The procedural boundaries of South African competition law have been tightened in the face of recent landmark rulings delivered by the Competition Appeal Court (the "CAC") and Supreme Court of Appeal (the "SCA"). Their findings demonstrate a strong commitment to ensuring due process in competition proceedings with particular reference to the manner in which complaints relating to prohibited practices in terms of the Competition Act are initiated, investigated, referred and prosecuted by the Competition Commission (the “Commission”) as well as adjudicated by the Competition Tribunal (the “Tribunal”). The rulings sent a strong message to the Commission and the Tribunal that the Competition Act has to be interpreted and applied in a manner that is consistent with the Constitution and re-confirmed the importance of the rule of law, the democratic values of dignity and freedom, the right to privacy, the right to a fair trial and just administrative action.
The first of these rulings was delivered in 2010 when the SCA dismissed complaints initiated by the Commissioner and referrals to the Tribunal against Woodlands Dairy and Milkwood Dairy on the basis that the complaints had not been properly initiated and investigated (the “Woodlands decision”). The SCA criticised the Commission's complaint investigation procedures and its generalist approach to the exercise of its enforcement function.
The Woodlands decision impacted on various other matters before the Tribunal. In the Yara decision, the CAC again set aside the referral by the Commission on the basis that it was procedurally unsound. The CAC clarified that the initiation, investigation and referral by the Commission of complaints must relate to specific conduct of properly identified parties.
Following this trend of strict procedural compliance, in the Loungefoam decision, delivered on 6 May 2011, the CAC provided guidance as to the proper procedure to follow when the Commission wishes to amplify or widen the scope of a referral to the Tribunal. The correct methodology as enunciated by the CAC is dealt with below. The CAC commented that the Competition Act does not offer “alternative routes” or “short cuts” with respect to the complaint statutory scheme.
This legal approach has found disfavour with the Tribunal and Commission. Their shared sentiment is that a heavy reliance on "procedural challenges" leads to a frustration of the law. However, the CAC pointed out that the “charge of formalism was unfounded” and stated that the rulings do not restrict the Commission’s powers, but rather protect the rights of those under investigation against the abuse of such power.
The CAC has made clear that respondents must be afforded clarity as to the scope of the allegations made against them and that the Commission’s investigations cannot be general or “fishing expeditions”. Rather, investigations must be specific as regards the alleged conduct and those allegedly involved therein. Further, the SCA has ruled that “a suspicion against some cannot be used as a springboard to investigate all and sundry.” This does not mean that the Commission may not during the course of a properly initiated investigation obtain information about other firms involved in the transgressions under investigation or about other transgressions. The proper use of the information so obtained is, however, to initiate another fresh complaint and investigation.
Collectively, the above decisions bring greater certainty to the Commission, Tribunal, and the business and legal communities. As regards the proper procedures to be followed in complaint initiation, investigation and referral, the guidance given by the cases is summarised below:
When a complaint is initiated by the Commissioner, the Commissioner must be in possession of information concerning an alleged practice that gives rise to a reasonable suspicion of the existence of a prohibited practice by one or more firms. Importantly, the complaint initiated should be expressed with sufficient clarity and must refer to specific conduct of specific firms and cannot be general against the industry as a whole for general conduct or outcomes.
The Commission’s investigative powers are not general in nature. The investigation must be executed in relation to the alleged conduct as set out in the initiating documents as well as to the parties as cited therein.
The subject(s) and object(s) of the referral by the Commission to the Tribunal must be the same as set out in the complaint and subsequently investigated.
In the event that information shows that there are contraventions beyond the scope of the original complaint and/or there are further parties suspected of the alleged anti-competitive conduct, the correct procedure would be to initiate another fresh complaint and investigation. The original complaint cannot be amended to encompass an additional complaint nor can parties be added to already instituted proceedings, without following the requirements of the Competition Act.