AAT exclusive, dominance, new regime, South Africa, Uncategorized

CRESSE CONFERENCE GREECE 2019: SOUTH AFRICAN AMENDMENT ACT

Africanantitrust regular contributors John Oxenham, Michael-James Currie and Stephany Torres (Primerio and Nortons Inc) authored and presented a paper on the role of non-competition law factors in competition law enforcement at the 2019 CRESSE Conference in Rhodes Island, Greece in early July 2019.

Motivated by the recent, but significant, amendments to South Africa’s Competition Act, the timing of the authors’ paper could not have been better scripted. The Amendment Act was brought into effect on 12 July 2019 – a week after presenting the paper to an esteemed delegation of competition law practitioners and economists.

The paper, titled “South African Competition Law – The role of non-competition factors in enforcing unilateral conduct: Forging ahead or falling behind?” explores the socio-economic context and objectives which underpin the recent amendments to South Africa’s legislation and highlights the expansion of what is often termed “public interest” considerations in competition law enforcement beyond merger control.

Most notably, the authors contextualise the policy debate before providing an in-depth discussion of the new thresholds and standards against which certain abuse of dominance conduct will now be assessed.

The Amendment Act introduces a public interest standard, namely what the effect of certain conduct by dominant entities will have on the ability of “small, medium businesses and businesses owned by previously disadvantaged persons” to participate effectively in the market”.

Looking specifically at the price discrimination and buyer power provisions, the paper notes that, notwithstanding the noble objectives of the Amendment Act, there are potentially a number of unintended consequences which require further deliberation so as not to dampen pro-competitive conduct.

In relation to the price discrimination provisions, the authors conclude that:

Accordingly, in light of:

  • the low market share threshold applicable to “dominant” entities;
  • the uncertainty regarding the threshold that must be met in order to sustain a case of prohibited price discrimination;
  • the evidentiary burden on a respondent to essentially prove a negative in relation to section 9(3); and
  • the threat of an administrative penalty for a first-time offence (potentially on both the South African business and its parent),

the price discrimination provisions pose a material risk to companies in South Africa who have a market share above 35%.”

As part of the presentation of the paper, it was noted that competition policy globally is constantly evolving. Issues such as “big data” and “data protection” have called on antitrust commentators to question whether the existing laws remain adequate to address broader consumer harm concerns. In South Africa, the authors point out that while the South African competition agencies have traditionally turned to European and US precedent in relation to antitrust enforcement, the socio-economic factors which have shaped competition policy in South Africa (at least from Government’s perspective) is unique and constitutes a substantial departure from more established jurisdictions.

Competition policy globally is, therefore, likely to be more divergent than convergent in the next few years.

In concluding, the authors point to the inordinate responsibility placed on the shoulders of the competition agencies in South Africa to exercise their discretion and develop a body of precedent as soon as possible that would hopefully provide practitioners and business with a more objective and transparent benchmark against which to assess their conduct. A task which could prove highly complex as the authorities will inevitable need to develop an objective basis for quantifying public interest considerations – an inherently subjective exercise.

To obtain a copy of the paper, please email the AAT editor by following the contact link below.

 

 

 

 

 

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East Africa, ECONAfrica, ECOWAS, Egypt, Extra-judicial Factors, jurisdiction, Kenya, legislation, Meet the Enforcers, mergers, new regime, Nigeria, no antitrust regime, Patel, predatory pricing, Price fixing, Protectionism, public-interest, South Africa, Tanzania, Uncategorized, Unfair Competition

Beyond Pure Competition Law – Is Africa Leading the Way Forward in Antitrust Enforcement?

To all our Africanantitrust followers, please take note of the upcoming American Bar Association webinar on 2 July 2019 (11amET/4pmUK/5pm CET) titled:

“Beyond Pure Competition Law – Is Africa Leading the Way Forward in Antitrust Enforcement?”

In what promises to be a highly topical (telecon) panel discussion, Eleanor Fox, Andreas Stargard, John Oxenham, Amira Abdel Ghaffar and Anthony Idigbe will:

  • provide critical commentary of the most recent developments in antitrust policy across the African continent;
  • highlight the most significant legislative amendments and enforcement activities in Africa; and
  • analyze some of the key enforcement decisions.

