THE COMPETITION TRIBUNAL
THE REPUBLIC OF SOUTH AFRICA
CASE NO: 22/CR/B/Jun01
Concerning the matter between:
NORVATIS SA (PTY) LTD 1st Applicant
ROCHE PRODUCTS (PTY) LTD 2nd Applicant
INGELHEIM PHARMACEUTICALS (PTY) LTD 3rd Applicant
BRISTOL MYERS SQUIBB (PTY) LTD 4th Applicant
SCHERING (PTY) LTD 5th Applicant
ABBOTT LABORATORIES SA (PTY) LTD 6th Applicant
SANOFISYNTHELABO (PTY) LTD 7th Applicant
BAYER (PTY) LTD 8th Applicant
ELI LILLY SA (PTY) LTD 9th Applicant
WYETH SA (PTY) LTD 10th Applicant
AVENTIS PHARMA PTY) LTD 11th Applicant
INTERNATIONAL HEALTHCARE DISTRIBUTORS 12th Applicant
(PTY) LTD
and
THE COMPETITION COMMISSION 1st Respondent
1
MAIN STREET 2 (PTY) LTD t/a NEW UNITED PHARMACEUTICAL
DISTRIBUTORS (PTY) LTD 2nd Respondent
NATAL WHOLESALE CHEMISTS (PTY) LTD
t/a ALPHA PHARM DURBAN 3rd Respondent
MIDLANDS WHOLESALE CHEMISTS LTD
t/a ALPHA PHARM PIETERMARITZBURG 4th Respondent
EAST CAPE PHARMACEUTICALS LTD
t/a ALPHA PHARM EASTERN CAPE 5th Respondent
FREE STATE BUYING ASSOCIATION LTD
t/a ALPHA PHARM BLOEMFONTEIN (KEMCO) 6th Respondent
PHARMED PHARMACEUTICALS LTD 7 th Respondent
AGM PHARMACEUTICALS LTD
t/a DOCMED 8th Respondent
L’ETANG’S WHOLESALE CHEMISTS CC
t/a L’ETANGS 9 th Respondent
RESEPKOR (PTY) LTD
t/a RESKOR PHARMACEUTICAL WHOLESALERS 10th Respondent
_____________________________________________________________________
Reasons
BACKGROUND
1. On the 2nd May 2001 the Competition Commission referred to us a complaint
by the 2 nd to 10 th respondents in this matter alleging that the applicants,
together with MSD (Pty) Limited (another pharmaceutical manufacturer that is
not party to these proceedings), engaged in practices prohibited by Chapter 2
of the Competition Act 89 of 1998 as amended (the Act). Specifically the
Commission alleged that the applicants and MSD (Pty) Limited contravened
sections 4(1)(a); 4(1)(b)(i); 5(1); 8(c); and 9(1)(c)(ii) of the Act.
2. The complaint referred to us was lodged with the Commission by the
2
respondents on the 11 th October 1999; and was accepted by it on the 17 th of
February 2000. Prior to the Act being amended by Act 39 of 2000, which
came into effect on the 1 st of February 2001, the Commission was required to
formally accept a complaint submitted to it for investigation. Thereafter in
terms of the previous Commission rule 19(2) the complaint once accepted had
to be referred to the Tribunal within one year after the date of acceptance as
opposed to the date of submission1. In terms of the amended Act the
requirement for formal acceptance of the complaint was dispensed with and
the time period for referral – still one year – began running from the date of
submission.2
3. On the 1 st June 2001, in response to the referral of the complaint against them,
the applicants instituted review proceedings in the High Court to have the
complaint referral by the Commission set aside. (We deal with the grounds for
the review application below.) On the same day the Tribunal received an
urgent application by the applicants to stay the referral proceedings pending
the finalisation of the review application in the High Court and condoning
their noncompliance with the Tribunal Rules relating to time limits with
reference to the filing of their answering affidavits.
4. At a hearing held on the 6 th June, at the request of the Commission the
hearing of the stay application was postponed until the 13 th June. The
Commission indicated that it would oppose the application for a stay and
needed time to prepare. In order that the postponement not prejudice the
applicants we made an order suspending the passage of days in the referral
proceedings pending our decision in the application for a stay. The
proceedings pending our decision in the application for a stay. The
Commission elected not to file an answering affidavit and argued the matter
on the basis of the applicants’ founding papers.
5. When the hearing resumed on the 13 th June the applicants argued that we
should stay the referral proceedings because if they succeeded in the review
application in the High Court the referral would be struck down rendering the
proceedings in the Tribunal nugatory.
6. In the review proceedings before the High Court the applicants seek to have
the complaint referral by the Commission set aside on two grounds. Firstly it
is contended that in terms of section 50(5) of the Act as amended, the
1 Rule 19(3) of the Commission Rules as they then were provided that this period could be extended by
agreement between the Commission and all claimants recognized at the time or by the Tribunal on
application to it by the Commission.
