risk street sign

What is collusion?

Any interaction between competitors, even if completely above board, will raise suspicion from competition authorities. Authorities are concerned that competitor interaction may lead to collusion that will be to the detriment of consumers.

Collusion refers to anti-competitive agreements or understandings amongst competitors to coordinate their conduct – for example agreeing to all sell at the same price or not to sell to certain customers. Instead of competing, competitors form a so-called cartel and behave like a single powerful supplier and this is almost always to the detriment of the consumer.

In 2010 Pioneer Foods was fined R195 million for cartel conduct in the bread industry. This large administrative fine amounted to 9.5% of Sasko’s Western Cape turnover and 10% of its national/inland turnover for 2006.

This case highlighted a very important principle (sometimes referred to as “the Pioneer principle”), namely that an employee must always verbally object when a competitor suggests or invites him or her to engage in cartel conduct.

If the employee does not verbally object to such conduct, a company could be deemed guilty of having participated in cartel conduct, and the person who did not verbally object to the inappropriate discussion, will be deemed to “have knowingly consented” to the cartel conduct and may be criminally liable in terms of the Competition Amendment Act.

To ensure that your interaction with competitors does not raise competition law concerns, always follow the rules below:

Rule 1: Avoid so-called off the record discussions with competitors – anything you discuss with a competitor in any forum can be used as evidence of collusion

Rule 2: Avoid discussing sensitive business information

Rule 3: Keep competitor interaction on the record:

  • schedule meetings and prepare an agenda
  • seek legal advice if potentially sensitive competitive issues may be discussed
  • limit the discussion to agenda items
  • keep detailed and accurate minutes
  • review the minutes for accuracy and file them
  • In the case of informal interaction – apply Rule 2

Rule 4: If any improper or questionable topic is raised in any forum:

  • object
  • ensure that your objection is noted (if in a formal forum)
  • leave the venue if the discussion persists
  • ensure that your departure is noted (if in a formal forum)

Rule 5: Always report any interaction with a competitor to your legal executive!

These rules for competitor interaction apply always, no matter the forum or how unofficial or social the gathering is. Do not be misguided into thinking that colluding is acceptable if done on the golf course!