South Africa, Nigeria, Egypt, COMESA and Kenya are among the key jurisdictions under the microscope.

Practitioners, agency representatives, academics and anyone who is an antitrust enthusiast will find this webinar to be of great interest. Not to mention companies actually active or looking to enter the African market place.

For details on how to participate, please follow this Link

 

 

 

 

 

 

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AAT exclusive, Grocery Retail Market Inquiry, market study, South Africa, Uncategorized

SOUTH AFRICA: COMPETITION COMMISSION PUBLISHES INTERIM REPORT RE GROCERY RETAIL MARKET INQUIRY

By Charl van der Merwe

Introduction

The South African Competition Commission (“SACC”) on Wednesday 29 May 2019 released its interim report on its findings in the Grocery Retail Sector Market Inquiry (“Inquiry”).

The Inquiry’s terms of reference, published in October 2015, mandated the SACC to investigate:

  • The impact of the expansion, diversification and consolidation of national supermarket chains on small and independent retailers in townships, peri-urban and rural areas and the informal economy;
  • The impact of long term exclusive lease agreements entered into between property developers and national supermarket chains, and the role of financiers in these agreements on competition in the grocery retail sector;
  • The dynamics of competition between local and foreign national operated small and independent retailers in townships, peri-urban areas, rural areas and the informal economy;
  • The impact of regulations, including inter alia municipal town planning and by-laws on small and independent retailers in townships, peri-urban areas, rural areas and the informal economy;
  • The impact of buyer groups on small and independent retailers in townships, periurban areas, rural areas and the informal economy;
  • The impact of certain identified value chains on the operations of small and independent retailers in townships, peri-urban areas, rural areas and the informal economy.”

The Inquiry received extensive submissions from industry stakeholders including large grocery retailers (“larger retailers”), FMCG suppliers, banks, shopping center property developers (“property developers”) and small and independent retailers.  The public hearings of the Inquiry were held in all major cities during April 2017 to November 2017 with further ‘informal hearings’ in smaller towns across South Africa.  The Interim Report was hailed by SACC Commissioner, Tembinkosi Bonakele (“Commissioner”) at the media briefing on 29 May 2019 as the most comprehensive study into all elements of the grocery retail sector.

Industry stakeholders will have a further opportunity to engage with the SACC on the findings of the interim report and to present further written submissions before Friday 28 June 2019. The Final Report is expected to be released on 30 September 2019.

Key Findings

Long Term Exclusive Lease Agreements and Rental Costs

The Inquire placed great emphasis on the practice of long term exclusive lease agreements entered into between large retailers and property developers apropos new shopping malls and other property developments. The Inquiry found that these exclusive lease agreements range for periods of up to 45 years, constituting what the Inquiry termed unnecessary artificial barriers to entry.

A central focus of the Inquiry was the significant market power of the large retailers which enable large retailers to negotiate long term exclusive lease agreements, lower rental fees and more favorable rebates from suppliers.

The Inquiry found that property developers are reliant on the large retailers’ participation in new property developments (as anchor tenants) as they attract customers to the development and are also required by banks and other financial houses to advance funding to property developers. It is noteworthy that the Inquiry found that contrary to the submissions made by large retailers, finance houses do not demand exclusivity (only a fixed terms commitment from an anchor tenant). The practice of exclusivity was introduced by the large retailers as compensation for risk.

The Inquiry found that the prevalence of the long term exclusive lease agreements had the effect of reinforcing the levels of concentration in the market as the ‘process’ repeats itself which each new  development. While this does mean that new competitors are foreclosed from the market, significantly, it also excludes small and independent specialist retailers such as butcheries, bakeries etc, which, according to the Inquiry, deprive consumers of ‘bespoke’ or ‘craft’ products which characterizes the retail sector in other areas of the world.

The Inquiry found the submissions made by the large retailers as ‘not compelling’ and has recommended that:

  • Large retailers immediately cease enforcing exclusivity provisions against specialty stores (which was undertaken by the large retailers); and
  • Exclusivity clauses be ‘phased out’ within 3 years (and no new lease agreements be entered into that contain exclusivity) in order to allow new entrants into developments.

