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[2013] ZASCA 107
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Competition Commission v Yara (South Africa ) (Pty) Ltd and Others (784/12) [2013] ZASCA 107; [2013] 4 All SA 302 (SCA); 2013 (6) SA 404 (SCA); [2013] 2 CPLR 351 (SCA) (13 September 2013)
THE SUPREME COURT OF APPEAL OF
SOUTH AFRICA
JUDGMENT
REPORTABLE
Case No: 784/12
In
the matter between:
COMPETITION COMMISSION
........................................................................
APPELLANT
v
YARA
(SOUTH AFRICA)(PTY) LTD
.................................................
FIRST
RESPONDENT
OMNIA
FERTILIZER LTD
............................................................
SECOND
RESPONDENT
SASOL
CHEMICAL INDUSTRIES LTD
...........................................
THIRD
RESPONDENT
Neutral citation:
Competition
Commission v Yara (SA)(Pty) Ltd
(784/12)
[2013] ZASCA 107
(13
September 2013).
Coram:
Brand, Nugent, Malan,
Petse and Saldulker JJA
Heard:
19 August 2013
Delivered: 13 September 2013
Summary:
Competition Act 89 of 1998
– initiation of complaint by Commissioner in terms of
s 49B(1)
can be informal and even tacit – where referral to the Tribunal
embodies new complaints not covered by complaint submitted
by a
complainant in terms of
s 49B(2)(b)
– the enquiry is
whether new complaints were as a fact initiated by the Commission.
___________________________________________________________________
ORDER
___________________________________________________________________
On appeal from:
The Competition
Appeal Court (Dambuza JA; Davis JP and Mailula JA concurring sitting
as court of appeal from the Competition Tribunal):
1 The appeal is upheld with costs,
including the costs of two counsel, to be paid by the second
respondent.
2 The order of the Competition Appeal
Court is set aside and replaced with the following:
‘
The appeal
is dismissed and the appellants are ordered, jointly and severally,
to pay the respondent’s costs, including the
costs of two
counsel.’
___________________________________________________________________
JUDGMENT
___________________________________________________________________
BRAND JA
(NUGENT, MALAN,
PETSE AND SALDULKER JJA concurring):
[1] This is an appeal against an order
of the Competition Appeal Court (the CAC) which overturned an order
of the Competition Tribunal
(the Tribunal). Proceedings commenced
with an application by the Competition Commission (the Commission) to
amend its referral
of a complaint to the Tribunal against the three
respondents. At the same time the second respondent brought a
counter-application
to have that referral declared invalid and set
aside. The Tribunal granted the application to amend and dismissed
the counter-application.
The first and second respondents
successfully appealed to the CAC against both facets of the
Tribunal’s order. What the appellant
effectively seeks in this
appeal is a reinstatement of the Tribunal’s order. The appeal
is with the leave of the CAC, following
upon an unsuccessful
application by the Commission for direct access to the Constitutional
Court. The judgment of the Constitutional
Court has since been
reported sub nom
Competition Commission v Yara South Africa (Pty)
Ltd
2012 (9) BCLR 923
(CC).
[2] The appellant is the Commission.
The first respondent is Yara (South Africa)(Pty) Ltd (Yara). The
second respondent is Omnia
Fertiliser Ltd (Omnia), while the third
respondent is Sasol Chemical Industries Limited (Sasol). Due to
Yara’s recent liquidation,
it did not take part in the appeal
proceedings. For reasons that will soon become apparent, Sasol
neither supported nor opposed
the appeal. This left Omnia as the only
persisting respondent.
[3] The issue to be determined is in
essence whether a particular complaint referral to the Tribunal by
the Commission, and an amendment
to that referral, complied with the
requirements of the Competition Act 89 of 1998 (the Act). The outcome
turns in the main on
an interpretation of s 49B and s 50 of
the Act. By the nature of things, the provisions of these two
sections will require
detailed examination in due course. However,
suffice it to say by way of introduction, that s 49B provides
for two ways in
which complaints against alleged prohibited practices
can start, ie: the Commission may initiate a complaint in terms of
s 49B(1),
or a private person – referred to as the
complainant – may submit a complaint to the Commission in terms
of s 49B(2)
(b)
. In terms of s 50(1) the Commission
may refer its own complaint to the Tribunal at any time after
initiating. With regard
to complaints submitted by complainants, the
Commission does not have the same freedom in its referral. In terms
of s 50(2)
it must within one year after the submission, either
refer the complaint to the Tribunal – if it determines that a
prohibited
practice has been established – or issue a notice of
non-referral to the complainant. If it does neither, it is deemed by
s 50(5) to have issued a notice of non-referral. In either event
the complainant itself may then refer the complaint to the
Tribunal.
