A spate of fines running into hundreds of millions of rand issued by the SA competition commission in recent months has spurred debate about whether directors should also be held criminally liable for competition infringements.
"Unlike imposing huge fines on companies, penalising the individuals involved avoids punishing shareholders and consumers, who ultimately pay when they purchase the firm's products in years to come," says Heather Irvine a director at Deneys Reitz.
WHAT IT MEANS
 It would be in line with global best practice
It would slow down the processing of cases
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She says imposing liability on culpable individuals would also enhance the effectiveness of corporate leniency programmes because individuals are much more likely to co-operate with the competition authorities if they feel they are at personal risk.
The Competition Act provides that administrative penalties of up to 10% of annual turnover can be levied on firms for contravening its provisions. The individuals who instigate or benefit from anticompetitive conduct by their firms are not penalised.
Introducing personal liability would bring SA's Competition Act in line with jurisdictions such as the UK, the US, Canada, France and Ireland. But what form of personal liability should be imposed on directors?
Irvine says international experience shows that the potential social stigma attached to a prison, term as opposed to a fine, is much more effective in deterring executives from anticompetitive arrangements.
"While executives will risk a huge fine, especially if their company is prepared to indemnify them in their contract of employment, they balk at the prospect of jail time," she says.
But Irvine says introducing criminal liability for competition-law violations could potentially slow up the processing of cases through the tribunal.
"Proceedings involving criminal sanction are likely to be significantly more protracted and will require far greater resources to be devoted to them by the competition commission," she says.
The department of trade & industry has said that it will consider strengthening the penal provisions of the act this year. It may also seek to base fines on the total turnover generated during the entire period of the violation, not just the turnover generated in the year prior to the discovery of the contravention.
"But if it wants to raise the level of deterrence, the tribunal can get far more heavy-handed without the need to amend the legislation at all," says Deneys Reitz economist Geoff Parr.
The competition authorities have recently imposed some enormous fines on companies contravening competition law. These include a R50m fine on SA Airways for anticompetitive practices, a R99m fine on Tiger Brands for price fixing, a R146m fine on The Reclamation Group, a R692m fine on Mittal for excessive pricing and a R53m fine on Tiger Brands subsidiary Adcock Ingram for collusive tendering.
But the authorities seem to be irritated that in spite of these huge fines and although legislation was introduced in 1999, there is still widespread contravention of even the most serious provisions of the act - those relating to collusion on price, the division of markets and bid-rigging.
Parr says, however, that instead of amending the law to allow for bigger fines, the competition tribunal could start to fine the full 10% of turnover. Until now, the tribunal has said it would set penalties in line with a set of weightings. These include the nature, duration and gravity of the contravention, the losses suffered by competitors or customers and whether it was a repeat offence or not.
The highest percentage fine yet, which was agreed to by Adcock Ingram Critical Care last week, amounted to 8% of its turnover. This indicates a shift towards imposing the maximum penalty of 10% in egregious cases.
"But the tribunal is free to depart from that set of weightings and impose a fine of 10% regardless," says Parr.