A second but related finding of the Inquiry is that large retailers are able to use their bargaining power to negotiate lower rental fees in property developments which, according to the findings, causes property developers to increase rental fees for small and independent stores in order to ‘recoup’ the discount offered to the large retailers.

The Inquiry heard evidence from a variety of small retailers and specialty stores (as well as property developers) that the higher rental fees in property developments hinders entrance or leads to the failure of small retailers and specialty stores. Interestingly, the Inquiry did not make any recommendations in this regard and, instead, called for further submissions on the commercial realities and possible remedies.

Rebate Structures

The Inquiry found that that the large retailers also enjoy significant market power, compared to independent retailers and wholesalers, as they provide a key route to market for suppliers. Accordingly, the Inquiry found that large retailers are able to extract more favorable trading terms than that which wholesalers and/or buying groups are able to negotiate. Interestingly, however, the Inquiry found that large retailers are able to extract larger rebates than buyer groups, despite the larger volumes purchased by buyer groups.

According to the SACC chief economist, James Hodge, the primary concern is not ‘basic rebates’ which are also available to buyer groups and wholesalers but rather the ‘special retail rebates’ (e.g. distribution center rebates, store opening rebates, advertising rebates etc.) which are not available to wholesalers or buying groups.

In this regard, the Inquiry found that the justification for these ‘special retail rebates’ are unconvincing as the knock-on effect is that the independent retailers or specialty stores at the retail level (who purchase stock from wholesalers and buyer group) face higher costs and cannot compete with the large retailers.

The Inquiry recognizes that rebates are not inherently anti-competitive and can often be justified. The Inquiry further found that the current rebate structures cannot be easily changed without commercial disruption. The Inquiry, therefore, did not make any recommendations and, instead, invited industry stakeholders to engage with the Inquiry in order to address the issue.

Other

The Inquiry also recommend intervention, through regulation, by a “single government department”. The department was not specified due to the uncertainty on whether the Economic Development Department (“EDD”) will remain in its current form. The EDD has now been subsumed into the Department of Trade and Industry (“DTI”), which will be headed by former EDD minister, Minister Ebrahim Patel. The DTI is, therefore, likely to be nominated as the relevant governmental department.

As an alternative, the Inquiry recommend an industry code of conduct, which requires buy in from industry stakeholders to agree on and implement policies which would otherwise cause commercial disruption.  Industry codes appear to be increasingly finding favour with the SACC as a form of soft enforcement. There is currently a draft Code of Conduct published in relation to the Automotive Aftermarket.

In this regard, the SACC Commissioner noted that the grocery retail sector is a sector which is known around the world for being highly regulated and, according to the Inquiry, is not conducive to the levels of concentration experienced in South Africa. The Commissioner, therefore, remarked that the sector cannot wait for the slow and costly process of regulating conduct through enforcement and should, instead, be remedied through ideally am industry code of conduct and/or regulation.

Asked to comment on the impact of the Code, John Oxenham says that “the timing of the Code is noteworthy in light of the Competition Amendment Act and draft buyer power and price discrimination regulations having been published. Dominant entities involved in the FMCG sector, will likely have to carefully evaluate their trading terms to ensure that they are objectively justifiable not only in light of traditional competition law principles but also public interest related objectives“.

Fellow competition lawyer, Michael-James Currie concurs with Oxenham and suggests that “while rebates can be anti-competitive, there needs to be robust evidence and a clear theory of harm before an anti-competitive finding. This ordinarily requires a case specific assessment based on the facts at hand which may make ‘industry wide’ reforms difficult to monitor and enforce. Likewise, rebates are nor per se anti-competitive and therefore industry wide reforms or blanket thresholds may have unintended consequences and potentially have adverse effects on consumer welfare.”

Oxenham suggests that a “carefully balanced approach must be taken in this regard, although this appears to be recognized by the SACC“.

It is clear from the Report that industry participants will ultimately need to justify and support any alleged pro-competitive effects based on clear and objective evidence.

