A cartel is a formal or informal group of otherwise independent competing businesses whose concerted goal is to lessen or prevent competition among its participants. Members of a cartel enter into an agreement or arrangement (horizontal agreement/arrangement) to engage in one or more anti-competitive activities to:
- Fix prices
- Allocate markets or customers
- Limit production or supply
- Rig bids
Section 9(1) of the CCP Act prohibits cartels, i.e. horizontal agreements, and provides that:
“A horizontal agreement between enterprises is prohibited per se, and void, if the agreement –
- Fixes, directly or indirectly, a purchase or selling price or any other trading conditions;
- Divides markets by allocating customers, suppliers or territories
specific types of goods or services;
- Involves bid rigging, unless the person requesting the bid is informed of the terms of the agreement prior to the making of the bid;
- Sets production quotas; or
- Provides for collective refusal to deal in, or supply, goods or services.
Why prohibit Cartels?
Cartels distort, prevent or lessen competition resulting in higher prices and less choice for consumers.
What is the punishment for participating in a Cartel?
The penalty for participating in a cartel has two limbs:
- Personal Liability
The Act provides for personal liability under section 9(2) which provides that “A person who contravenes subsection (1) commits an offence and is liable, upon conviction, to a fine not exceeding five hundred thousand penalty units (ZM
K90m) or to imprisonment for a period not exceeding five years, or to both.”
An enterprise that contravenes subsection (1) is liable to pay the Commission a fine not exceeding 10% of annual turnover as per section 9(3).
It is the Commission’s policy, as section 79 provides, to encourage enterprises to come forward to the Commission with information that may help to uncover prohibited agreements such as cartels.
Under its leniency program the Commission offers immunity from fines, or the guarantee of a reduction in fines, to persons/enterprises which are party to such agreements that volunteer information that may be relied on to uncover the existence of the said agreements.
Leniency is available to both enterprises and persons. The most important point is that the applicant is the first to approach and provide the with information about an agreement which was not previously known to it or if known, the Commission did not have sufficient evidence to pursue the parties to it.
For more details on the criteria used to assess whether or not an applicant qualifies for leniency see leniency program.
Who may apply for leniency?
Both individuals and enterprises may apply for leniency. A leniency application by an individual applies only to that individual who makes the application, e.g. an application from a salesperson employed by an enterprise applies only to that salesperson – not to the enterprise as such.
An application on behalf of an enterprise will only be valid if submitted by a person authorized to sign for the undertaking (such as a CEO or Executive Director, Company Secretary), and this authorized person must expressly state that it is the enterprise that is applying for leniency.
An application by an enterprise automatically covers all present and previous members of the board, managing directors and other employees. If an application is to cover several companies within a group of companies (i.e. parent company and its subsidiaries), this should be explicitly stated in the application.
Possible sources of information on Cartels
The Commission may rely on available information from sources such as:
- employees of a cartel member
- ex-employees of a cartel member
- Former cartel members
- Correspondence evidencing existence of cartel agreement
- Information provided by leniency applicant
REPORT ANY INFORMATION YOU MAY HAVE ON A CARTEL TO THE COMMISSION FOR THE BENEFIT OF ALL ZAMBIANS!