IN THE COMPETITION TRIBUNAL
REPUBLIC OF SOUTH AFRICA
Case Number: 97/CR/NOV04
GLAXOSMITHKLINE SOUTH AFRICA (PTY) LTD Applicant
And
MPHO MAKHATHININI 1 st
Respondent
NELISIWE MTHETHWA 2 nd
Respondent
MUSA MSOMI 3 rd
Respondent
ELIJAH PAUL MUSOKE 4 th
Respondent
TOM MYERS 5 th
Respondent
AIDS HEALTHCARE FOUNDATION LTD 6 th
Respondent
THE COMPETITION COMMISSION 7 th
Respondent
______________________________________________________________
REASONS
______________________________________________________________
Introduction
1. This is an application to have an agreement between the Competition
Commission (the ‘Commission’) and the applicant made into a consent order
in terms of section 49(D) of the Competition Act (‘Act’).
2. The applicant is Glaxosmithkline South Africa (Pty) Ltd (“GSK”), the South
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African subsidiary of the large multinational pharmaceutical manufacturer
Glaxo Group Limited.
3. The 1 st to the sixth respondents were complainants in a prohibited practice
case brought against the applicant, consequent upon a nonreferral by the
Commission in terms of section 51 of the Act. (For convenience we will refer
to them collectively as the ‘AHF complainants’). 1
4. The Commission is the seventh respondent as it is a party to the
agreement which the applicant seeks to have made into a consent order.
5. Initially the application was opposed by the AHF complainants, but they
withdrew their opposition on 2 March 2006, at the same time as withdrawing
their complaint referral against the applicant. The only issue that arises in
respect of this application is whether we have jurisdiction to grant the order
sought. The merits of the agreement itself are not in issue.
Background
6. The factual background giving rise to this application has been fully set out
in our earlier condonation decision in Mpho Makhathinini and Others vs
Glaxosmithkline South Africa (Pty) Ltd and Another 2 and it is not necessary to
repeat all those facts in this decision, save as is necessary to explain why the
jurisdictional issue arises.
7. In 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 Competition Act
(the Act) by excessively pricing its antiretroviral drugs (‘ARV’s’) used to treat
HIV positive persons. 3 In terms of section 8(a) of the Act, a dominant firm is
prohibited from charging an excessive price. Shortly thereafter in January
2003, the AHF complainants lodged a complaint against the applicant with the
Commission.4 It is common cause that the TAC and AHF complaints related
to substantially the same conduct on behalf of the applicant. For this reason, it
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 them investigated
together. The Commission then investigated the complaint.
8. Just prior to the date when the Commission would have had to refer the
1 This is because the application was led by the Aids Health Care Foundation or AHF a
United States based nongovernmental organisation.
2 Case No.: 34/CR/Apr04.
3 The TAC Complaint case was investigated by the Commission under Case Number:
2002Sep226.
4 The Commission gave the AHF complaint the Case Number 2003Jan357.
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complaint to the Tribunal, it entered into an agreement with the applicant in
which it agreed not to refer the matter, in return for the applicant agreeing to
licence various generic manufacturers to manufacture ARV’s. 5 The
Commission was satisfied with this arrangement, as it appears, so was the
TAC and its consortium of complainants, which also entered into a similar
agreement. We will refer to this agreement between the applicant and the
Commission as the ‘December 2003 agreement’.
9. However the AHF complainants, unlike the TAC, were not a party to the
agreement and allege that they were never consulted about its terms. They
allege that they were only aware that it had taken place when they read about
it in the media. 6
10. 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, if the Commission has not
referred a complaint during the requisite period, and has not issued a notice of
nonreferral, it is deemed to have issued one.
11. AHF was not able to file its complaint referral timeously and applied for
condonation, an application opposed by the applicant, GSK. As appears more
fully from our decision in that matter, we granted condonation on 23 July
2004.
12. Thereafter, on 22 November 2004 the applicant applied to have the
December 2003 agreement made into a consent order in terms of section 49D
of the Act. The AHF complainants, viewing this as a tactical ploy to deny them
their relief, opposed the granting of the order. The basis of their opposition
need not concern us today, in view of the fact that on 2 March 2006, they
withdrew both their complaint referral and their opposition to the granting of
the consent order. We were advised that some settlement had been reached
although we do not know its terms.
Jurisdictional issue
although we do not know its terms.
