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[2011] ZACAC 4
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Loungefoam (Pty) Ltd and Others v Competition Commission South Africa and Others, Feltex Holdings (Pty) Ltd v Competition Commission South Africa and Others (102/CAC/Jun10) [2011] ZACAC 4; [2011] 1 CPLR 19 (CAC) (6 May 2011)
REPORTABLE
IN THE COMPETITION APPEAL COURT OF SOUTH AFRICA
CAC CASE NO.102/CAC/Jun 10
In the matter between
LOUNGEFOAM (PTY) LIMITED AND OTHERS
….................
First
Appellant
GOMMAGOMMA (PTY) LIMITED
…...........................................
Second
Appellant
STEINHOFF INTERNATIONAL HOLDINGS LIMITED
…....
Third Appellant
STEINHOFF AFRICA HOLDINGS (PTY) LIMITED
…........
Fourth
Appellant
and
THE COMPETITION COMMISSION OF
SOUTH AFRICA
…......................................................................
First
Respondent
VITAFOAM SA (PTY) LIMITED
…......................................
Second
Respondent
FELTEX HOLDINGS (PTY) LIMITED
…..............................
Third
Respondent
KAP INTERNATIONAL HOLDINGS LIMITED
….............
Fourth
Respondent
And in the matter between
FELTEX HOLDINGS (PTY) LIMITED
…...........................................
Appellant
and
THE COMPETITION COMMISSION OF
SOUTH AFRICA
…......................................................................
First
Respondent
LOUNGEFOAM (PTY) LIMITED
…............................................
Second
Respondent
VITAFOAM SA (PTY) LIMITED
….........................................
Third
Respondent
STEINHOFF INTERNATIONAL HOLDINGS LTD
…........
Fourth
Respondent
KAP INTERNATIONAL HOLDINGS LIMITED
…................
Fifth
Respondent
GOMMAGOMMA (PTY) LIMITED
…....................................
Sixth
Respondent
STEINHOFF AFRICA HOLDINGS (PTY)
LIMITED
…...
Seventh
Respondent
and two related review applications
J U D G M E N T
Del. 6 May 2011
WALLIS J (DAVIS JP and NDITA AJA concurring)
INTRODUCTION
[1] There are before us two appeals from the Competition
Tribunal. I will refer to the first as the Feltex appeal after the
sole
appellant and to the second as the Steinhoff appeal after the
group of companies of which all four appellants are said to be
members.
In order to cater for the eventuality that this court holds
that the impugned decisions by the Tribunal, or any of them, are not
appealable, both Feltex and the Steinhoff appellants have brought
review proceedings against the Tribunal, citing the respondents
in
their appeals and seeking to have the Tribunal’s decisions set
aside on essentially the same grounds as are raised in
the appeals.
[2] Arising out of an investigation
in the flexible polyurethane market the Competition Commission
referred two complaints to the
Competition Tribunal in terms of s
50(2)(a) of the Competition Act. The first complaint is that
Loungefoam,
1
Vitafoam
2
and/or Gommagomma
3
agreed to fix the selling price of
the foam they produce and also jointly set the purchase price they
would pay to suppliers of
certain chemicals used in the production of
polyurethane foam. The latter is referred to in the affidavits and
argument as ‘the
chemical cartel’ and I adopt, without
comment, that description. It is said to constitute a horizontal
restrictive practice
in terms of s 4(1)(b)(i) of the Act. The second
complaint is that Loungefoam and Vitafoam, on the one hand, and
Feltex, on the
other, had an understanding to divide markets in terms
of which Feltex would supply polyurethane foam to the automotive
industry
and Loungefoam and Vitafoam would focus on the furniture
manufacturing industry. This is said to constitute a horizontal
restrictive
practice in terms of s 4(1)(b)(ii) of the Act.
[3] Whilst preparing for the proceedings before the
Tribunal the Commission obtained information that it believes
indicates that
Feltex is also a party to the chemical cartel. It
accordingly applied to the Tribunal for leave to amend its founding
affidavit
in the chemical cartel complaint in order ‘to connect
Feltex to the allegations regarding the joint purchasing of
chemicals,
or similar conduct, which have so far only been made
against Loungefoam and Vitafoam’. The Tribunal granted leave to
amend
the affidavit to introduce the relevant allegations. That
decision gives rise to the Feltex appeal and review. The Steinhoff
appellants
also challenge this decision in the Steinhoff appeal and
review.
[4] In their defence to the complaints against the two
of them alone Loungefoam and Vitafoam contend that they were at all
relevant
times part of a single economic entity and therefore could
not have been parties to horizontal restrictive practices with one
another.
They rely on the provisions of s 4(5)(b) of the Act.
The Commission does not accept this defence and sought to amend its
founding
affidavit to introduce far-ranging allegations directed at
showing that:
‘…
any sole control that Steinhoff
might have enjoyed over Loungefoam (which is not conceded) was as a
consequence of a wider co-operation
or collusion between firms in the
Steinhoff group of companies and those controlled by Daun or in which
Daun had a significant
interest and influence (which for convenience
I refer to as the KAP group of companies). Loungefoam and Vitafoam
were a manifestation
of this wider co-operation or collusion. Whilst
in strict formalism, which is also not conceded, it may appear that
Steinhoff controlled
Loungefoam sufficiently for purposes of section
4(5)(b) – because of this wider co-operation or collusion –
any such
control was rooted in a stratagem to achieve what section
4(1)(b) prohibits and cannot be permitted to benefit the Steinhoff
group
of companies and/or the KAP group of companies.’
There
followed forty paragraphs, largely consisting of factual allegations,
intended to support this approach. This will be referred
to as ‘the
collusion claim’.
[5] In the event of the Tribunal
finding that Loungefoam and Vitafoam were at all material times part
of a single economic entity,
the Commission contends that Steinhoff
International
4
and Steinhoff Africa
5
‘
should be held liable for any
administrative penalty that is imposed by the Tribunal in respect of
the prohibited conduct involving
Feltex’. It does so on the
basis that this is the effect of s 4(5)(b) of the Act (‘the
s 4(5)(b) claim’).
Accordingly the Commission sought an
amendment to paragraph 35 of the founding affidavit to include this
further allegation in
regard to liability for the administrative
penalty. It also sought an order for the joinder of Steinhoff Africa
and an amendment
to the relief claimed in the notice of motion to
reflect its revised approach to the referrals.
[6] The precise form of the amendment sought underwent
some variation in the course of argument before the Tribunal. It
granted
the amendments to the affidavit referred to above and the
amendment to the prayers for relief in its Notice of Motion. In
addition
it granted an order for the joinder of Steinhoff Africa. The
correctness of that decision depends upon whether the amendment to
paragraph 35 of the founding affidavit should have been granted. The
Steinhoff appeal is directed at challenging all of these decisions.
[7] The following questions fall for consideration by
this court in the appeals:
(a) Are the decisions taken by the Tribunal, or any of
them, appealable?
(b) If not, are the applicants entitled to challenge
them by way of review proceedings?
Assuming that the decisions are capable of being
challenged either by way of appeal or by way of review:
(c) Was the Tribunal correct in permitting the chemical
cartel complaint to be extended to include Feltex?
(d) Was the Tribunal correct to permit the Commission to
allege co-operation or collusion between the Steinhoff group of
companies
and the KAP group of companies directed at enabling
Loungefoam and Vitafoam to take advantage of the provisions of s
4(5)(b) of
the Act?
(e) Can s 4(5)(b) of the Act be invoked so as to render
Steinhoff International and Steinhoff Africa liable for any
administrative
penalty imposed by the Tribunal in respect of conduct
involving Loungefoam, Vitafoam and Feltex?
Before addressing these questions it is necessary to say
something about the procedure adopted by the Commission in seeking to
raise
these issues before the Tribunal.