[4] It appears that Omnia would have
had no objection if, on the facts of this case, the Commission had
initiated and referred its
own complaint to the Tribunal via the
s 49B(1) and s 50(1) route. The nub of Omnia’s case
is that this is not what
the Commission purported to do. What the
Commission purported to do, so Omnia contended, was to refer the
complaint submitted to
it in terms of s 49B(2)
(b)
by two
entities, Nutri-Flo CC, and Nutri-Fertiliser CC – referred to,
collectively, for present purposes, as ‘Nutri-Flo’
–
to the Tribunal in terms of s 50(2)
(a)
. When the
Commission subsequently brought an application to amend its referral,
it was opposed by Omnia. In addition, Omnia brought
a
counter-application for the referral to be set aside on the basis
that it was not covered by Nutri-Flo’s complaint and
that the
position was exacerbated by the amendments sought. The Tribunal did
not uphold Omnia’s contentions, but the CAC
did. The question
whether we agree with the one rather than the other falls to be
determined in the light of the background facts.
[5] Nutri-Flo blends, distributes and
supplies fertiliser in the province of KwaZulu-Natal. On 3 November
2003 it submitted a complaint
to the Commission in terms of
s 49B(2)
(b)
in the prescribed form, CC1, dated 30 October
2003. At around the same time Nutri-Flo lodged an urgent application
for interim
relief with the Tribunal in terms of s 49C. The CC1
form was accompanied by the same affidavit which had earlier been
filed
in support of Nutri-Flo’s notice of motion seeking
interim relief. The CC1 form stated that the complaint was one
concerning
two identified companies in the Sasol group –
collectively referred to as Sasol – and no one else. In the
part of the
CC1 form headed ‘description of complaints’
it is stated that ‘[t]he respondents (Sasol) have imposed price
increases
in respect of raw materials it supplies to [Nutri-Flo] to
such an extent as to render its continued operation unviable and to
constitute
various prohibited practices as amplified in the affidavit
attached hereto’. In the accompanying affidavit, as in the
notice
of motion which it accompanied earlier, three parties were
cited as respondents, namely, Sasol, Yara – known at the time
as Kynoch – and Omnia – known at the time as Nitrochem.
The affidavit specifically stated, however, that Yara and Omnia
‘have
been joined in this application because of their legal interest in
the matter’ and that ‘no relief is sought
against’
them.
[6] The deponent to the affidavit was
a member of Nutri-Flo, Mr William Lyle. He started out by explaining
that the three respondents
were all involved in the manufacture and
supply of fertiliser and that Yara and Omnia were the direct
competitors of Nutri-Flo
in the downstream market of KwaZulu-Natal.
But the main focus of the attack in the affidavit was clearly aimed
at Sasol as Nutri-Flo’s
supplier of raw materials. In broad
outline the attack rested on the following allegations.
a) Two of the basic elements of
fertilisers are Nitrogen and Potassium. The main sources of Nitrogen
are ammonia and ammonia derivatives
like Ammonium Nitrate Solution
(ANS) and Limestone Ammonium Nitrate (LAN). Sasol manufactures
ammonia as a by-product of the coal
to oil process. In fact, it is
the only producer of ammonia in South Africa. Moreover, because of
the physical characteristics
of ammonia, its importation is not
viable. Consequently, Sasol is the only source of ammonia and ammonia
derivatives as raw materials
in this country.
b) Ammonia derivatives can often, but
not always, be replaced with Urea since both are nitrogenous
fertilizers. But the chemical
manufacture of Urea is no longer
undertaken in this country. It has to be imported from elsewhere. The
same goes for the main source
of Potassium which is Potassium
Chloride (KCL). It does not occur naturally in South Africa. In
consequence it is also imported.
(c) With regard to Urea and KCL, Lyle
then went on to say:
‘
KCL
and Urea are imported by a cartel (“the cartel”), of
which Sasol is a member and which cartel collusively controls
the
price at which these products are sold in the local market. The other
members of the cartel are the third respondent [Yara]
and fourth
respondent [Omnia].’
And:
‘
.
. . [T]he importation of [Urea and KCL] by the cartel, which
exclusively controls the prices, collusively, of these products in
South Africa, gives Sasol considerable market power in relation to
these products.
The
collusive dealings between the members of the cartel to fix the price
of Urea and KCL is evident from what is stated herein.
Moreover,
Sasol has exercised its market power in relation to Urea and KCL to
impose an insurmountable barrier to Nutri-Flo importing
Urea and KCL
directly for its use.
This
barrier is Sasol’s threat to Nutri-Flo of a refusal to supply
Nutri-Flo with ANS and LAN if it continued to import Urea
and KCL
from the world market.’
(d) This led Lyle to conclude that
Sasol was not only dominant in the markets for the supply of ANS and
LAN, but also in the markets
for the supply of Urea and KCL. These
allegations clearly foreshadowed Nutri-Flo’s complaints against
Sasol, in terms of
s 8 and s 9 of the Act, that were to
follow.
(e) Under the heading ‘[t]he new
complaint against Sasol’ Lyle set out the circumstances that
had caused Nutri-Flo to
submit the complaint and to seek urgent
relief by way of an interim interdict against Sasol. According to
this exposition Nutri-Flo’s
actions were triggered, in essence,
by substantial increases of Sasol’s prices to Nutri-Flo which
took effect on 1 September
2003. The imposition of these new prices,
so Lyle contended, constituted an abuse of dominance by Sasol in
contravention of the
Act, aimed at intimidating Nutri-Flo into
abandoning an earlier complaint against Sasol and driving Nutri-Flo
out of the market.
