Omnia Fertilizer Limited v Competition Commission and Others; Sasol Chemical Industries Limited v Competition Commission and Others [2006] ZACAC 8; [2006] ZACAC 2 (28 April 2006)

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[2006] ZACAC 8
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Omnia Fertilizer Limited v Competition Commission and Others; Sasol Chemical Industries Limited v Competition Commission and Others [2006] ZACAC 8; [2006] ZACAC 2 (28 April 2006)
REPORTABLE
In the Competition
Appeal Court of South Africa
In
the matter of
Case 51/CAC/Jun05
Omnia
Fertilizer Limited
Applicant
and
The
Competition Commission
First Respondent
Sasol
Chemical Industries Limited
Second Respondent
Kynoch
Fertilizer (Pty) Limited
Third Respondent
Nutri-Flow
CC
Fourth Respondent
Nutri-Fertilizer
CC
Fifth Respondent
and
in the matter of
Case 52/CAC/Jun05
Sasol
Chemical Industries Limited
Applicant
and
The
Competition Commission
First Respondent
The
Competition Tribunal
Second Respondent
Nutri-Flow
CC
Third Respondent
Nutri-Fertilizer
CC
Fourth Respondent
Kynoch
Fertilizer (Pty) Ltd
Fifth Respondent
Omnia
Fertilizer Limited
Sixth Respondent
JUDGMENT
Delivered on 28 April 2006
Malan AJA et Patel
AJA
:
[1] In
November 2002 the first respondent (“the Commission”) received a
complaint (“the first complaint”) from Nutri-Flo (the
Nutri-Flow
corporations) will be referred to as (“the complainants”) in
which allegations were made that the applicant in case
52/CAC/Jun05
(“Sasol”) had made itself guilty of contraventions of the
Competition Act 89 of 1998 (“the Act”).
[2] The Commission
decided not to refer the complaint to the Tribunal and during October
2003 recorded its decision in a certificate
of non-referral. The
reason for the non-referral was that, after investigating the
complaint, insufficient evidence was found to
warrant such referral.
If the Commission issues a notice of non-referral in response to a
complaint, the
complainant
may refer the complaint directly to the Tribunal (s 51(1)). The
complainants in this matter did not do so.
[3] The
complainants lodged a fresh complaint (“the second complaint”) on
3 November 2003 and launched proceedings for interim
relief pending
the determination of the complaint. Two further respondents were
included in this complaint, viz Kynoch and Omnia.
Nothing came of
these proceedings.
[4] The
second complaint was investigated by the Commission and eventually on
4 May 2005, referred to the Tribunal. Due to time constraints
the
Commission had obtained the consent of the complainants to two
extensions of the prescribed time periods allowed for the
investigation.
The first extension agreed to by Nutri-Flo is dated 23
October 2004 and extends the expiry date of the investigation to 28
February
2005. The second is dated 15 February 2005 and extends the
expiry date to 30 April 2005.
[5] In two separate
applications Sasol and Omnia seek to review and set aside the
referral of the second complaint on the ground that
it is
ultra
vires
and or unconstitutional since it was made out of time, the second
extension of time being incompetent and a nullity; and in breach
of
the Constitution since the Commission had acted oppressively in
making a press statement at the time of referral thereby divulging
confidential information pertaining to Sasol. In addition, Sasol
seeks to review the referral of the second complaint on the ground
that it deals substantially with the same complaint the Commission
had issued a certificate of non-referral in respect thereof.
[6]
The first question is whether the Commission acted within its powers
when it referred the second complaint to the Tribunal. This
calls for
an interpretation of s 50 of the Act :
‘
(1) At any time after initiating
a complaint, the Competition Commission may refer the complaint to
the Competition Tribunal.
(2)
Within
one year after a complaint was submitted to
it,
the Commissioner must–
(a) subject to subsection (3), refer
the complaint to the Competition Tribunal, if it determines that a
prohibited practice has been
established; or
(b) in any other case, issue a notice
of non-referral to the
complainant
in the
prescribed
form.
(3) When the Competition Commission
refers a complaint to the Competition Tribunal in terms of subsection
(2)(a), it –
(a)
may –
(i) refer all the particulars of the
complaint as submitted by the complainant;
(ii) refer only some of the
particulars of the complaint as submitted by the complainant; or
(iii) add particulars to the
complaint as submitted by the complainant; and
(b) must issue a notice of
non-referral as contemplated in subsection (2)(b) in respect of any
particulars of the complainant not
referred to the Competition
Tribunal.