2 Section 50(2) states: “ Within one year after a complaint was submitted to it, the Commissioner
must –
a) … 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 nonreferral to the complainant in
the prescribed form. ”
3
Commission is time barred from referring the complaint to us and must
accordingly be regarded as having issued a Certificate of Nonreferral.
7. Secondly, the manner in which the complaint was referred by the
Commission is alleged to constitute a breach of the applicants’
common law right to audi alteram partemand, as such, is
procedurally unfair administrative action in terms of sections 3
and 6 of the Promotion of Administrative Justice Act and a
violation of section 33(1) of the Constitution. The applicants claim
that the Commission acted unfairly because (1) it did not give them
access to material evidence adverse to them or a summary thereof,
to enable them to respond thereto; (2) they were not afforded a
hearing to dispute the material evidence adverse to them prior to
the Commission taking its decision to refer the complaint; and (3)
the Commission has failed to substantiate allegations upon which
its referral of the complaint is based.
DECISION
8. The application for a stay of the proceeding of the Tribunal in case
22/CR/B/Jun01 is denied. Reasons for this decision follow.
REASONS
Jurisdiction
9. The parties appearing before us in this matter have devoted considerable time
to a discussion of weighty jurisdictional matters. In essence the applicants
allege that the Commission acted ultra vires by referring this matter to the
Tribunal outside of the prescribed time limit. The determination of whether
the Commission was competent or not to do so is a jurisdictional issue and, in
terms of the Applicant’s reading of section 62 of the Act such a question is a
matter over which the Competition Appeal Court (CAC) and the High Court
have jurisdiction but not the Tribunal. Secondly, the Applicant alleges that
certain of its constitutional rights have been violated by the procedures
certain of its constitutional rights have been violated by the procedures
employed by the Commission in referring this matter to the Tribunal. The
Tribunal, continues the argument, similarly has no jurisdiction to decide
constitutional matters because constitutional issues are part of the concurrent
jurisdiction of the CAC and the High Court but not the Tribunal. Accordingly,
since the review is concerned with jurisdictional matters and constitutional
matters the Tribunal is barred from any enquiry that presupposes a decision on
the merits of the review proceeding initiated in the High Court. Given then
that the Applicant has discretion whether to approach the High Court or the
CAC it is fully within its rights to approach the High Court and this is what it
has done.
4
10. The Commission, on the other hand, argues that the review falls within the
boundaries of the Tribunal’s exclusive jurisdiction and that it is fully
competent, indeed, from a jurisdictional point of view, it is uniquely
competent, to hear the review at issue here. In essence, the Commission
argues that the jurisdictional matters raised are not those, the adjudication of
which is reserved for the High Court. As for the constitutional violations
alleged, it is suggested that these are invoked precisely in order to give matters
clearly within the Tribunal’s jurisdictional competence a constitutional cast.
The Commission argues that the taking of jurisdictional and constitutional
points is in the nature of a mere device to place beyond the Tribunal’s reach a
matter actually within its jurisdiction. At very least, contends the Commission,
the Tribunal enjoys concurrent jurisdiction with the High Court and, as such, it
is jurisdictionally competent to enquire into the merits of the review.
Moreover, argues the Commission, even if jurisdiction was found to be
concurrent the principle that parties first exhaust the domestic remedies
provided, that is those remedies specifically provided by the statute in
question, dictate that the Competition Tribunal, or if that forum was found to
be jurisdictionally incompetent, the CAC, hear this matter.
11. In our view this discussion sets the sights too high. The matter of granting a
stay does not require a decision regarding the jurisdictional boundaries of the
Tribunal. This appears to us to be the judicial equivalent of constructing a
garden shed on foundations intended to support a skyscraper. The Tribunal
has been asked to grant a stay of its own proceedings and its competence to do
has been asked to grant a stay of its own proceedings and its competence to do
this has not been questioned. Accordingly all that is required is that we decide
the basis for making this decision and that we then proceed to decide it. Our
decision with respect to the stay in no way purports to derogate from the High
Court’s competence to decide the merits of the review. Nor does it purport to
decide whether the Tribunal (or the CAC) enjoys concurrent, much less
exclusive, jurisdiction in the review proceedings. The Tribunal has not been
asked to conduct a review. This has been asked of the High Court. Should the
High Court decide that this is not within its jurisdictional competence it will,
as in the decision of Jali J in the matter of Seagram Africa (Pty) Ltd v
Stellenbosch Farmers Winery Group (Pty) Ltd and Others; case number
7759/00 CPD, doubtlessly decline to decide the matter and direct the
Applicant to approach the competent body, be it the Tribunal or the CAC.