 

 

 

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ACF, COMESA, ECOWAS, Gambia, Gambia (The), new regime, state aid

ECOWAS creates functional antitrust commission

While the ECOWAS competition regime is not new in and of itself (it was adopted in 2008), the actual operationalization of the ECOWAS Regional Competition Authority (ERCA) is — its inaugural ceremony in took place this past Tuesday in The Gambia, 11 years after its technical launch (although it was established jointly with the adoption of the ECOWAS competition legislation, it remained non-operational for over a decade).  Its mission is to enforce the multi-national body’s Regional Competition Policy Framework (RCPF).

ERCA’s efforts will be supported by the twin launch of the ECOWAS technical committee meeting of national  trade and competition representatives to assist in implementing the RCP, including both its competition/antitrust as well as consumer protection mandates.

ERCA is a specialized, autonomous quasi-judicial body designed to help promote regional economic growth and competitiveness in the ECOWAS common market.

Andreas Stargard, a competition law practitioner with a focus on African antitrust issues, noted that the ECOWAS rules, while not enforced in practice until now, will reflect more of a European approach to competition regulation, as “they include provisions to evaluate and render invalid certain types of governmental support for domestic champion companies and industries, akin to the EU model of ‘state aid’ rules, which do not always form part of antitrust regimes globally.  This makes sense, in our view, in the African context, however, as most domestic economies on the continent have long been subject to state-owned monopoly enterprises and so-called national champions — one need not look further than the various large African state-owned airlines, for example.”

He concluded that two key issues remain to be seen, once ERCA launches its first investigations and brings enforcement actions: “First, with the increasing number of regional enforcers, how will jurisdictional overlaps be resolved, both regional/national, as well as regional/regional, conflict?  Many ECOWAS members are also part of other African multi-national organizations that have some form of competition or consumer protection regulations as part of their mandate, such as the west African monetary union.  Second, what will the be the degree — if any — of ‘public interest’ considerations that may be in play for the 15-member state body’s antitrust enforcement, perhaps copying many of its African sister commissions’ approach…”

Time will tell…

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AAT, meddling, mergers, new regime, Patel, public-interest, South Africa, Uncategorized

Minister Ebrahim Patel will no longer be a Member of Parliament: What does this mean for Competition Policy in South Africa?

According to recent reports, Minister of the Department of Economic Development, Ebrahim Patel, will not be sworn in as a member of Parliament despite initially being listed on the African National Congress’ (ANC) Members of Parliament list.

[see https://www.businesslive.co.za/bd/politics/2019-05-15-ebrahim-patel-and-senzeni-zokwana-fail-to-make-it-back-to-parliament/%5D

Since Cyril Ramaphosa was voted as the ANC’s President, and hence South Africa’s President, there had been increasing speculation regarding where Minister Patel would complement Ramaphosa’s economic policies. With many political commentators initially expected Ramaphosa to relieve Patel of his position as the Minister of Economic Development soon after taking over the presidency reins, it appeared that Patel had convinced Ramaphosa that he was an integral part of the team. Patel even accompanied Ramaphosa as part of the “special economic envoy” on a series of international road shows promoting and encouraging foreign investment in South Africa.

At this stage it is not clear what the reasons are for Patel not forming part of the ANC’s list of Members of Parliament (a prerequisite to serving as a Cabinet Minister unless Patel serves as one of the two non-MP’s allowed to serve in Cabinet) ). Following the national elections on 8 May 2019, however, Ramaphosa has indicated that he is intent on reducing the size of the Cabinet which would necessarily require various government departments and portfolios to be consolidated. It may be that the Department of Economic Development (EDD) is consolidated with the Department of Trade and Industry (DTI). If this were the case, the South African competition authorities would then also fall under the auspices of the DTI and no longer under the EDD. Many of our readers may recall that the competition authorities previously fell under the policy stewardship of the DTI.

While it may be too early to speculate what the ramifications of Patel’s departure could mean for competition policy and enforcement in South Africa, John Oxenham, director at Primerio, says that “Minister Patel was one of the key proponents behind elevating the role of public interest considerations in merger control. The minister’s intervention in numerous transactions, particularly international deals has resulted in public interest conditions, the scope and nature of which, pushed the outer most limits of what is appropriate in competition policy when assessed against international standards”.

Minister Patel’s reputation for engaging in robust opposition to mergers prompted Ab-Inbev directors to engage directly with Patel rather than the Competition Commission in order to secure public interest related conditions which would placate the Minister – all in the hope of ensuring that the transaction sales through the merger control process unchallenged. Which it largely did.

