Source:
BUSINESS DAY TV: Cartel conduct not justifiable
by Transcript service,
2015-10-27 13:27:54.0
ROSALIND Lake, Director: Competition at Norton Rose Fulbright, speaks to BDTV about when it’s okay for competitors to collude, and also talks on a spate of dawn raids by the Competition Commission
BUSINESS DAY TV: The Competition Commission has wound up its investigation into bid rigging in the construction sector referring its last case to the Competition Tribunal for litigation. But it’s not only the construction sector that the Commission has its eye on. Other industries have also been suspected of creating cartels in order to protect themselves against flutters such as the weakening rand. Joining us in the News Leader studio to discuss this further is Rosalind Lake Competition Director at Norton Rose Fulbright.
Thanks so much Rosalind for joining us today...so is an economic crisis and in SA’s case, which comes with the weakening of the rand a justifiable enough reason to engage in cartel conduct?
ROSALIND LAKE: The straight answer’s no. It just isn’t justifiable, the way in which the Competition Commission goes after cartel conduct, it’s assumed that it damages the economy, it’s assumed that it damages consumers and pretty much you can’t justify it because times are tough. Where it could potentially come in is if there is a possibility that competitors could get an exemption for their conduct because the damage to the economy or the sector is so severe that if they aren’t allowed to work together, that it would simply fall apart.
BDTV: Any examples of industries where that might be the case?
RL: It’s difficult to say at this stage because an exemption really is a last resort. The Competition Commission will very rarely allow it because they would rather see people compete, and market forces dictate that even if things are tough a competitor should leave the market and the market will sort itself out. However we are seeing in certain sectors where ITAC (International Trade Administration Commission) is stepping in for example in steel and so on to try and look after their industry and the local industry to keep it going, where we might see some exemptions. In the past we’ve seen in the airline sector where airlines are allowed to code share...and share the same plane, because if they both had a route then ultimately they wouldn’t continue on that route. So it can be justifiable in certain circumstances but it’s not an easy test to pass.
BDTV: Of course exemption is one thing but what about middle ground in terms of the competition authorities being swayed in terms of reducing penalties for example?
RL: That we haven’t seen yet? It’s something that in Europe we’ve seen in the economic downturn there was some consideration with the fact that a really severe economic downturn could be a reason to mitigate the penalty. In SA our authorities are...still don’t think that the penalties are high enough and are likely to...they’re not really going to be persuaded to say times were tough and we had no other choice. So that’s really…competitors should just not be doing it because they’re just going to get into trouble and it’s going to cost a lot of money.
BDTV: I suppose it is a fine line there because if you look at the banking industry where banks were told to bring down charges, they were told...and there was a certain amount of cooperation between the banks because there is a certain amount of sharing of charges, same in the cell phone industry where you have all these interconnect fees and things so, does that cross the line?
RL: It depends how it works and it also depends how strong the regulation is in that sector because sometimes that sector will be authorised to do that because of other legislation. Sometimes it really does have a benefit for consumers for competitors to work together and it can create efficiencies. What we’re saying though is, we need to be very careful, just because times are tough that’s not going to be a good enough justification to say that I fix prices with my competitor. So you’re going to have to have a very good justifiable reason and things like sharing infrastructure can really have good benefits for competition. So it might be a circumstance that you want to consider an exemption or something like that.
BDTV: Where distressed economic climate potentially sits is a breeding ground for this kind of activity, do you see the Competition Commission upping the ante when it comes to actually exercising or putting companies under more scrutiny?
RL: Absolutely this is a clear focus of the Competition Commission, has been for years, on cartel conduct. They really are rooting it out in all shapes and forms and what is clear is that there is no sector that is protected. In the last month we’ve seen suppliers of gas canisters being raided, people who do recruitment advertising and furniture removals for the second time being subjected to a dawn raid...which is something that the Competition Commission will normally only do if they don’t think that they’re going to get the evidence through their normal investigation routes and it’s quite an expensive operation. So they really are pushing huge amounts of resources into uncovering cartel conduct. And, I think the message is quite clear is, no matter how smaller industry, no matter how minor your infraction it’s not going to be left alone by the competition authorities.
BDTV: And I suppose that as you say that all sectors should be very...because nobody is safe...but it could be very damaging to business and particularly to staff morale to arrive at work during a dawn raid?
RL: It is. It’s a really traumatic experience, I must say, it’s something that companies really must take efforts to be prepared, because it takes all day, sometimes goes well into the night. People, private diaries, phones, those sorts of things can be taken by the authorities. They can take original documents and they take full copies of your server, so all those things that you think you delete, never ever disappear. And then you’re going to have the competition authority sifting through that. So you have to have measures in place to try and manage that process so that your employees are protected. Because the Commission will also use the opportunity to interrogate people and if you have your lawyers present at least you can prevent them from doing that because it can be a really damaging experience to morale and huge business interruption.