12. The applicants have obviously, by very dint of their application, conceded the
Tribunal’s jurisdiction to decide whether or not to stay its proceedings in
respect of the Commission’s complaint referral in the case in question and this
is what we shall decide, no more and no less. In the hearing Mr. Puckrin, for
the applicants, conceded that the Tribunal was not being asked to partake in a
mere formality, that it was, in other words, not being asked to issue a rubber
stamp type approval. However he conceded a very limited basis for that
discretion. Relying upon Rule 33(4) of the Rules of the High Court, he argued
5
that all that was at issue was ‘convenience’ 3. The applicant’s understanding
of convenience did not, it appeared, even extend to the question of the
‘balance of convenience’. It was simply a question of administrative
convenience, on the same footing as, for example, the decision to separate the
hearing of an in limine argument from the hearing on the substantive merits.
13. Mr. Brassey, for the Competition Commission, took a somewhat broader view
of our discretion. He contended that the Tribunal should examine whether the
review in question had any prospect of success. He argued that should we find
that there was, indeed, no prospect of success, we should then refuse to grant
the stay.
14. The convenience test is really not at issue here. Had we been asked to decide
the review points ourselves the applicants may well have approached us and,
as a matter of convenience, asked us to first decide the review points before
proceeding to the substantive merits contained in the referral. In this instance,
however, the review has been taken to another forum for consideration. We
are being asked to stay our proceedings whilst these issues are considered in
the High Court. Certainly convenience is a factor to consider in staying our
proceedings. However there is a prior question to consider and that is, as Mr.
Brassey suggests, the question of the prospects of success.
15. In the present situation the Tribunal is in an analogous position to that of the
High Court under the interim constitution in relation to the constitutional
validity of statutes. Hence in Mhlungu4 Kentridge AJ, examined the nature of
the High Court’s obligation under the interim Constitution to refer
constitutional matters to the Constitutional Court. The learned judge
expressed it as follows:
“In s 103(4) of the Constitution, which deals with the referral to this
“In s 103(4) of the Constitution, which deals with the referral to this
Court of matters originating in inferior courts, the referring
Provincial or Local Division must in addition be of the opinion 'that
there is a reasonable prospect that the relevant law or provision will
be held to be invalid'. … The reasonable prospect of success is, of
course, to be understood as a sine qua non of a referral, not as in itself
a sufficient ground. It is not always in the interest of justice to make a
reference as soon as the relevant issue has been raised. Where the
case is not likely to be of long duration it may be in the interests of
justice to hear all the evidence or as much of it as possible before
considering a referral. Interrupting and delaying a trial, and above
all a criminal trial, is in itself undesirable, especially if it means that
witnesses have to be brought back after a break of several months.
Moreover, once the evidence in the case is heard it may turn out that
3 The Tribunal is entitled to have regard to the High Court Rules where its own procedures make no
provision for a procedure. See Rule 55(1)(b) of the Tribunal Rules.
4
6
the constitutional issue is not after all decisive. I would lay it down as
a general principle that where it is possible to decide any case, civil or
criminal, without reaching a constitutional issue, that is the course
which should be followed.”
16. The principles at issue in deciding whether or not to grant a stay are, we
submit, identical. Borrowing the words of Kentridge AJ, in deciding whether
to stay our proceedings ‘the reasonable prospect of success is, of course, to be
understood as a sine qua non of a referral (read ‘stay’), not as in itself a
sufficient ground’. Beyond the question of the reasonable prospect of success
is, once again to borrow the learned Kentridge AJ’s words, ‘the interests of
justice’. Note that the learned judge, in the paragraph cited, appears to cast the
question of ‘justice’ in terms of the delay generated by a referral – per
definition a request for a stay, is a request for a delay and, following this
judgment, an unwarranted delay of a proceeding is unjust, the more so when
the applicant fails to show that the referral has a reasonable prospect of
success, that is, that it will achieve nothing more than a delay, a digression.
We should also point out that, in the context of the Mhlungu judgment the
question of the inferior court’s jurisdiction to hear constitutional matters did
not arise. It had no jurisdiction and still the learned Judge concluded that it
was not required to refer a constitutional matter to the Constitutional Court if
it did not pass the tests enunciated in the judgment, to recap, the sine qua non
of a reasonable prospect of success, and, then, its decisiveness for the case and
the interests of justice.
17. As we shall elaborate below we do not believe that the review has any
reasonable prospect of success largely because the High Court itself has
already decided both review points against the Applicants. It has, in other
words, fallen at the first hurdle erected by Kentridge AJ’s dictum in the
Mhlungu judgment.
Commission is time barred
18. The Applicants argue in their review application that in terms of section 50(5)
of the Act as amended the Commission is time barred from referring the
complaint and must accordingly be regarded as having issued a notice of non
referral.
19. Section 50(5) provides:
(5) “If the Competition Commission has not referred a complaint to
the Competition Tribunal, or issued a notice of nonreferral,
within the time contemplated in subsection (2), or the extended
period in subsection (4), the Commission must be regarded as
having issued a notice of nonreferral on the expiry of the relevant
period.”
7
20.Subsection (2) provides that the Commission must refer a
complaint to the Tribunal within one year after it was submitted to
it; and subsection (4) provides that before the oneyear period
allowed in subsection (2) expires, the Commission may extend it by
agreement with the complainant or by application to the
Competition Tribunal.
