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  • Writer's pictureRobyn Haupt

TOP INSURANCE COMPANIES UNDER INVESTIGATION BY THE COMPETITION COMMISSION FOR COLLUSIVE PRACTICES

On 25 August 2022, the Competition Commission of South Africa (“Commission”) raided eight insurances companies, as the Commission has reasonable grounds to suspect that the eight insurance companies are engaging in collusive practices to fix prices and trading conditions of insurance products. A search and seizure operation were conducted at the premise of the eight insurance companies in the Western Cape, Gauteng, and Kwa-Zulu Natal. The companies under investigation include Discovery, Old Mutual, BrightRock, Hollard, Sanlam, Momentum, Professional Provident Society, and FMI which is a division of Bidvest Life (collectively hereinafter, “the Insurers”).


Insurers are suspected of sharing information on premium rates in respect of risk-related products and fees for investment products, enabling the Insurers to alter the price of existing and new insurance products. Such engagements between competitors of the market are outright prohibited and are in contravention with the provisions of the Competition Act 89 of 1998 (“Competition Act”).


The Competition Act restrains particular trade practices which undermines a competitive economy. Its primary purpose is to promote and maintain competition in the economy of South Africa. In terms of section 4(1)(b)(i) of the Competition Act, an association of competitors are outright prohibited from entering into any agreement, engaging in concerted practices, or making joint decisions, directly or indirectly, which involves the fixing of purchase and selling prices, or any other trading conditions. The aforesaid prohibitions are known as restrictive horizontal practices, which relates to the collusive practices perpetrated by companies in a horizontal relationship competing in the same market.


The Commission was established by the Competition Act to investigate, control, and evaluate restrictive practices, abuse of dominant positions, and mergers, in order to achieve equity and efficiency. Accordingly, the Commission holds the burden of proving, on a balance of probability, by leading cogent evidence that the information shared between the Insurers are in contravention with the provisions of the Competition Act.


It was previous decided by the Competition Tribunal of South Africa (“the Tribunal”), who adjudicates competition matters in South Africa, that the Commission must prove the true nature of the alleged agreement, concerted practices, or decisions, together with proving whether the aforesaid practices violate section 4(1)(b) of the Competition Act. The mere presence of an agreement, or shared information, between the Insurers does not constitute collusive practice. The Commission is tasked with seeking whether the shared information may be construed as achieving legitimate commercial ends, or whether it is likely to be collusive practice. The practice must present a cartel-like conduct, sharing the market and consumers between the Insurers, lessening the competition in the South African market in order for the Tribunal to impose a sanction.


Should the Commission prove that the Insurers are in fact in contravention of the Competition Act, the Tribunal may impose an administrative penalty on the Insurers who participated in the anticompetitive practice prohibited by the Competition Act. A penalty may be enforced in two ways, namely, in terms of section 59 of the Competition Act, a penalty may be determined and enforced by the Tribunal, and in terms of section 58, an agreement by consent may be concluded between the colluders and the Commission and approved and enforced by the Tribunal. In terms of section 59(2) of the Competition Act, an administrative penalty is determined by the turnover threshold, capping the quantum of the penalty at 10% of the company’s annual turnover in South Africa and its exports from South Africa during the company’s preceding financial year.


The investigation is still ongoing, and we await to see whether the Commission has seized sufficient documents and electronic data to determine whether the eight insurance companies have contravened the aforesaid provisions of the Competition Act.

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