THE AMENDMENT APPLICATION
[8] The Commission’s application purported to be
an application in terms of Rule 18(1) of the Tribunal Rules. The
Commission
asked for the following relief:
‘
1. Granting the applicant leave to amend
the Notice of Motion, the founding, supplementary and replying
affidavits in the complaint
referral in the respects set out in the
founding affidavit which is attached to this Notice of Motion;
2. Permitting and directing the applicant to file the Amended Notice
of Motion, the founding, supplementary and replying affidavits
within
a time period stipulated by the Tribunal;
3. Directing the respondents to file such additional documents as
they are advised to file consequential to the amendments, within
a
time period stipulated by the Tribunal.’
[9] Rule 18(1) of the Tribunal’s Rules reads as
follows:
‘
1. The person who filed a Complaint
Referral may apply to the Tribunal by Notice of Motion in Form CT 6
at any time prior to the
end of the hearing of that complaint for an
order authorising them to amend their Form CT 1(1), CT 1(2) or CT
1(3), as the case
may be, as filed.’
The reference to the three different types of form
arises from the different ways in which a complaint may be referred
to the Tribunal.
In terms of Rule 15:
‘
(1) A complaint proceeding may be initiated
only by filing a Complaint Referral in Form CT 1(1), CT 1(2) or CT
1(3), as required
by Rule 14.
(2) Subject to Rule 24(1), a Complaint Referral must be supported by
an affidavit setting out in numbered paragraphs:-
(a) a concise statement of the grounds of the complaints; and
(b) the material facts or the points of law relevant to the complaint
and relied on by the Commission or complainant, as the case
may be.
(3) A Complaint Referral may allege alternative prohibited practices
based on the same facts.’
[10] The prescribed Form CT 1(1), which is the form used
by the Commission in referring a complaint to the Tribunal, is
relatively
simple. It requires the Commission to state the name of
the respondent; the complainant’s name and the Commission’s
file number; the sections of the Act that are said to have been
contravened and to provide a concise statement of the alleged
prohibited practice as well as a concise statement of the relief
sought. In completing the form in this case instead of providing
a
concise statement of the alleged prohibited practice the Commission
said:
‘
See attached referral affidavit of
Nompucuko Nontambana’
Ms Nontambana is an investigator in the employ of
the Commission. In regard to the relief claimed the Commission
referred to
a document entitled ‘Notice of Motion’ that
it attached to the referral form.
[11] Rule 18(1) of the
Tribunal’s Rules refers only to an amendment to the Form CT
1(1). It is a power equivalent to the power
of a court to permit the
amendment of a summons or notice of motion or a pleading. The fact
that the Commission chose, instead
of setting out a concise statement
of the complaint, to refer to the supporting affidavit does not have
the effect of rendering
the affidavit a part of the form susceptible
of amendment in the same way that the form can be amended.
Ms Nontambana contended otherwise in her replying
affidavit in the application to amend, saying that:
‘
The notice of motion and
founding affidavit are part of the Form CT 1. The objection to
amendment to affidavits in ordinary motion
proceedings in a court of
law do not apply. A founding affidavit in a complaint referral is not
required to contain evidence in
support of allegations of prohibited
practices.’
[12] Assuming this reflects the
general stance of the Commission it is labouring under a fundamental
misconception as to the nature
of the affidavit required by Rule
15(2). It treats it as if it is a type of pleading, subject to
amendment from time to time as
the case develops. That is incorrect.
An affidavit in competition proceedings has precisely the same
character as it has in any
other circumstances. It is a sworn
statement on oath by a witness that is required by Rule 15(2) to set
out a concise statement
of the grounds of the complaint and the
material facts and points of law relevant to the complaint and relied
on by the Commission.
It serves the same purpose as an affidavit in
application proceedings, which contains both the allegations
necessary in a pleading,
including any relevant propositions of law,
and the essential evidence in support of those allegations.
6
[13] It was suggested in argument
before us that the affidavit delivered in support of a referral to
the Tribunal is
sui
generis
and does
not stand on the same footing as a conventional affidavit. Counsel
made the point that the deponent to the affidavit is
usually an
investigator in the employ of the Commission and much of the contents
thereof constitute hearsay. It is unusual for
the investigator to be
a witness in the proceedings before the Tribunal and in practice the
Tribunal determines the cases that
come before it on the basis of
oral and documentary evidence.
[14] Whilst this may accurately describe what happens in
practice it is unclear why it is thought to alter the fundamental
nature
of an affidavit. There is no legal prohibition against an
affidavit containing hearsay evidence. In certain circumstances and
before
certain tribunals such evidence is inadmissible, but that does
not mean that an affidavit in support of a referral to the Tribunal
cannot contain hearsay. It may be convenient for the Commission to
cause the affidavit to be deposed to by the investigator who
investigated the complaint. That is likely to be a sensible course,
as the investigator will have the relevant facts and documents
at her
or his fingertips. However, it is inevitable in those circumstances
that the affidavit will largely be an affidavit of information
and
belief rather than direct evidence. That is immaterial bearing in
mind the practice of the Tribunal to conduct a hearing at
which
witnesses with direct knowledge of the facts testify under oath and
are cross-examined. No doubt if it sought to rely only
on the
investigator’s affidavit that would provoke protest from other
parties but that is a different matter.
[15] The Commission appears to have
overlooked the importance that is attached to an affidavit in South
African law. Whilst an affidavit
in support of a referral is not to
be used in the course of judicial proceedings, so that the deponent
is not potentially liable
to a charge of perjury,
7
our law has been extended to include
what is commonly referred to as statutory perjury. This offence is
embodied in s 319(3) of
the Criminal Procedure Act 56 of 1955 which
provides that:
‘
If a person has made any statement on oath
whether orally or in writing, and he thereafter on another oath,
makes another statement
as aforesaid, which is in conflict with such
first-mentioned statement, he shall be guilty of an offence and may,
on a charge alleging
that he made the two conflicting statements and
upon proof of those two statements and without proof as to which of
the said statements
was false, be convicted of such offence and
punished with the penalties prescribed by law for the crime of
perjury, unless it is
proved that when he made each statement he
believed it to be true.’
8
No doubt an awareness of this
provision underlies the provisions of Tribunal Rule 15(3) that says
that alternative prohibited practices
may be alleged provided they
are based on the same facts. This recognises that it is impermissible
in an affidavit to depose to
mutually inconsistent facts.
9
[16] The proper procedure for the Commission to follow
when it wishes to amplify or widen the scope of a referral to the
Tribunal
is to apply under Rule 18(1) to amend the referral form
CT 1(1) and simultaneously to seek leave to deliver a supplementary
affidavit in support of the amended allegations. Where that involves
a retraction of previous factual statements an explanation
should be
given for the change in stance. Usually one would expect this to flow
from the Commission having discovered additional
information. Where
the Commission is uncertain what conclusion should be drawn from the
facts at its disposal it may draw attention
to different possible
inferences to be drawn from the known facts, but that is different
from deposing to mutually inconsistent
facts.
[17] What must be done about this
manifest irregularity? Both Feltex and the Steinhoff appellants
pointed out, in their opposing
affidavits in the application, that it
is not competent in law for a deponent to amend an affidavit.
However, they also opposed
the amendments on their merits. In
argument before us it was common cause that it is desirable for this
court, if it is empowered
to do so, to deal with the issues raised by
the appeals on their merits, as it will cause inconvenience and
unnecessary expense
simply to set aside the decisions of the Tribunal
as irregular, leaving the Commission to pursue the same course on the
same grounds
in accordance with a proper procedure. In addition the
amendments to the referral affidavits are reflected in the amendments
to
the notice of motion, which were not infected with any procedural
irregularity, as well as in the joinder of Steinhoff Africa. In
those
circumstances it seems to me proper that we should accede to the
request of the parties and deal with the issues on their
merits.
10
In the view that I take of the
substantive merits of the Commission’s application this will
assist all parties in clarifying
the issues in this referral to the
Tribunal.
APPEAL OR REVIEW?
[18] The right to appeal against a decision of the
Tribunal is conferred by s 61(1) of the Act which provides that:
‘
A person affected by a decision of the
Competition Tribunal may appeal against, or apply to the Competition
Appeal Court to review
that decision in accordance with Rules of the
Competition Appeal Court if, in terms of section 37, the Court has
jurisdiction to
consider that appeal or review that matter.’
