The Zambian Competition and Consumer Protection Commission (CCPC) recently conducted a dawn raid in terms of the Competition and Consumer Protection Act, 2010 . This highlights that compliance with competition law is increasingly important for companies operating in Zambia.
The recent dawn raid by the CCPC on the offices of two major fertilizer suppliers is one of the first of its kind in this country. It relates to an investigation into alleged collusion in the fertilizer industry. The companies involved have appealed to the Competition Tribunal to set aside the raid on procedural grounds, but this development highlights the need for companies operating in Zambia to be aware of the provisions of the Act. The Act gives the CCPC extensive powers to conduct search and seizure operations in order to uncover evidence of anticompetitive conduct price-fixing, market allocation and bid-rigging by cartels, as well as abuses by dominant firms. Section 7 of the Act provides that the CCPC may enter and search any premises where information or documents relevant to an investigation may be kept, as long as the CCPC obtains a warrant prior to executing the search, and is conducted at a ‘reasonable time’. Offices as well as private dwellings can be searched. The CCPC is then entitled to examine any documents on the premises and to take extracts from them or make copies, and it may even attach documents and remove them from the premises for safeguarding. The CCPC can also use computers on the premises to search data and reproduce records, and it is also allowed to search any person on the premises if it has reasonable grounds to believe that he or she is in possession of any document which has a bearing on its investigation. Any person who delays or obstructs a dawn raid commits an offense.

Have a plan

Search operations can be hugely disruptive for both the company and its employees, unless they are dealt with in a carefully coordinated manner. A company may face serious disruption to its operations on the day of the raid and thereafter, as well as the risk that its confidential pricing, customer and other information will enter the public domain. Unless the company has proper records of what documents and electronic data have been copied and removed, and which employees were interviewed, it may be difficult to defend the allegations of anticompetitive conduct. If company staff destroy documents during a raid or the competition authorities are obstructed during the search, they may be liable for criminal prosecution. It is thus essential for companies to have a comprehensive plan in place to deal with a dawn raid. This plan should identify the team responsible for dealing with a search, including senior management, in-house legal counsel, the IT and security managers responsible for each site.  An external support team, including the company’s competition law advisors and investor relations personnel, should also be identified. The needs to practical in view of travelling distances and the size and number of company premises potentially involved.

Be clear on internal process

The Company’s procedures for dealing with a raid should be clearly set out. For example, competition authority staff should be asked to wait for the company’s legal advisors to arrive before commencing the search and the applicable warrant should be photocopied. The identification of each official involved in the raid should be checked.  Staff should be appointed to monitor the conduct of the search and record each document reviewed or removed by the authorities. These employees need to receive in-depth training, to ensure that they understand the crucial role they will play on the day of the raid.  Adequate measures to protect the company’s legally privileged and highly confidential documents should be put in place. It is a good idea to formulate an external communication plan to deal with questions from the press, as well as an internal communication plan to preserve confidentiality and deal with the impact on staff morale as far as possible.

After a raid

Once the search is over, the company will need to conduct a thorough internal investigation in order to determine whether the Act has been contravened. If so, it may be possible to negotiate a substantial reduction in fines if the company offers to cooperate with the authority’s investigation. It is also important to determine whether the conduct in question may have an effect on neighbouring states like Zimbabwe, which also enforce competition law. If so, the potential for the raid to trigger investigations in those states needs to be considered.
Companies operating in Zambia should consult with their competition law advisors and put in place a detailed competition law compliance program, including a plan to deal with the risk of dawn raids at each premises they operate from.

Written by Heather Irvine, Head of competition, Norton Rose Fulbright South Africa