(4)
In
a particular case –
(a)
the
Competition ‘Commission and the
complainant
may agree to extend the period allowed in subsection (2); or
(b)
on application by the
Competition Commission made before the end of the period contemplated
in paragraph (a), the Competition Tribunal
may extend that period.
(5)
If the Competition Commission has not referred a complaint to the
Competition Tribunal, or issued a notice of non-referral,
within
the time contemplated in subsection (2), or the extended period
contemplated in subsection (4), the Commission must be regarded
as
having issued a notice of non-referral on the expiry of the relevant
period.
’
[7] The interpretation
of s 50 arose for decision in
Sappi
Fine Papers (Pty) Ltd v Competition Commission
(62/CR/Nov
02) where the Tribunal held that multiple extensions of the period
referred to in s 50(2) were possible. The reasons for
coming to this
conclusion are the following:
‘
20. The respondent argues firstly
on a textual approach that the use of the words ‘the period’
presupposes a single period of
extension. This it argues is
reinforced by the fact that the power to extend in section 50(4) is
to ‘extend the period allowed
in subsection (2)’. Since this
period is a period of one year the legislature only contemplated an
extension to the period of one
year and not an extension to the one
year plus any previous periods of extension.
21. The
respondent argues that the reason that the statute does not permit
multiple extensions is that otherwise a respondent would
be
prejudiced by a never-ending series of extensions which would mean
that the case against it would never reach finality.
22. The
Commission argues that the statute is silent on this point and that
indeed if there is nothing in the statute to prevent
them from making
use of more than one extension, we should not read such a stricture
in. The Commission argues that where the legislature
had intended a
single extension period it had expressly done so in section 14, the
section dealing with merger control. In section
14(1)(a) it states
that the Competition Commission ‘may extend the period in which it
has to consider the proposed merger by a
single period not exceeding
40 business days and, in that case, it must issue an extension
certificate to any party who notified
it of the merger’.
23. We
are persuaded by the Commission’s argument. There is nothing in the
express wording of the text of section 50 to preclude
multiple
extensions. In order to be valid, however, the extensions must be
granted before the expiry of the previous period otherwise
the chain
will be broken. There is no suggestion that the chain of extensions
in this case has been interrupted by a period for which
a prior
consent had not been granted.
24. The
difference in the text in sections 14 and 50 is significant to serve
as interpretative guide. Both were introduced as part
of the same
amendment and therefore we can assume that when the legislature
applied its mind to the issues of extensions of both
merger
considerations and complaint referrals it was mindful of requiring a
single extension period with the former, but not with
the latter.
What is also significantly different about section 14 is that the
requirement of a single period is coupled with a stipulation
that the
extension may not exceed 40 days. Section 50(2) is silent on how long
the period of extension may run.
25. The absence of these features in
section 50 suggests that the legislature had not intended to provide
for only a single period
of extension for the reasons suggested by
the respondent. If it had considered it necessary, the logic would
not be merely to restrict
the Commission to a single extension but
also to impose a time cap on that extension. If the legislature was
concerned about the
danger of the abuse of multiple extensions it
would surely have provided for this expressly coupled with a cap on
the period for
extension. Without a cap the period of extension is
academic. A single period of several years is surely more prejudicial
to the
respondent than a multiple series of extensions that does not
extend beyond three months. The only distinction between the two is
that under the former the respondents know when the end of the period
is whilst under the latter the endpoint remains uncertain.
The
distinction would make little practical distinction as if the
Commission had only a single period of extension it would always
bargain for the longest period
ex
abundante cautela
, even if
it only needed a much shorter period. A respondent’s uncertainty is
hardly alleviated by this.
26. The real explanation for the time
cap on the Commission imposed by section 50 is not to protect a
respondent but a complainant.
The complainant has no right to proceed
with its own complaint referral unless it has a certificate of
non-referral from the Commission.
If the Commission is dilatory in
its investigative function a complainant might wish to bring the case
itself, but it cannot do so
without a certificate of non-referral.
Furthermore without a decision from the Tribunal declaring the
conduct in question a restrictive
practice it cannot bring a case for
damages in a civil court. What the legislature intended was to impose
some restriction on the
Commission’s prerogative to bring a
complaint referral in its own good time – it was thus meant to
balance the Commission’s
public right to be the preferred
prosecutor, with the private right of a complainant to get its
dispute heard. For this reason the
complainant can refuse to agree to
the extension and then the Commission has to apply to the Tribunal
for an extension.
27. If
the legislature had intended to protect the respondent by this
mechanism it would surely have done so expressly.
28. We
conclude that there is nothing in the Act to preclude the Commission
obtaining multiple extensions for referring a complaint
in terms of
section 50. The exception based on jurisdiction is dismissed”
(footnotes omitted).’
