Lack of compliance and corporate governance – provoking the revolving prison door – Part 2By Ahmore Burger-Smidt, director, and Kriska-Leila Goolabjith, candidate attorney.

Following on from last month’s discussion on the link between competition law and the Prevention and Combatting of Corrupt Activities Act, 2004, we now turn to the second part of our series; the “how” of compliance.

LegaL Brief | june 2013 Taking into consideration the personal

consequences a company director might face,

due to a lack of competition law compliance

within an organisation, we attempt to

answer in part the following two questions

that directors of companies might be asking

themselves - “Am I sure that my company

complies with the Competition Act?” and

“How do I ensure that I will not be held

criminally liable for my company’s actions?”

A further impetus towards the need for

competition law compliance is provided by the

Companies Act, 2008, which provides for class

action if management causes or acquiesces

to anti-competitive behaviour. Additional

endorsement of this sanction is contained in

King III.

The cost of ignorance

The reality is that ignorance is not a defence.

This begs the question: what should a

company do to mitigate and manage the

risk of non-compliance? Competition law

compliance is essential for all companies.

even though corporate governance, board

responsibility and risk management processes

may be in place, the directors or managers

need to be empowered to consider the risk areas within the company and clearly identify and know whether a contravention of competition law, if any, is taking place within the company.

The Competition Commission (“Commission”) has stepped up its focus on the investigation of prohibited practices. Its corporate leniency policy has assisted in uncovering significant cartel activity in various sectors of the South African economy.

Long gone are the days that the Commission focused on merger and acquisition evaluation only. Over the past number of years, it has achieved great success in living out the objectives of the Competition Act, 1998.

entrenching competition law compliance

What do we know? The desire to be compliant with regulatory requirements calls for a comprehensive system of controls in order to ensure that risks are diminished and company objectives attained. Competition law compliance can never stand on its own, but needs to form part of the bigger company strategy and risk management process. A

system of internal control, in one form or another, should be present in all successful enterprises.

Competition law compliance is essential and should not be merely a once-off, box-ticking exercise. It needs to be embedded in the organisation. One way of doing this is through training. The various levels of staff need to be trained to identify practices and events which may cause a breach of the Competition Act. Once employees achieve this, they can adjust their behaviour and report risks to management. In this way, individual directors and management within the organisation will not be exposed to personal consequences.

Having a self-regulatory environment within a company will mitigate against the other additional serious implications such as management distraction, cost of litigation, impact on share price, reputation damage, and civil claims that can be lodged post-competition commission investigation. When management is not distracted by these matters, it will be able to run an efficient and profitable organisation and focus on the core reason for existence - running and managing a financially-health company.

The significant role of training

Companies can create an environment that regulates competition law risks from within through online training or e-learning. Competition law online training that is both user-friendly and cost-effective enables companies to reach all employees at once. Companies are offered the opportunity to educate and empower all employees and to manage competition law non-compliance risks effectively. This allows for companies to implement proper risk management systems and puts them in a position to hold employees responsible for any actions that might negatively impact the company and its reputation.

“e-Learning” is more than just an abbreviation for “electronic learning”. It aspires to be an efficient, exciting, energetic, engaging and extended learning. Whilst online training is an extremely beneficial and innovative method of conveying information, there remains a need to incorporate face-to-face workshop training. We therefore propose an integrated method of training that primarily uses online training and incorporates workshop training in order to optimise training courses.

The main benefit of online training is that the competition law training material can be accessed 24/7 from any place that has an internet connection; provided you have registered for the online training course.

Participants wishing to access the training can take part at a time and for the duration that suits their individual schedules, until they have completed the training. Delivery of the information over the internet means that online training is immediate and that the training material can be revisited numerous times until the participant understands it. In addition, there is a reduction of training time because training individuals is quicker than group training.

Large numbers of people can be trained on various aspects of competition law at an affordable cost. This increases the participant-range of various competition law training courses. The numerous facets of competition law can be framed in different online training courses thereby catering to the specific needs of the firm in a cost-effective manner.