(f) Under the heading ‘[p]rohibited
practices’ Lyle then contended that Sasol’s
anti-competitive conduct in relation,
inter alia, to the September
2003 increases, resulted in Sasol committing three prohibited
practices, in contravention of ss 8
(a)
, 8
(c)
and
9(1)
(c)
of the Act, namely, exclusionary pricing, excessive
pricing and discriminatory pricing.
[7] The Commission investigated
Nutri-Flo’s initiating complaint and on 4 May 2005 referred a
complaint against Sasol, Omnia
and Yara to the Tribunal. The referral
contained complaints of exclusionary and excessive pricing by Sasol
in contravention of
ss 8
(a)
and 8
(c)
of the Act.
Those are irrelevant for present purposes. In addition, the complaint
referral alleged that Sasol, Yara and Omnia had
engaged in collusive
dealings in contravention of s 4(1)
(b)
, alternatively
s 4(1)
(a)
of the Act, inter alia, by engaging in market
division, price fixing with regard to KEL and Urea and bid rigging in
respect of
exports with regard to ammonia derivative products.
[8] On 18 May 2009 the Commission and
Sasol entered into a consent and settlement agreement. Sasol admitted
that it had acted in
contravention of s 4(1)(b) of the Act by
agreeing with Yara and Omnia on various pricing formulae for, and
discounts applicable
to, the products that it, Yara and Omnia,
manufactured and/or supplied and by making further collusive
arrangements in certain
provinces. Pursuant to the agreement, Sasol
provided the Commission with details on how these agreements were
reached and enforced.
In addition, it undertook to cooperate with the
Commission in prosecuting Yara and Omnia.
[9] The Commission, together with
Sasol, applied to have the consent and settlement agreement made an
order of the Tribunal. Despite
Omnia’s opposition, the
agreement was confirmed as an order of the Tribunal on 20 May 2009.
In terms of the consent and settlement
agreement Sasol paid to the
Commission an administrative penalty of R250 680 000.
Subsequently, the Commission included
details of the information
Sasol had provided to it in its witness statements and further
particulars provided to Yara and Omnia
at their request. When Yara
and Omnia both indicated that they considered the information
provided by Sasol to go beyond the scope
of the complaint referral,
the Commission gave notice of its intention to amend its referral so
as to include particulars of collusive
meetings disclosed by Sasol in
support of the existing complaints. Yara and Omnia opposed the
amendment. This led to the Commission’s
application for the
amendment of the referral and to the counter-application by Omnia to
have the referral set aside on the basis
that it went beyond the
scope of Nutri-Flo’s initiating complaint. As we now know, the
Tribunal allowed the amendment and
refused the counter-application
while the CAC went the other way on appeal.
[10] A proper understanding of the
CAC’s judgment requires a more detailed exposition of s 49B,
s 50 and s 51
of the Act. In relevant part they provide:
‘
49B
Initiating complaint
(1)
The Commissioner may initiate a complaint against an alleged
prohibited practice.
(2)
Any person may –
(a)
submit information concerning an
alleged prohibited practice to the Competition Commission, in any
manner or form; or
(b)
submit a complaint against an
alleged prohibited practice to the Competition Commission in the
prescribed form.
(3)
Upon initiating or receiving a complaint in terms of this section,
the Commissioner must direct an inspector to investigate
the
complaint as quickly as practicable.
(4)
. . .
50
Outcome of complaint
(1)
At any time after initiating a complaint, the Competition Commission
may refer the complaint to the Competition Tribunal.
(2)
Within one year after a complaint was submitted to it, the
Commissioner must –
(a)
subject to subsection (3), refer
the complaint to the Competition Tribunal, if it determines that a
prohibited practice has been
established; or
(b)
in any other case, issue a
notice of non-referral to the complainant in the prescribed form.
(3)
When the Competition Commission refers a complaint to the Competition
Tribunal in terms of subsection (2)
(a)
,
it
(a)
may –
(i)
refer all the particulars of the complaint as submitted by the
complainant;
(ii)
refer only some of the particulars of the complaint as submitted by
the complainant; or
(iii)
add particulars to the complaint as submitted by the complainant; and
(b)
must issue a notice
of non-referral as contemplated in subsection (2)
(b)
in respect of any particulars of
the complaint not referred to the Competition Tribunal.
(4)
In a particular case –
(a)
the Competition Commission and
the complainant may agree to extend the period allowed in subsection
(2); or
(b)
on application by the
Competition Commission made before the end of the period contemplated
in paragraph
(a)
,
the Competition Tribunal may extend that period.
(5)
If the Competition Commission has not referred a complaint to the
Competition Tribunal, or issued a notice of non-referral,
within the
time contemplated in subsection (2) of the extended period
contemplated in subsection (4), the Commission must be regarded
as
having issued a notice of non-referral on the expiry of the relevant
period.
51
Referral to Competition Tribunal
(1)
If the Competition Commission issues a notice of non-referral in
response to a complaint, the complainant may refer the complaint
directly to the Competition Tribunal, subject to its rules of
procedure.
(2)
A referral to the Competition Tribunal, whether by the Competition
Commission in terms of section 50 (1), or by a complainant
in terms
of subsection (1), must be in the prescribed form.’
