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[2012] ZACAC 5
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Competition Commission v Yara South Africa (Pty) Ltd and Others (93/CAC/Mar10, 94/CAC/Mar10) [2012] ZACAC 5; [2013] 1 CPLR 320 (CAC) (13 September 2012)
IN THE COMPETITION APPEAL COURT OF SOUTH AFRICA
CASE
NUMBER
: 93/CAC/Mar10
DATE
: 13 SEPTEMBER 2012
In the
matter between:
THE
COMPETITION COMMISSION
.................................................................
Applicant
and
YARA SOUTH AFRICA (PTY) LTD
........................................................
1
st
Respondent
OMNIA FERTILIZER LIMITED
...............................................................
2
nd
Respondent
SASOL CHEMICAL INDUSTRIES LTD
..................................................
3
rd
Respondent
J U D G M E N T
(Application for Leave to Appeal)
DAVIS, JP
:
This is an application for leave to appeal against the judgment of
this court on 14 March 2011. That, in itself, is reflective
of a
systemic problem. This Court delivered its judgment a year and a half
ago. Now the parties return in an application for leave
to appeal to
the Supreme Court of Appeal. In the interim, the case was heard on
appeal by the Constitutional Court, which declined
to decide the
matter on the merits, but referred this application to this court to
make a determination, whether on the test of
special leave, the
matter should proceed to the Supreme Court of Appeal.
Before I deal with the merits of this case, I should again reiterate
what I said when the initial application for leave to appeal
was
brought before this court. The system of competition litigation has
become unwieldy. It is presently at war with the objective
of
expeditious resolution of these disputes. Furthermore, this court is
now uncertain as to which cases it must hear on application
for leave
to appeal. We are told by theConstitutional Court that we are a
specialist court and, therefore, the matter should be
heard before
proceeding, if necessary, to the Supreme Court of Appeal.
However, this is not a case which requires specific competition
expertise. It demands an engagement with the procedural provisions
of
the Act. By contrast, in a complicated merger case in which this
court came to a decision recently the matter proceeded to the
Supreme
Court of Appeal without any recourse to this court’s view as to
whether there should be a further application for
leave to appeal.
The court can, therefore, be forgiven for being confused as to the
correct position is with regard to appeals.
Clarity is required.
Be that as it may, the essential core dispute in this case turned on
facts which I do not intend to repeat. They are set out carefully
in
the meticulous judgment of my colleague,
Dambuza
, JA. The
issue was that when the complainant, Nutri-Flow, complained to the
Commission in this case, the form CC1 and the accompanying
affidavit,
which were carefully prepared by the complainant, together with its
lawyers, stated, carefully and clearly, that three
complaints
relating to abuse of dominance against Sasol, were to be brought to
the attention of the Commission. There were but
three paragraphs in a
113 page affidavit, which made mention to allegations of the cartel
and, therefore, if read accordingly,
referred to a contravention of
section 4(1)(b)(i) of the Competition Act of 1998 (‘the Act’).
However, this court concluded that the complaint set out by
Nutri-Flo, amounts to three complaints in relation to abuse of
dominance.
It held that it was not within the power of the Commission
to add, what this court considered to be a further complaint, namely
a cartel complaint pursuant to section 4(1)(b)(i) of the Act. It is
against this finding that the applicant seeks to appeal to
the
Supreme Court of Appeal.
In order to determine the question of leave to appeal, it is perhaps
useful to recapitulate the key sections which govern this
case. In
terms of section 49B(1):
“
A commissioner may initiate a complaint
against an alleged prohibited practice.”
Further, in terms of subsection (2), any person may:
“
(a) Submit information concerning an
alleged prohibited practice to the Competition Commission in any
manner of form; or
(b) Submit a complaint against an alleged prohibited practice to the
Competition Commission in prescribed form.
(c) Upon initiating or receiving a complaint in terms of the section,
the Commission must then direct an inspector to investigate
the
complaint as quickly as possible.”
