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Is your business prepared for a dawn raid?

As Competition Commission regulators step up their search and seizure operations, South African businesses must be equipped to launch a rapid legal response, say Daryl Dingley and Elisha Bhugwandeen.


Cape Town, 30 Oct 2018
Daryl Dingley, Head of Webber Wentzel's competition team.
Daryl Dingley, Head of Webber Wentzel's competition team.

You don't see it coming. There's an early-morning knock on your office door, and a team from the South African Competition Commission, flanked by police officers, is there demanding to see all your company's files. You need an informed, co-ordinated and proactive response to protect your commercial interests and to mitigate significant financial, reputational and other risks. That means having the right tools and support at your disposal.

"The South African Competition Commission has established a reputation for relentlessly pursuing its cartel enforcement objectives," says Daryl Dingley, Head of Webber Wentzel's competition team. "Search and seizures, commonly known as a 'dawn raid', are one of the Commission's most effective investigation methods. Over the past three years, the Commission has raided over 70 companies and conducted hundreds of cartel investigations. It is imperative for businesses to ensure that they are prepared for a dawn raid."

Over the 2017/18 financial year alone, a total of 37 South African companies were raided. Over the 2015/16 and 2016/17 financial years, over 40 companies were raided. "Alarmingly, it is very common for the Commission to raid multiple premises of the same company simultaneously," says Dingley.

"Competing firms, or firms considered to be engaged in collusive activity together, as well as trade associations are also being pursued. All the Commission needs are reasonable grounds to believe that something untoward is going on, and after obtaining a warrant, they can come in and raid your offices to look for evidence. It happens, and it happens quite often."

The costs can be immensely damaging. "A company may face a penalty of up to 10% of its annual turnover if it is found to have engaged in cartel conduct," Dingley warns. "In recent times, sanctions have reached staggering amounts." Over the 2017/18 financial year, the Commission handled 146 cartel cases and imposed penalties in the region of ZAR 350 million. One firm faced a penalty of ZAR 69 million, while another was found liable for ZAR 23 million. In 2016, the Commission imposed a penalty of over ZAR 1 billion, the highest fine on a single firm for anti-competitive behaviour in South Africa's history.

"The net is also widening," Dingley adds. "Authorities have gone as far as prosecuting passive participants for cartel behaviour. Parties seen to be facilitating a cartel may also be scrutinised, and liability for the anti-competitive behaviour of a company may potentially extend to the entire group to which it belongs."

Elisha Bhugwandeen, Professional Support Lawyer.
Elisha Bhugwandeen, Professional Support Lawyer.

A disorganised response to a dawn raid could have a significant impact on your business; yet, in all the chaos and panic, it's not unusual for someone to say or do the wrong thing. "In our experience, substantial errors are often made where companies are not prepared," says Dingley. "Employees may allow the authority to access legally privileged information, unlawfully obstruct the raid, or answer self-incriminating questions."

As part of a growing focus on innovative risk management solutions, Webber Wentzel has launched "Webber Wentzel Alert", an online tool designed to launch a co-ordinated legal emergency response to a dawn raid, available at the click of a button. "The tool is available 24/7, and it enables organisations to notify a pre-identified group of key individuals within their businesses and their legal team at our firm that a dawn raid is in progress," says Dingley. Apart from saving valuable time, it also provides easy online access to best practice guidance on the business's rights and obligations during the raid.

Webber Wentzel Alert offers a crucial link between dawn raid preparedness and dawn raid response. "At one end of the spectrum, we ensure that our clients are competition law compliant, making sure they have competition law training (including dawn raid training), conducting compliance reviews, and even carrying out mock dawn raids to make sure they're prepared for when it happens at their offices," says Dingley.

The other side of the service is about managing the actual raid. "After we've been alerted, we will go to the offices to ensure the warrant is in order, and to ensure the raid is carried out lawfully and that our client's interests are protected," Dingley concludes. "This goes in hand with the 'Webber Wentzel Alert' tool, which allows clients to click a button and know that the right people have been notified, and that they have quick access to guidelines for what each person should do if a dawn raid happens."

For additional information, please contact info@webberwentzel.com or Elisha Bhugwandeen at elisha.bhugwandeen@webberwentzel.com or telephone (+27) 11 530 5309.

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