Abstract
In line with international practice, South African competition law prohibits agreements and concerted practices by firms that amount to price fixing, market division and collusive tendering. Penalties levied against firms that engage in collusive conduct are an important tool for competition law enforcement. If penalties are high enough, firms will be discouraged from engaging in anti-competitive behaviour. Therefore, a proper framework for penalty determination creates a disincentive to collude. A critical aspect of penalty determination that has not been properly considered in practice is the relationship between cartel duration and penalties. Further empirical research is required to understand how to improve the enforcement of competition laws, particularly in developing countries where competition is at the core of economic development. This dissertation analysed the relationship between cartel duration and administrative penalties in South Africa, taking cartel size and the type of contravention into consideration. Drawing on quantitative data on prosecuted cartel cases in South Africa and a case study of the ArcelorMittal cartel case to critically analyse the approach to penalty determination used by South African competition authorities, the paper assessed the impact of duration on the size of the penalty and whether cartel deterrence can be achieved using the current penalty determination framework. It found that there is a significant amount of variability in penalty determination, resulting in a weak positive relationship between duration and penalty. The case study illustrated that the absence of a strong positive relationship between the variables was because some settlement agreements are reached through a process of negotiation between the Commission and the firm in question, and not through the application of the six-step method. Furthermore, although cartel duration is accounted for in the six-step method, the full impact of duration is eroded by the statutory caps applied in penalty determination.