GlaxoSmithKline South Africa (Pty) Ltd v Lewis N.O. and Others (62/CAC/APR06) [2006] ZACAC 6; [2007] 1 CPLR 18 (CAC) (6 December 2006)

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GlaxoSmithKline South Africa (Pty) Ltd v Lewis N.O. and Others (62/CAC/APR06) [2006] ZACAC 6; [2007] 1 CPLR 18 (CAC) (6 December 2006)

IN THE COMPETITION APPEAL COURT.
Case No. 62/CAC/APR06
In the matter between
GlaxoSmithKline South Africa (Pty) Ltd
Applicant
and
David
Lewis N.O
1
st
Respondent
Norman
Manoin N.O. 2
nd
Respondent
Yasmin
Manoin N.O. 3
rd
Respondent
The
Competition Tribunal 4
th
Respondent
Mpho
Makhathini 5
th
Respondent
Nelisiwe
Mthethwa 6
th
Respondent
Musi
Msomi 7
th
Respondent
Elijah
Paul Musoke 8
th
Respondent
Tom
Myers 9
th
Respondent
Aids
Healthcare Foundation Ltd 10
th
Respondent
The Competition Tribunal
11
th
Respondent
JUDGMENT: DELIVERED 6 DECEMBER 2006.
SELIKOWITZ
JA:
The
Court has before it, an application to review and an appeal brought
by Glaxosmithkline South Africa (Pty) Ltd (“the Applicant”).

Both the review and the appeal arise from the same proceedings and
for all practical purposes can be dealt with together.
Applicant
applied to the Competition Tribunal (“the Tribunal”) for an order
confirming a settlement agreement concluded between
itself and the
Competition Commission (“the Commission”) as a consent order in
terms of
Section 49D
of the
Competition Act 89 of 1998
, as amended.
("the Act").
The
Tribunal declined to confirm the agreement as a consent order on the
basis that it did not have jurisdiction to do so. The Tribunal
observed, however, that, had it been vested with jurisdiction, it
"
would have seen no bar to
granting”
the consent order.
There
are no factual disputes on the papers, and the only question that
arises for determination in the appeal and in the review is
a
question of law. The question is whether, having regard to the terms
of the Act, the Tribunal correctly held that it lacked jurisdiction
to confirm the settlement agreement as a consent order in terms of
section 49D
of the
Competition Act.
Applicant
is the South African subsidiary of a large multinational
pharmaceutical manufacturer, Glaxo Group Limited.
First,
Second and Third Respondents are cited
nomine
officio
and are the three members of
the Tribunal who constituted the panel which considered the
application and took the decision against
which the review and appeal
are directed.
Fourth
Respondent is the Tribunal. Fifth to Tenth Respondents
were
complainants in a prohibited practice case brought against the
applicant, consequent upon a non-referral by the Commission in
terms
of
section 51
of the Act. For convenience they will be referred to
collectively as the ‘AHF complainants’.
The
Commission is the Eleventh Respondent. It is joined because it is a
party to the settlement agreement which Applicant seeks to
have made
into a consent order.
None
of the Respondents opposed the review or the appeal and none of them
were represented before this Court.
As
Glaxosmithkline South Africa (Pty) Ltd is both Applicant in the
review as also the Appellant, I will, in the interests of simplicity,
refer the company as Applicant. Because the Act refers to the party
against whom a complaint has been made regarding an alleged
prohibited practice as the “respondent”, I will adopt that
nomenclature when discussing the relevant provisions of the Act.
References to “respondent” will be consistent with the wording of
the Act. References to the Respondents who are cited in the
review
and in the appeal will be made using an upper case first letter.
During September 2002, the Treatment Action
Campaign (“TAC”), a non governmental organisation active in the
health care sector,
led a group of individuals and organisations that
initiated a complaint against the applicant with the Commission,
alleging that
it had contravened the Act by excessively pricing its
antiretroviral drugs used to treat HIV positive persons. In terms of
section 8(a)
of the Act, a dominant firm is prohibited from charging
an excessive price. Shortly thereafter on 27 January 2003,
the AHF complainants lodged a
complaint against the applicant with the Commission. The TAC and AHF
complaints both related to substantially
the same conduct on behalf
of the applicant. For this reason, it appears the AHF complainants
were willing to have the Commission
consolidate their complaint with
that of the TAC, and have the two complaints investigated together.
The Commission thereafter
proceeded with its investigation.
Section
50
of the Act provides that:
Outcome of complaint
At any time after
initiating a complaint, the Competition Commission may refer the
complaint to the Competition Tribunal.
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.
When the Competition
Commission refers a complaint to the Competition Tribunal in terms
of subsection (2)(a), it –
(a) may -
(i) refer all the
particulars of the complaint as submitted by the
complainant
;
(ii) refer
only some of the particulars of the complaint as submitted by the
complainant
;
or
(iii) add
particulars to the complaint as submitted by the
complainant
;
and
(b) must issue a notice of
non-referral as contemplated in subsection (2)(b) in respect of any
particulars of the complaint not
referred to the Competition
Tribunal.
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.
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.