Furthermore, each individual studying the information will access standard and consistent information on competition law as provided by the team of competition law experts. In addition, content can be updated quickly and easily and can therefore be relied upon to accurately reflect the current law and the practice thereof.

With online training, people can learn at their own pace and maintain control over their individual learning. There are many people who are uncomfortable in a workshop because it too closely resembles a ‘traditional classroom’ situation. Online training provides a way of training that is less intimidating to people who are shy and not confident in a face-to-face group setting. People have the comfort of addressing questions to the author of the specific online training course, without the pressure or stress of feeling awkward or embarrassed. Online training provides a certain level of anonymity because it does not take into account a person’s gender, age, race and qualifications – it instead seeks to place everyone on an equal footing. e-Learning also eliminates ‘classroom’ distractions (as is often the case in workshops) so that there are no hindrances to time or concentration levels. This enhances a person’s progress and understanding of the content as presented in the various competition law online training courses.

Lastly, online training is an effective way for businesses and organisations to reduce their carbon footprint. Through the use of online services, the training material is presented electronically and therefore saves paper and ultimately, trees.

If directors and management want to mitigate the risk of being held personally liable for the company transgressing competition law and

ensure that the company complies with the Competition Act, then training - specifically online training - is of the utmost importance.

Disciplinary considerations

Furthermore, if you intend taking disciplinary action against any employee contravening competition law, you first need to consider whether the company has met its own responsibilities. You need to consider the impact of the South African employment legislation when holding an employee responsible for acting in a way that negatively impacts the Company. The labour courts have endorsed the principle of corrective or progressive discipline. The foundation of this principle is to approach workplace discipline as a means for employees to know and understand exactly what standards their employer requires of them.

Accordingly, any disciplinary conduct against employees must be justified against certain considerations. In the first instance, whether or not the employee contravened a rule or standard regulating conduct, or of relevance to, the workplace; and if such a rule or standard was contravened. Rules must be judged in terms of whether or not the rule was valid or reasonable; whether the employee was aware, or could reasonably be expected to have been aware of the rule or standard; and whether the rule or standard has been consistently applied by the employer.

Conclusion

It is therefore imperative for all employers to adopt disciplinary rules that establish the standard of conduct in terms of Competition Law required of their employees. These rules must be easily accessible to employees and be concise and easy to understand. A robust competition law online training tool provides an answer to all these requirements. Through the Werksmans online training tool, employees are educated in the detail of competition law in plain language and though relevant case studies. The company directors and managers are in a position to manage the risk of non-compliance with the Competition Act through education and holding employees accountable.

Online training is a vital competition law compliance tool that should not be ignored. Only once employees understand what behaviour is wrong, can they be expected to act in accordance with and adherence to competition law. Only then can you, as director and manager, start being in control of compliance with competition law in your company.

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about werksmans attorneys

Kriska-Leila goolabjith

Title: Candidate attorney office: JohannesburgDirect line: +27 (0)11 535 8235 Fax: +27 (0)11 535 8635 Switchboard: +27 (0)11 535 8000email: klgoolabjith@werksmans.com

Kriska was appointed at Werksmans Attorneys as a candidate attorney in 2012 and joined the Competition Law practice area at the beginning of 2013. She holds a bA Honours LLb degree (cum laude) from uKZn Howard College.

ahmore Burger-Smidt

Title: Director office: JohannesburgDirect line: +27 (0)11 535 8462 Fax: +27 (0)11 535 8762 Switchboard: +27 (0)11 535 8000email: aburgersmidt@werksmans.com

Ahmore is a director at Werksmans Advisory Services and has extensively advised clients in relation to competition law-related matters; including clients in numerous African countries. She advises on all aspects of competition law including applications for leniency and for exemption from the Competition Act. She has significant expertise in the competition-related aspects of mergers and takeovers and in dealing with complaints of alleged anti-competitive conduct. She also undertakes compliance audits and programmes and is the principle driver of the Werksmans competition law risk assessment and e-Learning tools. Prior to joining private practice, Ahmore was Deputy Commissioner and headed the enforcement and exemptions Division of the South African Competition Commission.

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