Accordingly the right to appeal against or review a
decision by the Tribunal depends upon whether this court has
jurisdiction under
s 37 to hear such appeal or review.
[19] Section 37(1) provides that:
‘
The Competition Appeal Court may:
(a) Review any decision of the Competition Tribunal; or
(b) Consider an appeal arising from the Competition Tribunal in
respect of –
(i) any of its final decisions, other than a consent order made in
terms of section 63; or
(ii) any of its interim or interlocutory decisions that may, in terms
of this Act, be taken on appeal.’
As the decision by the Tribunal to grant the amendments
is not subject to any special provision of the Act entitling the
appellants
to appeal against it the question is whether that decision
was a final decision in terms of s 37(1)(b)(i).
[20] In
Telkom
SA Limited v Orion Cellular (Pty) Limited and Others
11
this court adopted the jurisprudence
of the Supreme Court of Appeal on what constitutes a final decision
that is susceptible of
appeal. The court looks to see whether the
decision in question:
(a) Is final in effect and not susceptible of alteration
by the Tribunal;
(b) Is definitive of the rights of the parties; and
(c) Has the effect of disposing of at
least a substantial portion of the relief claimed in the main
proceedings.
12
These principles are neither cast in
stone nor exhaustive.
13
In considering whether an order is
final one must have regard primarily to its effect.
14
[21] In contending that the order is not appealable
counsel for the Commission said in his heads of argument:
‘
The grant of an amendment … is a
procedural decision which is inextricably linked with the manner in
which, and the ambit
of, the dispute between the parties to be
litigated before the Tribunal. The Tribunal may still change its
findings underlying
the grant of the amendments, or even dismiss the
case sought to be advanced by way of the amendment. This is the key
reason why
the grant of an amendment is generally not immediately
appealable.’
[22] Whilst in general the grant or
refusal of an amendment is procedural in nature there are clear
instances where its effect is
to dispose of the substantive rights of
the parties. In such circumstances the grant or refusal of the
amendment is a final order
that is appealable. Thus in
Jacobs
and Others v Baumann NO and Others
15
it was argued that leave to amend a
pleading is interlocutory and does not dispose of any substantial
portion of the relief claimed
in the action. In that case proceedings
had been commenced
inter
alia
in the name of
one Wirz in his capacity as the representative of the heirs in a
deceased estate appointed as such by a Swiss court.
After the
commencement of the action Mr Wirz’s appointment was set aside
and thereafter Mr Baumann was appointed as the representative
of the
heirs. The remaining plaintiffs in the South African action then
sought to amend the summons and particulars of claim by
substituting
Baumann for Wirz. That amendment was granted. On appeal it was argued
that the order substituting Baumann for Wirz
was not appealable. This
contention was rejected because the substitution was crucial for
determining whether the initial summons
was valid and that in turn
would obviously impact on any defence of prescription. Accordingly it
was held that the order amending
the summons was appealable. That
case was concerned with whether the representative of the heirs was
properly before the court.
A similar issue arose in
Highveld
Steel & Vanadium Corporation Limited v Oosthuizen.
16
Mr Oosthuizen, a former employee
of the appellant, dismissed for bribery, fraud, theft and other
transgressions involving dishonesty,
instituted proceedings to
recover his pension benefits from the company pension fund. The
application was not defended. The appellant
sought leave to intervene
in order to preserve the pension benefits under
s 37(D)
of the
Pension Funds Act 24 of 1956
pending an action to recover the money
from Mr Oosthuizen. Leave to intervene having been refused it was
contended on appeal that
the ruling was purely procedural and
therefore not appealable. That contention was rejected on the grounds
that the refusal of
leave to intervene would deprive the appellant of
its right to preserve the pension benefits pending the outcome of its
action.
[23] These cases show that orders in
relation to procedural steps that have a final effect on a litigant’s
rights are final
orders and subject to appeal. It is for that reason
that the grant of an amendment to particulars of claim in the face of
an objection
that the claim as amended has prescribed
17
as well as the refusal of an
amendment on the grounds of a similar objection
18
are appealable.
[24]
The objection by the appellants to the amendments in this case are
largely based on the contention that the new matter sought
to be
raised by the Commission has never been the subject of a complaint
initiated in terms of s 49B of the Act and accordingly
these are
not matters that can be referred to the Competition Tribunal for its
determination. In other words they say that if these
matters are
considered by the Tribunal in the course of the present proceedings
it will be considering matters that are outside
its jurisdiction and
on which it is not entitled to rule. The objections go to the
jurisdiction of the Tribunal. The terms of the
three different
complaints initiated by the Commissioner in this case were before the
Tribunal when it made its decision. That
it was making a final
decision on the jurisdictional issue is clear from its determination,
the relevant paragraph of which reads:
‘
[66] In conclusion we find that the
chemical cartel as well as the complaint of collusion between
Steinhoff and KAP were initiated
by the Commission and the
jurisdictional requirement for a referral against Feltex and
Steinhoff and KAP respectively, has been
satisfied.’
That decision served to dispose of
the jurisdictional question. It stands on the same footing as the
dismissal of a special plea
to the jurisdiction;
19
or a decision upholding a special
plea to the jurisdiction;
20
or either the upholding or the
dismissal of an exception on the grounds that the court does not have
jurisdiction to hear the matter.
21
It constitutes a final decision by
the Tribunal intended to dispose finally of this issue.
[25] Accordingly I hold that the Tribunal’s
decision to allow the amendment to introduce Feltex in the chemical
cartel complaint
is appealable. So is the amendment relating to the
Steinhoff appellants insofar as it was directed at attaching
liability to Steinhoff
International and Steinhoff Africa for the
actions of Loungefoam and Vitafoam. The entitlement to appeal
encompasses not only the
amendments to the founding affidavit but
also the consequential amendments to the relief sought in the notice
of motion.
[26] That leaves only the appeal by the Steinhoff
appellants in relation to the grant of an amendment to the founding
affidavit
and the notice of motion to give effect to the s 4(5)(b)
claim. This does not raise an issue of jurisdiction. The argument
by
the Steinhoff appellants is that such relief is impermissible on a
proper construction of the Act. For its part the Commission
contends
that this is a permissible order in respect of the complaint that has
already been referred to the Tribunal and in respect
of which the
Tribunal’s jurisdiction is not in question.
[27] The Steinhoff appellants contend that there is no
legal foundation for the Commission to seek or the Tribunal to make
an order
in these terms. Clearly it was permissible for them to
oppose the amendment on the ground that it was bad in law. Had they
succeeded
in such opposition the refusal of the amendment would have
been appealable at the instance of the Commission. The reason is that
it would have disposed finally of the Commission’s entitlement
to that relief. Unfortunately the Tribunal did not deal separately
with this amendment. Its approach was that if the other amendments to
the founding affidavit were to be granted this one should
also be
granted. It appears from the Tribunal’s determination that it
was under the impression that if the earlier amendments
were granted
this should also be granted as a consequential amendment. It appears
to have gained that impression from the manner
in which the
amendments were argued before it. That approach was incorrect as the
amendment in question to introduce a new paragraph
35 to the founding
affidavit stood on a different legal footing to the other amendment.
[28] The contention raised by the
s 4(5)(b) claim is not an alternative claim based on the same
facts as the main claim but
adding nothing to the factual material
that the Tribunal will have to consider at the hearing.
22
It is a separate and distinct claim
on a novel legal ground seeking to attach liability to parties who
have not hitherto been regarded
as liable in respect of the
particular complaints that are at present before the Tribunal for
determination. In order to pursue
this claim it will be necessary for
the Commission to show that Steinhoff International and Steinhoff
Africa are, together with
Loungefoam and Vitafoam,
an
economic unit
. That will
require a consideration of the corporate structures of the group, the
manner of its management and the relationship
between the different
companies in the group. In order to deal with it the Steinhoff
appellants will be required to lead evidence
of the operation of the
different entities within the group. This goes beyond merely the
relationship between Loungefoam and Vitafoam.
