Pieter Steyn – LEX Africa Chairman and Director at Werksmans Attorneys in South Africa, contributed the South African chapter of GCR Know-how – on the topic of Immunity, Sanctions & Settlements for 2018.
See below all questions and answers for this chapter.
| 1. | What benefits are available to the first applicant to qualify? |
The principal benefit of the South African Competition’s (Commission) Corporate Leniency Policy (CLP) is that the first applicant to qualify does not pay any administrative penalties. In terms of the Competition Act, the penalties may be up to 10 per cent of the firm’s South African turnover and its exports from South Africa during its preceding financial year. No exemption/immunity is, however, given with regard to possible civil damages claims by a third party or the possible criminal liability of directors and managers.
| 2. | Do the protections extend to current and former officers, directors and employees? |
The CLP does not apply to current and former officers, directors and employees. In terms of the Competition Act, the Commission may, however, certify that a person is “deserving of leniency” and may make submissions to the National Prosecuting Authority in support of leniency if such person is prosecuted criminally for involvement in a cartel offence.
| 3. | Is immunity available after an investigation begins? |
Immunity is available after an investigation begins if the Commission is of the view that it has insufficient evidence to prosecute the cartel.
| 4. | What are the eligibility requirements before an investigation begins? |
The successful applicant must be “first to the door” and make full disclosure of documents and information relating to the cartel and fully cooperate with the Commission. In a recent case, however, immunity was granted to a second applicant who was able to provide evidence that the first applicant could not supply. The CLP is aimed at cartel conduct (i) of which the Commission is unaware, or (ii) of which the Commission is aware of but in relation to which it has insufficient information and has not yet initiated an investigation and (iii) in respect of pending or already initiated investigations but where the Commission is of the view that it lacks insufficient evidence to prosecute the cartel.
| 5. | What are the eligibility requirements after an investigation begins? |
The eligibility requirements are the same as before an investigation begins – see question 4.
| 6. | Will the applicant have to admit to a violation of law? |
Yes.
| 7. | Are ringleaders or initiators of the conduct eligible? |
Yes.
| 8. | When must the applicant terminate its involvement in the conduct? |
In terms of the CLP, the applicant must immediately stop the cartel activity unless otherwise directed by the Commission.
| 9. | What constitutes termination of the conduct? |
This will depend on the facts and circumstance of each case and must accord with the Commission’s directions.
| 10. | Will the applicant be required to make restitution to victims? |
Immunity under the CLP does not affect the successful applicant’s criminal or civil liability. Victims of the cartel may institute civil damages claims against the applicant. The Commission will, however, not make it a condition of granting immunity that the applicant makes such restitution.
| 11. | Can more than one applicant qualify for immunity? |
Please see question 4.
| 12. | Can an applicant qualify if one of its employees reports the conduct to the authority first? |
A report by a person who is not authorised to act for the firm will not amount to an application for immunity, but will be treated as whistleblowing. The firm itself would have to apply for immunity and comply with the eligibility requirements.
| 13. | Does the afforded protection extend to any non-antitrust infringements? |
No.
| 14. | What confidentiality assurances are given to the first applicant to report? |
The leniency process is undertaken on a confidential basis. Information provided by the applicant may be disclosed by the Commission with the consent of the applicant but such consent cannot be unreasonably withheld. The use of documents and information obtained from the applicant at the Tribunal hearing does not, however, amount to a breach of confidentiality. The South African Competition Act also provides protections for confidential information and it is prudent for an applicant to use these processes and not simply rely on the confidentiality provisions of the CLP.
| 15. | Does the authority publish guidance regarding the application of the programme? |
The CLP is published and available from the Commission’s website www.compcom.co.za. The Commission has not published further guidelines, but there have been some court and Tribunal cases on the CLP.
| 16. | Do the rules for obtaining immunity in your jurisdiction conflict with the immunity rules in other jurisdictions? |
Immunity granted by another competition authority will not automatically qualify the applicant for immunity under the CLP. In developing the CLP the Commission reviewed and compared leniency policies in other jurisdictions including the USA, UK, EU, Canada and Australia.
