Leniency and criminal prosecution - useful guidance from the UK

Leana Engelbrecht

In particular, there is rampant speculation as to whether the individuals involved in the collusive conduct may be prosecuted criminally under the common law as the provisions of the Competition Amendment Act, No 1 of 2009 (Amendment Act) that introduce criminal sanctions for cartel conduct are not yet in force. This is a particularly difficult question to answer in light of the nature of the fast-track settlement procedure offered by the commission in this matter, but also in other circumstances where leniency is obtained in terms of the commission's Corporate Leniency Policy (CLP) as a result of a successful leniency applicant's cooperation with the commission in exchange for not having an administrative penalty imposed against the firm for its involvement in collusive conduct.

This question is not unique to South Africa and most countries with competition law regimes that have policies to induce cartel members to come forward, similar to the CLP, have had to carefully consider this. This is especially true in those jurisdictions that have specific criminal sanctions for cartel conduct, such as the United Kingdom.

In July, the United Kingdom's Office of Fair Trading (OFT) introduced its policy dealing with, among other important issues surrounding the leniency process, criminal prosecution by individuals for cartel conduct where leniency was granted - "Applications for leniency and no-action in cartel cases, OFT's detailed guidance on the principles and process, OFT1495" (guidelines). These guidelines inform the OFT's approach to leniency applications and so-called 'no-action letters' in terms of which immunity from criminal prosecution is granted to individuals that took part in collusive conduct, which includes comfort letters that criminal prosecution will not be undertaken.

In terms of UK law, where leniency is granted to a firm, the current or former employees, directors and other officers of that firm may be awarded blanket immunity from criminal prosecution wherever they are in the world, irrespective of their role in the cartel activity. The approach taken by the OFT in this regard is informative:

- An individual hoping to obtain a no-action letter will be required to comply with the conditions for leniency (as required of the relevant firm) being:

• admitting that he participated in the cartel conduct;
  
• providing all relevant information to the OFT;
  
• complete and honest cooperation with the OFT;
  
• refraining from engaging in any further cartel conduct; and
  
• that individual must not, on behalf of the firm he was acting for, have been the ring leader of the cartel.

Leniency applicants may apply for leniency on a no-name basis should it be concerned of the likelihood of criminal investigation. Once the OFT is able to give an assurance that criminal enforcement will not be contemplated in the circumstances, the identity of the firm will have to be disclosed.

Where a no-action letter is issued in respect of an individual, such an individual will be interviewed by the OFT and the information provided in such an interview cannot be used against him in criminal proceedings, unless, the individual knowingly provided false or misleading information and in some instances where a no-letter issue is revoked due to non-cooperation.

The no-action or comfort letters will only be issued closer to the conclusion of the criminal investigation and, most probably, after at least one interview with the relevant individual. Interim comfort letters may be issued provided that the individual continues to give his full cooperation.

Although there can be no better deterrent to individuals engaging in cartel conduct than the prospect of criminal liability, this can impact negatively on the ability of the commission (and even firms themselves) to investigate and prosecute cartels, which invariably relies on whistle-blowers who may be less inclined to come forward if they are unable to manage the risk of criminal prosecution.

An integral function of the competition authorities is to prosecute collusive and anti-competitive conduct - it is, accordingly, important to manage the tension between, on the one hand, incentivising firms and individuals to disclose collusive conduct, to the benefit of the economy as a whole, through an effective and efficient leniency regime and, on the other hand, dis-incentivising firms and individuals from disclosing collusive conduct due to the risk of criminal prosecution.

The possibility of criminal prosecution outside of the competition law enforcement regime creates uncertainty and as a matter of policy it is probably far better to have the regulation of this drastic deterrent measure fall within the ambit of the competition authorities under the Amendment Act rather than on an ad hoc basis under the common law.