The
Act also recognises that the Commission and the party against whom a
complaint has been initiated (“the respondent”) might
wish to
reach agreement as to the terms of “an appropriate order”.
Section
49D of the Act provides:
Consent Orders
If,
during, on or after completion of the investigation of a complaint,
the Competition Commission and the
respondent
agree on the terms of an appropriate order, the Competition
Tribunal, without hearing any evidence, may confirm that agreement
as a consent order in terms of section 58(1)(b).
After hearing a motion for
a consent order, the Competition Tribunal must —
(a) make
the order as agreed to and proposed by the Competition Commission
and the
respondent
;
(b) indicate any changes
that must be made in the draft order before it will make the order;
or
(c) refuse
to make the order.
With
the consent of a
complainant
,
a consent order may include an award of damages to the
complainant
.
A
consent order does not preclude a
complainant
from applying for—
(a) a
declaration in terms of section 58(1)
(a)
(v)
or (vi); or
(b) an
award of civil damages in terms of section 65, unless the consent
order includes an award of damages to the
complainant
.
It
was accepted by the Tribunal and all other parties that the twelve
month period referred to on Section 50(2) of the Act expired
on the
first anniversary of the AHF complaint which was investigated
together with the earlier TAC complaint. It is not clear
whether
the TAC agreed to an extension pursuant to the terms of section
50(4)(a). However, in view of this acceptance, I too shall
accept
that date.
Just
prior to the expiry of the twelve month period by which the
Commission would have had to either refer the complaint to the
Tribunal, or issue a notice of non-referral, it entered into a
settlement agreement with Applicant in terms whereof the Commission
agreed not to refer the complaints to the Tribunal, in return for
Applicant agreeing to grant licences to various generic
manufacturers
to manufacture it’s antiretroviral drugs. This
settlement agreement was concluded on 3 December 2003.
The
AHF complainants, unlike the TAC, were not a party to the settlement
agreement and alleged that they were never consulted about
its
terms. They alleged that they were only made aware that it had taken
place when they read about it in the media.
Pursuant
to the settlement agreement, the Commission did not refer the
complaints to the Tribunal. Nor did it issue a notice
of
non-referral. The AHF complainants then decided to refer their
complaint to the Tribunal themselves in terms of section 51(1)
of
the Act. They were entitled to do so, as in terms of section 50(5)
of the Act as the Commission is deemed to have issued a
notice of
non-referral.
In
terms of section 51 of the Act:
Referral to Competition
Tribunal
If
the Competition Commission issues a notice of non-referral in
response to a complaint, the
complainant
may refer the complaint directly to the Competition Tribunal,
subject to its rules of procedure.
A
referral to the Competition Tribunal, whether by the Competition
Commission in terms of section 50(1), or by a
complainant
in terms of subsection (1), must be in the
prescribed
form.
The
Chairperson of the Competition Tribunal must, by notice in the
Gazette,
publish each referral made to the Tribunal.
The notice published in
terms of subsection (3) must include -
(a) the
name of the
respondent
;
and
(b) the nature of the
conduct that is the subject of the referral.
In
terms of the applicable procedural rules the complainant may,
within twenty business days, refer the complaint directly to the
Tribunal.
AHF
was not able to file its complaint referral timeously and applied
for condonation. Despite opposition by Applicant, the Tribunal
granted the condonation application on 23 July 2004. During the
condonation proceedings, First Respondent, the chairperson of
the
Tribunal, raised a concern as to whether it was appropriate that the
settlement agreement had not been referred to the Tribunal
for
confirmation in terms of section 49D of the Act.
Thereafter,
on 22 November 2004 Applicant applied to have the settlement
agreement of December 2003 confirmed and made a consent
order in
terms of section 49D(2)(a) of the Act. The AHF complainants, acting
in an apparent effort to protect their right to pursue
their
complaint before the Tribunal, opposed the granting of the order.
The basis of their opposition is, however, no longer relevant,
in
view of the fact that on 2 March 2006 - and whilst the application
was being argued - they withdrew both their complaint referral
and
their opposition to the granting of the consent order.
While the application was still being argued as
an opposed matter before the Tribunal at its hearing on the 2
nd
of March 2005, the Tribunal,
mero motu
raised an issue which it has consistently characterised as a point
of jurisdiction. Applicant then filed additional heads of
argument
on this point and the Tribunal heard oral submissions from the
applicant at a subsequent hearing exactly a year later
to the day.
The
Tribunal found that the December 2003 agreement was entered into at
time when the one-year period for referral to it by the
Commission
had not yet expired. However, the application in terms of section
49D was brought after the expiry of the one year
period, at a time
after the Commission was deemed to have non-referred the complaint.
In its “Reasons” for refusing the application,
the Tribunal
states that the question “asked of the Applicant was whether the
Commission may be party to an application for a
consent order at a
point in time when it is no longer legally entitled to bring a
complaint referral in respect of the complaint
that forms the
subject matter of the consent order”.
The
Commission was cited as a respondent in the application for a
consent order. Not surprisingly, as it was a party to the
agreement,
it did not oppose the application. Nor was it present
when the point raised was argued. The Tribunal notes that “we do
not
have the benefit of its view on the point of law”.