Jurisdictional issue
13. While the application was still being argued as an opposed matter at our
hearing on the 2nd of March 2005, we raised a point of jurisdiction with the
applicant. The applicant then filed additional heads of argument on this point
and we heard oral submissions from the applicant at our subsequent hearing
on 2 nd March 2006. 7 As this is a jurisdictional point, the lack of opposition
5 See paragraph 3.1 of the December 2003 agreement.
6 See paragraph 9.2.5 of AHF’s answering affidavit in the consent order application (i.e., page
8283 of the paginated bundle).
7 We postponed the matter during our earlier hearing to allow the AHF complainants to
comment on the merits of the December 2003 agreement as one of their grounds of
opposition was that they had not been consulted on its terms as they allege they ought to
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does not detract from the fact that we must still decide the issue. It is trite law
that an administrative tribunal can only exercise jurisdiction to the extent that
its empowering statute permits it to.
14. In terms of section 50 of the Competition Act, the Competition
Commission has a period of one year after the submission of a complaint to
do one of the following –
i) to refer the complaint if it considers that a prohibited practice
has taken place;
ii) to extend the period it has to refer the complaint by following the
procedures laid down in section 50(4); or
iii) to issue a notice of nonreferral.
15. In the present case the Commission did none of these things and is
hence, by virtue of section 50(5), deemed to have issued a notice of non
referral to the AHF complainants.
16. The December 2003 agreement was entered into at time when the one
year period for referral had not yet expired. However, the application in terms
of section 49(D) was brought after the expiry of the one year period, at a time
when the Commission was deemed to have nonreferred the complaint. The
question we 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.
17. The Commission has not opposed the application, but was not present
when this point was argued, so we do not have the benefit of its view on the
point of law.
18. The first issue addressed by the applicant is whether it, rather than the
Commission, may make the application as has happened in this case,
although the Commission is cited as a respondent. It 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.
entitled to do so.
19. The applicant concedes that the Commission no longer has jurisdiction to
refer a complaint. However it argues that this does not mean that it does not
retain the power to “ agree on the terms of an appropriate order” or as Mr
Unterhalter eloquently put it, the power to prosecute is not coextensive with
the power to enter into an agreement. The main thrust of this argument relies
on the language of the section 49D(1) which states:
”If, during, on or after completion of the investigation of a complaint,
have been.
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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).” (Our emphasis)
20. The applicant argues that the clear meaning of “ after completion of the
investigation” means that an application for a consent order may be made at
any time. The language in other words is unrestrained. In order to make it
subject to any qualification and thus restrain it, this would require a reading in
of the words for so long as the Commission retains the power to refer the
matter. This, the applicant argues is not warranted and it refers to well known
cases that caution against reading in language unless it is necessary to do
so.8 In this case it argues that there is no such necessity.
21. The applicant also relies on rule 24 of the Rules of conduct of proceedings
for the Tribunal (‘the Tribunal rules’) to support its contentions that any party
may bring such an application and that it may be brought at any time. The rule
states that any party may bring such an application and as we stated earlier
we have assumed in the applicants’ favour that it is entitled to do so. The
applicant also relies on rule 24(2) for the contention that the application can
be brought at any time without any restriction on this right. The subrule states:
”At any time before the Tribunal makes a final order in a complaint
proceeding, a party may request the Tribunal to make a consent order
by filing a Notice of Motion in Form CT 6 with the documents listed in
subrule (1)(b)”
22. The applicant also argues that if a settlement agreement was reached at
some time after the Commission had already referred a matter and thus
outside of the one year period this would prevent it settling the complaint and
‘lock it’ into a full trial, with no possibility of settling, no matter how willing the
‘lock it’ into a full trial, with no possibility of settling, no matter how willing the
respondent was.
23. Both these arguments however rely on an interpretation of the section that
creates a straw man argument for the applicant to easily refute. The
interpretation that we offer of section 49D requires neither a reading in of
words nor the absurd ‘lock in’ consequence that the applicant contends for.
24. The Act makes it perfectly clear that when a complaint arrives the
Commission has the prerogative to investigate it and then refer it. The period
of this prerogative, is one year unless extended either with the consent of the
complainant or if that is not possible, by application before the Tribunal. Once
this period or any extension has expired, the Act is clear that the
Commission’s authority to prosecute lapses.
8 See Cowper Essex v Acton Local Board 14 A.C. 153 at 169; cited with approval in Bhyat v
Commissioner for Immigration 1932 AD 125 at 129.