| 17. | What is the initial process for making an application? |
A written application must be submitted to the Commission to identify the cartel conduct and its participants. It is not necessary to disclose the identity of the applicant at this stage. The Commission will then advise the applicant whether it is first to the door. If so, a so-called “first meeting” will be arranged at which the applicant must reveal its full identity and allow the Commission to inspect (but not make copies of) all relevant information, evidence and documents. The Commission then decides whether or not the applicant qualifies for immunity. If not, the applicant will be advised in writing. If so, a “second meeting” will be arranged with the Commission to discuss and grant conditional immunity. The Commission will be able to take copies of all documents at the second meeting. Full immunity will be granted after a final decision on the case by the Competition Tribunal or (if there is an appeal) the Competition Appeal Court.
| 18. | What information is required to secure a marker? |
The marker application must identify the applicant’s full name and address, the alleged cartel conduct and its participants and justify the need for a marker.
| 19. | How much time will an applicant have to perfect its marker? |
The time given to perfect a marker is not stipulated in the CLP and is determined by the Commission on a case-by-case basis. Generally about 30 days is granted.
| 20. | Can the deadline for perfecting the marker be extended? |
The deadline may be extended on good cause shown.
| 21. | What is required to perfect the marker? |
To perfect the marker, an immunity application (with all required information, evidence and documents) must be submitted in accordance with the CLP.
| 22. | Can the scope of the marker be expanded if additional information is discovered by the applicant? |
The CLP does not give blanket immunity but only immunity in respect of the specifically disclosed cartel conduct. If additional information is discovered regarding conduct distinct from the conduct disclosed in the initial marker application, a new marker (or leniency) application would have to be submitted and the applicant runs the risk that another firm may already have submitted an application. Much accordingly depends on the facts and circumstances of each case as to whether the scope of the initial marker application is wide enough to cover the additional discovered conduct.
| 23. | Can an applicant lose its marker if a second applicant comes forward with better information? |
No. However, if the applicant does not perfect its marker during the required time period and fails to comply with the CLP requirements, a second applicant will move to the head of the queue.
| 24. | What if the applicant’s investigation reveals that no violation exists? |
An application should preferably only be made after a careful review of the evidence of a violation especially as an admission of a violation is required by the successful applicant. A marker and immunity application may be withdrawn by an applicant. This must be carefully considered as the applicant then runs the risk of losing its immunity protection and being prosecuted by the Commission.
| 25. | What if the authority decides not to investigate? |
The consequences depend on the Commission’s reasons. If the Commission decides the conduct is not a cartel violation, then the CLP will not apply and the immunity granted will not be effective. However, in terms of the CLP, if the Commission is not satisfied that it has sufficient information to institute proceedings against the other cartel members, it may meet with the applicant either to revoke the conditional immunity or to require further documents or information to enable the Commission to complete its investigation with a view to instituting proceedings.
| 26. | What is the applicant required to produce? |
The applicant is required to produce all relevant information, evidence and documents at its disposal, whether written or oral. This includes assisting and cooperating with the Commission and making available employees and executives to the Commission for interviews and ultimately as witnesses.
| 27. | Will the applicant be required to make a written confession? |
The applicant must admit to the cartel conduct. A formal written confession is not required.
| 28. | Can third parties obtain access to the materials provided by the applicant? |
All information submitted as part of the CLP processes is protected by the rules of litigation privilege and may not be accessed by third parties unless such privilege has been waived by the Commission (for example, by referring to the leniency application in its referral of cartel members to the Tribunal). Please also refer to question 14.
| 29. | Will the applicant lose its protection if one or more of its employees refuses to cooperate? |
No, provided that the applicant has acted in good faith and cooperated with the Commission in trying to procure that its employees cooperate with the Commission (ie, such refusal must amount to a breach by the applicant of the conditions for its immunity).
| 30. | Will the applicant lose its protection if one of its employees engages in obstructive conduct before or after the application? |
No provided that the applicant has acted in good faith, cooperated with the Commission and is not responsible for such obstructive conduct (ie, such conduct must amount to a breach by the applicant of the conditions for its immunity).
| 31. | Will the applicant be required to provide materials protected by attorney-client privileges or work-product doctrine? |
Generally not but in terms of the CLP the applicant is obliged to disclose all relevant information, evidence and documents at its disposal and if some of these materials are privileged and disclosure to the Commission is refused on that basis, it may amount to a breach of the immunity conditions allowing the Commission to revoke immunity (although no such revocation has occurred to date in practice). Much will depend on the facts and circumstances of the case.
