Firms urged to have plan in place for Competition Commission dawn raids after scrap metal crackdown

South African companies have been warned to put in place a comprehensive dawn raid response plan, as the Competition Commission appears set to use this enforcement tool more extensively. The warning follows a dawn raid conducted last week on four metal scrap dealers, signalling a renewed focus after such operations became less frequent following the Covid-19 lockdown, a partner at law firm Bowmans has said.

In a note, Heather Irvine said key priorities during a raid include protecting the company’s confidential information and data, and ensuring that the Commission does not gain access to legally privileged material, such as legal opinions provided by the company’s internal and external lawyers.

“This plan should identify a core on-site response team for dealing with a search, including senior management, in-house legal counsel, and the IT and security managers responsible for each site. Ideally, this core team of employees should receive in-depth training to ensure that they understand the crucial role they will play, both during and after the dawn raid. An external support team, including the company’s lawyers and investor relations and communication advisors, should also be identified. Well-prepared teams are essential to avoiding missteps, protecting the company’s rights, and minimising business disruption,” Irvine said.

She advised that, following a search, the companies involved would need to conduct a thorough internal investigation to determine whether any contravention of the Competition Act had occurred.

Depending on the findings, Irvine said it may be possible to qualify for immunity from prosecution in terms of the Commission’s Corporate Leniency Policy. This could relate either to the complaint identified in the search warrant or to other potential contraventions of the Competition Act of which the Commission is not yet aware — for example, involving other time periods, service or product lines, or different prohibited practices.

“Companies that offer substantial cooperation at an early stage after a dawn raid may, in due course, be able to negotiate reduced administrative penalties,” Irvine said.

The warning comes after the Commission on Friday executed search and seizure operations at the premises of four scrap metal purchasing companies — Scaw South Africa (Scaw), Cape Gate, Shaurya Steel trading as Force Steels, and Unica Iron and Steel (Unica) — located in Germiston, Nigel, Vanderbijlpark and Hammanskraal.

Meanwhile, the Recycling Association of South Africa (RASA), which said it welcomed the Commission’s decisive action against suspected price-fixing in the industry, has emphasised its call for the immediate suspension of the Price Preference System (PPS).

RASA chairman Geoff Borrajeiro said dismantling any alleged buyer-side cartel would help eliminate artificial barriers to entry, foster fair competition, and create opportunities for small businesses, informal collectors, waste pickers and firms owned by historically disadvantaged persons to participate meaningfully in the market.

“However, we must condemn in the strongest possible terms the alleged conduct of these powerful scrap buyers. This is not mere commercial rivalry — it is outrageous, predatory collusion that has deliberately and systematically suppressed domestic scrap prices for years. It is the economic equivalent of a cartel secretly fixing the price of bread, except that instead of robbing ordinary South Africans of their daily staple, these buyers have been robbing hundreds of thousands of the poorest of the poor — informal metal recyclers and waste pickers — of their only source of income and survival,” Borrajeiro said.

He added that the raids provide fresh and compelling evidence of the market distortions highlighted by the industry association in correspondence with Trade, Industry and Competition Minister Parks Tau. In that correspondence, RASA urged the immediate suspension of the Price Preference System, an independent forensic investigation into its manipulation since inception, and the removal of the export tax to restore equilibrium.

“While enforcement against anti-competitive conduct is crucial, sustained harm to recyclers, exporters and the broader value chain — including suppressed domestic prices, business sustainability risks, and devastating job losses among the most vulnerable — persists under the current policy framework. The raids reinforce that complementary policy adjustments are urgently needed to level the playing field across the entire scrap metal ecosystem,” Borrajeiro said.

BUSINESS REPORT