Racing into the future: Competition law and its impact on your business Marianne Wagener Director Norton Rose South Africa March 2012

Transcription

1 FINANCIAL INSTITUTIONS ENERGY INFRASTRUCTURE, MINING AND COMMODITIES TRANSPORT TECHNOLOGY AND INNOVATION PHARMACEUTICALS AND LIFE SCIENCES Racing into the future: Competition law and its impact on your business Marianne Wagener Director Norton Rose South Africa March 2012

2 Outline What is competition law? Impact on your business International trends South African trends Overview of SA legislation and interesting recent cases Prohibited practices Upcoming amendments to the Competition Act Mergers Corporate risks going forward Compliance Q&A

3 What is competition law? Government regulation of business Promotes free, competitive markets Prohibits anti-competitive behaviour that skews market outcomes Crime on society In SA it also involves public interest concerns Broadly regulates: Prohibited practices Conduct between competitors, different parties in same supply chain and abuse of a dominant position Mergers

4 What is competition law? According to business

5 Impact on your business Impact of non-compliance your business High fines and other conditions Higher percentages, higher turnover basis, multiple jurisdiction fining Reputational damage Costly and protracted litigation Waste of management and employee time Civil action (and potentially class actions) Amendment act will introduce personal liability (fines and jail time)

6 International trends Competition law / anti-trust well established internationally Increased global focus on competition law enforcement - especial cartel activity Huge fines EU bn US >$1bn Brazil fines up to 30% of total turnover Japanese auto parts just agreed to pay $500mil Competition Authorities have more and more tools available Leniency, dawn raids, specialized software, international co-operation etc Civil action - Internationally larger payments than fines Criminalization (US over days jail time)

7 South African trends SA authorities increasingly in contact with international counterparts EU, Korea, Japan, US, Brazil and other African Jurisdictions Commission focuses on sectors that impact poor consumers: Food and agro-processing Construction Telecommunication Financial services And now 2012: Healthcare

8 South African trends Focus on cartel conduct Aggressive enforcement Made easy through leniency / raids / IT Large fines and innovative conditions: Pioneer: R500 mil and pricing condition Sasol: R259 mil and divestiture of retail operations 2011: In difficult times almost R500 million in fines (for example AfriSam R125million, Telkom?) BUT High settlement rate = very little case law for guidance Commission constraints: Discounts for cooperation Many people still do not understand competition law

9 Overview of SA legislation and interesting recent cases Prohibited Practices what can you expect going forward? 24 of 26 consent agreements during 2011 related to cartel conduct Price fixing Market allocation Collusive tendering Many not aware of broad scope of the Act Definition of agreement / concerted practice Implementation not necessary What does price fixing really mean?

10 Overview of SA legislation and interesting recent cases Prohibited Practices what can you expect going forward? Not just hardcore price fixing tacit collusion Increased focus on mere information exchange Cement investigation Agro processing Motor vehicles Constitutional court cases broader investigative powers to Commission? SAB / Omnia and Yara / Loungefoam

11 Overview of SA legislation and interesting recent cases Upcoming amendments to the Competition Act Amendment Act has been signed not in force yet Will come in one way or the other Most NB: Market Inquiries (Banking inquiry) Personal and criminal liability for collusion 10 years jail time and / or R fine Management authority Participate or knowingly acquiesce No insurance Separate representation Individual leniency only deserving of

12 Overview of SA legislation and interesting recent cases Mergers what can you expect going forward? More and more prohibitions / conditional approvals Last 12 years 31 prohibited mergers Since Dec prohibited mergers Detailed analysis required (cost to business?) Timing - African filings? Public Interest - Retrenchments: Momentum / Metropolitan Conditional approval No retrenchments for a period of two years (except in senior management) Despite offer to provide support / training to employees affected by the merger Glenrand / AON

13 Overview of SA legislation and interesting recent cases Mergers what can you expect going forward? Public Interest: Recently more than just retrenchments: Massmart / Wal-mart No retrenchments based on operational requirements for 2 years Merged entity to reinstate 503 employees Local procurement: The merging parties must commission and pay for a study on how local suppliers can respond to threat of effect of the merger The Court will then formulate the mandate and conditions by which a fund or similar proposal will operate What does this mean for foreign investment?

14 Corporate risks going forward What does all of this mean to you, going forward? Mergers More careful analysis will be required to obtain approval Careful thought to timing (African jurisdictions) Focus on public interest Prohibited practices Higher risk Personal liability Civil action Africa Bigger chance of being caught out Stronger enforcement

15 Compliance What to do? Prevention is better than cure Compliance programs essential Consideration when filing a merger Compliance manuals Compliance policies Signed undertakings by employees Annual compliance training Online training Reporting structures Dawn raid training

16 Questions? Marianne Wagener Disclaimer The purpose of this presentation is to provide information as to developments in the law. It does not contain a full analysis of the law nor does it constitute an opinion of Norton Rose South Africa on the points of law discussed. No individual who is a member, partner, shareholder, director, employee or consultant of, in or to any constituent part of Norton Rose Group (whether or not such individual is described as a partner ) accepts or assumes responsibility, or has any liability, to any person in respect of this presentation. Any reference to a partner or director is to a member, employee or consultant with equivalent standing and qualifications of, as the case may be, Norton Rose LLP or Norton Rose Australia or Norton Rose OR LLP or Norton Rose South Africa (incorporated as Deneys Reitz Inc) or of one of their respective affiliates.