A cartel involves an agreement or concerted practice between two or more competitors to engage in fixing prices and/or trading conditions, dividing markets and/or collusive tendering. By artificially limiting competition that would normally prevail between them, firms avoid exactly the kind of pressures that lead them to innovate, both in terms of product development and production methods. This results ultimately in high prices and reduced consumer choice.
In South Africa, cartel behaviour is prohibited by section 4(1)(b) of the Act. The penalty for participation in a cartel is a fine of up to 10% of the firm’s annual turnover. The firm also faces the risk of damages claims by customers who may have suffered harm as a result of the cartel activity. The customers may use the finding of cartel behaviour against the firm to claim damages in the civil courts. There are also major reputational implications associated with cartel behaviour.