Compliance with Competition Act

RULES AND GUIDELINES FOR COMPLIANCE WITH
THE COMPETITION ACT, 89 OF 1998, as amended
(“Competition Act”)

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INTRODUCTION

PURCO SA is committed to comply with all applicable legislation which include strict compliance with the provisions of the Competition Act.

It is acknowledged that members of PURCO SA may qualify as parties in a horizontal relationship (being a relationship between competitors in a specific market) as defined in the Competition Act.

In order to ensure compliance with the provisions of the Competition Act, all members of PURCO SA (including their directors, employees and representatives) are required to adhere to the rules and guidelines set out in this document.

PROVISIONS OF THE COMPETITION ACT RELATING TO
PARTIES IN A HORIZONTAL RELATIONSHIP

The Competition Act imposes constraints on the conduct of parties in a horizontal relationship and, more specifically, that any agreement between, or a concerted practice by, competitors is prohibited if it involves any of the following practices:

  1. Directly or indirectly fixing a purchase or selling price or any other trading condition;
  2. Dividing markets by allocating customers, suppliers or territories; or
  3. Collusive tendering.
  4. In essence, any contact between competitors that result in agreements or concerted conduct which interfere with competition in a market is strictly prohibited.

Firms engaged in cartel behaviour as set out above, face administrative penalties up to a maximum of 10% of the firm’s annual turnover in South Africa including its exports.

Directors and managers who caused the firm to engage in cartel behaviour (or knowingly acquiesced in the firm engaging in cartel behaviour) will commit a criminal offence (subject to a fine of up to R500 000 and/or imprisonment of up to 10 years).

Any meetings and discussions between competitors, even if meant to pursue legitimate association objectives, provide an opportunity for such competitors to exchange views on the market which could easily spill over into a contravention of the Competition Act.  It should further be noted that, even casual discussions on prices, quantities and future business strategies can lead to agreements or informal understandings which may constitute a violation of competition legislation.

In view of the above, strict compliance with the rules as set out hereunder MUST at all times be ensured.
 

RULES RELATING TO INFORMATION SHARING
AT PURCO SA MEETINGS

The following information should not be shared between members which are conducting business in horizontal relationship:

  1. Commercially sensitive business information such as costs and cost calculation methods; 
  2. Output levels or sales volumes;
  3. A firm’s own or other market participants’ anticipated or planned volumes, capacity or throughput;
  4. Selling prices and pricing methods;
  5. Any trading conditions (including discount and rebate structures, credit terms etc.);
  6. Future pricing plans or strategies;
  7. Profit margins or what may constitutes a fair profit margins;
  8. Any company specific problems;
  9. The allocation of market share, customers, products or geographic regions;
  10. Advertising policies that reinforce uniformity of prices and products;
  11. Bids on projects or any procedures for responding to bid invitations.

The following information can be discussed during PURCO SA meetings:

  1. General statistical information on the overall industry;
  2. Historical information (older than 3 months);
  3. Aggregated information on the industry as a whole;
  4. Publicly available information (or information contained in independent published sources)

 

PROCEDURES TO BE FOLLOWED
IN RELATION TO ALL PURCO SA MEETINGS:

Prior to any meeting:

  1. Ensure that an agenda is circulated to each member at least seven working days before the date of the meeting in order to enable all members an opportunity to identify topics which may fall foul of competition legislation.
  2. Check that the agenda does not include topics relating to any commercially sensitive information of each party not related to the purpose of discussion.
  3. Each member should obtain legal advice if sensitive competition issues are to be discussed.

During each meeting:

  1. Limit discussions at the meeting to the items listed on the agenda.  The agenda may be amended in order to include additional topics to be discussed subject thereto that such topics and discussion thereof adhere to the rules set out in this document.
  2. Ensure that detailed and accurate minutes are taken.
  3. If any improper or questionable topic is raised:
    •       Object against such topic;
    •       Ensure that your objection is noted;
    •       Leave the meeting if such discussions persist; and
    •       Ensure that your departure is noted.

After the meeting

  1. Due to the sensitivity of the discussions between the parties, they should not participate in any unofficial discussions or informal exchanges of information with members who are competitors.
  2. Do not discuss any of the commercial sensitive matters during any social gathering incidental to the meetings as the guidelines provided above applies equally to any and all interactions between competitors.
  3. Minutes of each meeting must be circulated to all attendees including copies of all presentations as well as copies of all other documents presented at the meeting.
  4. Review the minutes to ensure that it accurately reflect the discussions that have occurred.
  5. File the minutes for record purposes.

Responsibilities of the chairperson during all meetings

  1. The chairperson must ensure that he/she is fully aware of prevailing competition legislation in order to enable him/her to identify issues which may be problematic from a competition perspective.
  2. Prior to any meeting, the chairperson is obliged to review the agenda in order to ensure that there are no items listed on the agenda which may give rise to potential competition issues.
  3. During the meeting, the chairperson must ensure that discussions are limited to the topics listed on the agenda.
  4. The chairperson must ensure that competitors do not discuss commercially sensitive information.
  5. The chairperson must, during his/her introduction at every meeting, emphasise and address the following:
    •       All discussions that are to take place during the meeting shall be in strict compliance with the provisions of the Competition Act;
    •       Obtain confirmation from each member present that they are fully aware of the provisions of the Competition Act;
    •       List all the items which he/she removed from the agenda due to concerns with competition legislation compliance;
    •       The chairperson must also emphasize the fact that each member shall be entitled to excuse herself/himself at any moment during the meeting and that any such excusal shall be recorded in the minutes;
  6. The chairperson is entitled to make whatever decision he/she deems fit to ensure compliance with competition legislation.