In my view therefore
permitting this amendment introduced a new cause of complaint, or
different claim, that will materially affect
the proceedings before
the Tribunal. Its introduction was permitted in the face of an
objection that it is bad in law. The Tribunal
has, by allowing it,
rejected that argument. In those circumstances the decision to permit
the amendment has in my view final effect
and is properly the subject
of an appeal.
[29] That conclusion renders it
unnecessary to consider an alternative argument advanced on behalf of
Feltex that s 62(2) of the
Act confers an appellate jurisdiction upon
this court going beyond the jurisdiction established by s 61(1) read
with s 37(1)(b)
of the Act. It is by no means clear that any such
additional jurisdiction exists and the point can best be left for an
occasion
where it properly arises. It is also unnecessary in the
light of that conclusion to deal at any length with the power of this
court
to review decisions of the Competition Tribunal. Such power is
analogous to the power that the High Court, in its current and former
form, has and always had to review the decisions of inferior
tribunals. As a general proposition, however, that court was and is
reluctant to exercise that power save in relation to completed
proceedings. It only exercises that power prior to the completion
of
the proceedings in the court or tribunal concerned in circumstances
where the exercise of the power is necessary to prevent
grave
injustice.
23
In general it is undesirable that
proceedings, whether before a court or a tribunal, should be
determined piecemeal. Accordingly,
in my view, there is much to be
said for this court adopting a similar approach to that which the
High Court has always adopted
to the exercise of its power to review
the actions of lower courts or tribunals before the completion of
proceedings in those courts
or tribunals. However, like the proper
construction of s 62(2) that question can await determination on
a more suitable occasion.
THE FELTEX APPEAL
[30] The stated purpose of the chemical cartel
amendments was ‘to connect Feltex to the allegations regarding
the joint purchasing
of chemicals … which have so far only
been made against Loungefoam and Vitafoam’. Both Feltex and the
Steinhoff appellants
objected to the amendment on the grounds that
the Commission had at no stage initiated a complaint against Feltex
in respect of
the chemical cartel. The deponents to the affidavits on
behalf of the appellants drew attention to the various complaint
initiation
statements and submitted that they did not refer to Feltex
as a party to the chemical cartel.
[31] The Commission’s response
to these contentions was vigorous
24
and
it was said by its deponent that:
‘
There
must, even to the third respondent, be a limit to which meritless
technical points can be relied upon.’
Insofar
as substance was concerned, however, the response was ambiguous. The
Commission said that it had initiated an investigation
into the
flexible polyurethane market against Vitafoam, Loungefoam, Feltex and
certain other entities in relation to allegations
of price fixing and
dividing markets in contravention of section 4(1)(b)(i) and (ii) of
the Competition Act. It said that ‘these
allegations are
sufficiently wide to colour the particulars of the complaint under
consideration’. It amplified that statement
with the contention
that:
‘
There is no requirement that an initiating
statement should detail allegations against a potential respondent in
the manner in which
the third respondent seems to expect.’
In a supplementary affidavit it said that the document
in which a complaint had been initiated against Feltex was a
complaint initiation
form CC 1 dated 27 November 2007. That was
not the document initially referred to which was a subsequent
complaint initiation
dated 26 May 2008.
[32] The Tribunal’s approach is set out in the
following extracts from its decision:
‘
[39] The language of section 49B(1) is
clear and unambiguous. The Commission must initiate an investigation
into an alleged prohibited
practice ie any conduct that is prohibited
under Chapter 2. There is no stipulation that the prohibited practice
be alleged against
specific respondents or all possible entities that
the Commission may wish to later prosecute at the time of initiation
…
[40] Section 49B(2)(b) provides that any person may submit a
complaint against – and once again we see the same wording –
an alleged prohibited practice to the Commission. There is no
requirement that the prohibited conduct be alleged against a specific
respondent or a group of respondents.
[46] … There is no need for the Commission at the moment of
initiation to provide precise details of the parties involved
or even
all the product markets that could potentially be involved. Nor is it
required to know with a degree of precision which
particular entities
in a group of companies was involved in the alleged prohibited
practice.’
[33] Subsequent to the Tribunal’s
decision the Supreme Court of Appeal in
Woodlands
Dairy (Pty) Limited v Competition Commission
25
held that its approach to the
construction of the Act is incorrect.
26
In the light of that Mr Maenetje, on
behalf of the Commission, did not attempt to support the reasoning of
the Tribunal. Instead
he contended that on a proper construction of
the complaint initiation documents the initiation of the chemical
cartel complaint
had included Feltex. However, this impales the
Commission firmly on the horns of a dilemma. If no complaint has been
initiated
in respect of Feltex and the chemical cartel then such a
complaint cannot be introduced by way of amendment, because the
accepted
requirements for a lawful referral are not satisfied. If a
complaint was made against Feltex in respect of the chemical cartel
then it was not referred to the Tribunal within one year of the
initiation. It would follow that in terms of s 50(5) there
has
been a deemed non-referral of this complaint and it is not open to
the Commission to resuscitate it. However as that point
was not
argued I will address this contention on its merits.
[34] The first complaint initiation
involving Feltex is dated 27 November 2007. It refers,
inter
alia,
to Vitafoam,
Loungefoam and Feltex and say that the subject of the complaint is:
‘
Price fixing and dividing markets by
allocating customers in contravention of sections 4(1)(b)(i) and
4(1)(b)(ii).’
Annexed to the initiation is a Statement of Conduct. It
reads as follows:
‘
1. The Commission initiated an
investigation in the flexible polyurethane market against Vitafoam
and Loungefoam (case number: 2007
Sep3164) for alleged contraventions
of
sections 4(1)(b)(i)
,
4
(1)(b)(ii),
8
(c),
8
(d)(i),
8
(d)(iv) and
8
(d)(v) of the
Competition Act, 89 of 1998
, as amended.
2. The documents summonsed from Vitafoam and Loungefoam show evidence
that implicates other firms, Feltex Ltd, Unimattress, Strandfoam
and
Feel-o-foam, which were not identified when the case was initiated,
as being likely involved in conduct which contravenes the
Competition
Act.
3. The
evidence available shows that in 1999 Feltex Ltd (“Feltex”)
entered into an agreement with Loungefoam in terms of which
Feltex
sold its foam manufacturing division for the bedding and furniture
industry to Loungefoam.. In terms of the agreement Feltex
retained
its foam manufacturing business for automotive and industrial
applications.
Clause 16 of the agreement restrained Feltex from conducting business
which would be in competition to the business division sold
to
Loungefoam. Loungefoam would also not compete with Feltex in those
business divisions retained by Feltex. This restraint applied
to both
firms for a period of 5 years and in South Africa, Botswana, Lesotho,
Swaziland, Namibia and Zimbabwe.
In 1999 agreement would have expired in 2004 but remains in force
(evidence attached) and establishes reason to believe that Feltex,
Loungefoam and Vitafoam are dividing markets in contravention of
section 4(1)(b)(ii)
of the
Competition Act.
4. Correspondence
by email, memorandum and minutes of a foam forum
also shows evidence that Vitafoam and Loungefoam may have colluded
with competitors
Unimattress, Strandfoam and Feel-o-foam to divide
markets and/or fix prices in contravention of
section 4(1)(b)(i)
and/or 4(1)(b)(ii) of the
Competition Act.
In order to fully investigate this case, it is necessary for the
Commission to expand the investigation initiated against Vitafoam
and
Loungefoam to include Feltex Ltd, Unimattress, Strandfoam and
Feel-o-foam, in terms of
section 49B(1)
of the
Competition Act.’
[35
] Paragraphs 1 and 2 of the statement of conduct
provide background to this further complaint initiation. Paragraph 3
charges Feltex,
Loungefoam and Vitafoam with dividing markets. That
is the complaint that was referred to the Tribunal from the outset.
Its relevance
for present purposes is that paragraph 3 is the only
paragraph suggesting that the Commission has any evidence that Feltex
is involved
in possible contraventions of the Act.