21.The Applicants argue that even though the complaint was lodged
with the Commission before the Act was amended the above
section applies by virtue of section 23(5) of Competition Second
Amendment Act 39 of 2000. This section states:
“Any proceedings that were pending before the Competition
Commission, Competition Tribunal or Competition Appeal Court
before the date of commencement of this Act must be proceeded
with in terms of the principal Act as amended, except to the extent
that a regulation under section 21(4) or 27(2) of the principal Act
as amended, or a rule of the Competition Appeal Court, provides
otherwise.”
22. The applicants argue that section 23(5) renders the amendments to the relevant
sections of the Act – specifically including the amended Section 50
retrospective and therefore applicable to the Commission’s complaint
proceedings.
23.Clearly at the time that the amendments came into effect the
complaint was still under investigation by the Commission. The
applicants argue that since neither sections 21(4) nor 27(2) are
applicable to this matter, which is common cause between the
parties, section 50(5) of the Act as amended applies. Accordingly,
in the absence of proof that the Commission either reached an
agreement with the complainants (the 2 ndto 10threspondents in
these proceedings) or received an order from the Tribunal
these proceedings) or received an order from the Tribunal
extending the time period allowed for investigation, which
otherwise, the Applicants argue, expired on 11 October 2000, the
Commission must be regarded as having issued a notice of non
referral and is time barred from referring the complaint to the
Tribunal. It is submitted by the applicants that the Commission
therefore acted outside of its jurisdiction in referring the complaint
to us when, by virtue of section 50(5), it was deemed to have issued
a notice of nonreferral.
8
24. On the applicants’ argument, the provisions of section 50(5) apply
retrospectively by virtue of section 23(5). It appears to be common cause that
if the provisions of section 50(5) apply only prospectively, the Commission’s
referral was timeous. It follows therefore that the Applicants can only succeed
on this point if they can establish that the provisions of section 50(5) are, as
they argue, retrospective in nature.
25. It is common cause that there is a strong presumption against the retrospective
application of legislation. It is also common cause that a statute can expressly
be given retrospective effect and that in such a case the presumption does not
operate. The matter becomes more complicated however as the courts have at
times distinguished between the retrospective effects of changes to procedures
on the one hands and changes to substantive rights on the other. Thus even
though a statute may appear through express language to operate
retrospectively the extent of the retrospective effect may be open to some
doubt.
26.In the Mhlungucase Kentridge AJ stated:
“It is however not always easy to decide whether a new statutory
provision is purely procedural or whether it also affects
substantive rights. Rather than categorizing new procedures in
this way it has been suggested one should simply ask whether or
not they would affect vested rights if applied retrospectively ….”
27.The Applicants argue that section 23(5) is express in its application
to procedural issues, that the issue of the time bar is a procedural
matter and hence the new legislation applies retrospectively and the
Commission in consequence is time barred. They find support for
their approach in a recent decision of the CAC in Norvatis SA
(Pty) Ltd and Others v New United Pharmaceutical
Distributors (formerly Mainstreet 2 (Pty) Ltd) and Others 5. In
Distributors (formerly Mainstreet 2 (Pty) Ltd) and Others 5. In
that matter the CAC had for the first time to interpret section 23(5).
The Court grappled with the interpretation of the section but
following the approach of the Constitutional Court in
Mhlungucame to the conclusion that:
“ In the present dispute, section 23(5) mandates the adoption
of procedures contained in the Amendment Act for all
cases which are already located in the legal pipeline
created by the Act. But if the legislature wished to go
further and provide that the substance of the law
5 Case number 07/CAC/Dec00
9
pertaining to dispute on appeal from the Tribunal to the
Court before the Amendment Act became law is to be
governed by a provision of the Amendment Act it would
have been required to employ an express decision to that
effect.” (At page 18.) (Our emphasis.)
28. We agree with the applicants that the decision of the CAC, namely that the
effect of section 23(5) is that the amendments to the Act apply retrospectively
to all procedural matters, supports, to this extent, their interpretation of the
section. However, we do not agree with the applicants’ argument that the
question of whether or not the time period within which the Commission has
to refer a complaint has prescribed is a procedural matter. In Protea
International (Pty) Ltd v Peat Marwick Mitchell & Co 1990 (2) SA 566
(A) the Appellate Division of the Supreme Court of South Africa (the
predecessor of the Supreme Court of Appeals) found that an extinction of a
right by prescription is a matter of substantive law, and not of procedure.
Clearly a decision that the Commission is time barred from referring the
complaint means that the right of the Commission to refer the complaint,
contemplated in section 50 of the Act as amended, has prescribed.