[11] In upholding the appeal by Yara
and Omnia, the CAC proceeded from the premise developed in its own
jurisprudence over a series
of cases, and designated by counsel for
the Commission as ‘the referral rule’ in the present
case. For lack of a more
appropriate label and in the interest of
conciseness I propose to adopt the same terminology. What the
referral rule requires in
its original form is, in short, that the
referral to the Tribunal must correspond and may not go wider than
the complaint submitted
by the complainant or initiated by the
Commission. If it does, the referral falls to be set aside. In this
case the CAC took an
even stricter approach by holding that, absent
any initiation of a complaint by the Commission itself, it may only
refer to the
Tribunal those prohibited practices which the
complainant intended to constitute distinct complaints. Writing for
the CAC Dumbuza
JA illustrated this point by the following postulate
(par 35):
‘
For
example, information relevant to a s 8 case against X may point
to a s 4 contravention by X, Y and Z. However, if
the
information is supplied by the complainant solely in support of the
s 8 case and, in circumstances where the private party
did not
signal an intention also to be a complainant in respect of a s 4
case, the submission of the information does not
constitute the
initiation of a s 4 complaint.’
[12] In applying the referral rule
thus extended the CAC concluded, firstly, that the complaint by
Nutri-Flo was aimed exclusively
at Sasol and was never intended as a
complaint against Yara and Omnia at all. Secondly, and in any event,
so the CAC held, the
complaints of prohibited practices against Yara
and Omnia that were referred to the Tribunal went wider than the
Nutri-Flo complaint,
from which it followed that the referral could
not stand.
[13] The Commission’s contention
on appeal involved a challenge firstly to the extension of the
referral rule by the CAC to
include the intent of the complainant,
and secondly against the referral rule in its original form. These
challenges direct the
focus to decisions of the CAC in which the
referral rule has its origin. One of these appears to be
Glaxo
Wellcome (Pty) Ltd v National Association of Pharmaceutical
Wholesalers
15/CAC/Feb02 (21 October 2002).
Glaxo
concerned
the referral of a complaint by the complainant itself pursuant to
s 51(1) after a deemed non-referral by the Commission
as
contemplated in s 50(5). The respondents in the case objected to
the referral on the basis that it did not represent the
complaints
initially submitted complaint to the Commission in terms of s
49B(2)
(b)
. In upholding the objection, the CAC pointed out
that although the Act provides for a blend of public and private
prosecutions
of prohibited practices, the Commission is clearly the
legislature’s investigator and prosecutor of first choice (para
26).
Only after it has investigated a complaint and decided not to
prosecute may the private complainant do so. In conformance with this
scheme, the Act does not allow for a complainant to bypass the
Commission by holding back some of its complaints, get a non-referral
and then add to the complaint that which the Commission was never
told (see paras 26-28 of the judgment). In this light, so the
CAC
held in
Glaxo
(at para 33):
‘
The
proper approach is to determine first what conduct is alleged in the
complaint and what prohibited practices such conduct may
be said to
invoke or be rationally connected to. Then, consideration is given to
the referral to see whether the conduct there
alleged is
substantially the same.’
[14] The extension of the referral
rule to include the intention on the part of the complainant to
complain against a prohibited
practice by the respondent appears to
have its origin in the decision of the CAC in
Clover Industries
Ltd v The Competition Commission
78/CAC/1 Jul 08 (12 November
2008). In this case the Commission referred a complaint against
Clover and others to the Tribunal.
Clover and its co-respondents
objected to the referral on the basis that it derived from a
complaint submitted to the Commission
by a dairy farmer, Mrs
Malherbe, in terms of s 49B(2)
(b)
; that the time period
of one year provided for in s 50(2) had lapsed since Mrs
Malherbe had submitted a complaint; and that
a referral of her
complaint was thus time barred by the section. The Commission’s
response was a denial that it acted in
terms of s 50(2). The
complaint referred, so it contended, did not derive from a complaint
submitted by Mrs Malherbe; it was
a complaint initiated by the
Commission in terms of s 49B(1) on information provided to it by
Mrs Malherbe in terms of s 49B(2)
(a)
; in consequence the
referral was in terms of s 50(1) which, unlike s 50(2),
contains no time bar.
[15] In support of their objection
Clover and its correspondents relied on
Glaxo
for the
proposition that the Act did not require an exact correspondence
between the complaint submitted by Mrs Malherbe and the
one
formulated in the referral, as long as the conduct complained of in
the former and the latter is essentially the same. The
CAC’s
answer to this argument was that, on a proper interpretation of Mrs
Malherbe’s letter, she did not intend to
submit any complaint
at all. In this light, so the CAC held (in para 11),
Glaxo
was
distinguishable on the facts ‘in that irrespective of the
manner and the language in which the complaint served before
the
Commission, the party who completed the document in the Glaxo case
was clearly intent on being a complainant and hence a party
to the
litigation’. Further (also in para 11), the CAC found that
‘[a]t best Mrs Malherbe’s letter can only be
interpreted
as an articulation of a grievance alternatively a submission of
information’.