[8] The question is
whether it is competent for the Commission and a complainant to agree
to the extension of any already-extended
period of time. To answer
this question it is necessary to consider what it is that the
legislature intended the Commission and a
complainant to be able to
do. In terms of section 50(4)(a) the Commission and a complainant may
agree
“to
extend
the
period
allowed in subsection (2)”
of section 50 of the Act.
[9] The applicants
submitted that, because the provision makes use of the singular
“period”
as opposed to the plural
“periods”
,
the period in s 50(2)
“within
one year after a complaint was submitted to [the Commission]”
was
contemplated. It follows, they argued, that s 50(4)(a) of the Act
enables the Commission and a complainant to agree to an extension
of
the one-year period which begins on submission of the complaint only
once. It does not enable them to reach an agreement in relation
to
any other period.
[10] In
making this submission the applicants rely on the use of the words
“as quickly as practicable” used in s 49B(3) indicating
the time
within which the Commission must act upon initiating or receiving a
complaint. Moreover, repeated extensions would prejudice
a respondent
and subject him to a continued investigation thereby impacting on its
respondent’s constitutional right to privacy
and should therefore
be narrowly construed.
[11] The Tribunal in
Sappi
appears to have been influenced by three considerations in coming to
the conclusion that it did: there was nothing in the Act precluding
multiple extensions; the different wording of s 14 lends support to
the construction of s 50 allowing multiple extensions; and, because
the purpose of s 50 is the protection of the complainant, it may
agree to multiple extensions.
[12] There
is some support for the Commission’s contention in s 14(1)(a) where
it is specifically provided that the Commission may,
in intermediate
merger proceedings, extend the period in which it may extend the
period of consideration “by a single period not
exceeding 40
business days” (and see also s 14A(2)). By not limiting the period
in s 50(4) to “a single period” there is some
room to argue that
multiple extensions are envisaged. This argument has some weight but
the two sections have different purposes
and little conclusive help
can be gained from a comparison. In any event, s 50(4)(b) allows the
Commission to approach the Tribunal
should the complainant in whose
favour the provision was inserted refuse to agree to an extension.
[13] The Act has no
express provision entitling the complainant and the Commission to
agree to multiple extensions. The question is
thus whether, on a
proper construction of the provisions, such a power can be implied.
The powers of the Commission are derived from
the Act (s 19). The
Act must be interpreted in a manner consistent with the Constitution
(s 1(2)(a)) and the Constitution requires
an interpretation
promoting the spirit, purport and objects of the Bill of Rights (s
39(2)). The right to privacy is one of the entrenched
rights (s 14)
and the applicant’s right to privacy as a business will be affected
by a continuing investigation by the Commission.
In addition, there
is an established principle of statutory interpretation which holds
that, where a provision is open to two interpretations,
the one which
encroaches least on existing rights is to be preferred (eg
Avex
Air (Pty) Ltd v Borough of Vryheid
1973 (1) SA 617
(A) 621F-G).
[14] Section 50 should be
construed by giving the words used their literal and ordinary meaning
unless it can be said that the words
used are ambiguous (
Standard
Bank Investment Corporation Ltd v Competition Commission and Others
Liberty Life Association of Africa Ltd v Competition
Commission and
Others
[2000] ZASCA 20
;
2000
(2) SA 797
(SCA)). When s 50(4) is considered as a whole it appears
that paragraphs (a) and (b) should be read disjunctively: the
subsection
commences with the words “In a particular case” and
this requires paragraphs (a) and (b) to be read as being mutually
exclusive
– hence the word “or” at the end of paragraph (b).
Paragraph (a) deals with the case where there is the agreement
between the
complainant and the Commission and paragraph (b) with the
circumstance where there is no such agreement. It follows that it is
only
where there is no agreement that the need to approach the
Tribunal arises (of course, the agreement must have been concluded
within
the initial period of one year or any agreed extension since s
50 (5) would otherwise apply). A failure to agree may manifest itself
either before the end of the one year period or thereafter.
[15] It
seems to us that every extension agreed upon is an extension of the
initial one year period. The complainant and the Commission
are
empowered by the very words of s 50(4)(a) to extend the period
referred to in s 50(2) without limiting their power to one extension
only. The fact that the singular is used in s 50(4) is not decisive:
there can initially be no other period; s 50(2) refers to that
one
period only: every extension is an extension of that period.
Moreover, the Interpretation Act 33 of 1957 provides that, “unless
the contrary intention appears” words in the singular also include
the plural.
