A recent settlement agreement between the Competition Commission of South Africa and Japanese car carrier Kawasaki Kisen Kaisha (K-Line) following its admission of cartel conduct has raised questions about what constitutes collusive behaviour and how this can be proved.
According to a competition law expert, the Commission is not very clear about exactly when a firm is committing an offence as it regards both indirect and direct price fixing as contravening competition law, along with the division of markets and tender collusion.
“While direct price fixing is fairly obvious to understand as competitors have purposefully and knowingly come together to decide on the rates of a product or a service, it’s not really clear what is meant by indirect price fixing,” she told FTW. “However, the Competition Commission regards any communication or friendly relationships between competitors as suspicious.” A bunch of guys in decision-making positions getting together at a bar or a restaurant chatting about prices, whether informally or formally and whether an agreement is agreed upon or not, could be seen as collusion.”
The attorney noted that shipping lines and their executives needed to be extremely careful in their relations with their competitors and if they found themselves in a position where a conversation was possibly edging into collusive territory, they needed to expressly object to anything being said or agreed upon.
“Decision-makers need to make sure that they are overtly distancing themselves from such a narrative amongst their competitors as the Competition Commission regards silence as consent,” she said. She also noted that while the Commission largely relied on whistle-blowers to uncover cartel conduct, it had been extremely successful in cartel prosecution due to the leniency clause.
“However, leniency only applies to the first person to come forward with information about collusion, there is no guarantee that that person will then be granted leniency, and they will only receive leniency if they have come forward with information that the Commission doesn’t already have,” she added. “Another risk factor to approaching the Commission for leniency is the fact that cartel conduct has been labelled a criminal offence. This means the risk of being sued in a personal capacity still exists and if the offender is found guilty he could do prison time.”
K-Line has agreed to pay the Competition Commission a penalty of over R98.9 million and admitted to eight of the 15 charges laid by the Commission. In 2012, the Commission initiated an investigation into K-line, MOL, NYK and Wallenius Wilhelmsen Logistics (WWL) and found that from at least 2002 to 2013 these shipping lines had colluded on a tender issued by Toyota South Africa Motors to transport vehicles from South Africa to Europe, North Africa and the Caribbean Islands.
The investigation also found that the shipping lines had agreed on the number of vessels that were to operate on the South Africa to Europe routes, along with frequencies and freight rates of shipments. In 2015, NYK and WWL admitted to colluding on the tender and settled with the Commission for a penalty of R103.9 million and R95.6 million respectively.
As the whistle-blower of this cartel conduct, MOL escaped without a fine. The settlement agreement will now be sent through to the Competition Tribunal for approval but it still remains unclear what contraventions of the Competition Act the Japanese shipping line has admitted to.