Furthermore, it means that the right of the complainants, 2 nd to 10 th
respondents in this matter, to have their complaint pursued by the Commission
on their behalf before the Tribunal has also prescribed. According to the
decision of the AD in the Protea case, which is binding on the High Court,
this is a matter of substantive law. As we have observed above the CAC found
that section 23(5) did not make the provisions of the Amendment Act
applicable to matters of substantive law pertaining to a dispute on appeal from
applicable to matters of substantive law pertaining to a dispute on appeal from
the Tribunal before the amendment became law. The implication of this
distinction is equally appropriate to the present case. Unless the section
contained a more express provision to the contrary it should not be construed
as applying retrospectively to the substantive provisions of the Act pre
amendment. We therefore find no merit in the argument that we are bound by
the decision of the CAC to find in the applicants’ favour on this point.
29. Furthermore, in terms of the decision of the CAC, the provisions of section
23(5) are ambiguous and need to be read restrictively so that they do not lead
to radical consequences that run “completely contrary to the dictum of the
majority in Mhlungu”. Finding that the provisions of section 23(5) apply
retrospectively as the applicants argue, would not only lead to radical
consequences, but absurd consequences as well.
30. As the Commission points out in its papers, the effect of a decision that the
amendments apply retrospectively; and therefore extinguish the Commission’s
right to refer this complaint; would result in the absurd consequence that by
operation of the amendments to the Act, the due date by which the
Commission had to refer the complaint to the Tribunal expired some four
months prior to the amendments coming into operation in circumstances
10
where, but for the amendments, the date would not have expired at the date
that the amendments came into effect. As appears above the complaint was
lodged with the Commission on 11 October 1999 and accepted by the
Commission on 17 February 2000. In terms of the law applicable at the time
the Commission had until 17 February 2001 (or as long thereafter as had been
agreed to it by the complainant or an order of the Tribunal) to refer the
complaint. The amendments, which came into effect on 1 February 2001, did
away with the requirement that the Commission accepts a complaint and the
Commission now has to refer a complaint to the Tribunal within a year of the
complaint being submitted to it. If the amendments apply retrospectively then
the Commission would have had to refer the complaint to us a year after it was
submitted, that is, by 10 October 2000 almost four months before the
amendments came into effect.
31. There is a presumption in our law that the legislature does not intend to create
absurdities, and the language of a statute may be departed from where its
ordinary meaning would result in a glaring absurdity 6. In English law Lindley
LJ said this in the Duke of Buccleuch case 7:
“You are not so to construe the Act of parliament as to reduce it to
rank absurdity…. You are not to attribute to general language used by
the legislature… a meaning that would not only carry out its object,
but produce consequences which to the ordinary intelligence are
absurd. You must give it such a meaning as will carry out its object”
32. As appears above, the language used in section 23(5) has already been found
to be ambiguous by the CAC. In that instance where an absurdity would result
one interpretation of the statute, we must prefer the more rational meaning. It
is our opinion that the High Court will not attribute to the legislature the
absurd result that will result from applying the provisions of section 23(5)
retrospectively and will interpret the section to apply only prospectively. We
therefore see no prospects that the applicants will succeed in the High Court
on this argument.
33. The applicants argue that since the contents of the amendment Act were
known publicly prior to the commencement date the Commission had plenty
of time to “get its house in order”. This argument is without foundation. The
Commission may have been aware of the possible enactment but had no
reason to know when that would occur. Indeed the amendment Act was
proclaimed on the same day that it came into effect. The Commission was not
under any obligation to curtail its right to a one year period to investigate post
acceptance, simply because the prospect of new legislation was lurking. It is a
notorious fact that the passing of legislation is not time related to its enactment
in any predictable way. Despite the applicants’ ambitious attempts on this
point the harsh and absurd consequences of applying the amendment
6 See for example Administrator (Natal) v Bluff Drivein Cinema 1969 (1) SA 415 (D) at 419 and
Venter v R 1907 TS 910 at 914.
7 (1889) 15 PD 96
11
retrospectively cannot be argued away.
34. We are satisfied that the applicants have no reasonable prospects of success on
the point that the Commission is time barred from making the referral.
The Commission proceeded unfairly
35. The applicants allege that the complaint referral by the Commission violated
the applicants’ right to natural justice and constitutes procedurally unfair
administrative action.
36. The Applicants’ submission is that in terms of section 239 of the Constitution
of the Republic of South Africa, 108, 1996, the Commission is an Organ of the
State and that being an institution that exercises a public power and performs a
public function the power of referral vested in the Commissioner is a
discretionary power and is reviewable in terms of the principles of
administrative law.
37. Its conduct therefore falls within the definition of administrative action in
section 1 of the Promotion of Administrative Justice Act 3 of 2000 (the
Administrative Justice Act). 8
38. They further argue that the Commission’s conduct must be exercised in terms
of the common law and the Constitution 9 which guarantees:
1.38.1 Procedurally fair administrative action.
2.38.2 Administrative action that is justifiable in relation to the
reasons given for it where a person’s rights are affected or
threatened.