| 32. | How does the authority announce its promise not to charge or sanction? |
The existence of an immunity applicant is not formally announced but this will be disclosed pursuant to the Commission’s prosecution of the cartel before the Tribunal. A written conditional immunity agreement will be concluded. Total immunity will be granted by written notice to the applicant.
| 33. | Does the authority put its commitment in writing? |
Yes. See question 32.
| 34. | Who is given access to the document? |
The applicant and the Commission. Third party access would have to be justified in terms of South African discovery and statutory access to information rules and laws. The Tribunal on good cause shown could order third party access to the conditional immunity agreement.
| 35. | Does the authority publish a model letter for conferring immunity? |
The authority has a model agreement but this is not published and the CLP provides that the terms and conditions of the agreement need to be agreed between the applicant and the Commission.
| 36. | Is there an individual immunity programme? |
No. See question 2.
| 37. | What is the process for applying? |
Not applicable – see question 36.
| 38. | What are the criteria for qualifying? |
Not applicable – see question 36.
| 39. | On what basis can corporate immunity be revoked? |
Immunity may be revoked if the applicant fails to meet the conditions and requirements of the CLP including lack of cooperation by the applicant, provision of false or insufficient information, misrepresentation of facts and dishonesty.
| 40. | When can it be revoked? |
Conditional immunity may be revoked at any time.
| 41. | What notice is required to revoke? |
Written notice of revocation must be given by the Commission. In practice, there have been no revocations and it is likely that the Commission will first liaise with the applicant with regard its non‑compliance issues and that revocation will be a last resort.
| 42. | Can the applicant file a judicial challenge to a decision to revoke? |
Decisions of the Commission may be appealed to or reviewed by the Competition Tribunal. In certain circumstances, the Commission’s decision may be taken on judicial review to the High Court of South Africa.
| 43. | Does the leniency programme allow for reductions in sanctions? |
No. The Commission has, however, issued penalty guidelines that provide for the reduction in penalties for firms that settle with the Commission by 10 to 50 percent. It must be noted that the Commission does not impose penalties and must apply to the Tribunal for approval of the penalty.
| 44. | What is the process for seeking a reduction in sanctions? |
The successful immunity applicant will be granted 100 per cent immunity from penalties. The Commission is generally amenable to negotiating a settlement agreement/consent order with the other firms involved in the cartel. There is, however, no formal process, procedure or guidelines for settlements/reductions in sanctions. Sanctions need to be approved by the Tribunal.
| 45. | Is there a marker process similar to immunity applications? |
No.
| 46. | Are the reductions in sanctions fixed or discretionary? |
In terms of the Commission’s penalty guidelines, the Commission may in its discretion offer a discount of between 10 per cent and 50 per cent of the administrative penalty determined in terms of the methodology set out in the guidelines. It must be noted that the Tribunal (and not the Commission) is empowered by the Competition Act to impose penalties and the Commission must apply to the Tribunal to approve the penalties.
| 47. | How are the reductions in sanctions calculated? |
The reduction is in the Commission’s discretion – see question 46. The penalty guidelines provide that, in considering whether to offer a discount, the Commission will consider all the facts and circumstances including the firm’s willingness to include a settlement with the Commission expeditiously, the extent to which the firm assists in the prosecution of other firms and whether the firm was proactive in approaching the Commission with information relating to the cartel.
| 48. | Are there sentencing guidelines? |
Yes. The Commission issued guidelines for the determination of penalties from 1 May 2015 but it must be noted that the Tribunal (and not the Commission) is empowered by the Competition Act to impose penalties.
| 49. | If an applicant’s cooperation reveals self-incriminating information that expands the scope of the conduct known to the authority, will that conduct be factored into the fine calculation? |
It depends on the facts and circumstances of the case. The six-step methodology in the penalty guidelines starts with calculating “affected turnover” and this depends on the scope of the conduct covered by the contravention. Although the successful impunity applicant will be granted 100 per cent immunity from penalties, the CLP does not give blanket immunity but only immunity in respect of the specifically disclosed cartel conduct. If the applicant reveals self-incriminating conduct not covered by its original application, the Commission may (if the applicant is not first to the door in claiming immunity for that additional conduct) prosecute the applicant. The fact that a firm voluntarily revealed the information to the Commission could be treated as a mitigating factor in the penalty calculation process.