Accordingly,
the complaint must be initiated against an alleged prohibited
practice. The complaint relates to an alleged contravention
of the
Act, specifically, it appears, contemplated by a complainant and
based on an applicable provision of the Act. That certainly
was the
position as confirmed in
Woodlands Dairy
v Competition Commission
2010
(6) SA 108
(SCA) at para 19. In this paragraph, Harms DP appeared
to uphold the approach of this court in
Sappi
Fine Paper (Pty) Ltd v Competition Commission & Another
[2003]
2 CPLR 272
(CAC). En passant, what was cited here does not appear
to follow precisely the
dictum
in the
Sappi
case.
Subsection 50(1) provides:
“
At any time after initiating a complaint,
the Competition Commission may refer the complaint to the Competition
Tribunal.”
In terms of subsection (2):
“
Within one year after the complaint was
submitted to it, the Commission must:
(a) Subject to subsection (3) as refer the complaint to the
Competition Tribunal, if it determines that a prohibited practice as
been established.
(b) In any other case, issue a notice of non-referral to the
complainant in prescribed form.”
Significantly, for the purposes of this dispute, in terms of
subparagraph (3), when the Competition Commission refers a complaint
to the Competition Tribunal in terms of subsection (2), it may:
“
(a) Refer all the particulars to the
complaint as submitted by the complainant.
(ii) Refer only some of the particulars of the complaint as submitted
by the complainant.
(iii) Add particulars to the complaint as submitted by the
complainant.
(b) Must issue a notice of non-referral contemplated in subsection
(2)(b) in respect of any particulars of the complaint not referred
to
the Competition Tribunal.”
In
Woodlands
, supra, which dealt with two summonses issued in
terms of section 49A, in terms of which the parties were required to
submit to
interrogation and produce documents,
Harms
, DP,
after a description of the structure of the Act, noted that ,during
the investigation which follows the complaint, the Commissioner
may
issue a summons for the purpose of interrogation of production of
documents. He then said the following:
“
The initiation and subsequent investigation
must relate to the information available or the complaint filed by
the complainant.
There is in any event no reason to assume that an
initiation requires less particularity or clarity than a summons. It
must survive
the test of legality and intelligibility. There are
reasons for this. The first is that any interrogation or discovery
summons
depends on the terms of the initiation statement. The scope
of the summons may not be wider than the initiation. Furthermore, the
Act presupposes that the complaint (subject to possible amendment and
fleshing out) as initiated, will be referred to the Tribunal.
It
could hardly be argued that the Commission could have referred an
investigation for anti-competitive behaviour in the milk industry
at
all levels to the Tribunal.” paras 34-35.
Where certain members of the cartel were mentioned, then,
notwithstanding that there is suspicion against others, this cannot
be used as a springboard to investigate ‘all and sundry’.
At para 36, Harms DP said:
“
This does not mean that the Commission may
not during the course of a properly initiated investigation, obtain
information about
other transgressions. If it does, it is fully
entitled to use information so obtained for amending the complaint of
initiation
of another complaint in a further investigation.”
It is this jurisprudence that confronted this court in the present
dispute. Mr Marcus, who appeared together with Ms Goodman on
behalf
of the applicants, sought to read
Woodlands
, supra, to deal
only with the summons. The problem with his argument is that
Harms
,
DP, with respect, went far further in order to determine what the
initiation statement was required to contain .The learned Deputy
President held, in effect, that the initiation statement was akin to
the issuing of a summons. It was on these principles that
much of the
findings of the Court in
Yara
, supra, were predicated. In
Yara
, as I have noted, Nutri-Flo submitted the complaint to
the Commission against Sasol. Both companies were involved in the
production
and supply of fertilizer. Pursuant thereto, it also
brought an application in terms of section 49C for an interim order
to the
effect that Sasol be interdicted from implementing price
increases and raw materials and/or products required by Nutri-Flow.
In
this case, Yara and Omnia were cited as respondents.