[16] In applying these authorities I
agree with the factual finding of the CAC that, on a proper
interpretation of the complaint
submitted by Nutri-Flo, it was aimed
exclusively at Sasol. It was never aimed at Omnia. In other words,
Nutri-Flo never intended
to complain against any prohibited practice
by Omnia. At the same time I do not believe that it is the kind of
intent that
Clover
had in mind. All
Clover
said was
that s 49B(2) draws a clear distinction between the submission
of information, on the one hand, and the submission
of a complaint by
a private person, on the other, and that a feature distinguishing the
two would be the intent of the private
person: did he or she intend
to submit a complaint or was the intention merely to submit
information? Once it is determined that
what was submitted was indeed
intended to be a complaint, it makes no difference at whom the
complaint was aimed. If what was submitted
amounts to a complaint
that A and B were involved in an agreement of price fixing, or in a
concerted practice of collusive tendering,
it makes no difference
that the complainant’s quarrel was only with A and not with B.
Ordinary language dictates that it
also constitutes a complaint of a
prohibited practice against B. And I can find no contrary indication
in the wording of the Act.
It follows, in my view, that the extension
of the referral rule that the CAC subscribed to in this case cannot
be sustained. I
therefore found it of no consequence that Nutri-Flo’s
complaint was aimed exclusively at Sasol and not at Omnia.
[17] That brings me to the CAC’s
further finding that the complaint formulated in the referral to the
Tribunal went wider
than the complaint submitted by Nutri-Flo.
Despite the Commission’s argument to the contrary, I again find
myself in agreement
with the CAC’s findings of fact. As we
know, the referral relies on prohibited practices by Sasol, Omnia and
Yara in contravention
of s 4(1)
(b)
, alternatively
s 4(1)
(a)
. If the Nutri-Flo complaint was indeed the only
source of this complaint, it would have been hopelessly deficient.
Though it relies
on bald statements of cartel behaviour between the
three respondents, these statements do not seem to be based on any
accompanying
facts. The charges in the referral of alleged prohibited
practices of market division, price fixing and bid rigging in respect
of exports were not covered by the complaint which Nutri-Flo
submitted. There was, for example, no mention in the Nutri-Flo
complaint
of any alleged collusion in relation to the separate and
distinct product markets for ANS, LAN or phosphate products let alone
any purported collusion in respect of these products. Nor was there
any mention of possible bid rigging in respect of exports.
Nutri-Flo’s concern was purely with the local market and, more
particularly, KwaZulu-Natal. In fact, as I see it, there is
an
implied admission in the referral itself that the complaints referred
to the Tribunal do not exclusively derive from Nutri-Flo.
After
setting out the Nutri-Flo complaint the referral continues (in para
11):
‘
The
Commission has investigated the complaints and concluded that they
have substance. The Commission has accordingly resolved to
refer the
complaints to this Tribunal in terms of this referral. In addition,
the Commission has in the course of its investigations,
uncovered
further instances of anti-competitive conduct committed by the
respondents, more fully described below. These activities
are
referred to the Tribunal herewith as well.’
[18] Strict application of the
referral rule would therefore dictate the order that the CAC made,
namely to set the referral aside.
This brings me to the Commission’s
challenge of the referral rule itself. At the outset it seems to me
that, in cases such
as
Glaxo
and
Clover
, there is merit
in the requirement of a correlation between the complaint submitted
by the private person and the complaint eventually
referred in the
referral. In cases like
Glaxo
, where the complaint is referred
by the original complainant and not by the Commission, the purpose of
the requirement is to protect
the legislature’s preference of
the Commission as its investigator and prosecutor of first choice. As
was said in
Glaxo
, this preference dictates that the private
complainant is not allowed to bypass the Commission by keeping part
of the complaint
in its pocket, as it were, then to introduce it for
the first time after a non-referral. In
Clover,
on the other
hand, the referral would have been time-barred in terms of s 50(2)
if it was the complaint submitted by the original
complainant. Again
it was therefore necessary to investigate the correlation between the
complaint submitted by the complainant
and the one referred.
[19] Apart from these instances, there
are other situations where it is necessary to determine the ambit of
the complaint submitted
by a complainant. It flows from the concept
subscribed to by the legislature that the complainant’s
‘ownership’
of its complaint does not merely entitle it
to prosecute the complaint if the Commission refuses or fails to do
so. The complainant
also enjoys limited protection pending the
Commission’s investigation and prosecution of the complaint.
So, for instance,
the complainant may apply for interim relief in
terms of s 49C; it must consent to an award of damages pursuant
to a consent
order in term of s 49D(3); and it may participate
in the hearing of its complaint by the Tribunal in terms of
s 53
(a)
(ii)
(aa)
. One of the purposes of
determining the ambit of the complaint submitted by the private
complainant, is therefore to define the
scope of the complainant’s
‘ownership’ of the complaint and to regulate the
interrelationship between the complainant
and the Commission
pertaining to that complaint.
[20] My problem with the referral rule
lies in the transposal of the same requirements from a complaint
submitted by a private person
to a complaint initiated by the
Commissioner, as if the two complaint forms are exactly the same.
