competition competition policy political economy public policy

Of cartels and corruption

The Eeufees offramp, the entry point into Tshwane for many cars coming from the direction of Sandton, must be a dreaded one for many executives with an appointment with the competition authorities. The Voortrekker monument looms in the distance. As does UNISA; with a portrait of Madiba gazing in the distance dominating one side of its impressive building. His face is tough and scholarly, defying the “Disneyfication” of his image. And whizzing through this complex terrain, is the Gautrain. If the Voortrekker monument is a creation of the past, and Madiba a symbol of our bridge to the future, the Gautrain is a promise of better times ahead. Yet this great infrastructure project, commissioned by the state with public funds and built by the private sector, became one of many projects that were preyed upon by cartelists in the construction industry.

On a wintry morning – 17 July 2013 – the Tribunal began hearings into a mega-case involving 15 firms that had been engaged in rampant collusion. The settlements before the Tribunal involved 140 projects rigged by these firms. With penalties totalling R1.5bn, this was the biggest settlement ever reached in a single process.

“Corruption, not collusion,” many have said.

Words that ring in my head as I too approach that dreaded off-ramp. Facing that brown and dull hill before the traffic light turns green, you might forget that you are driving on one of the busiest highways in the country and into the capital city.

Pretoria/Tshwane. Corruption/collusion. Much remains contested in this country.

But an old script was shred to bits in July. In that script, the scene is set like this: On one end of the highway, give or take 40 kilometres from Eeufus Road, dwell free market visionaries conducting clean business. But as we drive north, the temperature gets hotter as we approach languid, indifferent and corrupt bureaucracy. Around Christian de Wet, down Nelson Mandela drive, the heart of corruption beckons. For those of us who bounce between these cities, we know that this is absurd.

The idea that any race, sector of society or even industry has a monopoly (no pun intended) on illegal and unethical behaviour is hopelessly outdated.

What happens to an actor who has perfected the old script, who has been venerated by the establishment and can go through the scenes in his sleep? At this late stage, to suggest that he has to see the story afresh and pronounce new sounds, can seem like a hopeless request. And what of the new actor who has been watching the old play from the sidelines, excluded from the casting call, now having to emerge from the shadows?

This story is unfolding.

On that same morning, the Commission concluded various long-standing matters against Telkom, in a settlement worth R1bn. Commenting on the Telkom settlement, Tribunal chairperson Norman Manoim described it as “one of the most sophisticated settlements ever seen.” He also highlighted that settlements are not inferior to outcomes reached through prosecution but that they can often achieve pro-competitive outcomes in a tangible sense. The package of remedies in this settlement, including price reduction and structural commitments, will have an enduring impact on the market. This theme was reiterated by the deputy chair of the Tribunal, Yasmin Carrim at our annual conference in September, who advocated for the greater use of remedies in resolving cases.

In an action-packed year, South Africa was also in the spotlight for its incredible hosting of the International Competition Network’s cartel workshop, attended by many jurisdictions from around the world. The conference kicked off with a thought-provoking welcome address by the Minister of Economic Development, Honourable Ebrahim Patel followed by days of enlightening discussion. The organising team, led by Keitumetse Letebele, received compliments from far and wide.

Mergers and acquisitions such as the Nestle/Pfizer and Independent News transactions have displayed the Commission’s ability to handle complex competition and public interest concerns. Looming transactions such as the international acquisition of the Afgri group and the purchase of land in Gauteng by a Chinese consortium will give the competition authorities further opportunities to develop the law. Another key theme on the competition agenda for 2014 is that of the impact of government policy and actions on the effective functioning of markets. The global community will be grappling with this question at the 2014 International Competition Network conference, where a special session will be held on competition policy towards state-owned enterprises.

In some parts of the world, state-owned enterprises are exempt from competition policy, with damaging consequences for the economy as these SOEs are often responsible for anti-competitive conduct. Our jurisdiction does not suffer from that weakness, and the competition authorities have levied significant fines on entities such as SAA and partially state-owned Telkom. Where we may be lagging behind other countries is on the treatment of state action such as subsidies and other forms of government assistance that might distort the playing field. These types of government actions fall outside the scrutiny of the authorities, save for making recommendations to the rest of government on possible anti-competitive effects. However, this is not to under-estimate the effectiveness of well-crafted recommendations in changing policy.

To paraphrase Talib Kweli, ours is a beautiful struggle. It continues in 2014. I look forward to new challenges.

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