A cartel is an agreement between competitors whose objective is to increase their collective profits or maintain their market shares by means of fixing prices, restricting supply, bid rigging, dividing up markets and/or collective refusal to deal or supply. The agreement may take a wide variety of forms but often relates to sales prices or increases in such prices, restrictions on sales or production capacities, sharing out of product or geographic markets or customers, and collusion on the other commercial conditions for the sale of products or services.
Why are cartels harmful to consumers, businesses and to the economy in general?
Cartels naturally limit competition that would normally prevail between companies thus removing the pressure on them to improve the products they sell or find more efficient ways in which to produce them. This ultimately results in higher prices for lower quality goods and a narrower choice for consumers. Cartels also increase the price of inputs for other businesses along the supply chain thus increasing the cost of honest well-run businesses thereby affecting the competitiveness of the economy as a whole. Cartels that exist in public procurement through rigging bids decreases infrastructure due to inflated costs which ultimately reduces...
What legal provisions empower the Commission to deal with cartels?
Section 8 and 9 of the Act provides the legal provisions pertaining to cartel conduct in Zambia. Section 8 of the Act makes it an offense for companies to make any agreements, decisions or concerted practices that restrict, prevent or distort competition. Section 9 of the Act prohibits agreements between two or more competitors to engage in fixing prices and/or trading conditions, market sharing, output restrictions and/or bid rigging. The Commission fine companies up to 10% of their annual turnover for participating in a cartel.
Can cartel members be prosecuted?
Engaging in cartelistic conduct is a criminal offence in Zambia and the Act empowers the Commission to pursue legal action against cartel participants. Cartel members who are prosecuted by the Commission risk being convicted by the courts to a fine and/or to imprisonment for a period of five years or both.
Does the Commission have the last word?
All cartel decisions by the Commission may be appealed against before the Competition and Consumer Protection Tribunal, the High Court of Zambia and then before the Supreme Court. These appeals can therefore be closely scrutinised by these institutions which are empowered to annul decisions in whole or in part and to reduce or increase fines, where this is deemed appropriate.
What is the leniency programme?
The leniency programme allows members of a cartel to inform the Commission of their participation in a cartel and provide information that helps the Commission to curb further operations of the cartel in exchange for immunity. The policy provides for partial or total immunity from prosecution and financial penalties for up to three applicants. The first company to apply for leniency is granted total immunity from fines (full immunity is granted on a first come first serve basis). The other two companies that follow suit may be granted a reduction in the amount of the fine.
What is the settlement procedure?
The settlement procedure allows cartel members who are willing to acknowledge their participation and liability in a cartel to settle the matter before the Board of Commissioners can make a decision. The procedure enables cartel participants get lesser financial penalties than what would be imposed if the matter is decided by the Board of Commissioners. However, the settlement procedure does not exempt or protect a company from criminal or civil liability by third parties arising from the contravention of the Act.
Can companies apply for both leniency programme and the settlement procedure?
A leniency applicant can settle a case in terms of the Commission’s leniency programme and settlement procedure and benefit from both leniency and settlement discounts. The first leniency applicant does not have to apply for settlement as they are granted total immunity from fines. Only the second and third leniency applicant can apply for settlement to benefit for further reductions in fines.
How to can I avoid from being drawn into joining a cartel?
It is possible that your competitors or trade association may want to draw you into joining a cartel. You need to take the following steps to avoid being drawn into a cartel:
Make decisions about prices independently;
Do not discuss tenders with competitors before they are submitted;
Make decisions about your market and product independent of other companies;
Do not agree to stay out of certain areas or stay away from another company’s customers.
What can I do if I want to get out of a cartel?
When your company is involved in a cartel but wish to get out of that arrangement, you need to must urgently contact the Commission and provide the necessary information about the cartel to the Commission under the leniency programme. It is also possible for a lawyer to apply for leniency on behalf of a person or a company.