Fellow competition lawyer, Michael-James Currie, says that another key element of Patel’s departure relates to the Competition Amendment Act which was signed into law by President Ramaphosa in February 2019. Currie says that “although the Act has been signed into law, the enforcement of a number of the provisions of the Amendment Act remains unclear. For example, there are draft guidelines published in relation to the “price discrimination” and “buyer power” provisions of the Amendment Act which completely do away with any standard of “adverse effect on competition” and even the “consumer welfare” standard is of no relevance when small, medium or historically disadvantaged persons may be affected. Currie says Patel’s departure may spark a fresh round of debate and submissions in relation to the draft regulations. Submissions which previously appeared to largely be ignored by Patel.”

Oxenham echoes Currie’s sentiments and is of the view that the Amendment Act, which was largely driven by Patel, may ultimately be interpreted and enforced by the competition agencies in a manner which is more consistent with international best practice. Of course, this would depend on who replaces Patel and whether there is a different policy view as to the role of competition law in South Africa by Patel’s successor.

A key concern raised by numerous commentators is that the subjectivity of public interest assessments together with the increasing intervention by the executive to extract non-merger specific public interest related conditions, particularly in foreign transactions, does little to boost South Africa’s image as being open to foreign investment.

While the on-going debate of the role of public interest considerations in merger control will continue well beyond Patel’s tenure as Minister of the EDD, the entire South African competition community will be watching closely Ramaphosa’s final Cabinet announcement as this would likely be the clearest indication of whether we could expect a material policy direction change fin South Africa insofar as competition law enforcement is concerned.

 

 

 

 

 

 

 

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AAT exclusive, merger documentation, mergers, new regime, Nigeria

Plus ça change… Merging parties should continue as before in Nigeria

FCCPA in effect – but not quite, as FCCPC not yet fully operational

As AAT reported previously, the landmark Federal Competition & Consumer Protection Act (FCCPA) that suddenly went into effect in Nigeria earlier this year has not quite been operationalised.  Notably, the agency that is supposed to be tasked with enforcing the FCCPA, the Federal Competition & Consumer Protection Commission (FCCPC) is currently “undergoing construction”, so-to-speak.  An African competition-law practitioner with Primerio notes that “apparently there has been some political wrangling around the constituents of the FCCPC’s Board,” which is unsurprising, to say the least.  One might be inclined to say, Plus ça change, plus c’est la même chose…, as politics has always played a major role in Nigerian enforcement.

That said, the AAT editor does understand that, at a minimum, the Director General of the existing Consumer Protection Council, Babatunde Irukera, will serve in some capacity with the FCCPC — it is unknown whether the remaining 5 CPC commissioners will likewise continue to act for the FCCPC or not.  (Screenshots of his Twitter account below, indicating a full-blown transition from the CPC to the FCCPC).

One indication of the lack of the FCCPC’s operational status when it comes to mergers is that its web site (presumably soon to be http://fccpc.gov.ng/) still yields an error message.  Another is a recent joint statement issued by the SEC and its yet-to-be-established counterpart, which provides in relevant part as follows:

In order to ensure continuing and seamless commercial transactions and market operations, SEC and FCCPC have come to a mutual understanding with respect to these transactions within the transition period, which pursuant to this notice commences immediately, and shall remain in force until otherwise discontinued by further Advisory or Guidance.

During this transition period, starting today, May 3rd, 2019:

  • All notifications or fillings will be reviewed under existing SEC Regulations, Guidelines and Fees.
  • Notifications will be filed at FCCPC OR SEC/FCCPC Interim Joint Merger Review Desk at SEC.
  • All applicable fees will be paid to the FCCPC.
  • SEC and FCCPC will jointly review notifications and FCCPC will convey decisions with respect to the notifications.

Notifications previously received by SEC, but yet to be decided, will be subject to the interim process above and FCCPC will convey the decisions accordingly.