The
first issue addressed by Applicant before the Tribunal was whether
it, rather than the Commission, may make the application
as had
happened in this instance. The Tribunal recorded that “[i]t has
been normal practice for the Commission to bring this
type of
application. We need not decide this issue, although we will assume
in the applicant’s favour that it is entitled to
do so”. I will
revert to that issue later in this judgment.
Applicant conceded that at the time when the
application in terms of section 49D was brought, the Commission no
longer had the power
to refer a complaint. However it argued that
this does not mean that the Commission did not retain the power to “
agree on the
terms of an appropriate order”. The main thrust of
Applicant’s argument both before the Tribunal and this Court
relies on
the language of the section 49D(1) which states:
”
If, during, on or after
completion of the investigation of a complaint, the Competition
Commission and the respondent agree on the
terms of an appropriate
order, the Competition Tribunal, without hearing any evidence, may
confirm that agreement as a consent
order in terms of section 58(1)
(b).”
Applicant
submits that the plain meaning of section 49D(1) is that the
agreement has to be reached “during, on or after” the
investigation but that neither that section, nor any other states
when the application to confirm has to be made. Applicant argues
that there is no warrant to “read in” words which limited the
time by which the application to confirm has to be made and that
there are safeguards in the Act to ensure that the complainants are
not prejudiced.
The
Tribunal after analysing the scheme of the Act - and in particular,
sections 49D and 50 - concluded that the word “after”
as it
appears in section 49D(1) did include the power to reach and
agreement after the investigation was completed, but that the
section did “not contemplate any situation after the
investigation, but only one where the Commission has retained its
title
to prosecute, by referring the complaint.”
The
basis of the Tribunal’s decision is that:
“
the Commission must retain
its title to prosecute at the time a consent order application has
been launched to avoid it facing prosecutorial
impotence if the
Tribunal does not sanction its bargain with the respondent. It can
retain this title to prosecute either (a)
by having the consent
application considered during the one year period or an extended
period or (b) after this period, provided
it has referred the
complaint to the Tribunal during the period thus preserving that
right. The legislature intended that once
a matter had been
non-referred by the Commission it washed its hands of the matter and
had no further right or interest in the
complaint including the
right to settle it by way of a consent order.”
The
Tribunal expressed the view that:
“
Thus, the power to prosecute
and the power to settle are coextensive; once the former is lost so
is the latter.
Thus, the
power to prosecute and the power to settle are coextensive; once the
former is lost so is the latter. This is not a case
of having to
read in language into section 49D(1). If one follows the procedural
evolution of a complaint - how the Commission
enjoys the monopoly
power to prosecute and how it can lose this right to a complainant –
then one need not read in words to the
section, one simply follows
the schema and logic of the Act to appreciate that the legislature
never contemplated conferring the
power to settle to exist
independently of the power to prosecute. It is precisely for this
reason that the Commission is given
such a long period to
investigate a complaint and to apply to extend it. It must during
this period of investigation decide whether
to refer or settle a
complaint. If it refers it can of course settle it later. What it
may not do is to investigate, decide not
to refer or settle and then
at some later time decide it should enter into a settlement
agreement for a consent order. Nor should
it, as happened in this
case, enter into some contract (as opposed to a consent agreement
contemplated in section 49D) with a respondent
not to prosecute
further, in return for some
quid
pro quo
,
unless it fully appreciates the legal implications of doing this.”
In
support of its finding the Tribunal pointed to what it considered to
be the undesirable results of accepting Applicant’s

interpretation of the Act.
“
One can easily see what
absurdities would result if the title to prosecute and settle were
not coextensive. In the first place
there is the fact that the
Commission is left in a position of a contracting party not a
prosecuting party in approaching settlement
negotiations with the
respondent, which cannot be in the public interest. The ability to
approach a settlement negotiation with
the threat of proceeding is
vital to a proper bargaining process. A further concern is that the
only time a consent order would
be likely, after the title to
prosecute has lapsed, is when a respondent faces a complainant in a
non-referral situation or a new
complaint based on a previous
complaint that was not prosecuted. The respondent, anxious to
constrain the complainant’s range
of remedies, then enters into a
consent order with the Commission, the effect of which is to limit
the private complainant’s
remedies to those contemplated in
section 49D(4). Now of course that presupposes that the Commission
will allow itself to be used
to those ends. However, the expedient
motive of a respondent may not always be that transparent to the
Commission, especially
if it was not a complaint that it referred,
and it may be persuaded that the complainant is unreasonably
pursuing the respondent
and that a good settlement is available to
the Commission even in this case it had not sought to prosecute.
The legislature never
contemplated placing the Commission in this
sort of situation as a settler of last resort – once it lost its
title to prosecute
the fate of the litigation is left to the private
complainant and the respondent to resolve. Nor as a matter of
public policy
is it desirable that a body charged with policing
legislation be left with a residual power to settle when its primary
power to
prosecute is lost.
The applicant’s
interpretation would also be extremely unfair to the private
complainant. The latter is entitled to proceed with
a complaint
referral on the assumption that the field is now open to it and that
the Commission had not entertained the possibility
of entering into
a consent agreement with the respondent, otherwise it would have
done so before non–referring the complaint.
