does not criminalise the regime or anti-competitive practices but introduces a scheme holding individuals criminally liable

16. Constitutional challenges
Personal Liability
Constitutional challenges
The intention was not to re-open the findings of the Tribunal when proceeding against an individual
This meant that one element of the offence is decided on a lower standard i.e. balance of probabilities
The Bill is revised to allow two separate processes to address the problem
The dti through Nedlac has sought legal opinion and will revise the provision based on the opinion

17. Impact on consent order
Personal Liability
Impact on consent order
The intention is to effectively deter and discourage people from engaging in cartel activities
A firm makes a decision to settle through a consent for various factors such as the strength of evidence against it, speedy resolution of the matter, litigation costs and reputational risk
Consent orders require no admission of guilt
The argument on negative impact on consent orders is unfounded
Consent orders allows for speedy resolution of matters but does not absolve individuals from further prosecution

18. Impact on Leniency Policy
Personal Liability
Impact on Leniency Policy
An authority with competent jurisdiction will grant leniency from criminal prosecution
The leniency policy is an ancillary enforcement tool for cartels
Leniency policy and criminal sanctions are complementary and work well together. Leniency policy is a tool for detection whereas criminal sanctions serve as an essential deterrent
Criminal sanctions enhance the effectiveness of leniency as it increases the cost of being caught
The argument that criminal sanctions impact negatively on the efficiency of leniency is artificial as there is no evidence showing such outcome
The perceived negative impact can be remedied by extending leniency to individuals in terms of the Bills
Information indicates that most cases, if not all, are not a voluntary initiative by a firm or directors but are a direct result of an action by the Commission

19. Conclusion
There is no fundamental objection to the principles. Concerns raised by stakeholders are rather technical in nature and can be addressed through revision of specific areas of the Bill.
The Bill was extensively discussed and debated at Nedlac. The Nedlac Report will be presented before this Committee on 8 August 2008.
the dti engaged extensively with key stakeholders especially the competition authorities from a policy review process and during the drafting of these amendments.
The proposals are aimed at advancing government’s initiatives on promotion of economic growth and competitiveness.
It also responds to anti-competitive practices that undermine social well being of the citizens e.g. prevalence of cartel activity in various sectors of the economy.
Therefore the assertion that this Bill is not urgent undermines the significance of the above efforts.

20. THANK YOU