[36] Paragraph 4 of the statement of conduct is the only
paragraph that could potentially encompass the price fixing
constituting
the chemical cartel. Significantly it makes no reference
whatever to Feltex. Instead it refers to the other three parties
whose
affairs were to be the subject of the complaint and the
consequent investigation.
[37] A fair reading of this document is that the
Commission had information suggesting that Feltex, together with
Loungefoam and
Vitafoam, might have been and be involved in an
understanding to divide markets. That is reinforced by the reference
to s 4(1)(b)(ii)
of the Act, which deals with the division of
markets. Paragraph 4 does not refer to Feltex. That it does not
involve Feltex is
clear from the statement that Vitafoam and
Loungefoam may have colluded with the three other named parties to
fix prices. It is
only in that paragraph that there is a reference to
s 4(1)(b)(i) of the Act dealing with fixing prices.
[38] Mr Maenetje endeavoured to suggest that the closing
paragraph commencing with the words ‘in order to fully
investigate
this case’ extended the referral in respect of the
chemical cartel to Feltex. That is not a tenable reading of this
paragraph.
All that it says is that the investigation will extend to
encompass the conduct set out in paragraphs 3 and 4. Insofar as
Feltex
was concerned that did not include conduct forming part of the
chemical cartel.
[39] As a last string to his bow Mr Maenetje sought to
rely upon a later complaint initiation dated 26 May 2008. That
attempt must
however fail. First it is contrary to his client’s
case that the relevant complaint initiation is embodied in the
document
of 27 November 2007. Second there is nothing in the document
of 26 May 2008 to suggest that it is concerned with the chemical
cartel.
Third, and decisively, it says that ‘it is necessary
for the Commission to expand the investigation initiated against
Vitafoam
and Loungefoam to include Steinhoff International Holdings
Limited’. Once it is accepted that the earlier document had not
initiated a complaint against Feltex in respect of the chemical
cartel, the later document cannot overcome the difficulty.
[40] Throughout the argument on behalf of the Commission
the refrain was sounded that to uphold the objection by Feltex
involves
an unduly technical approach to the construction of the Act
and renders the task of the Commission and the Tribunal more
difficult
or even impossible. Implicit in this is a suggestion that
this court and the SCA are being unduly technical in contrast to the
informality of the approach of the Commission and the Tribunal. That
is an unfortunate and incorrect view of matters. The Commission,
the
Tribunal, this Court and the SCA are all engaged in applying the same
statute – the
Competition Act. In
common parlance we sing from
the same song sheet. The language of the statute and the architecture
of the complaints system it
establishes is set out in the Act and was
determined by the legislature. If it suffers from defects the remedy
is in the hands
of the legislature.
[41] There are certain basic principles arising from the
terms of the
Competition Act that
bear repeating. First the
Commission has no general powers of investigation into
anti-competitive conduct. Second the Act does
not in general terms
prohibit anti-competitive conduct. Third anti-competitive conduct
under the Act consists of horizontal and
vertical restrictive
practices and the abuse of dominance. Fourth these are not terms of
generality but terms that are defined
and circumscribed by the Act
itself in ss 4,5 and 8 respectively. Unless conduct falls within the
definitions it is not prohibited
even if its effects are perceived as
anti-competitive. Fifth anti-competitive conduct in any of these
forms is conduct involving
a firm
27
or firms. In other words it cannot exist apart from the
conduct of a firm or firms. Neither the Commission nor the Tribunal
question
any of this.
[42] Instead of vesting the Commission with general
powers of investigation, the Act provides that the Commission’s
powers
of investigation are triggered either by the initiation of a
complaint by the Commissioner, or by the receipt of a complaint from
a third party under s 49B. We need only address the first of
these possibilities. In
Woodlands
the
SCA held that, in the case of the Commissioner, this requires that
the Commissioner be in possession of information that gives
rise to a
reasonable suspicion that anti-competitive conduct, as defined in the
Act, has been committed.
28
As anti-competitive conduct must involve a firm or firms
it held that the firm or firms involved must be identified as being
party
to that conduct.
29
[43] The application of those conclusions and the
implications if they are not a correct view of the law is
instructive. The complaint
initiation in
Woodlands
referred to an investigation into the ‘milk
industry’. The Commissioner had no information that suggested
wrongdoing
by Woodlands. Nonetheless representatives of Woodlands
were summoned and interrogated, and it was compelled to produce
documents,
purely with a view to ascertaining whether it had been
guilty of any anti-competitive conduct falling within the Act. The
conduct
by others that had originally given rise to the investigation
was not the subject of the interrogation or the demand for documents.
Its representatives were obliged, over their protests, to answer the
questions put to them unless they incriminated them in criminal
conduct.
30
A failure to do so would have constituted a criminal
offence under s 72. They were obliged to produce the required
documents
because a failure to do so was also a criminal offence
under s 71. In the light of the breadth of the summons and the
absence
of any grounds to suggest that Woodlands had been guilty of
anti-competitive conduct the summons was nothing more than an
invitation
to engage in what the SCA described as a fishing
expedition. This court set aside the summons and the Commission did
not challenge
that decision. The SCA set aside the complaints
subsequently initiated against Woodlands because they were based on
the information
the Commission had illegally obtained.
[44] It is helpful in the light of the suggestion that
the approach in
Woodlands
hampers
the Commission in uncovering anti-competitive conduct to compare the
position under the Act with an investigation by the
police. Their
power to enter premises or seize documents is expressed in similar
terms to the powers of an investigator under the
Competition Act and
the powers of the latter are clearly modelled on the powers of the
former. However, the police have only a limited power, with
judicial
approval, to compel witnesses – but never accused persons –
to submit to interrogation.
31
In order to exercise any of their investigative powers
they are required – and must usually satisfy a judicial officer
of
this – to have both information giving rise to a reasonable
suspicion that a crime has been committed and information as to
the
likely perpetrator or perpetrators of that crime. By contrast the
Commission’s investigator has such powers whenever
the
Commissioner decides to initiate a complaint. The Commissioner is
therefore both the gamekeeper striving to catch the perpetrators
of
anti-competitive conduct and the gatekeeper to the exercise by
inspectors on the Commissioner’s staff of the power of
interrogation and some powers of entry, search and seizure. The
investigator’s powers are exercised without judicial oversight,
other than judicial review, and are capable of being abused by the
Commissioner as past experience has regrettably demonstrated.
32
Woodlands
itself was also an
example of such abuse. Had the police engaged in the same type of
conduct as the Commission in
Woodlands
it
would unequivocally have been unlawful and the courts would have
constrained them from pursuing such an investigation. They would
have
failed in their duty to protect the targets of the investigation
against a misuse of police powers had they not done so.
[45] The reason for circumscribing powers of
investigation, whether by the police or the Commission, is to protect
the rights of
those subjected to investigation. That is a central
pillar of our constitutional democracy. Quite rightly the Commission
does not
suggest in argument that these safeguards should be absent.
It is for precisely that reason that the SCA held that the
Commissioner
must be in possession of information on which a
reasonable suspicion of the commission of unlawful anti-competitive
conduct by
a firm or firms can be based before initiating a
complaint. In the same way the police are required to be in
possession of information
on the basis of which they suspect that a
crime has been committed in order to exercise their powers of
investigation. Any other
approach is inimical to the protection of
the rights guaranteed in the Bill of Rights.
[46] The Commission’s powers of investigation are
inextricably linked to the Act’s referral system in respect of
complaints
of anti-competitive conduct. As already mentioned either
the Commissioner initiates a complaint or some other person submits a
complaint.
33
Upon initiation or receipt of a complaint the
Commissioner must direct an inspector to investigate the complaint as
quickly as practicable.
34
Once an investigation has commenced the Commission’s
inspector is vested with powers similar to a police officer
investigating
a crime and in regard to the interrogation of persons
more extensive than those. The outcome of the investigation may be a
referral
to the Tribunal and the imposition of substantial
administrative penalties.
35
The Commission itself describes its activities in
enforcing the Act as prosecutions.