It might spend vast
resources on prosecuting its complaint only to find that it is
robbed at the post by a subsequent deal between
the Commission and
the respondent. On our interpretation this would not arise because
the settlement would have had to occur during
the time that the
Commission retained its prerogative to prosecute.”
The
Tribunal concluded its reasons as follows:
“
For this reason we find
that although the settlement in this matter was concluded during the
period when the Commission had retained
its title to prosecute the
complaint, the application for the consent order was made after this
period – a time when we find
that the Commission no longer retains
the right to prosecute and hence no right to conclude, revise or
amend a consent agreement.
Without the Commission retaining this
power, we have no jurisdiction to make the agreement that was
entered into in December 2003
into a consent order. The application
accordingly fails.
Given the considerable public
interest there has been in the settlement between the Commission and
the respondent we need to stress
that our decision not to grant the
consent order is a technical one, based on the timing of the
application. Were this consent
application to have been made at a
time when the Commission retained its title to prosecute, we would
have seen no bar to granting
it. It would seem that the reason the
December 2003 agreement was not made a consent order at the relevant
time of its conclusion
was that there was a difference of legal
opinion between the applicant and the Commission about whether it
was required to state
the section of the Act it had contravened.
The Commission it appears has changed its view on this matter and
now no longer as
a matter of policy requires such an admission to be
made. We are not called upon to determine whether such a policy is
correct
in law, but we mention this only to indicate that it may
well be that technical concerns of the Commission, as opposed to
tactical
machinations on the part of the applicant, explain the
absence of an application for a consent order at the relevant time.”
In his argument before this Court,
Mr
Unterhalter
SC (who appeared for
Applicant together with Mr
Cockrell
and Mr
Gotz
)
emphasised three points.
Firstly, he contended that the provisions of
section 49D(1) are clear and unequivocal. The Commission can enter
into a settlement
agreement “
during,
on or after completion of the investigation of a compliant
.”
The plain meaning of these words does not limit the time during
which the Commission can conclude a settlement agreement.
Indeed,
it can do so after a referral to the Tribunal and right up until the
Tribunal announces its findings.
Section
49D has two jurisdictional requirements that must be satisfied
before the Tribunal may grant an order in terms of the section.

They are:
- the Commission and the respondent must have agreed
the terms of an appropriate order;
- the agreement must have been
reached “
during, on or after the
completion of the investigation of a complaint
”.
It
was submitted that both requirements had been met and that the
Tribunal had the necessary jurisdiction to grant an order confirming
the settlement agreement.
Secondly,
there was no warrant, in law, to read in words that limited the
clear meaning of section 49D(1) of the Act.
Thirdly,
the anomalies relied upon by the Tribunal were more apparent than
real. Even where the complainant pursued the complaint,
the
Commission had the right to appear and participate in the hearing
(Section 53(1)(a). It was, therefore, not rendered impotent.
The
legislature granted the right to the complainant to pursue its
complain where there is a non-referral to ensure that it is not
prejudiced.
Recognising that the Commission has a role to
represent the public interest in cases of an alleged prohibited
practice,
Mr Unterhalter
submitted that the complainant who pursues a complain after a
non-referral, has both a private and a public role.
In
order to determine the questions raised in the review and appeal -
which are in both cases the same questions - it is necessary
to
examine the provisions of the Act.
Part
C of Chapter 5 of the Act deals with the complaint procedures and
investigation of alleged prohibited practices. A complaint
may be
initiated by the Commissioner
mero motu
or as a result of information or a complaint submitted by “any
person” to the Commission. (Section 49B(1)and (2)). The
Commissioner
is obliged to direct an inspector to investigate the
complaint “as soon as possible” (Section 49B(3)). The
investigative procedures
and powers are found in Parts A and B of
Chapter 5 of the Act.
Section
49C provides that an interim order may “at any time” be granted
by the Tribunal at the instance of a complainant in
respect of a
prohibited practice.
Section
50 deals with the outcome of a complaint. The provisions recognise
and give effect to the fact that the Commission is empowered
and,
indeed, directed to investigate and evaluate alleged contraventions
of Chapter 2 of the Act which deals with prohibited practices.
Per
contra
, the Tribunal is empowered to
adjudicate on prohibited practices (See:
Simelane
& Others NNO v Seven-Eleven Corporation SA (Pty) Ltd &
Another
2003 (3) SA 64
(SCA) paras. 55
and 56).
The
Commission is empowered to refer the complaint to the Tribunal for
adjudication at any time after the complaint is initiated
(Section
50(1)). However, the Commission must, within one year after the
complaint was submitted to it, either refer the complaint
to the
Tribunal “if it determines that a prohibited practice has been
established or in any other case, issue a notice of non-referral
to
the complainant in the prescribed form.” (Section 50(2)).
When
the Commission refers a complaint to the Tribunal it may refer all
or only some of the particulars of the complaint or add
any
particulars to the complaint. It must issue a notice of
non-referral in respect of any particulars not referred. (Section
50(1),(2) and (3)).
