Why companies can no longer afford to
continue ignoring the important role of
In-House Legal Counsels
This article is intended to highlight the important role of In-House Legal Counsels in ensuring compliance with the requirements contained in the South African Competition Act of 19981 ("the Act").
Why should compliance be a priority for companies?
The SA competition law regime has undoubtedly changed the way business should be done. It poses many challenges for business, and the snail's pace with which business is responding to this challenges is not helping the situation. The sooner companies realise that it is not a question of whether one wants to comply or not, the better. No company is immune to the scrutiny of the competition authorities.
The increasing risks of non-compliance, which may include fines of up to 10% of turnover, or actions for damages by third parties, do not only have financial implications for companies, but may damage a company's image and reputation.
Compliance failure has led to crippling actions and damaged reputations of many companies - such as Microsoft2 - thus no responsible management can afford to ignore this. Though companies are, generally speaking, aware of the inherent risks of non-compliance, competition laws are based on very broad legal concepts that require extensive interpretation. Thus, a common sense approach to this issue is not sufficient.3
Effective mechanisms to ensure compliance must be developed. This involves reviewing business processes, cooperation agreements, contracts with suppliers, etc, and the development of effective compliance programmes. Companies must demonstrate willingness to comply with the Act through action.
How can your In-House Legal Counsel assist your company?
Ideally, in-house advisors should be responsible for advising on compliance matters and be able to make companies aware of actions that may expose them to potential liability.
It is often a difficult task for management to focus on maximising profit and return on investments while ensuring that processes are compliant with regulatory requirements. The employment of In-House Legal Counsels will not only reduce the risks of non-compliance, but will also ease the burden of compliance from management and ensure that compliance receives the attention it deserves. A Counsel is best placed to understand the company's operations, processes and business strategies. Management may discuss sensitive information such as prices with competitors without realising that this may constitute price fixing. The Counsels must monitor such discussions and any agreements drafted for competition issues that may arise. Overlooking these issues may cost the company dearly.
Does your company comply with merger provisions?
An example could be all those outsourcing, sale and lease transactions that need to be finalised urgently. Remember, all mergers that meet the threshold must be notified to the Commission prior to implementation. This guide should assist you in preparing your notification to the Commission.
Is your company's conduct risk-free?
The following outlines some of the everyday issues in-house Counsels should be concerned about. If these questions are addressed, companies can manage to be good citizens and continue to make the desired profits.9
Clearly all companies, big and small, regulated and unregulated, profit making and non-profit making are in some way or another vulnerable to competition law violations. It is, therefore, in their best interests to develop mechanisms to avoid and prevent these violations. As the saying goes; "prevention is better than cure".
It's your choice, comply or face the consequences!
1 Competition Act 89 of 1998, as amended, which replaced the Maintenance and Promotion of Competition Act of 1979
2 Article on Lessons Learnt From Microsoft, Antitrust and Unfair Competition Bulletin, February 2000
3 See comments by Eugene V. Lipkowitz, former senior trial attorney at the Antitrust Division of the United States Department of Justice; Article on Gene Lays Down the Law, Comments from a Former Regulator, Antitrust and Unfair Competition Bulletin, February 2000
4 Notice 254 of 2001
5 See Tribunal decision on market definition in Bidvest Group Limited and Paragon Business Communications Limited (Case 56/LM/Oct01)
7 Form CC4 (1), CC4 (2)
8 20 days for intermediate merger and 40 days to recommend a large merger to the Tribunal
9 Common Sense Guidelines by John H. Shenefield and Irwin M. Stelzer, The Antitrust Laws, A. Primer,
3rd Edition, AEI Books, 1998 on http://www.antitrust.org/aei/Guidelines.htm
With our compliments.
Nationwide Poles & Jim Foot
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Disclaimer: This site does not profess to offer legal assistance or interpretation. Itís content reflects the view and experience gained by of the author during a hearing at the Competitions Tribunal of South Africa. It may help you to figure out what happens & why.