[16] The
applicants also object to the referral of the second complaint on the
basis that the Commission referred substantially the
same complaint
to the Tribunal, a complaint in respect of which it had previously
issued a notice of non-referral. The circumstances
under which the
second referral is made is set out in the Commission’s answering
affidavit (paragraphs 18 ff).
[17] Two
inspectors were appointed to investigate the first complaint and they
identified three allegations warranting further investigation,
viz.
that Sasol, Nitrochem and Kynoch had engaged in market allocation as
envisaged by s 4(1)(b)(ii) during a meeting in 2001; that
Sasol was
engaged in predatory pricing in contravention of s 8(d)(iv); and
that Sasol had during 2001 reduced Nutri-Flo’s credit
facility from
R7 to R3 million in contravention of s 9(1). The complaint was,
however, not referred to the Tribunal because insufficient
evidence
was found to warrant a referral.
[18] The
second complaint repeated many of the allegations made in the first
complaint one but, in addition, details of cost, price
structures and
margins were included to substantiate allegations of excessive
pricing by Sasol. Kynoch and Omnia were also included
as respondents.
The focus of the excessive pricing complaint against Sasol relates to
prices charged by Sasol during September 2003
and March 2005 and
price increased in respect of LAN during January 2004 and March 2004
which were not referred to in the first complaint.
[19] At
the time the Commission received the first complaint, the Commission
during its investigation of and attendance of the large
merger
hearing between Main Street 150 (Pty) Ltd and Profert (Pty) Ltd and
Rowan Tree 16 (Pty) Ltd obtained new information and evidence
pointing to the possibility of collusive practices in the fertilizer
industry (see the judgment of the Tribunal of 2 December 2003
annexure NM2 to the answering affidavit paragraphs 17-27). On this
basis and as a result of further memoranda the Commission decided
on
a thorough investigation of the alleged collusion between Sasol,
Omnia and Kynoch and of Nutri-Flo’s allegations of price
discrimination
and excessive pricing in the second complaint.
[20] The
Commission decided, although it was entitled to initiate a fresh
complaint under s 49B(1), rather to investigate the alleged
collusion
by Kynoch, Sasol and Omnia under the second complaint together with
its investigation of the new allegations of excessive
pricing and
price discrimination by Sasol. It also intended looking afresh at the
alleged practices of excessive pricing and price
discrimination by
Sasol which had not been investigated during the investigation of the
first complaint (paragraph 24 answering affidavit).
[21]
Section 67(2) protects a person against being subject to the same
complaint:
‘
A
complainant may not be referred to the Competition Tribunal against
any
firm
that has been a
respondent
in completed proceeding before the Tribunal under the same or another
section of
this
Act relating substantially to the same conduct.’
The first complaint has
not been referred to the Tribunal nor has any proceedings against the
respondents been completed before the
Tribunal. The subsection,
therefore, does not apply in the present matter. Moreover, it
suggests that a complaint may be referred
to the Tribunal even if it
is substantially the same as an earlier complaint provided that the
proceedings in respect of the conduct
relating to the first complaint
have not been completed before the Tribunal.
[22] This raises the
question who or which institution may refer a complaint to the
Tribunal. Section 49B provides for the
initiation
of a complaint by the Commission (subs (1)) and the
submission
of a complaint by any person (subs (2)). The Commission may at any
time “after initiating a complaint” refer it to the Tribunal
(s
50(1)). This has not occurred in the present case: the Commission
neither initiated the first complaint nor referred it to the
Tribunal
but decided not to pursue this route but rather to refer the second
complaint lodged by Nutri-Flo as expanded to the Tribunal.
The
question is therefore whether, assuming that the two complaints were
substantially the same, the Commission’s referral was
competent.
[23] A “complaint” is
not defined in the Act but the Rules for the Conduct of Proceedings
in the Competition Commission describe
it as “(i) a matter
initiated by the Commissioner in terms of section 49B(1); or (ii) a
matter that has been submitted to the
Commission in terms of section
49B(2)(b)”. A “prohibited practice” is a practice as defined in
s 1(xxv). A complaint must obviously
relate to a “prohibited
practice” but must also contain information or evidence supporting
the practice. This is evident from
the content of the prescribed
form to be used (Form CC 1) where a concise statement of the conduct
as well as the dates on which
the conduct occurred are required. The
complaint is therefore very much defined by the facts relied upon.
See
Novartis
SA (Pty) Ltd v New United Pharmaceutical Distributors (Pty) Ltd (1)
(2001-2002)
CPLR
74
(CAC) and
Sappi Fine Paper (Pty) Ltd v Competition Commission of SA
(2003)
2 CPLR 272
(CAC) where at 271i the question is asked “whether the
second complaint is based on substantially the same conduct referred
to
the first respondent by the second respondent, or founded on new
facts”. Whether a complaint is the same as another is therefore
a
question whether it is “based on substantially the same conduct
forming the basis of the initial complaint” (
Sappi
at 282D-E).
