The application of the single economic entity doctrine to combat cartels in South Africa: lessons from Germany

Abstract

The relationship between holding companies and their subsidiary companies is determined principally by the degree to which holding companies can exercise control over their subsidiary companies. The Companies Act regulates this relationship by assessing the control that holding companies exercise over subsidiary companies. The way these companies conduct their business can attract issues relating to competition which may attract the application of the Competition Act 89 of 1998. The anticompetitive behaviour of subsidiary companies has sparked controversy relating to whether holding companies should be held liable for their conduct. This research report discusses the Single Economic Entity Doctrine which deals with the attribution of liability of the conduct of a subsidiary company to a holding company. In particular, it assesses whether given the control that holding companies exercise over their subsidiary companies, they can be held liable for cartel infringements under section 4(1) of the Competition Act using the Single Economic Entity Doctrine. Drawing on the experiences of the European Union and Bundeskartellamt in Germany, this report argues that there is a need to expressly introduce and apply the Single Economic Entity Doctrine in South Africa with a view to allow the Competition Commission to hold holding companies liable for the cartel conduct of their subsidiaries which often cease to operate when cartel related charges are brought against them