Directors, managers: Your risk of “cartel conduct” criminal liability

“A cartel involves an agreement or concerted practice between two or more competitors to engage in fixing prices and/or trading conditions, dividing markets and/or collusive tendering.  By artificially limiting competition that would normally prevail between them, firms avoid exactly the kind of pressures that lead them to innovate, both in terms of product development and production methods. This results ultimately in high prices and reduced consumer choice.” (Competition Commission)

Government’s determination to crack down on cartel conduct is evidenced in the newly-introduced criminal liabilities imposed on individuals by amendments to the Competition Act.  Offending businesses already face substantial penalties, and now any director or manager of a business guilty of causing or permitting it to engage in a “prohibited practice” is also personally liable to prosecution, risking heavy fines (up to R500,000) and/or imprisonment (up to 10 years).

A “prohibited practice” here means “directly or indirectly fixing a purchase or selling price or any other trading condition”, “dividing markets by allocating customers, suppliers, territories, or specific types of goods or services”, or “collusive tendering”.

Legal commentators are suggesting that even more severe sanctions (possible life imprisonment, blacklisting from public tenders etc) imposed by separate anti-corruption legislation could also come into play.

Don’t forget also that these penalties for directors and managers personally are in addition to the existing and substantial penalties already faced by the businesses themselves.

Don’t take any chances here – get advice before embarking on any course of conduct which might be regarded as falling foul of these provisions.

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