The
period of one year provided for in section 50(2) can be extended by
agreement between the Commission and the complainant. (Section
50(4)(a)). Section 50(4)(b) empowers the Tribunal ,at the instance
of the Commission , to extend the extended period agreed to
by the
Commission and the complainant provided that the application for
such further extention is made during the period of the
initial
agreed extension.
The
statement made by the Tribunal in its Reasons (para 24) to the
effect that the period which the Commission has in which to

investigate and refer the complaint is one year “unless extended
either with the consent of the complainant or, if that is not
possible by application before the Tribunal” is erroneous. The
terms of section 50(4)(b) are clear. The extension which the
Tribunal is empowered to grant is an extension to the period which
the Commission and the complainant had agreed to in terms of
section
50(4)(a). Absent an agreement in terms of section 50(4)(a), there
is no period to extend pursuant to the terms of section
50(4)(b).
Notwithstanding the “or” which links sub-sections 50(4)(a) and
(b), the wording of sub-section (b) cannot provide
an alternative to
sub-paragraph (a) by reason of the words “that period” which can
only refer to the period “contemplated
in paragraph (a)”. The
reference to a period of “one year” appears in section 50(2)
only. In order to give effect to the
clear terms of section
50(4)(b) the “or” should properly be read as “and”.
As
noted, section 50(5) is a deeming provision. If the Commission has
not referred a complaint to the Tribunal nor issued a notice
of
non-referral, within the one year contemplated in sub-subsection
(2), or any period extended in accordance with sub-section
(4), the
Commission “must be regarded as having issued a notice of
non-referral on the expiry of the relevant period.”
Section
51, the final section in Part C of Chapter 5, permits the
complainant to refer the complaint to the Tribunal where the

Commission has issued a notice of non-referral either actual or
deemed. (Section 51(1)).
Any
referral must be in the prescribed form and the Chairperson of the
Tribunal must publish each referral in the Gazette and include
in
the notice certain specified details. (Sections 51(2), (3) and
(4)).
I
return now to Section 49D which is quoted above and which deals with
Consent Orders.
The
Act as originally passed first came into force during 1998 and 1999.
In the original Act consent orders were referred to in
section 63.
That section formed part of Chapter 6 of the Act.
In
terms of section 15 of the
Competition
Second Amendment Act
, No 39 of 2000
Chapters 5 and 6 of the original Act were substituted by the
chapters that now appear in the legislation. The subject
matter of
the former section 63 is now deal with in section 49D. This is
relevant when one has regard to the nature and functions
of the
Commission.
The
Commission is established by section 19 of the Act. It is a
juristic person with jurisdiction throughout the Republic of South
Africa and “must exercise its functions in accordance with this
Act.” (Section 19(1)). These functions are primarily set
out in
section 21 and the relevant provisions are:
21. Functions of Competition
Commission
The Competition Commission
is responsible to â€“
(a) ... ;
(b) ...
;
(c) investigate
and evaluate alleged contravention’s of Chapter 2;
(d) ...
;
(e) ...
;
(f) negotiate
and conclude consent orders in terms of section 63;
(g) refer matters to the
Competition Tribunal, and appear before the Tribunal, as required by
this Act
;
(h) ... ;
(i) ...
;
(j) ...
;
(k) ...
; and
(l) deal
with any other matter referred to it by the Tribunal.
When
the
Competition Second Amendment Act
,
No 39 of 2000 was passed the legislature appears to have failed to
make the necessary and consequential amendment to section 21(1)(f)
so as to substitute section 49D, the section which thereafter
regulated Consent Orders, for section 63 which had before the
amendment
regulated them.
The
Commission is a creature of statute which has only those powers
given to it in the Act. It has a defined role and and, “must
exercise its functions in accordance with this Act.” (Section
19(1)).
The terms
of section 49D(1) in relation to the scope of the powers of the
Commission is clear. The language is clear and effect
can be given
to the ordinary meaning of the words. Section 49D empowers the
Commission to agree the terms of an “appropriate
order” with a
respondent against whom a complaint has been laid and in respect of
whose practices an investigation has been instituted.
The content
of the agreement which the Commission is empowered to enter into is
limited to “the terms of an appropriate order”.
Clearly such
order could be drafted in terms which incorporate an annexed
detailed agreement. An example of such an agreement
is the December
2003 settlement agreement at issue here.
The
nature of the agreement which the Commission can conclude is limited
to an agreement on the terms of an appropriate order.
That
agreement is not to be confused with a settlement agreement which
may itself be incorporated in the proposed order. The actual
terms
of the proposed order are not enforceable nor, indeed, is any
settlement agreement which is referred to or incorporated in
the
proposed order legally enforceable until it is dealt with and
confirmed by the Tribunal in terms of section 49D.
The
binding effect of the agreed order will be limited to requiring the
parties to proceed with an application to the Tribunal for
confirmation of the agreed order in terms of section 49D of the Act.
I am
fortified in my view by the wording of section 49D(2) which empowers
the Tribunal to:
“
(a)
make the order as agreed to and
proposed
by the Competition
Commission and the respondent;
(b) indicate
any changes that must be made in the
draft
order
before it
will make the order; or
(c) refuse to make the order.”
(My
emphasis).
When can
the Commission and the respondent conclude an agreement as
contemplated in section 49D?