[24] Where
two complaints are substantially the same the Commission would be
precluded from pursuing a second complaint and making
a referral in
circumstances where s 67(2) applied or where the complainant refers
the complaint directly to the Tribunal in terms
of s 51(1). It has,
however, no express power to refer a complaint that the complainant
has abandoned by not referring it to the
Tribunal. The only
circumstance in which the Commission can do so would be where it
initiates a complaint under s 49B(1) which it
may refer to the
Tribunal at any time (s 50(1)).
[25] The issue is
whether, where the same complaint or a similar complaint is submitted
by a complainant to the Commission, it can
be said that the
Commission is
functus
officio
if it has previously decided not to investigate that particular
complaint? The answer to this question must depend on the role of
the
Commission envisaged by the Act (see Daniel Malan Pretorius “The
Origins of the
Functus
Officio
Doctrine, with Specific Reference to its Application in
Administrative Law”
(2005) 12
SALJ
832
and cf
S
v Singh
1990
(1) SA 123
(A) 131H-132A). Section 21 clearly requires the Commission
as one of its many functions to investigate and evaluate alleged
violations
of the practices proscribed by Chapter 2 of the Act. There
are no provisions to be found in the Act that prevent the Commission
from
reconsidering a prior decision unless it does so for an ulterior
motive. No such ulterior motive is contended for by the applicants
nor do the papers reveal such a motive. If new facts are placed
before the Commission or if new facts come to light which were not
previously known to the Commission, it is enjoined to investigate the
complaint in order to properly fulfil its statutory function
as the
primary body responsible for prosecuting any conduct which is alleged
to be prohibited by the Act. To hold otherwise would
preclude the
Commission from properly fulfilling its statutory function. The
functus
officio
doctrine should in our view have a very limited if any application
lest the very purpose envisaged by the Legislature is stultified.
[26] No
evidence appears from the papers that the first decision of the
Commission not to refer the dispute was preceded by a proper
investigation of the allegations. Absent an ulterior motive there are
only two circumstances in which the Commission is precluded
from
making a referral, namely, where the issue has been previously
determined by the tribunal or where in consequence of the
Commission’s
refusal to prosecute a complaint, the complainant
itself is prosecuting the complaint.
[27] The second complaint
is not identical to the first. Put at its highest the two complaints
in some respects bear substantial similarity.
In
Horowitz
v Brock and others
1988 (2) SA 160
(A) at 178I Smalberger JA stated the following:
‘
the
requisites of a valid defence of
res
judicata
in Roman-Dutch law
are that the matter adjudicated upon, on which the defence relies,
must have been the same cause, between the same
parties, and the same
thing must have been demanded. (Voet
Commentarius
ad Pandectas
44.2.3;
Bertram v Wood
(1893) 10 SC 177
at 180;
Mitford’s
Executor v Ebden’s Executors and Others
1917
AD 682
at 686.) ‘
Even if the doctrine of
functus
officio
or
res
judicata
is to have any application it is for Sasol to show not that the two
referrals are substantially similar but that they are the same.
[28] It
is common cause that the complainants are the same in both the
referrals. Further that the third respondent has embodied allegations
of fact that are in some measure, repeated in the second complaint
but as the papers reveal, the similarity ends there. Not only
new
facts are relied on in making the second referral but these facts are
more extensive and deal in part with events that occurred
after the
filing of the first complaint. Moreover, the second complaint
implicates two new parties, Omnia and Kynoch. In addition
new
contraventions are identified which are fully ventilated in the
answering affidavits of the third and fourth respondents. It
will be
jejune to repeat them. We are therefore satisfied that the complaints
were and are temporally and qualitatively different.
[29] In
the result both the applications are dismissed with costs, such costs
to include the costs consequent upon the employment
of two counsel.
Malan AJA et Patel AJA
I
agree
Jali JA
Date of hearing : 20
September 2005
Date
of Judgment : 28 April 2006
Counsel
for Appellant : Adv J.J. Gauntlett (SC)
Adv
E. Fagan
Counsel
for First Respondent : Adv M. Brassey
Adv
R. Mashabane
Counsel
for Second Respondent : Adv D.N. Unterhalter (SC)
Adv
R.M. Pearce
Counsel
for Fourth & Fifth : Adv V.I. Gajoo (SC)
Respondent Adv
I. Moodley