Little pig, little pig, let me in…

The Competition Commission (Commission) is, in terms of s48 of the Competition Act, No 89 of 1998, authorized to enter and search, with or without a warrant, premises and seize documents and electronic data, including laptops and servers, if it has reasonable grounds to suspect that a business has been engaging in anti-competitive practices. Consequently, all businesses, irrespective of size are not entitled to respond “no, not by the hair on my chinny chin chin” to unannounced inspections by the Commission.

13 Apr 2016 2 min read Competition Alert Article

During the month of March 2016, the Commission conducted a search and seizure operation at the Gauteng premises of PG Glass, Glassfit, Shatterprufe and Digicall as part of its investigation into alleged price fixing and market division in the provision of automotive glass fitment and repair services. The reason given by the Commission for the raids was that it had grounds to believe that information relevant to its collusion investigation existed on the premises of the firms.

A week later, the Commission’s officials swooped into the premises of PG Bison and Sonae Novoboard as part of its investigation into alleged collusion between these firms as the only two manufacturers of medium density fibreboard in South Africa.

These recent dawn raids by the Commission are again a reminder to business to ensure that one’s house is in order so to speak as the way in which a raid is handled can have very significant consequences, both for a business’ reputation and also for its market value. Understanding what will happen, and knowing what your obligations, and indeed your rights are will help ensure that the business cooperates fully, but while minimising disruption and protecting your legal position.

Suggested positive actions to be taken include:

  1. implementing a response strategy before being confronted by a dawn raid;
  2. ensuring appropriate training for all employees so that they know and understand what they should do in the event of a dawn raid;
  3. checking the warrants or authorisation documents (should they exist) produced by the Commission inspectors and raising any concerns with in-house or external lawyers;
  4. immediately contacting in-house and/or external lawyers and requesting the inspectors wait until lawyers arrive before commencing the inspection (but not insisting on this);
  5. trying to delay answering any questions (other than straightforward administrative queries) until a lawyer is present; and
  6. seeking external legal advice if at any stage you are uncertain as to your rights and responsibilities.

Some suggested actions to avoid include:

  1. obstructing the investigation by refusing to co-operate;
  2. insisting that the inspectors wait for the arrival of external lawyers before starting the investigation if they refuse to do so when asked;
  3. trying to destroy, delete or hide any paper or electronic documents or files; and
  4. telling anyone outside the business that the inspection is taking place or discussing any aspect of it.

The fact that the Commission has undertaken six rounds of dawn raids over the past 12 months, together with the Commission’s performance targets cited in the Commission’s Strategic Plan for 2015 to 2020 is evidence that we can only expect a greater number of raids by the Commission in the future. The key question which remains is how prepared will you be, when the big bad wolf comes knocking on your door?

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