3.38.3 Lawful administrative action.
39. The question arises, given this constitutional and administrative backdrop,
whether the decision of the Commissioner to refer the complaint in terms of
section 50(2) was arrived at in accordance with the requirements of
administrative justice. The applicants argue that it was not and that the
decision was unfair for the following reasons:
39.1 The applicants were not given access to material evidence
39.1 The applicants were not given access to material evidence
8 The Administrative Justice Act defines administrative action as, inter alia, any decision taken, or any
failure to take a decision by an organ of state, when “exercising a public power or performing a public
function in terms of any legislation … which adversely affects the rights of any person and which has a
direct, external legal effect”. (There are various exclusions which are not applicable in this case,
although significantly amongst these exclusions is a decision to institute or continue a prosecution) See
paragraph (ff) of the definition.
9 Section 33.
12
adverse to them or to a summary of such evidence in order to
enable them to address or refute such evidence
39.2 The applicants were not afforded a hearing to dispute material evidence
adverse to them held by the Commission prior to its taking its decision to refer the
complaint;
39.3 The Commission has failed to substantiate allegations upon which it purports
to base its referral. 10
39.4 By way of example they refer to the fact that the Commission did not give
them an opportunity to comment on its allegations regarding market definition and
market dominance.
40. The Commission argues that its decision to refer a complaint is neither final
nor does it have any consequences for the applicants. Its powers are of a
preliminary and investigative nature, comparable to those of the police
services or the Directorate of Serious Economic Offences. Accordingly, the
Commission submits, it has not engaged in unfair administrative action.
41. To decide whether an administrative action has been taken fairly it is crucial
that the decisionmaking process be viewed as a whole. The demands of
fairness will depend on the context of the decision viewed within the
procedural context in which it arises. An essential feature of the context is the
empowering statute, which creates the discretion, as regards both its language
and the shape, and the legal and administrative system within which the
decision is taken. 11
42. In Brenco12 the Supreme Court of Appeal had to consider, inter alia , whether
the Board on Tariffs and Trade (BTT) had violated the principles of natural
justice by making recommendations to the Minister of Trade and Industry
without giving the respondents access to all information at its disposal or the
opportunity to respond thereto prior to making the recommendation. The
opportunity to respond thereto prior to making the recommendation. The
Court held that no single set of principles for giving effect to the rules of
natural justice is applicable to all investigations, official enquiries and
exercises of power. The Court emphasized the need for flexibility in the
application of the principles of fairness depending on the context. The Court
quoted the dicta of Sachs L.J. in In re Pergamon Press Ltd 13 where he
stated:
“In the application of the concept of fair play, there must be real
flexibility, so that very different situations may be met without
producing procedures unsuitable to the object in hand ...
It is only too easy to frame a precise set of rules which may appear
10 See paragraph 51 of the applicants’ application to the High Court.
11 See the dicta of Lord Mustill in Doody v Secretary of State for the Home Department and Other
Appeals quoted extensively by the Supreme Court of Appeals in Chairman: Board on Tariffs and
Trade and Others v Brenco Incorporated and Other (BRENCO) case number 285/99; at paragraph 13.
12 Supra
13 [1970] 3 All ER 535 (CA)
13
impeccable on paper and which may yet unduly hamper, lengthen
and, indeed, perhaps even frustrate ... the activities of those
engaged in investigating or otherwise dealing with matters that fall
within their proper sphere. In each case careful regard must be
had to the scope of the proceeding, the source of its jurisdiction
(statutory in the present case), the way in which it normally falls to
be conducted and its objective.”
43.The Court then examined the provisions of the BTT Act 14as part of
the context to determine what the requirements of fairness are in
BTT investigations. It found that in terms of that Act BTT performs
both an investigative and determinative function. It went on to hold
that:
“Whilst BTT has a duty to act fairly, it does not follow that it
must discharge that duty precisely in the same respect in
regard to the different functions performed by it. When BTT
exercises its deliberative function, interested parties have a
right to know the substance of the case that they must meet.
They are entitled to an opportunity to make representations.
In carrying out its investigative functions, BTT must not act
vexatiously or oppressively towards those persons subject to
investigation. In the context of enquiries in terms of sections
417 and 418 of the Companies Act 61 of 1973, investigatory
proceedings, which have been recognised to be absolutely
essential to achieve important policy objectives, are
nevertheless subject to the constraint that the powers of
investigation are not exercised in a vexatious, oppressive or
unfair manner.”
44.The Court was of the view that when BTT carried out its
investigative functions fairness did not demand that “every shred
of information provided to BTT should be made available to the
respondents”15. The standard applicable in the conduct of the
respondents”15. The standard applicable in the conduct of the
investigative function is the general principle that an interested
party must know the “gist” or the substance of the case that it has
to meet.