[47] I do not understand the Commission to suggest that
the statutory scheme requiring the initiation or referral of a
complaint
followed by an investigation and then a reference to the
Tribunal is in principle deficient or should be altered. In other
words
the Commission accepts that a complaint initiation, followed by
an investigation, before a referral is necessary and desirable.
According to the Commission’s own report it seems effective in
winnowing out unmeritorious cases, resolving many on a consent
basis
and referring only those that require a decision, primarily one
suspects those where the allegations of anti-competitive
conduct are
disputed or their scope is in issue, for a hearing before the
Tribunal. According to the 2009/2010 Report of the Commission
it
achieved the following results during that year:
‘
Of
the 289 cases under investigation during the reporting period, 27
complaints were included in the 13 referrals to the Tribunal
for
adjudication, 102 cases were closed at screening, 15 cases were
closed after further investigation, 6 cases were withdrawn
and
consent agreements were concluded in 5 cases.’
[48]
Where then does the perceived problem lie? It appears to be with
situations where there has been a proper initiation of a complaint,
an investigation and then a referral, where either the referral
relates to some anti-competitive conduct other than that referred
to
in the original complaint or it is sought to add another party to the
alleged anti-competitive conduct. Taking the present case
as an
example it is said that the Commission has discovered evidence that
implicates Feltex as a participant in the chemical cartel
and
accordingly it wishes to add that charge to the others that Feltex
already faces before the Tribunal. To require the Commissioner
to
amend the original complaint initiation, institute an investigation
(however cursory) and then refer this complaint against
Feltex to the
Tribunal is said to involve an excess of formalism.
[49]
That approach misses two fundamentally important points about the
process prescribed by the Act. The first is the reason for
it
providing in s 49B(3) that the Commissioner
must
direct an inspector to investigate a complaint
irrespective of whether the complaint is initiated by the
Commissioner or is made
by a third party. Whilst that enables the
inspector to exercise the powers conferred by the Act in relation to
an investigation
it also 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. The consequences of a public charge that a
firm is guilty
of anti-competitive conduct are potentially
far-reaching. Considerable reputational damage may flow from being
charged with anti-competitive
conduct. The ability of the public, via
the lens of the media, to distinguish between an allegation of
anti-competitive conduct
and proof that anti-competitive conduct has
occurred is by no means clear.
36
If nothing else the firm so charged must devote
resources that would otherwise be directed elsewhere to defending
itself including,
in many instances, fighting a public relations
battle in trying to clear itself of these charges. As the
Commission’s own
statistics quoted in paragraph [47] show many
charges of anti-competitive conduct prove on investigation to be
unfounded. In addition
the investigative phase enables the target
firm and the Commission to arrive at a suitable consent order in
terms of s 49D
that largely obviates the need for a protracted
hearing before the Tribunal.
[50]
The second important point that is overlooked is that s 67(1) of
the Act provides that:
‘
A
complaint in respect of a prohibited practice may not be initiated
more than three years after the practice has ceased.’
The
date of initiation of a complaint is accordingly of vital importance
in applying s 67(1) of the Act. That is so whether
the section
is construed as the Tribunal has done as one akin to prescription
37
or whether it is construed as going to the jurisdiction
of the Commissioner to initiate and the Tribunal to entertain a
complaint
of anti-competitive conduct. In either case the critical
date for determining the three year period is the date of initiation
of
the complaint. In the absence of the initiation of a complaint,
because the matter has been referred directly to the Tribunal without
the complaint or the target firm having been the subject of a
complaint initiation, the foundation for invoking s 67(1) is absent.
In view of its importance in the application of the Act that cannot
be correct. This illustrates the importance in every instance
of
every complaint against any firm of a proper initiation of that
complaint in terms of s 49B.
[51] The charge of formalism is therefore unfounded. The
Commission would not dream of referring a case to the Tribunal unless
there
had been a complaint initiation and the Tribunal would not
accept jurisdiction if it did so. That situation is not altered by
saying
that because a matter is already before the Tribunal in
respect of firm A or conduct X there should be no problem in adding
firm
B or conduct Y without following the statutory route. If one
takes away the existing referral the Commission would not adopt that
approach. There is accordingly no justification for it doing so
merely because there is an existing referral encompassing different
parties or different conduct to that which it now wishes to pursue.
[52] The Tribunal has itself recognised the need to
follow the sequence of initiation, investigation and referral. It
said:
‘
While initiation, investigation and
referral could conceivably all happen within the space of 24 hours,
the act of referral (or
non-referral) is always preceded by an act of
initiation and the two are distinct from each other.”
38
There
is no difference between that approach and the approach of this Court
and the SCA. It is plainly the correct approach to the
Act in its
present form. The Act requires that the sequence of complaint
initiation, investigation and referral be followed. It
provides no
alternative route, no shortcut. Where the evidence is clear or the
conduct egregious no doubt, as the Tribunal points
out in the
above-cited passage, that process will not take very long. Nor will
it in such cases hamper the Commission in discharging
its mandate. In
circumstances where the required steps are largely of a technical
nature it is difficult to conceive of any problems
in taking them.
[53]
The reality is that in the cases where it has encountered
difficulties over these issues the Commission has not been following
the requirements of the Act.
39
Why this is so is unclear as the statutory scheme is reasonably clear
and the decisions of both the Tribunal and this Court have
set them
out in a number of cases. This Court has also stressed that the focus
of the complaint should be the conduct that is said
to be
anti-competitive.
40
We have also recently emphasised that all that is required is that
the conduct said to contravene the Act 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,
41
bearing in mind 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.
42
This gives a broad scope to the Commissioner in formulating the terms
of a complaint initiation. In a cartel case, where new participants
may be discovered as an investigation progresses, the Commissioner
may be justified in couching a complaint initiation in fairly
broad
terms covering a number of market participants, on the basis of
circumstantial evidence to be construed in the light of the
pattern
that cartel activity takes, even if the Commissioner lacks
information directly implicating a particular firm, but that
is not
what has happened here.
[54] The Commission, as a statutory body exercising
statutory powers in terms of the Act, is obliged to comply with it.
That is
a central requirement of the rule of law. Had it done so in
relation to Feltex and the chemical cartel it would not be facing its
present difficulties. It was not suggested in argument that any
problem would have arisen had it done so and if it had one can
only
speculate about the outcome.
[55] Before leaving this topic I should deal briefly
with a
dictum
in the judgment in
Woodlands
that,
although not relied on in argument before us, might be thought to
have some bearing on the matters discussed above. In paragraph
[35]
Harms DP said:
‘
Furthermore,
the Act presupposes that the complaint (subject to possible amendment
and fleshing-out) as initiated will be referred
to the tribunal.’
Further at para [36] he said, and this is particularly
pertinent to this case:
‘
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 others or about other transgressions. If
it does,
it is fully entitled to use the information so obtained for amending
the complaint or the initiation of another complaint
and fuller
investigation.’
In
referring to the possibility of both an amendment and the initiation
of another complaint the learned judge contemplated two
possibilities. The first is that the information obtained in the
course of an investigation may relate to and fortify the existing
complaint and justify an amendment of the particulars of that
complaint as initiated without altering its fundamental nature. The
second is where the information discloses a quite different
transgression or participation by a party not hitherto the subject
of
a complaint. In those circumstances either the original initiation
must be amended to encompass the additional complaint or
party or a
fresh initiation of a complaint is required. In view of the careful
analysis of the requirements of the Act that preceded
these
statements they cannot be taken as sanctioning an amendment of a
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.
[56] For those reasons the Feltex appeal must succeed.
The precise order flowing from this depends upon the outcome of the
Steinhoff
appeal to which I now turn.
THE STEINHOFF APPEAL
[57] The contention on behalf of the Steinhoff
appellants in relation to the collusion claim is in substance the
same as that of
Feltex in regard to the chemical cartel. In the
affidavit on behalf of the Steinhoff appellants opposing the
application for amendment
the deponent put the objection on two
grounds depending upon the proper construction of the complaint. She
first said:
‘…
assuming that the Commission
intends to refer a complaint against either Steinhoff [International]
or its subsidiary, Steinhoff
Africa, the Commission has never
initiated a complaint regarding alleged price fixing, customer
allocation and joint purchasing
of chemicals against either of those
firms.’