This transposal appears clearly
from the following statement by the
CAC in
Netstar (Pty) Ltd v Competition Commission
2011 (3) SA
171
(CAC) para 26:
‘
The
process starts with the commissioner initiating a complaint in terms
of s 49B(1) of the Act, or some other person submitting
a complaint
to the commission under s 49B(2)
(b)
of
the Act. In either case the complaint must be investigated and, if
the commission concludes that a prohibited practice has been
established, must be referred to the tribunal under s 50 of the Act.
The
tribunal's jurisdiction is confined to a consideration of the
complaint so referred, and the terms of that complaint are likewise
constrained by the terms of the complaint initiated by the
commissioner or made by some other person. Accordingly, if the
original
ground for the complaint is that there was a prohibited
agreement, the tribunal cannot determine it on the basis that there
was
a concerted practice or
vice
versa
.
’
(My
emphasis.)
[21] A vital consideration in
evaluating the cogency of the CAC’s equation of the two
complaint forms, is that with regard
to formalities, the legislature
draws a clear distinction between a complaint initiated by the
Commission (in terms of s 49B(1))
and a complaint submitted by a
private person (in terms of s 49B(2)(b)). While the latter has
to be in the ‘prescribed
form’, no formalities are
prescribed for the former. Taken literally ‘initiating a
complaint’ appears to be an
awkward concept. The Commission
does not really ‘initiate’ or start a complaint. What it
does is to start a process
by directing an investigation, which
process may lead to the referral of that complaint to the Tribunal.
And it can clearly do
so on the basis of information submitted by an
informant, like Mrs Malherbe in the
Glaxo
case; or because of
what it gathers from media reports; or because of what it discovers
during the course of an investigation into
a different complaint
and/or against a different respondent. Since no formalities are
required, s 49B(1) seems to demand no
more than a decision by
the Commission to open a case. That decision can be informal. It can
also be tacit. In argument, counsel
for Omnia informed us that, in
practice, the initiation usually takes the form of a memorandum. I
have no doubt that for the sake
of good order and certainty, that
would be so. But it is not a requirement of the Act.
[22] The CAC’s equation of the
two forms of complaints gave rise to its further insistence that in
both instances the complaint
should contain sufficient information so
as to enable the target of the complaint to respond. That appears
from the next para 27
of the
Netstar
judgment which reads:
‘
What
is required is that the conduct said to contravene the Act must be
expressed with sufficient clarity for the party against
whom that
allegation is made to know what the charge is, and be able to prepare
to meet and rebut it. It is true that the competition
issues upon
which the tribunal is called to adjudicate may be broader, more
general and less clear-cut than those that arise in
a conventional
civil case in the High Court. That does not mean, however, that broad
and unspecific generalities should take the
place of a properly
articulated complaint before the tribunal to which the target of the
complaint can respond.’
[23] The motivation that the complaint
– whether submitted by a complainant or initiated by the
Commission – must express
the conduct said to contravene the
Act with sufficient clarity for the party against whom the
allegations are made to know what
the charge is, and be able to rebut
it, was expanded upon by the CAC in the later case of
Loungefoam
(Pty) Ltd v Competition Commission and others
[2011] 1 CPLR 19
(CAC) para 53. In this case it added a further rationale for the
requirement by saying (in para 49):
‘
[I]t
affords the firm that is the target of the investigation an
opportunity to engage with the Commission, dispel its concerns
and
demonstrate that it has not engaged in conduct prohibited by the
Act.’
[24] But as I see it, the CAC’s
motivation conflates the requirements of an initiating complaint and
a referral and misses
the whole purpose of an initiating complaint.
In fact, it is in direct conflict with the judgment of this court in
Simelane NO v Seven-Eleven Corporation SA (Pty) Ltd
2003 (3)
SA 64
(SCA) para 17, which in turn relies on statements in the
decision of the Tribunal in
Novartis SA (Pty) Ltd v Competition
Commission
(CT22/CR/B Jun 01 paras 35-61). What these statements
of
Novartis
make plain is that the purpose of the initiating
complaint is to trigger an investigation which might eventually lead
to a referral.
It is merely the preliminary step of a process that
does not affect the respondent’s rights. Conversely stated, the
purpose
of an initiating complaint, and the investigation that
follows upon it, is not to offer the suspect firm an opportunity to
put
its case. The Commission is not even required to give notice of
the complaint and of its investigation to the suspect. Least of
all
is the Commission required to engage with the suspect on the question
whether its suspicions are justified. The principles
of
administrative justice are observed in the referral and the hearing
before the Tribunal. That is when the suspect firm becomes
entitled
to put its side of the case.
[25] Not unexpectedly, the formalism
insisted upon by the CAC gave rise to difficulty where the
investigation following upon a complaint
revealed some
ante-competitive conduct other than that objected to in the original
complaint, as in fact happened in this case.
The panacea proposed in
Loungefoam
(para 48) is for the Commission ‘to amend the
original complaint initiation, institute an investigation (however
cursory)
and then refer this complaint . . . to the Tribunal . . .’.