When the matter was referred by the Commission to the Tribunal, the
complaint against Sasol referred to contraventions of section
8(c),
8(a) and 9(1), but against all the three respondents an additional
allegation was now made, that is a contravention of section
4(1)(b).
Before the Tribunal an application was brought to amend the referral.
The amendment which was brought was designed to
incorporate the
complaint details relating to the contravention of section 4(1)(b)(i)
by Sasol, Yara and Omnia. The question arose
as to whether the
Commission had now sought to introduce a new matter, which had not
been covered in the Nutri-Flo complaint and
in terms of which the
only case made out in the Nutri-Flo’s papers, was a
contravention by Sasol of abuse of dominance provisions.
In
Yara
, this court referred to the description of the
complaint by Nutri-Flo in the CC1, and the amplification thereof in
an affidavit
which served to extend the complaint and which
constituted the founding affidavit for the interim order so sought.
Although mention
was made of a cartel, Mr Lyle disposed to an
affidavit and made it clear that Sasol committed the following
prohibitory practices,
namely:
1. Exclusionary pricing practices.
2. Excessive pricing practices.
3. Discriminatory pricing practices.
The court found that, to the extent that any cartel activity had been
mentioned, this allegation fell to be classified as ‘information
submitted’ in terms of section 49B(2)(a) of the Act. As noted
in my description of the architecture of the Act, there is
a
distinction to be drawn between a complaint and information submitted
to the Commission. That distinction must be given concrete
meaning.
Accordingly, the court held that only the particulars of the
complaint as submitted by Nutri-Flow, could be referred to
the
Tribunal. Further information, which was provided by the Tribunal,
could then have formed the subject matter of a further,
fresh
complaint initiated by the Commission.
Although
not strictly necessary for this application, it is useful to cast a
jurisprudential eye on the illumination of the position
as provided
by
Wallis
,
AJA(as he then was) in
Lounge Foam (Pty)
Ltd v Competition Commission
[2011]
1 CPLR 19
(CAC). The learned judge of appeal made the observation
that where the Commission has discovered evidence that implicates a
party
as a participant in a cartel, and wishes to add to the existing
charge that the party faces before the Tribunal, the Commission
may
amend the original complaint initiative, institute an investigation,
however cursory, and then refer the complaint against
that party to
the Tribunal. Wallis, AJA noted that this was hardly an avenue which
would sacrifice the importance of the functions
of the Commission on
the alter of formalism.
The court found, in terms of section 49B(3), that the Commissioner
must direct an inspector to investigate a complaint, irrespective
of
whether the complaint is initiated by the Commission or made by a
third party. This enables the Commissioner to exercise wide
powers
conferred by the Act. It also affords the firm, which is the target
of the investigation, an opportunity to engage with
the Commission
and, if possible, dispel its concerns regarding the complaint.
Furthermore, the court held, with reference to section
67(1), which
provides that a complaint in respect of a prohibited practice may not
be initiated more than three years after the
practice has ceased,
that the date of initiation of the complaint is thus vital for the
purposes of this section. Hence, the importance
that in every
instance of every complaint against a firm, the complaint must be
based on a proper initiation in terms of section
49B. Reference was
again made to the
Woodlands
decision, supra, in order to
determine the contours of a proper initiation.
In dealing with the question of an amendment or a fleshing out of a
complaint, which had been engaged with in the
Yara
case, the
court in
Lounge Foam
suggested that this may contemplate two
possibilities:
“
1. The information obtained in the course
of investigation may relate to and fortify the existing complaint and
justify an amendment
to the particulars of the complaint as initiated
without altering its fundamental nature.
2. Where the information discloses a different transgression or
participation by a party, which is not the subject of the complaint,
either the original complaint must be amended to encompass the
additional complaint or party or a fresh initiation of the complaints
required.” Paragraph 55.
What was not contemplated and is not part of the Act, according to
the
Lounge Foam
judgment, is the situation of an amendment of
the complaint that has been referred to the Tribunal, by including
new transgressions
or new parties to existing transgressions without
following the requirements of the Act.
