South Africa’s Competition Commission has started to feel the effects of recent decisions by the country’s Competition Appeal Court and the Supreme Court of Appeal in relation to the manner in which the commission refers complaints to the Competition Tribunal.
Director
Edward Nathan Sonnenbergs
Decisions by the Competition Appeal Court in the Yara and Omnia Fertilizer case, and by the Supreme Court of Appeal in the Woodlands Dairy and Milkwood Dairy case, have led to another of the Commission’s referrals, this time against South African Breweries Limited (SAB), being set aside.
After many years of what the commission described as “procedural challenges” by SAB, on 7 April the Competition Tribunal finally dismissed the case against SAB on the basis that it had no jurisdiction to hear the commission’s 2007 referral to it. Reasons for its decision are yet to be delivered.
The tribunal seems to hold the view that the Yara decision and the Woodlands decision – which are binding upon it – require that a referral by the commission to the tribunal arising from a complaint lodged by a complainant to the commission must be the same as the complaint from which the referral emanates, unless certain formalities have been complied with prior to the referral.
Background
By way of background, the Big Daddy Group lodged a complaint with the
commission in 2004 alleging that SAB had contravened various provisions of the Competition Act No. 89 of 1998 (as amended). Big Daddy’s complaint was that SAB charged the Big Daddy Group, which is a wholesaler, the same price as SAB charged to retailers, thereby preventing Big Daddy from earning a fair margin on its sales to retailers.
The commission, in its referral of the complaint to the tribunal in 2007, alleged that:
- SAB’s agreements with its appointed distributors had the impact of dividing markets between competitors, in contravention of the Competition Act;
- SAB favoured its own distributors at the expense of independent
distributors and, in that way, placed independent distributors at a
disadvantage in the market; and - SAB had abused its dominance by requiring retail outlets not to deal with SAB’s competitors, thereby placing SAB’s competitors at a disadvantage in the beer market.
Because of the disparity between the complaints of Big Daddy on the one hand and the referred complaints on the other hand, the tribunal found itself duty bound to apply the principles articulated in the Yara and Woodlands cases.
In the Yara case, the Competition Appeal Court held as follows:
- courts have drawn a distinction between an amendment introducing a new cause of action and one which merely introduces fresh and alternative facts supporting the original action as set out in the existing cause of action;
- neither Yara nor Omnia were referred to in the original complaint. Although Yara and Omnia featured in the original complainant’s affidavit (attached to the complaint), this was not evidence of a distinct complaint in the sense of a separate cause of action within the complaint (as opposed to further information concerning the initial complaint); and
- information cannot be converted into a complaint when it is plain that the information is not part of the complaint of the submitting party.
Director
Edward Nathan Sonnenbergs
In the Woodlands case, the Supreme Court of Appeal held that the commission is not empowered to investigate conduct which it generally considers to constitute anti-competitive behaviour. A complaint can relate only to an alleged contravention of a specific provision of the Competition Act.
The SAB case which was referred to the tribunal was thus not the same case which was originally initiated by the Big Daddy Group in 2004. As such, the tribunal found that it did not have jurisdiction to hear the referral against SAB. The tribunal stated that “this is a regrettable outcome but we are bound by recent decisions of the superior courts to come to this conclusion. Recent case law requires that a complaint lodged by a complainant to the commission should be the same as that referred to us unless it meets certain formalities that have to be complied with, prior to the referral.”
Serious impact
The legal precedent handed down by the Supreme Court of Appeal and the Competition Appeal Court will provide some legal certainty in relation to new complaints and referrals to the tribunal. However, this may have a serious impact on matters currently before the tribunal which have not yet been finalized. The commission is acutely aware of this issue and has thus published a press release which sets out that the judgments of the two courts “create opportunity for firms who are the subject of the commission’s investigations to frustrate the investigation and prosecution of cases”. The commission also lamented the repercussions of the Yara decision which, in its view, sets out that “the commission can only investigate and prosecute the conduct as set out in the complaint submitted to it and that there is no provision in the act allowing for it to amend or add to the conduct disclosed in that complaint. The effect of this decision is to require a complainant to know with precision all the facts relating to the conduct complained of at the time of lodging the complaint when the complainant simply does not have the facts to enable it to do so.”
The commission is preparing its appeal in the Yara matter in the hope of obtaining more clarity on its power to initiate, investigate and prosecute complaints. The commission has stated that it does not intend to abandon its case against SAB.
In the interim, there is a window of opportunity for respondents in complaints referred to the tribunal to the commission to study and challenge the terms of the referral.
Justin Balkin and Lee Mendelsohn are directors in the competition department of Edward Nathan Sonnenbergs
Johannesburg
150 West Street
Sandton
Johannesburg
South Africa
2196
Tel: +27 11 269 7600
Fax: +27 11 269 7899
E-mail: info@ens.co.za