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25. Thus the Act, if not expressly, at the very least by implication,
contemplates two distinct periods in the gestation of a complaint before the
Commission. First, an investigation period in which the Commission decides
whether to refer the complaint or not, or with the consent of the respondent to
enter into a consent agreement contemplated in section 49D; second, a
litigation period if the Commission decides to refer the matter to the Tribunal,
which is the period “after the completion of the investigation” that runs from
the date of the filing of the referral until the conclusion of the proceedings. As
long as the Commission files its complaint referral, which is the pleading that
initiates the litigation period, within the prescribed period, it retains the title to
prosecute the matter, and does not lose this title, irrespective of the time it
takes to conclude the matter.
26. It is possible that the Commission and a respondent may not be able to
agree on the terms of a consent order during the investigation period, but do
so during the litigation period. It is for this reason that section 49D(1),
contemplating this, refers to the fact that a consent order may also be granted
in the period after completion of the investigation of the complaint . In this
respect we are in agreement with the interpretation of the applicant the Act
cannot be interpreted in such a way that it locks the Commission and a
respondent into litigation, simply because the complaint has been referred
prior to the parties concluding a consent agreement.
27. It does not follow however and this is where we part company with the
interpretation of the applicant that this also applies to a situation where the
Commission has not referred the complaint, i.e. the words after the
investigation do not contemplate any situation after the investigation, but only
one where the Commission has retained its title to prosecute, by referring the
complaint.
one where the Commission has retained its title to prosecute, by referring the
complaint.
28. What differs in this interpretation from that of the applicant’s, is that
because it has referred the complaint on time, the Commission has not lost its
title to prosecute and there is a reason why this is so material to appreciating
the mechanism of the consent order. If the consent order does not find favour
with the Tribunal the Commission retains its title to prosecute. Section 49D(2)
makes it clear that apart from approving a consent order the Tribunal is
entitled to either indicate changes it wants before it will make such an order or
refuse to grant such an order. 9 If the Commission has lost its title to prosecute
at this stage, then it is helpless to respond if the Tribunal wants changes to
9 Section 49D(2) provides as follows:
(2) 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.
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the order to which the respondent won’t agree, or if the Tribunal refuses to
grant the consent order.
29. It seems clear 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
this period thus preserving that right. The legislature intended that once a
matter had been nonreferred 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. At this stage having non–referred,
whether expressly or by way of inference, the Commission effectively vacates
the battlefield with the respondent in favour of the complainant. It follows
logically that this schema contemplates a period during which the Commission
is unrestricted by the complainant in dealing with the complaint and thereafter,
if not otherwise disposed of by the Commission by way of referral or a
consent order, the complainant, with its full rights restored, may prosecute the
matter unrestricted by the Commission.
30. 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
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.
31. Nor does Tribunal rule 24, on which the applicant seeks to rely as a
further plank for its argument, take the matter any further. At best it constitutes
another reexpression of section 49D(1). It does not answer, expressly or by
implication, the question of whether the Commission can settle when it has
lost its power to prosecute. If anything rule 24(3) which states that the party
filing the notice must serve it on the complainant and request the complainant
to inform the Commission whether it is willing to accept damages in the order,
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and if so amount claimed, suggests that this is all happening while the
Commission’s prosecutorial power is alive, otherwise what would be the point
of all this if the complainant had already received or been deemed to have
received, a notice of nonreferral and was in the process of initiating its own
complaint.
32. 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 nonreferral
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). 10 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
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.
33. 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
10 Note that under section 49D (4) the complainant is confined to two remedies the voiding
of an agreement, and a declaration that the conduct is unlawful. Any other remedy such as an
interdict, or access, etc. would not be available to it, unless the consent order provided for
them. We do not need to decide whether the private complainant can press for the imposition
of an administrative penalty as the AHF complainants were seeking. Even if this remedy is
only available to the Commission to contend for, a consent agreement still bars the private
complainant from a number of remedies that it might otherwise wish to seek to remedy its
complaint. Note that in relation to the interdict remedy the courts have decided in Ansac v
Botash, [2005] 1 CPLR 18 (CAC) that such a remedy is open to a private complainant.
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Commission and the respondent. 11 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.
34. 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.
35. 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
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.
ORDER
36. The application is dismissed. There is no order as to costs.
______________ 20 March 2006
11 Note too the danger of agreements being entered into prior to the referral by the private
complainant, which only emerge in public as a consent agreements when it becomes known
that the complainant has filed. Some of this can be detected in the present application where
the AHF complainants clearly felt they were being excluded from the negotiations and
settlement only to have them thrust in their faces when they showed a determination to
pursue their complaint.
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Norman Manoim Date
Concurring: David Lewis and Yasmin Carrim
For the Applicant: Adv. D. Unterhalter SC together with Adv.
Anthony Gotz instructed by Webber Wentzel
Bowens
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