Because
the Commission is enjoined and obliged to investigate the alleged
prohibited practices of a respondent against whom a complaint
is
made and to evaluate whether or not to refer the complaint to the
Tribunal for adjudication, the Commission would not - without
being
specially empowered - be authorised to “settle” the matter or to
agree an appropriate order. For the Commission to do
so without
authorisation would, in my view, amount to an abrogation of its duty
to exercise its functions in accordance with the
Act. The
Commission clearly has a public duty in cases of prohibited
practices. That duty extends beyond the protection or advancement
of the complainants private interests. The Commission acts on
behalf of the South African public and, in particular, the South
African consumers whenever it investigates a complaint, evaluates
the results and determines whether or not to refer the matter
to the
Tribunal for adjudication.
Section
49D read with section 21(1)f) are the provisions which empower the
Commission to agree an appropriate order with the respondent.
The power
which is granted has a time component which is expressed in the
words: “during, on or after completion of the investigation
of a
complaint”. The legislature has recognised that there may be
circumstances where the Commission will find itself in a
position to
reach agreement on an appropriate order before it has completed its
investigation. Indeed, if the respondent agrees
to cease the
alleged prohibited practice it would hardly be necessary for the
Commission to embark upon or complete an inquiry.
It is for this
reason that the legislature has empowered the Commission to reach an
agreement during, on or after it completes
it’s investigation.
Applicant
contended, and the Tribunal found that the word “after” means
that the agreement as to an appropriate order could
be entered into
even after the time for the Commission to have either referred the
complaint to the Tribunal or issued a notice
of non-referral in
respect of the whole or part of the complaint.
I do not
agree.
In my
view, the words “during, on or after completion of the
investigation of a complaint” relate only to a time in relation
to
the investigation. They do not affect the Commission’s obligation
to evaluate the results of an investigation which has been
undertaken and to fulfill its duty to refer the complaint to the
Tribunal if it determines that the respondent is engaging or has
engaged in a prohibited practice.
In
my opinion, it is hardly likely that a respondent will agree to
cease a practice where there is no basis for it being characterised
as a prohibited practice. It was suggested in argument that a
respondent might be prepared to cease a practice for sound business
reasons even though it was convinced that the practice was not a
prohibited one. That may well occur. However, the Act is not
intended to provide for such a situation and that possibility ought
not to influence the proper interpretation of the Act.
On
the assumption that there will only be an agreement between the
Commission and the respondent when the latter is engaged or was
engaged in a prohibited practice, I am of the firm view that the
Commission cannot ignore its duty to evaluate the practise and
refer
the complaint if it determines that there is or has been a
prohibited practice. Not to do so would amount to an abrogation
by
the Commission of its duty in terms of the Act to both the
complainant and to the public.
The
interpretation of section 49D(1) contended for by Applicant results
in incongruity and produces a result which could never have
been
intended by the legislature. Indeed, the result would effectively
undermine the confirmatory role of the Tribunal.
It
must be borne in mind that when the Tribunal comes to consider
whether or not to confirm the agreed order and, as it is empowered
to do, to request that the order be changed, the provisions of the
Act and the intention of the legislature would be emasculated
if the
time for a referral had passed.
The
submission by
Mr Unterhalter
that the complainant could still pursue its complaint is no answer.
The policing of prohibited practices is primarily the task
of the
Commission and the Tribunal. It is only where the Commission
decides not to make a referral or fails to issue a notice
of
non-referral that the complainant has the option, not obligation, to
pursue the complaint. Even if the complainant does take
advantage
of section 51(1) that
ex post facto
decision does not relieve the Commission of its duty to fulfill its
obligations timeously in terms of the Act. The Commission
is not
entitled to abrogate its public duty by failing to refer a matter on
the grounds that it believes that the agreement on
a proposed order
will be confirmed. It is precisely because the Commission must
refer a complaint which it determines as establishing
a prohibited
practice that the Commission must not only conclude the agreement
envisaged in section 49D(1) before the time for
referral or
non-referral is reached but it must allow time for the Tribunal to
adjudicate and decide whether to confirm the proposed
order so that
it can institute a referral should the Tribunal refuse to confirm
the order.
Furthermore
time must be allowed before the referral or non-referral date to
permit any changes to be made if so sought by the Tribunal.
As
noted the date for referral or non-referral is no later than one
year after the complaint was submitted. That date can be extended
by agreement with the complainant and if so extended, then it can be
further extended by the Tribunal. The practical effect of
section
50(4) is to allow a complainant to stymie an agreement on a draft
order where the year is nearly run. It may be advisable
for the
Commission and the Tribunal to report this anomaly to the
Minister
of Trade and Industry
with a view to
having section 50(4) amended so as to permit the Commission to
approach the Tribunal for an extension without a
prior extension
having been agreed to by the complainant. If that were the
situation then the Commission could apply to extend
the time for
referral or non-referral where there was the probability of an
agreed order but insufficient time for it to be dealt
with by the
Tribunal in terms of the Act.
The
Commission would certainly not be exercising its functions in
accordance with the Act if it were to agree an appropriate order
with the respondent and then allow the time for referring a
complaint to the Tribunal to lapse. If the Tribunal declined
confirmation
or sought changes that the respondent rejected, the
opportunity to police and end an alleged prohibited practice would
be lost
or, at least, dependant upon the complainant to pursue.
