Germany won’t join jurisdictions with criminal competition penalties
The head of the federal cartel office, the Bundeskartellamt’s Andreas Mundt, reportedly dismissed the idea of introducing criminal sanctions for competition-law offences. Speaking at the GFR Society for Law and Policy’s event, he called imprisonment a “severe weapon” that had no place in the “rarely  crystal clear matter” of cartel violations, where “the lines are often blurred.”
Among the countries that do have a criminal antitrust regime (usually only for “hard-core” offences, such as price-fixing or bid-rigging and market allocation among horizontal competitors), the most well-known is of course the United States, whose Sherman Act made cartel violations a criminal felony as far back as 1890. Among the more recent acolytes of criminal penalties are newer competition-law jurisdictions, such as South Africa and Kenya.
International precedent-setting institutions and enforcers’ recommendations tend towards identifying the positive effect of criminal antitrust penalties:
OECD, 3rd Hard-Core Cartel Report (2005):
- Recommends that governments consider the introduction and imposition of criminal antitrust sanctions against individuals to enhance deterrence and incentives to cooperate through leniency programmes.
U.S. Department of Justice, Tom Barnett (2008):
- “Jail time creates the most effective, necessary deterrent.”
- “[N]othing in our enforcement arsenal has as great a deterrent as the threat of substantial jail time in a United States prison, either as a result of a criminal trial or a guilty plea.”
Cornerstones of a successful criminal antitrust regime commonly include the following:
- Crystal-clear demarcation of criminal vs. civil conduct
- Highly effective leniency policy also applies to individuals
- Standard of proof must be met beyond a reasonable doubt
- No blanket liability for negligent directors – only actors liable
- Plea bargaining to be used as an effective tool to reduce sentence
- Clear pronouncements by enforcement agency to help counsel predict outcomes
Nortons Inc., together with the South African Chamber of Commerce and Industry (SACCI) and the Mandela Institute at Wits School of Law, have gathered together a panel of experts to discuss the judgment, handed down by Judge Wallis of the Supreme Court of Appeal last year, and the effects it has on South Africa’s jurisprudence.
The seminar is entitled: “A new class – the problems and promises of class action litigation in South African law” and runs from 8:00 am – 4:30 pm on Wednesday, 12 June 2013, in Johannesburg at the Wits School of Law (map).
For more information, a full schedule, and to sign up, please visit the event page here.
On 29 November 2012, Judge Wallis of the Supreme Court of Appeal (the “SCA”) handed down judgment in The Trustees of The Children’s Resource Centre / Pioneer Foods (Pty) Limited & Others. The case related to the certification of a class in respect of a number of class actions against three bread producers arising from an investigation by the Competition Commission into price fixing and market allocation in respect of various bread products (the “Bread class action litigation”).
The appeals were brought by a bread distributor in the Western Cape and by a number of organisations in relation to a so-called “consumer” class action for damages after their applications were dismissed by the Western Cape High Court (the “WCHC”).
In its decision the SCA held that class actions should be recognised, not only in respect of constitutional claims, but also in any other case where access to justice in terms of Section 34 of the Constitution required that it would be the most appropriate means of litigating the claims of the members of the class. The SCA then laid down the requirements for such an action, commencing with the need for certification by the court at the outset, before even the issuing of summons. For this purpose, the SCA set out the following criteria before a court could certify a class action:
- there must be an objectively identifiable class;
- a cause of action must exist which raises a triable issue;
- there must be common issues of law and fact that can appropriately be dealt with in the interests of all members of the class;
- there must be appropriate procedures for distributing damages to the members of the class; and
- the representatives must be suitable to conduct the litigation on behalf of the class.
The SCA found that the appellants’ case had changed during the course of the litigation; and it held that their definition of the proposed class was over-broad and the relief they sought inappropriate. However, Wallis JA held that their claim was potentially plausible and, as this was the first time that the SCA had laid down the requirements for bringing a class action, it was appropriate to afford the appellants an opportunity to remedy the flaws in their papers in compliance with these new requirements. Accordingly, the SCA remitted the matter back to the WCHC.