We will update AAT’s readership with new intel as soon as it becomes available.  For the time being, the status quo remains largely intact.  Says Andreas Stargard, an antitrust practitioner:

For now, merger parties should proceed as before, namely: analyse your transaction under the Investment & Securities Act (ISA), and file with either the SEC or the FCCPC — some advise to file with the SEC for the time being, if applicable, as the lack of full operational status of the FCCPC does not bode well for procedural thoroughness or guaranteed document retention in this early phase.  That said, if your transaction has a longer time horizon, with closing potentially several months down the road, your counsel should take into account the very real possibility of there being a notification under the FCCPA, even if none was required under the ISA.  I expect the FCCPC to set merger notification thresholds very soon.”

Osayomwanbor Bob Enofe, an academic and proponent of the Nigerian competition law notes, however, that the current interim arrangement “only suggests to me that the SEC currently leads, concerning merger enforcement in Nigeria, rather than clarifying that the FCCPC is not existent (especially given the transitional period established by the two Commissions).”  He continues: “The erstwhile CPC might be revamped to reflect a more competition-law cognisant staff base,” noting that “various competition law offences now exist in Nigeria,” of which cartel conduct is punishable not only my monetary fines but also criminally under the FCCPA.

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AAT exclusive, Appellate Review, BRICS, collusion, South Africa, Uncategorized

South Africa: Trilogy of Rulings Against the Competition Commission Demonstrates the Importance of Following Proper Procedure

In three recent decisions, two by the Competition Tribunal and one by the Competition Appeal Court, a number of important procedural flaws were exposed in the manner in which certain complaints were initiated against various respondents. The Competition Appeal Court even made an adverse costs order against the Competition Commission in one of the cases. We discuss these important decisions below.

Misjoinder of Parent Company

The South African Competition Commission (“SACC”) had recently alleged that Power Construction (West Cape) Pty Ltd (“West Cape”) and Haw and Inglis (Pty) Ltd (“H&I”) colluded in respect of a tender submitted to South African National Roads Agency (SANRAL). The tender was in respect of maintenance services. The SACC alleges both parties had contravened section 4(1)(b)(ii) and (iii) of the South African Competition Act (the “Act”).  The parent company of West Cape, Power Construction (Pty) Ltd (“Power Construction”) was cited as a respondent on the basis that it would be liable to pay the administrative penalty. Power Construction, had engaged in “with prejudice” settlement negotiations.

The SACC refused the proffer and informed Power Construction that after having  considered the settlement proceed that it was clear that Power Construction and West Cape (being the subsidiary of Power Construction) shared a majority of their respective directors which, according to the SACC, was sufficient to implicate Power Construction in the alleged collusive conduct. Accordingly, the SACC alleged that any Administrative Should be calculated using the higher annual turnover figures of Power Construction.

Power Construction disputed this, arguing that it was never alleged by the SACC that Power Construction had contravened the Act. The SACC then opted to amend its referral to include Power Construction. On application to the South African Competition Tribunal (“Tribunal”), the Tribunal dismissed the proposed amendment on the basis that the SACC had failed to provide any material evidence to establish a prime facia case in favour the relevant amendment, stating that the burden remains on the applicant to prove that it is deserving of the amendment by putting sufficient factual allegations before the Tribunal.

In conclusion, the Tribunal also confirmed that the amendment could regardless have been rendered excipiable based on prescription. In this matter, the alleged conduct ceased more than three years prior to the Commission becoming aware of the conduct.

Prescription

In a further case, namely the Competition Commission and Pickfords Removals SA, regarding the interpretation of section 67(1) of the Act (namely that dealing with prescription), the Competition Appeal Court (“CAC”) was very recently called to decide on the correct date for the running of prescription in terms of section 67(1) of the Act.

The SACC (being the appellant in the matter), brought an appeal to the CAC after the Tribunal held that the complaint initiated by the SACC was time barred in terms of section 67 of the Act.

The SACC disputed this and submitted that prescription in terms of section 67 of the Act should only commence from the date on which the Commissioner or Complainant acquired knowledge of the prohibited practice and, alternatively, that the Tribunal has a discretion to condone non-compliance with this 3-year time period. The latter issue was central to the dispute.

The question was further complicated by the fact that the SACC filed two compliant initiations against the respondents. The SACC submitted that the so called ‘second initiation’ was merely an amendment to the first initiation. So the SACC argued, even if the time period had begun running when the practice had stopped, the time period in question would still not have expired.

