Enforcement

Complaints procedure for private parties

Is there a procedure whereby private parties can complain to the authority responsible for antitrust enforcement about alleged unlawful vertical restraints?

Yes. The party to a vertical agreement, or third parties, can file a complaint with the Commission, which then has one year to investigate this complaint (although this period may be extended with consent from the complainant by up to 12 months at a time). At the end of the investigation, the Commission must either issue a certificate of non-referral or refer the complaint for adjudication by the Tribunal.

Regulatory enforcement

How frequently is antitrust law applied to vertical restraints by the authority responsible for antitrust enforcement? What are the main enforcement priorities regarding vertical restraints?

The Commission enforces the outright prohibition on minimum resale price maintenance in section 5(2) of the Act relatively infrequently, and the Tribunal has confirmed relatively few consent orders relating to this practice to date. However, the Tribunal has emphasised in a decision involving a consent order in relation to SBS Household Appliances t/a SMEG that despite the global trend towards considering minimum resale price maintenance as justifiable in certain circumstances, this practice is still prohibited outright in South Africa and there is no intention to amend the Act at present.

Very few cases involving a contravention of the rule of reason prohibition in section 5(1) of the Act have been adjudicated by the Tribunal. There is currently no penalty imposed for a first-time contravention of section 5 of the Act and this has apparently impacted on the Commission’s appetite to pursue these complaints to date. Note, however, that an amendment to the Act, which was passed by Parliament in December 2018 (but which has not yet been signed into law by the president), will enable the imposition of a fine for even a first-time contravention of section 5(1). Also, many cases involving vertical restrictions in agreements with a dominant firm are dealt with as an abuse of dominance, rather than a contravention of section 5 of the Act. The Commission remains more focused on cartels and far more complaints involving restrictive horizontal practices (price-fixing, market allocation and collusive tendering by competitors) are investigated and referred for adjudication by the Tribunal.

What are the consequences of an infringement of antitrust law for the validity or enforceability of a contract containing prohibited vertical restraints?

The Tribunal can declare all or part of an agreement that contravenes section 5 of the Act to be invalid. However, where it is possible to sever the offending clauses from the agreement, the rest of the agreement can remain valid.

May the authority responsible for antitrust enforcement directly impose penalties or must it petition another entity? What sanctions and remedies can the authorities impose? What notable sanctions or remedies have been imposed? Can any trends be identified in this regard?

After investigating a complaint concerning a contravention of section 5 of the Act, the Commission may refer the complaint for adjudication by the Competition Tribunal, which can currently impose an administrative penalty for a first-time contravention of section 5(2), and a second-time contravention of section 5(1), of up to 10 per cent of the turnover of the parties to the agreement. Note, however, that an amendment to the Act, which was passed by Parliament in December 2018 (but which has not yet been signed into law by the president), will enable the imposition of a fine for even a first-time contravention of section 5(1).

Significant penalties for contraventions of section 5(2) have been imposed on companies in South Africa to date: Pentel South Africa (Pty) Ltd (2.8 million rand); Daimler Chrysler South Africa (8 million rand); and General Motors South Africa (12 million rand).

Investigative powers of the authority

What investigative powers does the authority responsible for antitrust enforcement have when enforcing the prohibition of vertical restraints?

The Commission’s powers when conducting an investigation are set out in Chapter 5 of the Act, and include the power to conduct searches of business premises with or without a warrant (sections 46, 47 and 48) and summons individuals for questioning under oath (section 49A). The Commission does demand information from suppliers domiciled outside South Africa, although its ability to enforce compliance is yet to be considered by the Tribunal or any South African court.

Private enforcement

To what extent is private enforcement possible? Can non-parties to agreements containing vertical restraints obtain declaratory judgments or injunctions and bring damages claims? Can the parties to agreements themselves bring damages claims? What remedies are available? How long should a company expect a private enforcement action to take?

A party that sustains a loss as a result of a restrictive vertical agreement can claim damages in the South African High or Magistrates courts, as envisaged in section 65 of the Act. However, a finding by the Tribunal that section 5 of the Act has been contravened is a prerequisite for a claim of this nature. To date, no claims for damages arising from contraventions of this section of the Act have been decided by the civil courts.