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South Africa Targets Sasol and ArcelorMittal in Cartel Push

Source: Bloomberg Date: 01 October 2010

Bloomberg reported South Africa is stepping up efforts to fight an unexpected legacy of apartheid cartels in industries from supermarkets to steel that push up prices, deter investment and damp competition.

The Competition Amendment Act, signed into law by President Mr Jacob Zuma in August 2009, will put South Africa among a minority of countries willing to put executives in jail for knowingly committing antitrust violations. Only one third of the members of the Organization for Economic Cooperation and Development impose such penalties. The Competition Commission got Sasol Limited to sell almost all its fertilizer plants in July 2010 to boost competition. The agreement was the first in South Africa to require a company to divest units rather than pay a fine for breaking antitrust rules.

Mr Shan Ramburuth CEO of Competition Commission said that “Any potential investor is more likely to invest in a country where they are guaranteed fairness of opportunity in the marketplace. They are comforted by the fact that there’ll be strong competition regulation, ensuring that markets are not contrived in any way and that transgressors will be dealt with.” The initiative may help spur investment in South Africa and curb prices for inputs, such as steel, for manufacturing exports. The government says exports must be boosted to create jobs for the one in four South Africans without work. Mr Jean Francois Mercier, an economist at Citigroup Inc, said that “If you open up the market, on balance you’ll have more competition, better allocation of resources and lower prices. Greater competition is positive for the economy as a whole.” Mr Antonio Capobianco, a senior expert in competition law enforcement at the Paris based OECD, said that only 11 countries, or a third of OECD members, have laws that can imprison company officials in antitrust cases.

South Africa joins Brazil and Indonesia as non OECD developing countries monitored by the group that also make violations a criminal offense. The South African penalties, which include jail terms of as long as 10 years, haven’t yet come into effect. Mr Keith Hylton, a law professor at Boston University, said that “Under US law, a company can be fined USD 100 million, or twice the gross gain of the violation or twice the gross loss to the victim. If the defendant is a big company, the fine under South African law of 10% of annual sales, which is similar to the European Union’s statute, could be potentially a lot higher than the US.”The commission initiated 31 investigations in the year through March 2010, involving companies such as Tiger Brands Limited, South Africa’s biggest food producer, and Shoprite Holdings Limited, Africa’s biggest grocer. That is up from 23 in the previous year and triple the number in the year before. ArcelorMittal South Africa Limited, which meets 70% of the country’s steel requirements, is being probed in four antitrust cases.

Bloomberg reported South Africa is stepping up efforts to fight an unexpected legacy of apartheid cartels in industries from supermarkets to steel that push up prices, deter investment and damp competition.

The Competition Amendment Act, signed into law by President Mr Jacob Zuma in August 2009, will put South Africa among a minority of countries willing to put executives in jail for knowingly committing antitrust violations. Only one third of the members of the Organization for Economic Cooperation and Development impose such penalties. The Competition Commission got Sasol Limited to sell almost all its fertilizer plants in July 2010 to boost competition. The agreement was the first in South Africa to require a company to divest units rather than pay a fine for breaking antitrust rules.

Mr Shan Ramburuth CEO of Competition Commission said that “Any potential investor is more likely to invest in a country where they are guaranteed fairness of opportunity in the marketplace. They are comforted by the fact that there’ll be strong competition regulation, ensuring that markets are not contrived in any way and that transgressors will be dealt with.” The initiative may help spur investment in South Africa and curb prices for inputs, such as steel, for manufacturing exports. The government says exports must be boosted to create jobs for the one in four South Africans without work. Mr Jean Francois Mercier, an economist at Citigroup Inc, said that “If you open up the market, on balance you’ll have more competition, better allocation of resources and lower prices. Greater competition is positive for the economy as a whole.” Mr Antonio Capobianco, a senior expert in competition law enforcement at the Paris based OECD, said that only 11 countries, or a third of OECD members, have laws that can imprison company officials in antitrust cases.

South Africa joins Brazil and Indonesia as non OECD developing countries monitored by the group that also make violations a criminal offense. The South African penalties, which include jail terms of as long as 10 years, haven’t yet come into effect. Mr Keith Hylton, a law professor at Boston University, said that “Under US law, a company can be fined USD 100 million, or twice the gross gain of the violation or twice the gross loss to the victim. If the defendant is a big company, the fine under South African law of 10% of annual sales, which is similar to the European Union’s statute, could be potentially a lot higher than the US.”The commission initiated 31 investigations in the year through March 2010, involving companies such as Tiger Brands Limited, South Africa’s biggest food producer, and Shoprite Holdings Limited, Africa’s biggest grocer. That is up from 23 in the previous year and triple the number in the year before. ArcelorMittal South Africa Limited, which meets 70% of the country’s steel requirements, is being probed in four antitrust cases.

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