The Institute of Directors’ Corporate Governance Network (CGN) – a body representing some of the country’s foremost experts on corporate governance and sponsored by PricewaterhouseCoopers (PwC), introduced its second position paper Anti-competitive Practices.
Attended by members and non-members of the IoD, the paper was presented by PwC’s Rob Newsome, Paul Cleland from Werksman who is an expert on South Africa’s Competition Act and Nigel Payne, a member of the CGN working group.
The Anti-competitive Practices position paper, like its predecessor The Dissenting Director, aims to provide important, concise and easy-to-use guidance to directors on dealing with real-life corporate governance issues. The papers also provide the basis for round tables and practical discussions around pertinent governance topics.
The Anti-competitive Practices paper discusses issues such as Understanding Competition Law; Prevention Better than Cure; Risk Management Processes and Policies and Penalties and Fines. The basis for establishing whether a practice is considered to be anti-competitive is the Competition Act 1998, the 2008 proposed amendments thereto (once promulgated) and the growing body of local case law and international precedents.
It is on the last mentioned Penalties and Fines on which Payne commented: “these penalties are enough to put you off anti-competitive behaviour and should be on the top of your boardroom agenda. If not, I would go so far as to say your board is being negligent.”
The paper highlights that in incidences of cartel behaviour (where two or more competitor companies enter price fixing, bid rigging, collusive tendering or market sharing arrangements) the fines may be as high as 10 percent of the organisation’s annual turnover.
On the subject of risk management processes and policies related to anti-competitive behaviour, the paper states that the board should determine to which extent the company is affected by the Competition Act. “A company of size or complexity would be unwise not to use experts in the field of competition law because the enquiry needs to be a detailed one on all levels (perhaps even the salesperson level) and aspects of the business.”
Here Payne commented: “It is important to understand the law in the context of your industry. You will need to get professional help.”
Anti-competitive Practices also discusses the importance of the Competition Act’s relevance in the global economy, citing it as giving regulators arguably one of the most stringent enforcement capabilities in the world.
Payne added that the livelihood of South Africa is based on competition and the free enterprise and discussed the balance between this and the statement in the paper that “A feature of most modern free market economies is the existence of legislation and enforcement mechanisms to guard against, investigate and punish anti-competitive behaviour.”