In the alternative she submitted that:
‘…
it is not possible to raise a
complaint that the actions of Loungefoam and Vitafoam ought to be
construed as the result of co-ordination
between Steinhoff and KAP as
an alternative to a complaint that Loungefoam and Vitafoam colluded
as independent firms.’
[58] Which of these was the intended construction was
clarified in a replying affidavit on behalf of the Commission. It
disavowed
any intention to refer a new complaint of collusion against
the Steinhoff group of companies. Instead the Commission contended
that it was permissible for it to raise a complaint that the actions
of Loungefoam and Vitafoam ought to be construed as the result
of
co-ordination between Steinhoff and KAP, as an alternative to a
complaint that Loungefoam and Vitafoam colluded as independent
firms.
It averred that this was encompassed by the terms of the complaint
initiation of 26 May 2008.
[59] In advancing the collusion claim therefore the
Commission nailed its colours to the mast of the second construction
of its
amendment identified by the Steinhoff appellants. It is
noteworthy that in the founding affidavit in the review application
by
the Steinhoff appellants it was said:
‘
The Commission confirmed in its replying
affidavit and heads of argument in the amendment application that
what it intended by this
amendment was to refer a complaint against
Steinhoff [International] (or its subsidiary Steinhoff Africa) and
KAP that the two
firms engaged in collusive behaviour in relation to
the activities of Loungefoam and Vitafoam, namely price fixing,
customer allocation
and joint purchasing of chemicals through the
Foam Forum.’
The Commission did not dispute this description of the
basis for the amendment.
[60] In argument before us the Commission shifted its
stance. No doubt it did so in the face of two insuperable obstacles
to the
contentions advanced on its behalf in the affidavits. The
first is that the complaint initiation document dated 26 May 2008
does
not allege collusive conduct in breach of the Act by Steinhoff
International and KAP International. It merely alleges that Feltex,
Vitafoam and Loungefoam may have engaged in collusive conduct and
that:
‘
The relationship between the parties and
Steinhoff appears to have orchestrated the collusive conduct
complained of.’
Whatever that sentence was intended
to mean it does not embody a separate charge of conduct in breach of
the Act on the part of
Steinhoff International and KAP or Steinhoff
Africa and KAP. The second insuperable problem is that the
application to amend and
introduce this further complaint was only
made on 16 February 2010. That was substantially outside the one
year period for
referring a complaint to the Tribunal prescribed in
s 50(2) of the Act. Accordingly, insofar as that complaint
initiation
document embodied this particular claim of a breach of the
Act, the Commission must be regarded as having issued a notice of
non-referral
in respect of it
43
and it was impermissible for it to
refer that matter to the Tribunal at that stage.
[61] Mr Maenetje sought to place a narrower construction
on the factual allegations contained in the collusion claim. He
focussed
on the following words in the preamble to the relevant
paragraph:
‘
Whilst in strict formalism, which is also
not conceded, it may appear that Steinhoff controlled Loungefoam
sufficiently for purposes
of section 4(5)(b) – because of this
wider co-operation or collusion – any such control was rooted
in a stratagem to
achieve what section 4(1)(b) prohibits and cannot
be permitted to benefit the Steinhoff group of companies and/or the
KAP group
of companies.’
In essence he contended that the purpose of the
allegations was not to introduce a separate complaint of a
restrictive horizontal
practice between Steinhoff International and
KAP, but to provide the factual basis for a contention by the
Commission that, whatever
the appearance might be of Loungefoam and
Vitafoam being part of a single economic entity, it was in truth a
charade created by
collusion between the two groups and should be
disregarded. He relied upon the well-known principle that a court
will strip away
the façade in which parties have chosen to
cloak their transactions or relationship and look to the underlying
reality of
matters.
[62] I have no doubt that it is open to the Commission
to meet a defence based on s 4(5)(b) of the Act by contending that
the appearance
of two firms being part of a single economic entity
does not reflect the true situation. I equally have no doubt that
many of the
factual allegations embodied by the Commission in its
proposed paragraph 32 to its founding affidavit could be invoked as
evidence
of the existence of such a stratagem. Indeed, and in
fairness to the Steinhoff appellants, Mr Unterhalter SC, who appeared
on their
behalf, conceded that were that the sole purpose and
intention of the proposed amendments there could be no objection to
them.
Where I have difficulty lies in the proposition that this is
indeed the purpose of the amendments. The history of the proposed
amendment as traced above demonstrates that this was not the basis
upon which the amendment was sought nor was it the basis upon
which
it was granted.
[63] Whilst it is permissible in appellate proceedings
to argue a matter on an alternative legal basis to that on which it
was argued
in the tribunal from which the appeal lies, that is not
this case. Here the Commission is seeking to place a construction on
its
amendment that wholly differs from the construction for which it
contended in its affidavits and in argument before the Tribunal.
In
other words it wishes to say that the proposed amendment means
something different from what it was said to mean before the
Tribunal. That is not a new legal point in support of the same
result. It is an attempt to change the meaning, basis and content
of
the amendment. In my view that is impermissible and it must be held
to the construction on the basis of which it sought the
amendment. If
it wishes to raise these matters on the narrower basis indicated
above it is free to apply to the Tribunal to deliver
a supplementary
affidavit having that purpose. On the basis on which it sought the
amendments it was not in law entitled to them
and the appeal must
succeed.
[64] That leaves the amendment based on the Commission’s
s 4(5)(b) claim and the consequential relief of joinder and amendment
of the prayer for relief. Section 4(5) reads as follows:
‘
The provisions of subsection (1) do not
apply to an agreement between, or concerted practice engaged in by –
(a) a company, its wholly owned subsidiary as contemplated in section
1(5) of the Companies Act, 1973, a wholly owned subsidiary
of that
subsidiary, or any combination of them; or
(b) the constituent firms within a single economic entity similar in
structure to those referred to in paragraph (a).’
[65] The purpose of this section is to prevent companies
operating within a group of companies, or firms operating within a
single
economic entity similar to a group of companies, from being
accused of perpetrating restrictive horizontal practices in
consequence
of their interactions with one another as part of the
group. The purpose of the section is exclusionary. It is not creative
of
obligations going beyond that exclusionary purpose. Its operation
is restricted to s 4 of the Act and to relationships between
members of the group, whether a group of companies or a group of
firms. It permits companies or firms forming part of a group to
engage in conventional corporate trading activities such as joint
purchasing or co-ordinated price-setting. One can readily imagine
a
retail group operating under five different brands and five separate
subsidiaries, consolidating its purchasing power to purchase
goods
collectively for the group. Equally it would be understandable if two
or more subsidiaries traded in the same category of
goods that the
group might think it undesirable to engage in price competition with
itself. The purpose of s 4(5) is to exclude
such conduct from the
ambit of restrictive horizontal practices.
[66] In this case, where complaints were originally
levelled only against Loungefoam and Vitafoam, the provisions of s
4(5)(b) were
invoked. What the Commission seeks to do by its s
4(5)(b) claim is to say that if the defence is justified then conduct
involving
Loungefoam, Vitafoam and Feltex must be taken to be conduct
between Feltex and the group of companies constituted by Steinhoff
International, Steinhoff Africa, Loungefoam and Vitafoam. That
approach is not justified by s 4(5(b). If Loungefoam and Vitafoam
together with Feltex have engaged in a restrictive horizontal
practice then each of those firms is liable under the Act for its
role in that practice. Loungefoam and Vitafoam cannot excuse their
conduct by reliance on s 4(5)(b). Conversely the Commission
cannot
rely upon s 4(5)(b) to attach liability to Steinhoff International
and Steinhoff Africa. It follows that the amendments
to permit the s
4(5)(b) claim should not have been granted and Steinhoff Africa
should not have been joined in these proceedings.