45.Another complaint made in this matter against BTT was that its
inspectors had obtained information from a party and that the
14 Act No. 107 0f 1986
15 At paragraph 42
14
information had not been given to the respondents so that they
could test its correctness. On this point the Court held:
“There is no requirement that BTT in the investigation of a
matter must inform the parties of every step that is to be
taken in the investigation and permit parties to be present
when the investigation is pursued by way of the verification
exercise. There is no unfairness to the respondents in
permitting the officials of BTT to clarify information without
notice to the respondents. To hold otherwise would not only
unduly hamper the exercise of the investigative powers of
BTT, but would seek to transform an investigative process
into an adjudicative process that is neither envisaged by the
BTT Act, nor what the audi principle requires”. 16
46. The Court found that BTT had not engaged in unfair procedural action when,
in making the recommendation to the Minister, it relied on information that it
had not disclosed to the respondents.
47. Nor is the result in Brenco surprising or novel. It represents the practical and
flexible approach our courts have taken on many occasions to administrative
fairness challenges.
48. In Huisman v Minister of Local Government, Housing and Works 1996
(1) SA 836 (A) , Van den Heever J.A placed a significant emphasis on the
theme of administrative efficiency and held that proceedings of administrative
bodies could be endlessly protracted were such “right”(in this case the right to
reply) to be held to exist. Whilst the case deals with a different set of
procedures not analogous to those in this case it does illustrate the consistent
approach of our courts in striking a compromise between fairness and practical
concerns of efficiency.
49. The same could be said of the Competition Commission the administrative
efficiency of the Commission in rendering its duties could be severely affected
efficiency of the Commission in rendering its duties could be severely affected
if, in exercising its discretion in terms of section 50(2), its every action would
be subject to scrutiny under the principle of administrative review in the
manner suggested by the applicants in this matter.
50. Moreover, there is no express provision in the Act requiring or compelling the
Commission to furnish reasons or to afford the applicant the opportunity to be
heard prior to the Commission referring the restrictive practice complaint to
the Tribunal. It would have to be inferred, and it seems to be difficult to read
into the Act a necessary inference which compels the Commissioner to afford
16 Brenco supra at paragraph 51.
15
the applicant the right to be heard.
51. In Park – Ross v Director for Serious Economic Offences 1998 (1) SA 108 (C) J had to
decide whether an applicant subject to a proceeding in terms of the Serious Economic
Offences Act was entitled access to written statements given by witnesses to the Director of
Serious Economic Offences. In coming to the conclusion that he was not, he remarked:
“ It is convenient to deal with the right to be heard first. I agree with …
that the applicant has no right at this stage to invoke the audi alteram
partem rule. In my view, it is clear that the powers of the respondent
are as Mr Gauntlett argued, of a preliminary and investigative nature.
In essence, in this context, they do not differ from those vested in
members of the police service.” 17
52. In Van der Merwe and Others v Slabbert NO. and Others 1998(3) SA 613
(N), Booysen J, stated the principle that:
“It is so that bodies required to investigate only need in general not
observe the rules of natural justice and that bodies are required to
investigate facts and make recommendations to some other body or
person with the power to act need not necessarily apply the rules of
natural justice, depending on the circumstances.” 18
53. We turn now to the application of the above conclusion to the above
circumstances of the present case.
54. The Brenco decision is entirely in point in relation to the matter at hand. It is
our view that the distinction drawn by the court between an investigative and a
determinative function performed by public bodies is crucial in ensuring that
public bodies are not unduly restrained in their work where the exercise of
their powers carries no serious or final consequences for affected parties.
55. In the context of this application the distinction drawn by the Court between
investigative and determinative administrative conduct by public bodies
investigative and determinative administrative conduct by public bodies
disposes of the applicants’ case. In terms of the decision in the Brenco case
the violations of natural justice alleged by the applicants against the
Commission can only be upheld if the complaint referral by the Commission
constitutes a determinative action. Our view is that it does not. Section 21 of
the Act, which deals with the functions of the Commission, states that the
Commission has the power to investigate and evaluate alleged contraventions
of Chapter 2. Chapter 2 deals with prohibited practices. The Commission
therefore is empowered to investigate and evaluate alleged prohibited
17 See judgment at 122. Although the applicants argued that cases dealing with criminal procedures
were not analogous we fail to see why. A complaint referral is brought at the instance of a public body
in much the same way as a prosecution and the Tribunal can impose penalties in event of a
contravention including an administrative fine.
18 See judgment at 624.
16
practices, and, in terms of section 50(2), refer to the Tribunal those complaints
that in respect of which, it “determines”, a prohibited practice has been
established. The Commission is an investigative body, which in referring the
complaint to the Tribunal is only instituting the initial procedural step on the
road to a hearing.
56. The Tribunal, on the other hand, is specifically empowered by section 27(a) of
the Act to adjudicate on prohibited practices and to determine whether a
prohibited practice has actually occurred. In terms of section 52(2)(a) the
Tribunal is explicitly enjoined to apply the rules of natural justice. A
respondent in proceedings before the Tribunal clearly is afforded
administrative justice rights; in terms of the Tribunal Rules it may request
information prior to a hearing and be represented. The Tribunal clearly
exercises a determinative action as it is empowered to do by the Act and
therefore it is enjoined to conduct its proceedings in accordance with the tenets
of natural justice. The Commission is not subject to the same requirement
precisely because the legislature, like the Court in Brenco, sought, in this Act,
to distinguish between investigative and adjudicative procedures.