But in the judgment of the CAC in the present case it specifically
held (in para 39) that there is no provision in the Act or the rules
of the Tribunal for amendment of a complaint. With regard
to a
complaint submitted by a private person this must clearly be so. I
cannot see how the Commission can amend the complaint submitted
by
another. But it seems equally clear that the same position does not
necessarily prevail with regard to complaints initiated
by the
Commission.
[26] The CAC also found support for
the referral rule in the judgment of this court in
Woodlands Dairy
(Pty) Ltd v Competition Commission
2010 (6) SA 108
(SCA). As I
see it, however,
Woodlands
does not provide that support.
Woodlands
concerned the validity of two summonses issued by
the Commission in terms of s 49A of the Act, pursuant to an
investigation
into the milk industry as a whole. This court
considered the scope of the initiating complaint to determine whether
the summonses
issued during the course of this investigation were
valid. What it held, in essence, was that there can be no
investigation in
terms of the Act without a complaint submitted by a
complainant or initiated by the Commission against an alleged
prohibited practice;
that a complaint can only be initiated by the
Commission on the basis of a reasonable suspicion; and that
information of a prohibited
practice involving nominated members of
the milk industry did not warrant the initiation of a complaint nor
an investigation into
the milk industry as a whole. In
Woodlands
the focus of this court was therefore not on the degree of
correlation there has to be between an initiating complaint, on the
one hand, and the ultimate referral on the other. Rather loose
statements in the judgment on these subjects should therefore not
be
submitted to a process of interpretation akin to the construction of
statutory provisions. On the other hand, this judgment
should not be
understood to authorise a formal investigation without a complaint
initiation, nor the initiation of a complaint
without reasonable
grounds, nor to absolve the Commission of its obligation to provide
those grounds when challenged to do so.
[27] The proposition relied upon in
Netstar
(para 26) in support of the referral rule, that the
Tribunal’s jurisdiction is confined to a consideration of the
complaint
formulated in the referral and that the terms of that
complaint are likewise constrained by the terms of the complaint as
initiated
by the Commission, are in conflict with the judgment of the
Constitutional Court in
Competition Commission of South Africa v
Senwes Ltd
2012 (7) BCLR 667
(CC). In
Senwes
the
Constitutional Court held that the Tribunal was not precluded from
determining a complaint not covered by the referral. It
found that,
although the Tribunal cannot initiate a hearing, ‘this does not
mean that it cannot determine a complaint brought
to its attention
during the course of deciding a referral’ (para 48). If the
Tribunal may consider a complaint not raised
in the referral it must
follow,
a fortiori
, in my view, that a referral is not
confined to the parameters of the original complaint.
Senwes
thus
appears to be wholly destructive of the CAC’s formulation of
the referral rule.
[28] Once it is appreciated that the
initiation by the Commission demands no more than an informal and
even tacit decision to set
the process in motion, it becomes apparent
that the enquiry into whether or not the Commission can introduce a
new complaint by
amending a complaint initiated by itself, is
inappropriate. All the Commission has to do is to decide to initiate
a new complaint,
to investigate that complaint and, if appropriate,
refer that complaint to the Tribunal. If the Commission already has
enough information
to warrant a referral, the intervening
investigation can be quite cursory, as envisaged by the CAC in
Loungefoam
. What also seems clear to me, is that the concept
of an informal initiation – by way of a decision to open a case
–
leaves no room for the referral rule as applied by the CAC.
To demand that the referral corresponds with the contents of the
complaint
simply makes no sense if the complaint, as initiated,
consists of nothing more than an informal decision to investigate.
[29] Moreover, I can find nothing in
the Act which prevents several complaints, some submitted by a
complainant and the others initiated
by the Commission, to be
incorporated in one referral document. In so far as the referral
contains a complaint not covered by the
complaint submitted by a
complainant, the enquiry will thus be whether the additional
complaint had, as a matter of fact, been
initiated by the Commission.
Absent any evidence of an express – albeit informal –
initiation, the question will be
whether a tacit initiation had been
established. That will be a matter of inference which depends on the
enquiry whether or not
it is the most probable conclusion from all
the facts, that the Commission had decided to initiate the additional
complaint?
[30] Applied to the present facts I
believe the probabilities favour the inference that the Commission
indeed decided to initiate
complaints that fell outside the ambit of
the original Nutri-Flo complaint against all three the respondents,
including Omnia.
Thereafter it decided to refer those complaints,
contained in the referral, together with the original Nutri-Flo
complaint, to
the Tribunal. I find support for this inference
primarily in the following statements (in para 11 of the referral)
which bears
repetition, although it has been quoted earlier in a
different context. It reads:
‘
The
Commission has investigated the complaints [submitted by Nutri-Flo]
and concluded that they have substance. The Commission has
accordingly resolved to refer the complaints to this Tribunal in
terms of this referral. In addition, the Commission has in the
course
of its investigations, uncovered further instances of
ante-competitive conduct committed by the respondents, more fully
described below. These activities are referred to the Tribunal
herewith as well.’