| 50. | Are there fixed or discretionary discounts for the first applicant to cooperate after the immunity applicant (assuming there is an immunity applicant)? |
See question 46.
| 51. | Other than fine reductions, are there additional incentives offered to an applicant that is the first non-immunity applicant? |
No.
| 52. | Does the competition authority publish guidance regarding sentencing reductions? |
No, other than the section of the penalty guidelines dealing with discounts for settlement.
| 53. | Does the authority provide for “Amnesty Plus” benefits? |
No, although reporting anticompetitive conduct or providing assistance with the Commission’s other investigations or prosecutions will be taken into account in determining a settlement discount – see questions 46 and 47 above.
| 54. | How is the Amnesty Plus discount calculated? |
Not applicable.
| 55. | Are the cooperation obligations similar to those for immunity applicants? |
Not applicable.
| 56. | Will the applicant be required to make a written confession? |
Not applicable.
| 57. | Can third parties obtain access to the materials provided by the applicant? |
Not applicable.
| 58. | Will an applicant qualify for sentencing reductions if one or more of its employees refuse to cooperate? |
As stated above, discounts/penalty reductions will only be considered if a firm settles with the Commission. The refusal of an employee to cooperate may affect the Commission’s willingness to offer a discount to the firm especially if the firm is responsible for the employee’s behaviour. However, the mere refusal of an employee to cooperate with the Commission need not necessarily prevent a settlement with the Commission.
| 59. | Will the applicant lose its protections if one of its employees engages in obstructive conduct before or after the application? |
This depends on the terms of the settlement agreement with the Commission and whether the employee’s conduct amounts to a breach of the settlement agreement. A key factor will be whether the firm is responsible for the employee’s behaviour.
| 60. | Will the applicant be required to provide materials protected by attorney-client privilege or work-product doctrine? |
Settlement agreements will generally not require the settling firm to provide privileged materials to the Commission.
| 61. | Can an applicant challenge the amount of the reduction of sanctions? |
The Commission has a discretion whether to offer a discount off the penalty to firms which settle with it. If the parties cannot agree on the amount of the penalty in terms of the settlement agreement, the agreement will not be concluded and the Commission may prosecute the firm before the Tribunal. In terms of the Competition Act, the Tribunal (not the Commission) determines the amount of the penalty.
| 62. | How is the settlement process initiated? |
There is no formal settlement process or guidelines and either the Commission or the relevant firm may initiate settlement discussions.
| 63. | Is the amount of the sanction always fixed in the settlement agreement? |
The amount of the penalty is usually agreed in the settlement agreement. If the parties can’t agree the penalty, it will be determined by the Tribunal pursuant to the prosecution of the firm by the Commission.
| 64. | What role, if any, do the courts play in the settlement process? |
The courts do not play a role in the settlement process. However, to the extent that the penalty is determined by the Tribunal, the firm may appeal or review the Tribunal decision to the Competition Appeal Court.
| 65. | Are the settlement documents, including any factual admissions, made public? |
Non‑confidential versions of the settlement agreement/consent order are made public.
| 66. | Is an admission of wrongdoing required? |
The Commission will generally require an admission of a contravention of the Competition Act in the settlement agreement.
| 67. | Do companies that enter into settlement agreements receive an automatic sentencing discount? |
No. See questions 46 and 47.
| 68. | Do all of the subjects of an investigation have to agree to the settlement procedure before it is initiated by the authority? |
No. Settlement agreements are generally concluded between the Commission and individual firms.
| 69. | Will the authority settle with subjects who refuse to cooperate? |
A refusal to cooperate is likely to result in an inability to agree a settlement agreement and result in a prosecution before the Tribunal.
| 70. | If the settlement discussions terminate without an agreement, may any information provided or statements made during the negotiations be used against the parties? |
The settlement discussions are generally conducted on a “without prejudice”/“off the record” basis and as such information provided or statements made during the negotiations may not be used in formal proceedings.
| 71. | May a party to the settlement agreement void the agreement after it is entered? |
This depends on the terms of the settlement agreement. However, a breach of the agreement could result in its termination.
| 72. | Does the competition authority publish guidance regarding settlements? |
No. Apart from the provision in the penalty guidelines dealing with settlement discounts.
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