57. Thus if one looks at the complaint procedure holistically, in accordance with
the analysis in the Brenco case, and not in piecemeal fashion, one comes to
the conclusion that, on existing case law which is binding on the High Court,
the applicants’ argument that it is entitled to administrative justice at the
complaint referral stage has no prospect of success before the High Court.
Their application attempts to transform an investigative process into an
adjudicative process which, in the words of the court in the Brenco case “is
adjudicative process which, in the words of the court in the Brenco case “is
neither envisaged by the BTT Act (read Competition Act), nor what the audi
principle requires.”
58. Furthermore, this application incorrectly assumes that if the applicants were in
anyway prejudiced by the complaint referral, such prejudice cannot be
remedied through the processes in the Tribunal. This is clearly not the case. As
a matter of fact MSD, one of the respondents in the complaint referral, has
applied to the Tribunal for a dismissal of the complaint referral on various
grounds. The applicants have therefore ignored the fact that Tribunal Rules
and procedures provide them with remedies if the referral is approached
holistically.
59. If one examines the grounds of the applicants’ complaint about why the
Commission proceeded unfairly we will see that all three are accommodated
in the Tribunal’s procedures as set out in the Act and the Tribunal’s Rules.
Thus, in the proceedings before the Tribunal, the applicants would have to be
given access to material evidence adverse to them, would be given a hearing to
dispute adverse evidence and the Commission would have to be able to
substantiate its allegations otherwise its case would fail.
60. If the applicants’ contentions are correct the complaint referral process would
amount to two sets of hearings, one before the Commission prior to its act of
17
referring the complaint and then the process before the Tribunal. The
investigator, the Commission, would be asked to adjudicate over what it had
thus far investigated despite the fact that it is not the final arbiter. A more
pointless and inefficient process is hard to imagine. At the time that the
Commission makes its referral the respondent firm (ie the applicants in this
case) is not required to defend itself. That takes place when the hearing
procedures evolve as part of the Tribunal process, that is, after the step of
referral. Fairness is not compromised by denying natural justice prematurely;
it is only compromised if it is ultimately denied.
61. In order to get around the difficulties occasioned by the case law and in
particular the Brenco decision the applicants argued that in referring a
complaint to us the Commission exercises a determinative action. Their
argument revolves around the wording of section 50(2), which states that the
Commission shall refer a complaint to the tribunal “if it determines that a
prohibited practice has been established” (our underlining). In the applicants’
argument the use of the word “determines” is proof that a complaint referral
by the Commission is a determinative function. In our view the applicants are
emphasizing form over substance. On the basis of its investigation the
Commission determines whether or not a prohibited practice has occurred. If
the Commission determines that a prohibited practice has occurred it cannot
impose a fine or any other remedy, it must refer the complaint to the Tribunal.
Referring a complaint to the Tribunal is not determinative of the complaint.
All it means is that the respondent will have to face a hearing before the
Tribunal where it will be given an opportunity to respond to the allegations
Tribunal where it will be given an opportunity to respond to the allegations
that it has engaged in a prohibited practice. Even where the Commission
decides not to refer a complaint this decision is also not determinative of the
complaint in terms of section 51(1) of the Act the complainant has the right
to refer the complaint to the Tribunal directly. We repeat what we have stated
above that the decision by the Commission to refer a complaint is merely one
of the steps in the resolution of a complaint; it may be the most important one
but it is not determinative of the complaint. The respondent gets an
opportunity to state its case before the Tribunal. The decision of the Tribunal
is determinative of the complaint as a whole and this is why the Act entitles a
respondent in Tribunal proceedings to the principles of natural justice. In the
light of the above and the Brenco decision, we see no prospect of this
argument succeeding in the High Court.
62. The applicants also argue that a decision to refer a complaint is determinative
since, in terms of section 49D, the Commission is entitled, without reference
to the complainant, to settle matters with respondents, subject to a consent
order by the Tribunal. The applicants’ argument in this regard is hard to
follow. Firstly the Commission’s decision to refer cannot become a consent
order without the consent of the respondent firm. As such its nature is more
contractual than administrative. If it were a determinative administrative act
the acquiescence of the affected party would not be required. Secondly any
agreement between the Commission and respondent in terms of section 49D is
expressly made subject to a decision of the Tribunal. It is only with the
18
imprimatur of the latter not the former that a consent order acquires its final
character.
63. We conclude that there is no reasonable prospect that a High Court will
uphold the unfair administrative procedure points raised by the applicants.
Conclusion
64. Having come to the conclusion that the two objections to the referral have no
reasonable prospect of success in the High Court we accordingly refuse the
application for the stay.
65. There is no order as to costs.
_____________ 02 July 2001
DH Lewis Date
Concurring: NM Manoim; P Maponya
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