Such a situation runs contrary to the purposes of the Act.
The
Tribunal stated that “[i]t seems clear that the Commission must
retain its title to prosecute at the time that the consent
order
application has been launched to avoid it facing prosecutorial
impotence if the Tribunal does not sanction its bargain with
the
respondent.” I do not agree. There is no warrant for the finding
that the launch of an application in terms of section
49D(1) has the
effect of suspending the running of the period by which a referral
or notice of non-referral must be issued or that
the launch of the
application extends that period. The processing of the application
to a final decision has to be completed in
time for a referral
should the Commission have determined that a prohibited practice has
been established and the Tribunal declines
to confirm the agreed
draft order. Should the refusal by the Tribunal to confirm the
draft order be taken on appeal, the filing
of the notice of appeal
will, at common law, freeze the
status
quo ante
.
Mr
Unterhalter
submitted that the fact
that the complainant could pursue its complaint even after a consent
order was made by the Tribunal showed
that the granting of the
confirmation after the expiry of the time for referral or
non-referral supported Applicant’s position.
(Section 49D(4)).
After the consent order is made, the complainant’s rights are,
however, limited to applying for a declaration
“for the purposes
of section 65" or “an award of civil damages in terms of
section 65, unless the consent order includes
an award of damages to
the complainant.” Section 65 recognises a civil action for
damages but prohibits the plaintiff from
commencing such action
without first filing a notice from the Chairperson of the Tribunal
or the Judge President of this Court
certifying that the conduct
relied upon has been found to be a prohibited practice. The
complainant’s rights in terms of section
49D(4) provide scant
protection for South African consumers in a case of a prohibited
practice.
I
referred earlier to the question of who should bring the application
in terms of section 49D(1) for confirmation of an agreed
draft
order. In terms of the general principles of our law of procedure,
the parties who seek the confirmation of the agreed order
should
jointly apply for the consent order. The parties to the agreement
as well as any other interested parties will need to
be cited and
joined. The Act envisages that the Tribunal may confirm the
agreement “without hearing any evidence”. That does
not,
however, relieve the Tribunal of making an informed decision. In
order to do so, the Tribunal will invariably need to be
informed by
both the Commission and the respondent as to the appropriateness of
the agreed draft order and to that end the parties
to the agreement
should be before the Tribunal and should motivate the application.
Rule 18(2) of the Competition Commission Rules,
which is quoted
below, provides for the Commission to refer the agreed draft order
to the Tribunal. In this matter the application
was brought by
Applicant only and the Commission was cited as a respondent. The
Tribunal noted, however, that the Commission was
not represented at
the hearing - at least when the jurisdiction issue was argued. The
Tribunal cannot discharge its duty without
investigating the
appropriateness of the order and, in my view, it requires input from
the Commission as to its findings, and its
reasons for agreeing that
the order is appropriate. It would be desirable for both the
respondent and the Commission to jointly
bring the application.
That procedure may, however, be impractical both from a costs
perspective and because the two parties may
prefer to employ their
own legal representatives and not act jointly. If that is so, the
Commission should be asked to file an
affidavit in support of the
respondent’s application. In all cases, however, the Commission
should be represented at the hearing
in order to assist the Tribunal
with its task.
It
was argued before this court that to preclude a settlement after the
time within which a referral can for all practical purposes
be made,
deprives the respondent and the Commission of the opportunity to
settle and to avoid unnecessary cost and effort. The
effect of my
view is not, however, as characterised by that argument.
After
a referral, the matter comes before the Tribunal for adjudication.
There is no reason whatsoever why after reaching agreement
with the
Commission and/or the complainant and/or any other interested
parties - or, indeed, without such agreement, a respondent
cannot
present a draft order to the Tribunal and agree to it being made an
order of the Tribunal. Such a procedure would be
dehors
section 49D which is a provision intended to empower the Commission
to agree a draft order during, on or after the completion of
the
investigation but not in such a manner or at such a time as to
preclude the Commission from fulfilling its duties in terms
of the
Act. The Tribunal is entitled - at any time while it is seized with
the matter - to make an order proposed and agreed to
by the
respondent provided only that it acts in accordance with the
requirements of just administrative action that is lawful,
reasonable and procedurally fair. And, of course, that it is
thereafter satisfied that the order is appropriate.
At
the hearing before the Tribunal, Applicant sought to rely upon the
terms of Rule 24 of the Competition Tribunal Rules. Sub-section
(2)
states that:
“
At any time before the
Tribunal makes a final order in a complaint proceeding, a party may
request the Tribunal to make a coinsent
order by filing a Notice of
Motion in form CT6 with the documents listed in sub-rule 1(b).”
Insofar
as this sub-rule is intended to regulate the procedure for the
confirmation of a consent order in terms of section 49D it
would
appear to me to be
ultra vires.