CONCLUSION
[67] In the result both the Feltex appeal and the
Steinhoff appeal must succeed in their entirety. That does not mean
that the Commission
may not seek leave to place before the Tribunal,
by way of a supplementary affidavit at this stage and evidence in due
course,
material directed at showing that the appearance of a single
economic entity between Loungefoam and Vitafoam is a charade. In
saying
that, however, it is not my intention to give any indication
to the Tribunal whether to permit such a supplementary affidavit to
be delivered at this stage of the proceedings. As for the reviews
they have become academic and will be dismissed. However the
applicants have succeeded on the points sought to be raised in the
reviews and in those circumstances it seems to me fair that
each
party pay its own costs in the reviews. That can be achieved by
making no order for costs.
[68] I accordingly make the following order.
1. The appeal by Feltex Holdings (Pty) Limited is upheld
with costs, such costs to include those consequent upon the
employment
of two counsel.
2. The appeal by the Steinhoff appellants is upheld with
costs, such costs to include the costs of two counsel, where two
counsel
were employed.
3. Paragraphs [67.1] and [67.2] of the order of the
Tribunal contained in paragraph 67 of its decision are set aside and
replaced
by the following:
‘
[1] The Commission’s
application for the amendments set out in Annexure “A”
to its decision is granted subject
to the following qualifications:
The amendment to paragraph 3 of the order prayed in
its notice of motion dated 29 July 2009 is refused;
The amendment of the founding affidavit in the
respects set out in paragraphs 10, 11 and 12 of annexure A is
refused.
[2] The application for the joinder of Steinhoff Africa
Holdings (Pty) Limited is dismissed.’
4. The review applications brought by Feltex and the
Steinhoff applicants are dismissed with no order as to costs.
M J D WALLIS
ACTING JUDGE OF APPEAL
DATE OF HEARING 18 MARCH 2011
DATE OF JUDGMENT 6 MAY 2011
APPELLANT’S COUNSEL M du P VAN DER NEST SC with
him
(FELTEX) ALFRED COCKRELL SC
APPELLANT’S ATTORNEYS SHEPSTONE &WYLIE
(FELTEX)
APPELLANTS’ COUNSEL DAVID UNTERHALTER SC with him
(STEINHOFF APPELLANTS) M A WESLEY
APPELLANTS’ ATTORNEYS DENEYS REITZ INC
RESPONDENT’S COUNSEL N H MAENETJE
RESPONDENT’S ATTORNEYS STATE ATTORNEY
1
First
appellant in the Steinhoff appeal.
2
Second
respondent in the Steinhoff appeal and, according to the Commission,
no longer trading.
3
Second
appellant in the Steinhoff appeal. Gommagomma owns 100% of the
shares in Vitafoam and, by the use of the expression ‘and/or’,
the two are treated as identical and interchangeable in the record.
Accordingly references to Vitafoam in the judgment are to
be taken
as comprehending Gommagomma.
4
The
third appellant in the Steinhoff appeal.
5
The
fourth appellant in the Steinhoff appeal.
6
Hart
v Pinetown Drive-In Cinema (Pty) Limited
1972
(1) SA 464
(D) at 469 F.
7
C
R Snyman,
Criminal Law
,
(4
th
Ed) 343.
8
If
the deponent to an affidavit knows that a statement in the affidavit
is untrue that is an offence in terms of s 9 of the
Justices of
the Peace and Commissioners of Oaths Act 16 of 1963.
9
Unfortunately
this too is something of which the Commission appears to have been
unaware as Ms Nontambana elsewhere claimed that
allegations in an
affidavit ‘cannot be contradictory and mutually destructive
when they are made expressly in the alternative.’
10
C/f
Paola v Jeeva NO and others
[2003] ZASCA 100
;
2004
(1) SA 396
(SCA) para [17].
11
[2004]
ZACAC 4
;
[2005] 1 CPLR 113
(CAC) at 9.
12
Zweni
v Minister of Law and Order
1993 (1)
SA 523
(A) at 536 B.
13
Moch
v Nedtravel (Pty) Limited t/a American Express Travel Service
1996 (3) SA 1
(A) at 10F-11C.
14
South
African Motor Industry Employers’ Association v South African
Bank of Athens Limited
1980 (3) SA 91
(A) 96H.
15
2009
(5) SA 432
(SCA) para[ 9]
16
2009
(4) SA 1
SCA.
17
CGU
Insurance Limited v Rumdel Construction (Pty) Limited
2004
(2) SA 622
(SCA).
18
Associated
Paint & Chemical Industries (Pty) Limited t/a Albestra Paint and
Lacquers v Smit
2000 (2) SA 789
(SCA).
19
Steytler
NO v Fitzgerald
1911 AD 295
at 305.
20
Ndlovu
v Santam Limited
2006 (2) SA 239
(SCA)
at para [9].
21
Maize
Board v Tiger Oats Limited and Others
2002
(5) SA 365
(SCA) paras [9] and [14].
This
is an exception to the general principle that the dismissal of an
exception is not final.
22
C/f
Dharumpal Transport (Pty) Ltd v
Dharumpal
1956 (1) SA 700
(A)
23
Wahlhaus
and Others v Additional Magistrate, Johannesburg and Another
1959 (3) SA 113
(A) 119G;
Ismail and Others v Additional
Magistrate, Wynberg and Another
1963 (1) SA 1
(A) 5H - 6A
24
It
described the contentions by Feltex as ‘devoid of any merit’
25
2010
(6) SA 108
(SCA)
26
See
also
Netstar (Pty) Limited and Others v
Competition Commission of South Africa and Others
[2011]
ZACAC 1
27
A
firm includes a person, partnership or trust.
28
Woodlands
para [13].
29
Woodlands
para [35].
30
Sections
49A(2) and (3).
31
Section
205
of the
Criminal Procedure Act 51 of 1977
.
32
Pretoria
Portland Cement Co Ltd and Another v Competition Commission and
Others
2003 (2) SA 385 (SCA)
33
Sections
49B(1)
and (2).
34
Section
49B(3).
35
">
35
The
Commission appears routinely to ask for the maximum penalty of 10%
of the turnover of the firm to be imposed. This can amount
to many
millions of Rand. According to the Commission’s Annual report
for 2009/2010 the total figure collected by way of
penalties in that
year was slightly less than R500 million.
36
The
Supreme Court of Canada has recently drawn attention to the problem
that an accused person may face if they are unable to
ensure that
‘the public will not be influenced by untested, one-sided and
stigmatising information bearing on issues that
are often irrelevant
to guilt.’
Toronto Star Newspapers Ltd and others v R (in
right of Canada) and others; Canadian Broadcasting Corporation and
others v R and
another
[2010] SCC 21
;
[2010] 1 SCR 721
;
2011 (1)
CLR 1
(SCC) para [51].
37
Competition
Commission v Pioneer Foods (Pty) Ltd
[2010]
ZACT 9
, paras [84] and [86].
38
Competition
Commission v Pioneer Foods (Pty) Ltd
[2010] ZACT 9
, para [85].
39
Th
e
only cases where these issues of the proper procedure to be followed
have resulted in the Commission being unable to proceed
are
Woodlands
and the
recent decision of this Court in
Yara South
Africa (Pty) Ltd v Competition Commission and Others, Competition
Commission v Sasol Chemical Industries Ltd and Others,
Omnia
Fertilizers v Competition Commission
[2011]
ZACAC 2.
We have noted newspaper reports of the Tribunal upholding a
similar procedural point in a matter involving South African
Breweries
but no reasons for that decision have been published at
this stage.
40
Glaxo
Wellcome (Pty) Ltd and Others v National Association of
Pharmaceutical Wholesalers
[2002] ZACAC 3
,
paras [15] to [19].
41
The
essential question is whether the issue was raised with sufficient
clarity not whether it was described by a term understood
in the
area of competition law. See
Senwes Ltd v
Competition Commission of South Africa
[2009]
ZACAC 4
, paras [27] to [43]
.
42
Netstar
(Pty) Ltd and Others v Competition Commission South Africa and
Another
[2011] ZACAC 1
, para [27].
43
Section
50(5).