So much for the existing jurisprudence. It is clear that a series of
issues are now raised which are of considerable importance
to the
future of competition enforcement in South Africa. These include:
1. To what extent is the intention of the complainant determinative
of the ambit of the complaint lodged in terms of section 49B(2)(b).
If, as in
Yara
, the complainant only intends to complain about
excessive pricing and related abuse of dominance contraventions on
the part of
one party, that is Sasol, but not about cartel activity
which includes other parties, can the ambit of the complaint be read
to
include a reference to other parties, which then transmogrifies
into a full blown component of the complaint after the investigation
which takes place, pursuant to the initiation of a precisely worded
complaint in terms of section 49B(3)?
The
Yara
case illustrates the problem. To recapitulate: the
Commission receives a complaint about price increases in respect of
raw materials
provided by Sasol. In it, the essential complaint is
described expressly as constituting a range of exclusionary price
practices,
excessive pricing and discriminatory pricing, practised by
one company, namely Sasol. Assuming further that the paragraphs in
the
founding affidavit refer to Yara and Omnia by way of further
information supplied to the Commission relating to cartel activities,
as opposed to an express complaint which was made, can the Commission
after investigation of this aspect of the complaint, refer
it to the
Tribunal; that is the cartel activity? In other words, can the latter
aspect, the allegation about the constitution of
a cartel, which has
been the product of the investigation be so included as part of the
initial complaint and hence the referral?
The investigation could
have found that the very reason for the excessive and discriminatory
pricing practices, was the existence
of a cartel. It is this problem
which caused this court to answer the question in the negative,
because of the specific and precise
nature of this complaint,
However, the question remains: does the Act bear the weight of the
second meaning which I have posed
in the question set out above?
2. In
Yara
, the court found, notwithstanding paragraph 36 in
Woodlands
, supra, that there was no provision in the Act for
an amendment to the complaint. In a section of the Competition
Tribunals’
decision in
South African Breweries
(unreported 2012), there was a discussion with regard to this
particular point. Notwithstanding the voluminous nature of this part
of the judgment, no reference was made to suggest that there is a
provision in the Act which permits amendment to the complaint,
nor
that the jurisprudence, set out in
Yara
was incorrect.
Accordingly, on the basis of a careful reading of the Act and the
regulations, the court in Yara concluded that
the legislature did not
permit such amendments. Hence a complaint can only be initiated and
submitted as provided for in section
49B(1) and 49B(2)(b). The
question, however, arises, given the dictum in
Woodlands
, to
which I have already made mention and which refers to an ‘amendment
or fleshing out’, whether it could have been
the intention of
the Supreme Court of Appeal to read section 50(3) to mean that
particulars of a complaint include an amendment
to the complaint?
There appears to be no other source in the Act to justify this kind
of amendment to the complaint. For this reason,
it may be that
paragraph 36 of
Woodlands
has to be construed, and was
intended to be construed, to read section 50(3) in a different
fashion to the court in
Yara
. That interpretation would support
the applicants in this particular application for leave to appeal.
3. Should the test not be whether the Commission is entitled, after
investigation to refer any prohibited complaint that is rationally
or
cognisably linked to the conduct alleged to constitute a prohibited
practice? This interpretation would be supported by a reading
of
section 50(3) of the Act, which refers to a notice of non-referral in
respect of any particulars of a complaint which are not
in turn
referred to the Tribunal. In this context, particulars may then not
mean simply the details of the complaint, but further
refer to a core
allegation of a breach of the Act, which the Commissioner, in his
discretion, determines should not form part of
the referred
complaint. In effect, this court adopted the contrary view, namely
that the word complaint must constitute a competition
law cause of
action, that is a discrete competition law claim, which in itself is
sourced in the idea that the complaint is legislatively
linked to an
alleged prohibited practice as provided for in the Act. This
formulation appears to indicate that the complaint is
grounded in a
prohibited practice as contained in Chapter 2 of the Act. In turn,
the word ‘particulars’ would then
appear to sit uneasily
with this notion.