In this regard, the CAC held that the SACC has the power to amend a compliant initiation and that it must be taken at its word on whether a second initiation is an amendment to the first or a separate and distinct complaint initiation. This is so, particularly where both complaint initiations concern the same conduct, in the same market and where the first complaint initiation states that the conduct is ongoing.

In relation to the issue of prescription, the CAC held that section 67 cannot be equated with section 12 of the South African Prescription Act which provides for prescription to commence  from the moment on which the “creditor acquires knowledge of the identity of the debtor and the relevant fact from which the debt arises”. Section 49B(1) of the Prescription Act provides for a much lower threshold, being the ‘reasonable suspicion of the existence of a prohibited practice’.

Accordingly, it must be accepted that the time bar in section 67 is intended to be a limitation of the Commissioner’s wide ranging powers (to prevent investigation into historic matters which are no longer in the public interest) and that the knowledge requirement contained in the Prescription Act cannot be read into this limitation as argued by the SACC. It follows then, based on this reasoning that there can similarly be no condonation by the Tribunal or the CAC on these matters.

For completeness sake, the CAC confirmed the general understanding that, for purposes of section 67, the alleged prohibited conduct will be deemed to have ceased on the date on which the respondent last benefited from the prohibited conduct (e.g. the date on which it last received payment under the agreement). In this regard, the Tribunal initially ordered the parties to produce evidence of the date on which the last payment was received. The CAC deemed this appropriate and opted not to interfere with this order.

Condonation and Costs

The Tribunal was also called recently upon to decide two interlocutory applications, the first being a condonation application brought by the SACC in terms of section 54 of the Act for the late filing of its revised trial bundle (containing an additional 1221 pages), which was opposed by the respondents (Much Asphalt and Roadmac Surfing) and finally a counter application for costs against the SACC.

In terms of the condonation application, the SACC sought to revise the trial bundle on the basis that the revised trial bundle contained documents which were essential to its case (which were inadvertently omitted from its initial bundle) and had been re-organized in a manner that was less burdensome for all the parties involved. In support, the SACC argued, that the respondents wouldn’t be prejudiced by the late filing as the extra documents had already been discovered.

The Tribunal confirmed that the test for condonation must be ‘good cause shown’ by the SACC which should be assessed on case by case basis. The Tribunal held that the SACC had not shown good cause in this matter as it had ample time to furnish the respondents with the revised bundle and further found that filing the revised bundle at the 11th hour was unnecessarily prejudicial to the respondents.

south_africaIn terms of applications for costs, the respondents sought an order for wasted costs in relation to the postponement due to the late furnishing of the bundle as well as the cost of defending the application for condonation. Importantly it should be borne in mind that the Tribunal does not as a matter of course make cost orders against the SACC.  In this regard, the Constitutional Court has previously held that the Tribunal does not have the powers to make adverse cost orders against the SACC, even where the SACC has abused its powers. The general rule is that the parties pay their own costs. The Tribunal may only make cost orders against third parties and, accordingly, dismissed the respondent’s application for costs.

John Oxenham, director of Primerio says that these cases demonstrate the objectivity and impartiality of the adjudicative bodies which is an encouraging sign for respondents who do not believe that the case brought against them is procedural or substantively fair.

Fellow competition lawyer, Michael-James Currie says it is unfortunate that only the Competition Appeal Court makes adverse costs rulings and that the Competition Tribunal is precluded from doing so. Adverse costs ruling against the SACC should be reserved for matters in which there was clear negligence in the manner in which a case was investigated, pleaded or prosecuted. Such costs orders would, however, go a long way in ensuring that parties and in particular the prosecution agency, does not refer cases  to the adjudicative bodies (which have limited prospects of success) with no downside risk in losing the case.

Oxenham shares Currie‘s sentiment and suggests that adverse costs orders against the Commission will likely result in a more efficient enforcement regime as cases will be settled more expeditiously and respondents will be more reluctant to oppose the Competition Commission’s complaints with the knowledge that the SACC is confident in its case and prepared to accept the risk of an adverse costs order.

[The Editor wishes to thank Charl van der Merwe for his contribution to this article]

 

 

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