[31] By deciding to investigate the
additional complaints and by subsequently referring them to the
Tribunal, the Commission in
effect tacitly initiated the complaints
not covered by the original Nutri-Flo complaint. It is not suggested
that the Commission
did not have reasonable grounds to initiate and
refer these new complaints. It follows, in my view, that the referral
by the Commission
was not invalid and that its striking out by the
CAC was therefore unwarranted. Moreover, counsel for Omnia conceded,
rightly in
my view, that the amendments sought by the Commission
constituted no more than further particulars to complaints already
covered
by the referral and that if the referral were to be held
valid, the amendment application must inevitable succeed. The outcome
of the views that I hold is therefore that the Tribunal was right in
the first place with regard to both facets of its order and
that the
appeal against the CAC’s judgment to the contrary must be
upheld.
[32] Normally these findings would
sound the end of the case. But the Commission urged us to take one
step further. A starting point
that the initiation of a complaint by
the Commission amounts to no more than a decision to start an
investigation, which decision
can be taken informally and even
tacitly, must inevitably lead to the conclusion, so the Commission
argued, that there is no justification
for insisting on an initiation
of every new complaint at all. Once an investigation has been set in
motion because of an initiation
by the Commission or a submission by
a complainant, so the argument went, there is no reason for requiring
that new complaints
discovered during the investigation should first
be initiated by the Commission before they can be investigated and
referred to
the Tribunal. Insistence on initiation of every new
complaint in these circumstances, so the Commission argued, would
amount to
substance being rendered subject to form. The Commission
found support for its argument in s 50(3)
(a)
(iii) of the
Act which provides that, when private complaints are referred to the
Tribunal, the Commission may add particulars to
the original
complaint. In the context of s 50(3) as a whole, so the
Commission argued, ‘particulars’ must be
understood to
include separate complaints. This means, so the argument concluded,
that s 50(3)
(a)
(iii) allows the Commission to add new
complaints which were not included in the initial complaint without
requiring that the new
complaint be separately initiated.
[33] I do not agree with this line of
argument. As was said in
Woodlands
, the Act insists on an
initiation of a complaint by the Commission as a juristic act –
by way of a decision to set the process
in motion – before
there can be a formal investigation into that complaint. As I see it,
the same goes for s 50(1) which
provides that the Commission may
refer a complaint to the Tribunal ‘after initiating the
complaint’. When s 50(3)
refers to ‘a complaint as
submitted by the complainant’, it must be understood as a
complaint against a specific prohibited
practice submitted by a
complainant. Adding particulars means no more than further
information to support that complaint. It cannot
mean a new complaint
about a different prohibited practice not raised by the original
complaint. And I can find nothing in s 50(3)
as a whole which
would justify any different conclusion.
[34] Negating the requirement of a
decision by the Commission to initiate its own complaint will give
rise to further problems.
For instance, it will blur the demarcation
of a complaint submitted by a complainant, which in turn will render
it difficult to
determine the ambit of the complaint over which the
complainant can exercise ‘ownership’ over its complaint,
as I have
spoken about earlier. Moreover, if the Commission is
allowed to add new complaints to the one submitted by the complainant
–
not being complaints initiated by it – how does one,
for instance, apply the time bar of one year in s 50(2)? If the
new complaints are simply allowed to piggy back, as it were, on the
original complaint submitted by the complainant, which of these
complaints are time-barred by s 50(2)? The problem will of
course be exacerbated if only the new complaints are eventually
referred to the Tribunal. Moreover, if the juristic act of initiating
new complaints is completely discarded once a complaint had
been
submitted or initiated against a different prohibited practice, how
does one apply s 67(1) of the Act? This section provides
that:
‘
A
complaint in respect of a prohibited practice may not be initiated
more than three years after the practice has ceased.’
[35] It is therefore not only the act
of initiation, but also the date of that act that is of vital
importance in applying s 67(1).
Formal investigation of a new
complaint or a direct referral of that complaint to the Tribunal,
without a complaint initiation,
would therefore deprive the operation
of s 67(1) of its foundation. It is true that an informal or
tacit initiation may render
the establishment of its date
problematic, but I do not believe that difficulties of proof could
relinquish the Commission from
establishing a juristic act that is,
in my view, required by both the wording and the scheme of the Act.
Self-evidently, however,
the refusal to take the further step urged
upon us by the Commission does not detract from the view I expressed
earlier, namely,
that the appeal should be upheld.
[36] It is ordered that:
1 The appeal is upheld with costs,
including the costs of two counsel, to be paid by the second
respondent.
2 The order of the Competition Appeal
Court is set aside and replaced with the following:
‘
The appeal
is dismissed and the appellants are ordered, jointly and severally,
to pay the respondent’s costs, including the
costs of two
counsel.’
____________________
F D J BRAND
JUDGE OF APPEAL
APPEARANCES:
FOR APPELLANTS: W Trengrove SC
G Marcus SC
M J Engelbrecht (Ms)
I Goodman (Ms)
INSTRUCTED BY: Cheadle Thompson &
Haysom Inc
JOHANNESBURG
CORRESPONDENTS: Webbers
BLOEMFONTEIN
FOR SECOND RESPONDENT: D Unterhalter
SC
P B J Farlam
INSTRUCTED BY:
Norton Rose Inc
Nugent, Malan, Petse and Saldulker JJA
CAPE TOWN
CORRESPONDENTS: Phatshoane Henney
Attorneys
BLOEMFONTEIN