Collectively, eight insurers investigated by the Competition Commission for price- fixing could be fined up to 25% of their turnovers by the Competition Tribunal, making the penalties the highest ever fined by South Africa’s competition authorities.
Competition Commission spokesperson Siyabulela Makunga said yesterday that while the hearings for the investigation were still some way off, and information from last year’s raids at the various insurers was still being analysed, the Competition Tribunal had the power to fine companies up to 25% of their turnover for repeat offenders, and “we always go for the maximum penalty”.
He was responding to Business Report’s questions following the publication yesterday by News24, which had made a Promotion of Access to Information PAIA) request for the commission’s court documents of information that showed the commission suspected that the life-insurers had been colluding to fix prices for 34 years, and that the commission had also presented emails between employees to the court as evidence of this collusion.
The insurers denied all allegations of collusion last year, when the investigation was first announced.
This was after the commission raided the offices of Sanlam, Old Mutual, Hollard, Momentum, Discovery, PPS, BrightRock and Bidvest Life in August, the first dawn raid by the commission in four years. The combined turnovers of these companies easily run into many tens of billions of rand.
The commission had provided information to the Western Cape, Gauteng and KwaZulu-Natal High Courts concerning its allegations of price-fixing, when it sought permission to raid the insurers offices.
The commission alleged that these companies – and Liberty, which was not raided on the day – shared passcodes to one another’s pricing systems so they could fix prices of life insurance and investment products, including retirement annuities (RAs), News24 reported.
The commission said between 1989 and 1991, each insurer kept a “rate book” where they each recorded the prices of the affected products.
They would then exchange their rate books. After 1991, pricing information was loaded on floppy disks, which they’d then exchange with each other. In 2013, they migrated to online platforms that could only be accessed with login details, and they would share the login details, News24 reported.
The commission said it was not only pricing information that was shared. Technical information on the design of new products was also circulated to ensure that insurers all had similar products, thus eliminating competition among themselves. The commission believed this was one of the reasons insurers’ products were similar, News24 reported.
“This, in turn, robs consumers of competitive prices and choices,” the commission argued.
The commission said in its December newsletter the information shared included premium rates for risk-related products and fees for investment products. The investment and risk-related insurance products affected were retirement annuity and life-insurance cover such as dread disease cover/chronic medical condition cover, disability cover, life cover and funeral assistance benefits.
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