ROSALIND Lake, Director: Competition at Norton Rose Fulbright, speaks to BDTV about when it’s okay for competitors to collude, and also talks on a spate of dawn raids by the Competition Commission
BUSINESS DAY TV: The Competition Commission has wound up its investigation into bid rigging in the construction sector referring its last case to the Competition Tribunal for litigation. But it’s not only the construction sector that the Commission has its eye on. Other industries have also been suspected of creating cartels in order to protect themselves against flutters such as the weakening rand. Joining us in the News Leader studio to discuss this further is Rosalind Lake Competition Director at Norton Rose Fulbright.
Thanks so much Rosalind for joining us today...so is an economic crisis and in SA’s case, which comes with the weakening of the rand a justifiable enough reason to engage in cartel conduct?
ROSALIND LAKE: The straight answer’s no. It just isn’t justifiable, the way in which the Competition Commission goes after cartel conduct, it’s assumed that it damages the economy, it’s assumed that it damages consumers and pretty much you can’t justify it because times are tough. Where it could potentially come in is if there is a possibility that competitors could get an exemption for their conduct because the damage to the economy or the sector is so severe that if they aren’t allowed to work together, that it would simply fall apart.
BDTV: Any examples of industries where that might be the case?
RL: It’s difficult to say at this stage because an exemption really is a last resort. The Competition Commission will very rarely allow it because they would rather see people compete, and market forces dictate that even if things are tough a competitor should leave the market and the market will sort itself out. However we are seeing in certain sectors where ITAC (International Trade Administration Commission) is stepping in for example in steel and so on to try and look after their industry and the local industry to keep it going, where we might see some exemptions. In the past we’ve seen in the airline sector where airlines are allowed to code share...and share the same plane, because if they both had a route then ultimately they wouldn’t continue on that route. So it can be justifiable in certain circumstances but it’s not an easy test to pass.
BDTV: Of course exemption is one thing but what about middle ground in terms of the competition authorities being swayed in terms of reducing penalties for example?
RL: That we haven’t seen yet? It’s something that in Europe we’ve seen in the economic downturn there was some consideration with the fact that a really severe economic downturn could be a reason to mitigate the penalty. In SA our authorities are...still don’t think that the penalties are high enough and are likely to...they’re not really going to be persuaded to say times were tough and we had no other choice. So that’s really…competitors should just not be doing it because they’re just going to get into trouble and it’s going to cost a lot of money.
BDTV: I suppose it is a fine line there because if you look at the banking industry where banks were told to bring down charges, they were told...and there was a certain amount of cooperation between the banks because there is a certain amount of sharing of charges, same in the cell phone industry where you have all these interconnect fees and things so, does that cross the line?
RL: It depends how it works and it also depends how strong the regulation is in that sector because sometimes that sector will be authorised to do that because of other legislation. Sometimes it really does have a benefit for consumers for competitors to work together and it can create efficiencies. What we’re saying though is, we need to be very careful, just because times are tough that’s not going to be a good enough justification to say that I fix prices with my competitor. So you’re going to have to have a very good justifiable reason and things like sharing infrastructure can really have good benefits for competition. So it might be a circumstance that you want to consider an exemption or something like that.
BDTV: Where distressed economic climate potentially sits is a breeding ground for this kind of activity, do you see the Competition Commission upping the ante when it comes to actually exercising or putting companies under more scrutiny?
RL: Absolutely this is a clear focus of the Competition Commission, has been for years, on cartel conduct. They really are rooting it out in all shapes and forms and what is clear is that there is no sector that is protected. In the last month we’ve seen suppliers of gas canisters being raided, people who do recruitment advertising and furniture removals for the second time being subjected to a dawn raid...which is something that the Competition Commission will normally only do if they don’t think that they’re going to get the evidence through their normal investigation routes and it’s quite an expensive operation. So they really are pushing huge amounts of resources into uncovering cartel conduct. And, I think the message is quite clear is, no matter how smaller industry, no matter how minor your infraction it’s not going to be left alone by the competition authorities.
BDTV: And I suppose that as you say that all sectors should be very...because nobody is safe...but it could be very damaging to business and particularly to staff morale to arrive at work during a dawn raid?
RL: It is. It’s a really traumatic experience, I must say, it’s something that companies really must take efforts to be prepared, because it takes all day, sometimes goes well into the night. People, private diaries, phones, those sorts of things can be taken by the authorities. They can take original documents and they take full copies of your server, so all those things that you think you delete, never ever disappear. And then you’re going to have the competition authority sifting through that. So you have to have measures in place to try and manage that process so that your employees are protected. Because the Commission will also use the opportunity to interrogate people and if you have your lawyers present at least you can prevent them from doing that because it can be a really damaging experience to morale and huge business interruption.
Login OR Join up TO COMMENT