Section 78 of the Act empowers the
Minister
of Trade and Industry
to make
“regulations that are required to give effect to the purposes of
this Act”. The regulations are subordinate legislation
and they
cannot alter the provisions of the Act. If on a proper
interpretation of the Act, an application to confirm an agreed
draft
order must be determined before the expiry of the time for a
referral to the Tribunal then the regulations in question can
go no
further than to give effect to those provisions of the Act.
En
passant, I note Rule 18 of the Competition Commission Rules which
deals with consent orders which was not mentioned by the Tribunal
in
its ‘Reasons” nor was it referred to by the Applicant in this
Court. The rule is, however, instructive. It states:
18. Consent orders
If, at any time before
issuing a Notice of Non-referral in Form CC 8, or referring a
complaint to the Tribunal in Form CT 1(1),
it appears to the
Commission that the respondent may be prepared to agree terms of a
proposed order, the Commission –
(a) must notify the
complainant, in writing, that a consent order may be recommended to
the Tribunal; and
(b) invite
the complainant to inform the Commission in writing within 10
business days after receiving that notice –
(i) whether the complainant
is prepared to accept damages under such an order; and
(ii) if
so, the amount of damages claimed.
If the Commission and the
respondent agree the terms of an appropriate order, the Commission
must –
(a) refer the complaint to
the Tribunal in Form CT 1(1) to be proceeded with in terms of
section 49D;
(b) attach
to the referral -
(i) a draft order
(aa) setting out the section
of the Act that has been contravened;
(bb) setting
out the terms agreed between the Commission and the respondent,
including, if applicable, the amount of damages agreed
between the
respondent and the complainant; and
(cc) signed
by the Commission and the respondent indicating their consent to the
draft order; and
(ii) Form CT 3, completed by
the complainant, if applicable; and
(c) serve a copy of the
referral and draft order on the respondent and the complainant.
The Commission must not
include an order of damages in a draft consent order unless it is
supported by a completed Form CT3.
A draft consent order may
be submitted to the Tribunal in terms of section 49D and this Rule
notwithstanding the refusal by a
complainant to consent to
including an award of damages in that draft order.
It
is noteworthy that the Commission rule envisages that the agreement
to a proposed order will be made at any time before referral
or
non-referral. Furthermore the “... Commission must refer the
complaint to the Tribunal in Form CT 1(1) to be proceeded with
in
terms of section 49D”
In
the settlement agreement of 3 December 2003, the Commission
undertook not to refer the complaint to the Tribunal. I am of the
view that Commission is not entitled to conclude such an agreement.
The Commission cannot abrogate its statutory functions by
agreement. It should also be observed that the agreement pursuant
section 49D(1) between the Commission and the respondent to
the
effect that the Tribunal would be requested to incorporate the
settlement agreement into a consent order does not have the
effect
of making the terms of the settlement agreement legally enforceable
until such time as the agreed draft order is confirmed
by the
Tribunal and a consent order is made. The undertaking by the
Commission in this case not to refer the complaint was, in
the
circumstances of this case, not only
ultra
vires
but an exercise in futility in
that the time for referral had passed before the Tribunal was asked
to confirm the agreed draft
order which, if confirmed
,
would have incorporated the settlement agreement and given it
efficacy.
The
Tribunal was satisfied that the agreement of 3 December 2003 was
made within the period allowed
for
the Commission to refer the complaint to the Tribunal or issue a
notice of non-referral. Further , it found that the agreement
satisfied the requirements of section 49D(1) and was susceptible of
confirmation in terms of that section. The settlement agreement
of
3 December 2003 does not, in my view, satisfy the requirements of
section 49D in that the Commission and the Applicant did not
agree
upon the terms of an appropriate order. The agreement is simply a
settlement agreement. There is no reference in the settlement
agreement to any appropriate order nor to a consent order. Indeed,
it appears on the facts advanced by Applicant in its founding
affidavit in the review application that until some time in 2004,
the Commission held the view that no consent order could be made
unless it contained an admission of liability and acknowledgement by
Applicant that it was engaged in a prohibited practices.
Applicant
has consistently refused to make that concession.
It
was only in a letter dated 16 November 2004 - long after the time
for a referral or a notice of non-referral had expired - that
the
Commission consented to the settlement agreement of 3 December 2003
being confirmed as a consent order. Given those facts,
it cannot
be said that any agreement as to an appropriate order - as
envisaged in section 49D(1) was
concluded before the period for the referral of the complaint had
expired
On the facts of this matter, the Commission had already
in October 2003 decided to refer the complaint to the Tribunal.
Having
made that determination, it remained open to the Commission
to agree a draft order with Applicant as contemplated in section
49D(1)
provided only that it referred the complaint to the Tribunal
timeously if no consent order was issued prior to the expiry of the
time for referring the complaint.
As will appear from what is set out above, I am of the
opinion that the decision of the Tribunal not to confirm the
proposed order
incorporating the settlement agreement was a correct
decision. As noted I do not subscribe to a number of the arguments
and interpretations
relied upon by the Tribunal, but concur with
their decision not to confirm the agreement of 3 December 2003 for
the reasons stated
above.
In
the result, the review and the appeal are both dismissed. As none
of the Respondents opposed the review or the appeal no order
as to
costs is made.
___________________
SELIKOWITZ JA
Davis
JP and Mhlantla AJA concurred.