4. In
Woodlands
, the foundational approach adopted by
Harms
,
DP, which dictated the basis of his judgment, is encapsulated in
paragraph 11. It read thus:
“
I accordingly disagree with the view of the
CAC that because it is difficulty to establish the existence of
prohibited practices,
a generous interpretation of the commission’s
procedural rights would be justified. This approach would imply that
the more
difficult it is to prove a crime (such as corruption), the
fewer procedural rights an accused would have.”
There is no authority, and neither is any cited in
Woodlands
,
which suggests that criminal penalties are expressly contained in the
Act, that a criminal model should be employed to interpret
the Act.
Indeed, the effect of the judgment of the Constitutional Court in the
Competition Commission of
South Africa v
Senwes Ltd
2012
(7) BCLR 667
(CC) (which reversed a decision of the Supreme Court
of Appeal) appears to have established a more generous approach to
the formulation
of a complaint. Although the Constitutional Court
ruled that the concept of a margin squeeze be deleted from the
complaint, the
core of the complaint turned on whether the
complainant could reasonably know the case it was required to meet.
The Constitutional
Court eschewed a rigid approach to the nature of a
complaint in finding against the respondent.
The question arises, albeit in a different context, whether this
approach will now be extended to the particular dispute before
this
court. Whatever the debate with regard to the exact nature of the
Constitutional Court’s formulation, the judgment of
Jafta
,
J, adopted a generous interpretation to the construction of the
complaint which, in turn, must throw some doubt on the fundamental
premise adopted by
Harms
, DP in
Woodlands
, and which,
to a large degree, was the source of the other judgments to which I
have made reference, including
Yara
.
5. The ambit of this court’s
dicta
in
Glaxo Welcome
(Pty) Ltd & Others v National Association of Pharmaceutical
Wholesalers & Others
(15/CAC/Feb02), concernin the concept of
a rational and cognisable link between the conduct referred to or
described in a submission
by the complainant, and one or more of the
prohibitions in the Act, has been debated. The question arises as to
why this
Glaxo
test should apply where a complainant who,
lodges a complaint, sets out a description of an alleged prohibited
practice, and the
parties alleged to have so perpetrated it which, on
a reasonable interpretation, can justify the conclusion that this
complaint
is rationally or cognisably linked to other prohibitions in
the Act.
If the various questions posed and which are an encapsulation of the
difficulties which have followed after the
Woodlands
judgment
and its application in
Yara
, are answered differently to the
manner in which they were in
Yara
, then the decision in Yara
may well have to be reversed.
It is important , however, to note that the facts of
Yara
, for
the reasons I have already set out, are unusual in the context of
these kind of disputes ; that is , this is a case in which
the
complainant was specific about the complaint which it had lodged and,
furthermore, it was clear that this was not simply a
case of an
ordinary member of the public complaining in circumstances without
careful legal consideration having been taken as
to the nature of the
complaint.
That having been said, this is a dispute which raises a host of
difficulties. It is profoundly in the public interest that the
matter
be determined. Because courts have to achieve the correct balance
between affording the Commission sufficient latitude to
perform its
crucial functions and according parties, including those who are
alleged to have been involved in a cartel, due procedural
fairness,
which is congruent with our constitutional ambitions, the case assume
even greater importance for the future of the administration
of the
Act.
I am cognisant and have taken careful account of the extremely
persuasive arguments which have been lodged by Mr
Rogers
on
behalf of the second respondent. They are the arguments which this
court accepted. However, the test is whether another court,
for all
of the reasons I have suggested, may well consider them to be
incorrect on a different reading, particularly of the law
as set out
by the Constitutional Court in its
Senwes
judgment. For all
these reasons, this matter deserves full consideration from the
Supreme Court of Appeal. Accordingly,
leave is granted to the
Supreme Court of Appeal. Costs to stand over
.
_______________
DAVIS, JP
Mailula
and Dambuza JJA agreed: