COMPETITION TRIBUNAL
REPUBLIC OF SOUTH AFRICA
Case Numbers: 49/CR/Apr00 and
87/CR/Sep00
In the matter between:
The Competition Commission First Applicant
Botswana Ash (Pty) Ltd Second Applicant (Intervening)
Chemserve Technical Products
(Pty) Ltd Third Applicant (Intervening)
and
American Natural Soda Ash Corp First respondent
CHC Global (Pty) Ltd Second respondent
AND
American Natural Soda Ash Corp First Applicant
CHC Global (Pty) Ltd
Second Applicant
and
Botswana Ash (Pty) Ltd
First Respondent
Chemserve Technical Products
(Pty) Ltd
Second Respondent
Reasons and Order
1
INTRODUCTION
Section 3(1) of the Act, which is the application section states:
This Act applies to all economic activity within, or having an effect
within, the Republic
.
We have to decide whether the word ‘ effect’ must be interpreted as meaning
adverse effect. If the answer to that question is in the affirmative then it has
implications for the manner in which allegations are made in the pleadings
and for the type of evidence that becomes admissible .
HISTORY OF THE LITIGATION
In October 1999 Botash, a Botswana based producer of Soda Ash, launched
an application for interim relief in terms of section 59 of the Competition Act 1
against Ansac, an association of five US soda ash producers. Botash alleged
that Ansac was operating in South Africa in contravention of section 4(1)(b)(i)
and (4)(1)(b)(ii) of the Act and engaged in predatory behaviour in
contravention of section 8. Ansac opposed this application and also launched
its own application for interim relief against Botash in December 1999,
alleging that Botash was engaged in predatory pricing against it. 2
On 10 February 2000 after deliberations between the Commission, Ansac and
Botash, the parties agreed to withdraw their respective interim relief
applications provided the Commission finalised its investigation into Botash’s
complaint by 22 March 2000 by which date it had to either refer the complaint
or issue a notice of nonreferral. If the Commission referred the complaint
Botash would have the right to intervene and fully participate in the Tribunal’s
proceedings, including the right to file a separate statement of particulars of
complaint. The conditions were set out in an agreement between the parties
that was made an order of the Tribunal.
On 23 March 2000 the Commission filed its complaint referral with the
Tribunal. Ansac, responded by filing an application to request further
Tribunal. Ansac, responded by filing an application to request further
particulars to the referral. The Commission, subsequent to this, decided to
withdraw its referral and filed a fresh referral on 14 April 2000. The Tribunal
published a notice of this referral in terms of section 51(3) of the Act in
1 Although the Competition Second Amendment Act, No. 39 of 2000 and new Tribunal Rules came
into affect on 1 February 2001 we will be referring to the Competition Act and Tribunal Rules, as they
were immediately before that date unless otherwise indicated.
2 We have, except where the context suggests otherwise, referred to the respondents collectively as
Ansac and the intervenors collectively as Botash and have for convenience referred to them in the
singular. For the purpose of the decision the distinction is not pertinent
2
Government Gazette No. 21145 on 12 May 2000.
On 25 May Botash served intervening particulars of complaint on both Ansac
and the Commission. However, the Competition Commission objected to this
on grounds that neither the Act nor the Rules of the Tribunal permitted Botash
to file such particulars. Ansac approached the Tribunal for an order seeking
declaratory relief and the Tribunal granted Botash leave to intervene on 7
September 2000 after hearing the matter on 10 August 2000.
Ansac subsequently filed answering affidavits to both the Commission’s
complaint referral and to Botash’s particulars of complaint. We then convened
a prehearing conference on the 12 October 2000. At this hearing the Tribunal
member presiding suggested, inter alia, that a number of preliminary legal
issues referred to in the papers should be determined initially. These included
determination of the meaning of Section 4(1)(b) of the Act. In summary
ANSAC argued that in order to sustain a charge under Section 4(1)(b) it was
incumbent upon the complainant to prove that the horizontal agreement that
forms the basis of the charge generated anticompetitive effects. Moreover,
argued ANSAC, the defendant was entitled to adduce evidence purporting to
prove that the conduct in question generated efficiency gains that outweighed
the anticompetitive consequences arising from the same conduct.
The Tribunal heard this argument, in tandem with a number of other
interlocutory matters, on the 27th of February 2001. It handed down its
decision on the 27 th of March 2001. The panel held that Section 4(1)(b)
required no showing of anticompetitive effect and that it permitted of no
efficiency defence the mere fact of the agreement was sufficient to condemn
it. Expressed in the language of US antitrust jurisprudence, agreements falling
foul of the provisions of Section 4(1)(b) were held to be condemned per se.
foul of the provisions of Section 4(1)(b) were held to be condemned per se.
We have referred to the panel’s decision on the interpretation of section 4(1)
(b) as Ansac argues that it is in consequence of this decision they have to
make the argument in relation to section 3(1) which we consider now.
THE APPLICATIONS BEFORE US
This decision will dispose of four exception applications before the Tribunal.
Three of these applications pose an identical question, namely the meaning of
Section 3(1) of the Act. 3 These are:
3 The decision is also likely to have a bearing on an application that was brought by Ansac to
consolidate the Commission and Botash’s complaint referrals against it with their complaint referral
against Botash. At the commencement of our hearing of these exceptions on the 9 th October 2001,
Ansac advised that it would not move the application to consolidate until we had decided the
exceptions as success on the application to consolidate was predicated on the success of the exception
3
1. The exception by Ansac to the Commission’s complaint referral and to
the particulars of claim filed by Botash, concerning the ambit of the
Competition Act as set out in section 3(1).
2. The exception raised by the Commission to Ansac’s averments in par.
18.5.2 of its Answering Affidavit to the Applicant’s Complaint referral
where it relies on a procompetitive defence.
3. The exception raised by the Botash to Ansac’s defence that Ansac is a
legitimate, transparent and efficiencyenhancing joint venture, which is
contained in paragraphs 18.1, 20.1 – 20.3, 20.4.1, 20.4.3 and 20.5 of
Ansac’s statement of defence.
As we shall demonstrate there is an intimate connection between these
applications and the previous enquiry into the meaning of Section 4(1)(b) – in
essence Ansac argues that a prerequisite for exercising the extraterritorial
jurisdiction provided for in section 3(1) is a showing of anticompetitive harm
which, by extension, then permits the introduction of evidence by Ansac
purporting to demonstrate countervailing procompetitive gains. These
applications will henceforth be referred to as the Section 3(1) exceptions and,
it was common cause between counsel, could be dealt with collectively.
The fourth exception application is filed by Ansac and it purports to challenge
Botash’s locus standi in the complaint filed by the Commission against Ansac.
This application is intimately connected to the agreement concluded in
February 2000 between the Commission, Ansac and Botash and made an
order of the Tribunal and which purports to provide, inter alia, for Ansac’s
status in these hearings and which is confirmed in the Tribunal’s order of 7
September 2000. This application will henceforth be referred to as the locus
standi exception and is dealt with below after consideration of the section 3(1)
exceptions.
Part A
SECTION 3(1) EXCEPTIONS
1) Introduction
exceptions.
Part A
SECTION 3(1) EXCEPTIONS
1) Introduction
Section 3(1) specifies the application of the act. Subject to three exceptions
that are not relevant for our purpose, it simply provides that
This Act applies to all economic activity within , or having an effect
within, the Republic. (Our emphasis)
in relation to the interpretation of section 3(1).
4
It appears to be common cause between the various parties that this ‘activity’,
given that it originates in an agreement concluded in the US, has an extra
territorial dimension. All the parties agree that the Act has some measure of
extraterritorial reach. However, argument centres on the precise extent of
that reach.
Section 3(1) contains two legs on which to found jurisdiction. Either it is
economic activity ‘within’, or it is economic activity having an ‘effect within’, the
Republic. The debate in this case however is confined to an interpretation of
the second leg i.e. the meaning of ‘effects’. It is not obvious from a perusal of
the pleadings and from at least the Commission’s argument that they confine
their assertion of jurisdiction only to this second leg. 4 However it emerges, at
least from Ansac’s argument in reply, that the parties interpret ‘economic
activity’ differently.
According to Ansac in the context of this case ‘economic activity’ is the
conclusion of the agreement between the members of Ansac. Thus, and
although they did not express it in this language, economic activity is equated
with the consummation of the prohibited practice. There is no economic
activity within the Republic as the conclusion of the agreement took place
within the USA. Thus, in order for Ansac’s conduct to be justiciable within the
Republic, the Commission and Botash will have to show that Ansac’s activity
had an effect within SA.
For the Commission ‘economic activity’ has a far broader meaning and, whilst
including the conclusion of the agreement, extends beyond that to other
conduct on the face of it neutral, but nevertheless constituting economic
activity in ordinary parlance. Thus they argue that conduct by Ansac, that they
will seek to prove, took place within the Republic, such as the soliciting of
will seek to prove, took place within the Republic, such as the soliciting of
business, conclusion of sales, and receipt of payments, constitutes ‘economic
activity’.
Nevertheless, Ansac consider the case against them to be confined to
establishing jurisdiction through the ‘effect’ leg only and hence they have
confined their exception accordingly. 5
Whilst we have been asked to confine ourselves to the ‘effect’ leg, and we do
so, we want to make it clear that this does not mean we have accepted
4 Paragraph 6.3, page 25 of the Commission’s Heads of Argument states: “ In interpreting effect, in this
case, as the implementation of the agreement in South Africa, also accords with the application of
objective territorial jurisdiction.”
5 The pleadings show that Botash alleges both economic activity in and
effects within see amended referral par. 16 pg 6 of bundle). The
Commission’s allege “economic activity having an effect within” see par.
9.2.5.1 at p. 129.
5
Ansac’s contentions as to the proper meaning of ‘economic activity’. 6 But
since the interpretation of ‘effect’ not only has a consequence for the
adequacy of the present pleadings, but more significantly from the practical
point of view may entail the leading of substantial evidence which might
otherwise be inadmissible in these proceedings, resolution of what seems a
very fine point of law at a preliminary stage, is by no means academic.
Ansac argues that since the allegation of negative or deleterious effects within
South Africa is not made in either the pleadings of the Commission or of
Botash, and both have made it clear that they do not need to rely on these
allegations, the pleadings are excipiable. Botash and the Commission
contend that likewise Ansac’s pleadings, which deny the anticompetitive
effects of their conduct in South Africa are themselves excipiable as such
evidence is irrelevant to an enquiry in terms of section 4(1)(b). 7
2) Summary of the parties arguments
a) Ansac
Ansac argues for a reading down of the word ‘effect’ 8. In essence it argues
that the Competition Act is concerned only with conduct that is deleterious in
its ‘effect’, conduct that prevents or lessens competition. A threshold
requirement or a jurisdictional prerequisite is that a complainant in a
competition matter, in order to invoke the provisions of the Competition Act,
must establish that the act complained of impacts negatively upon
competition. This presupposes a balance between anti and procompetitive
effect, with the onus, presumably, on the complainant to introduce evidence
establishing the anticompetitive consequences of the act complained of and
the onus, presumably, on the defendant to introduce evidence of pro
the onus, presumably, on the defendant to introduce evidence of pro
competitive gains attributable to the conduct in question. The adjudicator
would then, in order to determine jurisdiction, balance the evidence of anti
and procompetitive effect and would only accept jurisdiction if the net balance
proved to be deleterious in its consequence.
This is, on the face of it, an ambitious reading into the word ‘effects’. However
Ansac claims support for its argument based on three approaches that lead to
the same conclusion; namely that the word ‘effect’ in section 3(1), at least in
6 “ We will be arguing that there is no economic activity within the Republic such as is relied on, on the
pleadings, but what is effectively relied on, on the pleadings, is economic activity having an effect
within the Republicc.” (Ansac opening argument Record page 7) And later on: “We are not here
concerned with the implementation of the agreement as such, because section 4(1) is concerned with
the conclusion of an agreement…. We are concerned with the effect of a conclusion of that agreement
within South Africa” . (See Ansac argument in reply at page 2123 of the Record.)
7 See par. 3133 of Ansac’s Heads of argument, section 3: par 4.6 and 7 of Botash’s Heads and par
5.135.16 and par.6 and 7 of the Commission’s Heads.
8 Botash have quibbled with this characterization and insist that what Ansac is contending for amounts
to a ‘reading in’, not a ‘reading down’.
6
relation to foreignbased concerns, must mean a deleterious effect. 9
The first approach is based on the textual meaning of the word ‘effect’.
Interpreting effect requires a purposive interpretation within its context i.e. one
that connotes negative effects because the object of the Act is to regulate and
govern anticompetitive action. This, it claims, has also been the interpretation
of the term effects in other jurisdictions.
The second is a policybased argument that the legislature could never have
intended the statute to reach foreign conduct whose ‘effect’ is benign. To the
extent that this may lead to discriminating between the conduct of foreign and
domestic firms such a distinction is justified.
The third requires one to interpret section 3(1) within the context of
international law. In international law, it argues, harm is an essential element
of what is termed the “effects doctrine”.
b) Commission and Botash
The Commission and Botash argue that
1) A purposive interpretation is not required when the meaning of a
statutory provision is clear. Section 3(1) is unambiguous and warrants
no secondary interpretation;
2) Ansac is unable to justify a policy for distinguishing between the foreign
and domestic treatment of cartels. On the contrary such a policy would
lead to schemes to defeat the clear intent of the legislature;
3) In relation to its international law arguments Ansac fails at the threshold
requirement of establishing a clear and consistent rule of international
practice. Secondly the Constitution requires that the rule of
international law be the preferred interpretation of a statute, provided it
is reasonable. If it is not reasonable, which Botash suggests is the
problem with the Ansac approach, then we are not required to follow
the international rule, assuming of course it can be established. They
the international rule, assuming of course it can be established. They
argue that the Ansac interpretation would lead to a double inquiry; first
to establish jurisdiction and secondly to establish the existence of the
prohibited practice. Furthermore, it is impractical because without
jurisdiction the Commission cannot investigate, and if it cannot
investigate it cannot do its job hence frustrating the purposes of the
Act.
9 See par.9 of Ansac’s Heads of argument.
7
3) Legislative framework
Before we turn to an analysis of the three respective arguments it might be
appropriate to first consider the relevant sections of the Act and Constitution.
The arguments put forth by the parties refer to the following sections in the
Act:
Section 3 (1) of the Competition Act states that:
This Act applies to all economic activity within, or having an
effect within, the Republic, except….
This section should be interpreted according to Section 1(2) of the
Competition Act, which states that:
This Act must be interpreted
a) In a manner that is consistent with the Constitution and gives
effect to the purposes set out in section (2); and
b) In compliance with the international law obligations of the
Republic.
Section 2 of the Act states:
The purpose of this Act is to promote and maintain competition in the
Republic in order –
a) To promote the efficiency, adaptability and development
of the economy;
b) To provide consumers with competitive prices and
product choices;
c) To promote employment and advance the social and
economic welfare of South Africans;
d) To expand opportunities for South African participation in
world markets and recognize the role of foreign
competition in the Republic;
e) To ensure that small and mediumsized enterprises have
an equitable opportunity to participate in the economy;
and
f) To promote a greater spread of ownership, in particular
to increase the ownership stakes of historically
8
disadvantaged persons.
This case concerns Ansac’s alleged violation of section 4(1)(b), which states:
4(1) An agreement between, or concerted practice by, firms, or a
decision by an association of firms, is prohibited if –
(b) it involves any of the following restrictive horizontal practices:
(i) directly or indirectly fixing a purchase
or selling price or any other trading
condition;
(ii) dividing markets by allocating
customers, suppliers, territories, or
specific types of goods or services; or
(iii) collusive tendering.
Sections 232 and 233 of the Constitution state:
232. Customary international is the law in the Republic unless it
is inconsistent with the Constitution or an Act of Parliament.
233. When interpreting any legislation, every court must prefer
any reasonable interpretation of the legislation that is consistent
with international law over any alternative interpretation that is
inconsistent with international law.
4) Analysis
a) Textual approach
Ansac argues that the word ‘effect’ is ambiguous. One meaning consistent
with the approach of the Commission and Botash is that an effect is simply a
result, outcome or consequence 10. On this meaning the word shorn of any
accompanying adjective means that the effects can be neutral. But, argue
Ansac the word can also mean negative effects. Once the word is at least
capable of textual ambiguity then we need to interpret the word in its proper
context, which leads Ansac to argue that in the context of the statute’s policy
and international law that means negative effect.
We find no ambiguity in the use of the word ‘effect’ in section 3(1). ‘Effect’
10 See Black’s Law dictionary for this formulation.
9
bears its ordinary meaning of ‘a result, consequence or outcome’. 11 Ansac
offers no authority for its creative colouring in of a neutral word. This of course
does not end the matter. 12 Ansac argue that we must approach the
interpretation of the word purposively and, in the context of a statute
concerned with the regulation of anticompetitive activity, the word ‘effect’
should be interpreted to refer to a negative effect.
In support of the purposive approach we were referred to the well know dicta
of Schreiner JA in Jaga v Donges NO and Another; Bhana v Donges No and
Another 1950 (4) SA 653 (A) at 664E – H , where he:
“warns against the Sirenic perils of words, whilst repeating that there
are bounds to legitimate interpretation” 13
He goes on to state:
“Seldom indeed is language so clear that the possibility of
differences of meaning is wholly excluded, but some language
is much clearer than other language; the clearer the language
the more it dominates over the context, and vice versa, the less
clear it is the greater the part that is likely to be played by the
context.
Ultimately, when the meaning of the language in the context is
ascertained, it must be applied regardless of the consequences
and even despite the interpreter’s firm belief, not supportable by
factors within the limits of interpretation, that the legislator had
some other intention. But the legitimate field of interpretation
should not be restricted as the result of excessive peering at the
language to be interpreted without sufficient attention to the
contextual scene.
Yet quoted equally often 14 is the judgment of Innes CJ in Dadoo Ltd and
Others v Krugersdorp Municipal Council , 15 where he remarked:
11 See for instance De Villiers v Maursen Properties 1983 (4) SA 670 (T) where in considering the use
of the word in the Insolvency Act, the court concluded that "Effect" as used in s 8 (c) means "result" or
"consequence". (Cf Shorter Oxford Dictionary on Historical Principles, "effect")
12 Botash argue that it is where we could end the matter as once we have decided that the language is
unambiguous no further enquiry into it’s meaning is necessary. Tempting as such an approach may be
it would ill serve our adjudicative role if we did not apply our minds to the remaining arguments lest
we are wrong on this point.
13 Quoted in this manner in Standard Bank Investment Corporation v The Competition Commission
and Others 2000 (2) SA 797 (SCA)
14 Also referred to in the Standard Bank case at 810.
15 1920 AD 530 at 543.
10
“Speaking generally, every statute embodies some policy or is designed to
carry out some object. When the language employed admits of doubt, it falls
to be interpreted by the Court according to recognised rules of construction,
paying regard, in the first place, to the ordinary meaning of the words used,
but departing from such meaning under certain circumstances, if satisfied that
such departure would give effect to the policy and object contemplated. I do
not pause to discuss the question of the extent to which a departure from the
ordinary meaning of the language is justified, because the construction of the
statutory clauses before us is not in controversy. They are plain and
unambiguous. But there must, of course, be a limit to such departure. A
Judge has authority to interpret, but not to legislate, and he cannot do
violence to the language of the lawgiver by placing upon it a meaning of
which it is not reasonably capable, in order to give effect to what he may think
to be the policy or object of the particular measure.”
Thus we must, following these cases, strive for an interpretation that
constitutes neither “excessive peering” nor “violence to the language of the
law giver”.
Now Ansac’s argument for a purposive approach starts with the sensible
observation that the word ‘effect’ requires some limit, which must be read into
it otherwise the statute could be applied to all economic activity no matter how
remote its effects. According to Ansac once you start asking questions about
remoteness that leads one inevitably to a more purposive interpretation i.e.
the quality of the ‘effect’ is therefore not an irrelevant consideration as Botash
and the Commission suggest. 16
The purpose is then discerned in the light of the purposes of the Act, which
states the Act‘s prime purpose is to promote an efficient economy and to
provide consumers with competitive prices and product choices . This
provide consumers with competitive prices and product choices . This
suggests that where there is ambiguity one should favour a reading that
permits of the leading of evidence that furthers these values, as opposed to
the per se approach, that favours the suppression of this evidence in the
interests of quasijudicial expediency .17
16 The Commission relies on the establishment of the intent of the legislature
as the classical rule of interpretation. The words of the legislature must be
given their ordinary and normal meaning, and if necessary regard can be
given to the context within which such words are used. They say that in
interpreting “ all economic activity ” and “ effect” there is no reason to limit these words or indeed
extend them because we are dealing with a Competition statute. Section 3 merely establishes
jurisdiction and the conduct still has to be measured against the provisions of the Competition Act.
17 This is because Ansac characterizes per se prohibitions as a tradeoff between the efficiency of
having curtailed hearings (where no evidence of justification is allowed as opposed to say section 4(1)
(a) where such evidence is permissible) as against permitting a more protracted, but entirely sound in
economic terms, enquiry premised on evaluating any procompetitive gains; albeit that cases where
such evidence will prevail will be few.
11
Thus Ansac arrives at the one leg of its argument concluding that ‘effect’ must
be construed as connoting negative effects. This approach is later to be
shored up by the interpretation suggested by the policy approach and the
international law argument both of which Ansac says leads us to the same
conclusion.
We consider the latter two legs of the argument below. It is convenient now to
examine whether the adoption of even the most expansive purposive
approach should lead us to the Ansac conclusion about ‘effects’ meaning
negative effects.
The structure of the section with its broad sweep chapeau followed
immediately by exclusions suggests the legislature’s purpose was to assert
jurisdiction as widely as possible. Botash argue that if the legislature had
intended ‘effect’ to have some more limited meaning they would surely have
stated this more explicitly as the design of all the substantive provisions of the
Act shows that when anticompetitive effects or a lessening of competition is
intended, the legislature has said so expressly. 18
They also point to case law where courts have suggested that clauses, which
limit a court’s jurisdiction, will be strictly construed. Since, this is what Ansac’s
interpretation effectively does it should not be followed in the absence of
express language to require it. Botash also argue that our Act differs in an
important respect with the Sherman Act of the United States as the latter Act,
unlike our own, does not have an application clause and hence the courts
needed to develop a doctrine of application leading to the “effects doctrine.
“19
We agree with this. If one examines the various jurisdictional establishment
clauses in the Act, all are widely cast. 20 The policy compromise was to allow
wide ranging defences since jurisdiction could be assumed with minimum
threshold requirements. Granted that may be of small comfort to those faced,
threshold requirements. Granted that may be of small comfort to those faced,
as Ansac is, with a per se prohibition, but that does not detract from the clear
legislative intent to bring a wide range of conduct under the Act ‘s scrutiny and
then at the stage of substantive enquiry to asses the harm done. The fact that
the latter enquiry is curtailed when it comes to a per se contravention does not
mean that we should pervert the clear legislative intent with respect to
jurisdiction.
b) Policy argument
Ansac argues that once you have established that the word ‘effect’ requires
18 See sections 4 (1)(a), 5 (1) and section 8 where we find this language repeatedly used.
19 We discuss this doctrine below in the section on international law.
20 See for example section 12 which defines when a transaction constitutes a merger and is thus
subject to Chapter 3 of the Act and our observations on the intentional broadness of this section in the
Distillers case on page 18 of Tribunal Case No’s: 94/FN/Nov00 and 101/FN/Dec00.
12
qualification, policy requires that this be applied differently to parties who are
aliens and who conduct their operations abroad. In the context of section 4(1)
(b) the implications of its per se application to domestic cartels is
understandable as it is a rule premised on efficiency in legal proceedings. But,
argues Ansac, that rule should not be applied to foreign companies who might
need to lead evidence of the procompetitive effects of their activities.
Yet Ansac would want to lead evidence to establish that without the horizontal
relationships between its members that the WebbPomerene 21 agreement
affords, they would not achieve the economies of scale necessary to enter the
S.A. market and hence they would exit leaving Botash with a monopoly. They
allege that their agreement is procompetitive and they would want to be able
to prove it – the inquiry as to threshold jurisdiction in terms of section 3(1) is
the only opportunity they would have to do to establish its benign effect given
the per se nature of section 4(1)(b), which does not permit evidence going to
justification.
The reason for the differential treatment of foreigners, it argues, is based on
principles of international law and comity. We might, if we adopt an inflexible
approach, act against firms, which are compelled in terms of their domestic
legislation to form agreements, which our law prohibits. They are thus in the
unenviable position of being unable to comply with the exigencies of two
different legal systems.
Yet apart from an argument based on a hard conflict, which might be
recognised as a gesture to comity, even on the Hartford Fire 22 approach, no
other legal principle for such a distinction was advanced, nor any economic
one.23 Indeed it is easier to appreciate the dangers of making such a
distinction. Those who wished to collude in the local market would simply find
distinction. Those who wished to collude in the local market would simply find
themselves an offshore cartel haven and collude to trade in the Republic
knowing that evasion would be simpler than if they were located domestically.
Secondly it seems unlikely that the legislature could have intended to favour
foreign firms with a defence not available to domestic firms. 24
21 The WebbPomerene Act, 15 U.S.C. § 6165 (1982), provides a limited antitrust exemption for the
formation and operation of associations of otherwise competing businesses to engage in collective
export sales.
22 Hartford Fire Insurance Company v California 509 US 764 (1993). We deal with this case below.
23 The respondents initially advanced the proposition that the United States had provided for Webb
Pomerene associations in order to further their foreign trade interests and that comity required us to
acknowledge this in our treatment of Ansac. This argument does not seem to have been advanced
anywhere else let alone accepted notwithstanding and not surprisingly was not persisted with.
24 Where discrimination has been intended the Act is express on the point. See for example in relation
to merger control section 12 A (3) (d) which talks of the ability of national firms to compete in
international markets.
13
iii.International law argument
As we have seen Ansac argue that the word effect can also mean a negative
effect and this interpretation, they say, is strengthened when coupled with the
notion of ‘substantiality’ and ‘direct connection’, which the international law
cases suggest is frequently employed when judges interpret effects.
They contend for the thesis that central to the effects doctrine in international
law is the notion that the effects are harmful. The legislature could not have
intended to reach foreign conduct whose effects in SA are benign.
It is common cause between the parties that notwithstanding the fact that we
are a domestic tribunal interpreting a domestic statute we must have regard to
international law. That this is so appears not only from section 1(2) of our Act
which points us in that direction and reminds us of our obligation to the
Constitution, but also the provisions in the Constitution which deal with
international law. We have cited these provisions earlier in our section on the
legislation and need not repeat them here.
There is also no dispute over how these provisions should be interpreted. Let
us deal with them briefly for they form the framework for the application of the
international case law.
Section 232 of the Constitution says that customary international law is the
law of the Republic unless it is inconsistent with the Constitution or an Act of
Parliament. This is an important qualification and means that if section 3(1) of
the Act is inconsistent with customary international law, the Act nevertheless
prevails.
However the more important provision in the Constitution for our purposes is
section 233 which says where a statute is susceptible to different
interpretations a court must prefer the interpretation that is consistent with
international law as opposed to any other interpretation. However the section
international law as opposed to any other interpretation. However the section
contains an important proviso. The interpretations have to be reasonable.
Thus even if there is an interpretation consistent with international law that is
at variance with another interpretation that is inconsistent, we must not prefer
the former to the latter unless it is reasonable.
At this stage the parties part ways. Ansac argues that it can prove a
customary law practice that favours its interpretation, that this practice is
reasonable and therefore we are bound to prefer it.
Their opponents argue that not only have they not established a customary
law practice that meets the requirements for recognition, but even if they
have, this interpretation is not reasonable and hence we are not bound in
terms of section 233 to prefer it. Indeed on the contrary both constitutional
14
values and the common law rules of statutory interpretation require us not to
interpret a statute even if ambiguous in a manner that would lead to an
unreasonable result.
In the present case it is not disputed that we are dealing with customary
international law and not an international agreement. How then do we know
when a rule is to be regarded as customary international law in the Republic?
Dugard25 says our courts have identified two main requirements for the
existence of a customary rule: settled practice (usus) and acceptance of an
obligation to be bound (opinio juris sive necessitatis). 26 According to Dugard
our courts now hold the view that universal acceptance is not necessary,
general acceptance suffices. 27
In the Asylum28 case the International Court of Justice held that a practice
must constitute, “constant and uniform usage” before it will qualify as custom.
Accordingly, we examine the case law to establish if it sets out a
constant and uniform usage that has been generally accepted.
As Oppenheim has indicated;
“international problems of jurisdiction arise almost exclusively when a
state tries directly or through proceedings in its courts to exercise its
jurisdiction over persons, property or circumstances which (at least
arguably ) are or occur abroad.” 29
In this complaint referral we are concerned with the issue of territorial
jurisdiction. That a state may exercise jurisdiction over matters within its own
territory is uncontroversial. However as Oppenheim points out the territoriality
principle cannot be applied in a straightforward manner. Attributing territorial
jurisdiction is particularly difficult when one is dealing with conduct. For this
reason two bases for establishing territorial jurisdiction have developed in
international law, the ‘objective’ and ‘subjective’. Oppenheim explains the
distinction:
distinction:
“The subjective application of the principle allows jurisdiction over
offences begun within the state but not completed there; objective
25 See John Dugard, International Law – A South African perspective ( 2 nd ed 2000) on page 28.
26 According to Black’s Law Dictionary the opinio juris is “ the opinion that an act is necessary by
rule of law " Black’s goes on to state that it is “ the principle that for a country’s conduct to rise to the
level of international customary law, it must be shown that the conduct stems from the country’s belief
that international law (rather than moral obligation) mandates the conduct .”
27 Dugard op cit pg. 30.
28Colombia v. Peru, 1950 ICJ Reports 266 at 277 .
29 See Oppenheim’s International Law, Ninth Edition Volume I Longman (1992) pg. 457.
15
territorial jurisdiction allows jurisdiction over offences having their
culmination within the state even if not begun there.” 30
However the basis for the exercise of territorial jurisdiction can be taken
further as states will sometimes exercise jurisdiction over conduct that has
taken place abroad that has effects within the state. This basis for jurisdiction
is referred to sometimes as the “effects doctrine”.
The “effects doctrine” is frequently confused with circumstances where
jurisdiction is in fact being exercised on the basis of objective
jurisdiction. Oppenheim maintains that there is a distinction between
the two, which he explains thus:
“the ‘effects’ basis for jurisdiction, which is to be distinguished from the
objective territorial basis for jurisdiction in that with the latter, but not
the former, the consequences taking place within the ‘objective’
jurisdiction are essentially a constituent part of the offence. This
important distinction may be obscured when consequences which are
constituents of the offence are referred to as ‘effects’, as indeed
happened in the Lotus case.” 31
Thus we have a to make a distinction between effects or consequences which
are part of the offence and consequences which are not.
Ansac argues that ‘effects’ that are mere consequences cannot found a
proper basis for jurisdiction for otherwise one may be risking intruding upon
the sovereign rights of other nations. To the extent that the US Sherman Act
is interpreted as embodying an “effects doctrine” on this basis, it is considered
to be in violation of international law. To the extent that our section 3 may
seem to emulate this doctrine we must be wary of the extent it should be so
understood.
Since we have found that section 4(1)(b) does not permit the leading of
evidence of benign effects the only way one can interpret a socalled per se
offence in a manner consistent with international law is to interpret ‘effects’ as
meaning negative effects.
They then, having established this platform go and examine the US
cases in an attempt to distil a limit on the concept of ‘effects’. They
suggest that this case law must be regarded as international customary
law and hence more authoritative and binding upon us than
comparative law might otherwise be, since the foreign courts are
30 Oppenheim op cit pg. 460.
31 Oppenheim op cit pg. 460 fn 14.
16
pronouncing upon international customary law and not their domestic
law.
We will now go on to examine the United States case law to see
whether it supports Ansac’s reading.
The leading authority for the “effects doctrine” in US law is Alcoa.32 The
case concerned whether an agreement to set import quotas was intended to
effect the United States. 33 The Court held:
“It is settled law ... that any state may impose liabilities, even upon
persons not within its allegiance, for conduct outside its borders that
has consequences within its borders which the State reprehends; and
these liabilities other states will ordinarily recognise. 34
The Court went on to identify two situations. One is where an agreement
made beyond the borders of the United States is not intended to affect
exports or imports within the United States but does so. The other is where
the agreement is intended to affect the United States but in fact does not do
so. In neither of these cases was the Court certain whether it would have
jurisdiction. Thus the dichotomy is between intention and effect. It was this
context that led to the formulation of the ‘ Alcoa rule’, which is that the United
States only had jurisdiction over conduct, which has an intended effect within
the United States.
The court found that the intention was to effect trade in the US. In that sense
the word effect was used and there was no separate consideration of whether
the ‘effects’ were harmful. There is thus nothing in this language which
suggests that the ‘effects’ must be harmful to found jurisdiction. Ansac,
however, latch on to the language of reprehends and deduce that the case is
authority for the proposition that ‘effects’ must be reprehensible to found
jurisdiction. In doing so they confuse a part of the judgement where the court
jurisdiction. In doing so they confuse a part of the judgement where the court
is considering the justification for exercising extraterritorial jurisdiction with
the test for founding such jurisdiction. It is the latter, which the court decided
was the intended ‘effects test’.
The case properly understood is not authority for the proposition that ‘effects’
must be reprehensible to found jurisdiction.
32 United States v Aluminium Company of America 148 F.2d 416 (1945)
33 Foreign companies had agreed amongst themselves that each company would pay royalties to the
other companies if its production of aluminum exceeded a certain level: the result was to discourage
production of aluminum beyond that level, and it was possible that the resulting shortage of aluminum
had affected levels of imports into the United States. (Summary is from Akehurst page 193)
34 Alcoa decision at 443444.
17
The Alcoa decision was seen by other countries to be an aggressive
assertion of jurisdiction by the United States particularly as the case was
followed by similar decisions in the U.S. courts over the next three decades.
In reaction to this growing criticism the U.S. courts “sought to temper the
exercise of jurisdiction with consideration of ‘comity’ factors”. 35
The case that best exemplifies this ‘tempering’ approach is the 1976 decision
of the 9 th Circuit in Timberlane.36 There the court held that ‘effects test’
enunciated in Alcoa was incomplete because it failed to consider the other
nation’s interests. The court went on to criticize Alcoa for not expressly taking
into account the relationship between the actors and the country wishing to
assert jurisdiction. It then devised its own doctrine in the form of a threepart
test, in terms of which a court would ask the following
1) was there an intended or actual effect on American
commerce
2) is it of such a type and magnitude so as to be cognisable as
a violation of the Sherman Act; and
3) is it appropriate to exercise jurisdiction in the light of
considerations of comity and fairness ( this itself is subject to
a test of eight factors to be weighed up)
The third part of the test, known as the ‘jurisdictional rule of reason’, became
the subject of controversy in later cases. 37 Although we detail the content of
this rule in a footnote the one comment that Ansac rely on is the language;
“The extent to which there is explicit purpose to harm or affect
American commerce.”
Ansac argues that this choice of language evidences a consistent approach to
couple the concept of harm with ‘substantial’ and ‘significant’ effect.
Our reading of the case is a more limited one. When the Timberlane court is
Our reading of the case is a more limited one. When the Timberlane court is
referring to harm it is doing so not in the context of founding jurisdiction, but in
35 See Joseph P Griffin, Extraterritoriality in U.S. and EU antitrust enforcement, 67 Antitrust Law
Journal 159
36Timberlane Lumbar Co v Bank of America National Trust and Savings Association 549 F.2d 597
(1976)
37 “ The elements to be weighed include the degree of conflict with foreign law or policy, the
nationality or allegiance of the parties and the locations or principal places of business of
corporations, the extent to which enforcement by either state can be expected to achieve compliance,
the relative significance of effects on the United States as compared with those elsewhere, the extent to
which there is explicit purpose to harm or affect American commerce, the foreseeability of such effect,
and the relative importance to the violations charged of conduct within the United States compared
with conduct abroad.” (at 614)
18
the context of setting out a balancing test for comity. It is not in itself an
independent leg of the courts’ test.
Whilst the Timberlane approach was followed in some circuits, in others it was
expressly disavowed in no uncertain terms. 38
The legislative response was the 1982 Foreign Trade and Antitrust
Improvements Act which stated that jurisdiction would only exist when the
challenged conduct had a direct, substantial and reasonably foreseeable
effect.
In 1987 the Restatement (Third) of the Foreign Relations Law of the United
States adopted the Timberlane balancing approach :
“ consequences within the territory must be substantial and occur as a
direct and foreseeable result of the conduct outside the territory.” (Our
emphasis)39
In 1993 the United States Supreme Court was to revisit the issue of extra
territorial jurisdiction in the case of Hartford.40
Briefly the case concerned the Sherman Act’s reach over a British
reinsurance scheme where British firms had agreed not to make a type of
reinsurance available unless subject to certain exclusions. This agreement
although made by foreign firms in the United Kingdom was alleged to have
had an effect on the United States market. The British firms moved to dismiss
the complaint on the grounds of international comity as the conduct in
question was by British firms and was lawful in the U. K. despite effects in the
United States. 41
In Hartford the court split 54. The majority found there was no true conflict
with the British law and therefore the Court did not need to consider whether it
should decline jurisdiction on the basis of comity. In so doing the Court
reaffirmed the effects test and according to most commentators relegated the
jurisdictional rule of reason to obscurity. Note that in Hartford although effects
jurisdictional rule of reason to obscurity. Note that in Hartford although effects
are referred to as needing to be ‘substantial’ the court did not require the
38 As Griffin has noted the Third, Fifth and Tenth circuits adopted similar tests whilst the D.C. and
Seventh circuits questioned their validity. For instance in the Laker case the court observed that the
Timberlane factors are not useful in resolving the controversy (See Griffin op cit page 161 footnote
14.)
39 Section 402 (2)
40 Hartford Fire Insurance Company v California 509 US 764 (1993)
41 The Hartford case had come to the Supreme Court after a District Court and a circuit court had
differed on the application of the third part of the Timberlane test viz. whether jurisdiction should be
declined on the basis of comity. In both lower courts and in the judgment of the majority in the
Supreme Court it was assumed that the conduct in question was intended and had produced a
substantial effect in the United States.
19
additional element of ‘directness’.
Post Hartford the test seems to be this; is the foreign conduct intended to
produce and does it produce a substantial effect in the United States?
Secondly, is there a true conflict between the domestic and foreign law? In
Hartford the court said that since the British defendants could comply with
both laws at the same time there was no conflict with British law.
Ansac relies heavily on the judgment written for the minority in Hartford by
Scalia J. In his dissent he finds that it is well established in US law that the
Sherman Act applies extraterritoriality. However a second canon of
interpretation is that an act of Congress should never be construed to violate
the law of nations if any other possible construction remains.
This is implicit in the notion of comity. Since the notion of comity is important
to an understanding of the cases to follow we digress briefly in our discussion
of Hartford to consider it here.
Comity may be described as the recognition that one nation allows within its
territory to the legislative, executive or judicial acts of another. However, like
extraterritorial jurisdiction, comity is one of those slippery concepts that evade
concise definition. Black’s Law Dictionary in defining ‘comity’ quotes an
extract from the literature where the authors complain that:
“A great deal of misconception about the nature of conflict of laws is
due to the loose use of the term ‘comity’.” 42
What Scalia J does in Hartford is to identify that comity seems to be used in
two respects. One in relation to the courts, so–called ‘judicial comity’, that is
where judges prefer to not exercise jurisdiction they otherwise have over
cases they consider may be more properly adjudicated elsewhere. The
second is what is sometimes described in the United States cases as
second is what is sometimes described in the United States cases as
‘prescriptive comity’. This is the respect that legislatures afford each other by
limiting the reach of their laws.
42 See Black’s Law Dictionary, quoting H.Goodrich and E Scoles Handbook of
the Conflict of laws . Black’s also quotes Macalister Smith who says the term is misleadingly used as a
synonym for international law. According to Griffin the European Commission believes that comity is
a matter for prosecutorial discretion rather than a legal prerequisite for jurisdiction. See Griffin op cit,
page 77 footnote 88.
In Laker Airways Ltd v Sabena, Belgian World Airlines, 731 F.2d 909 (D.C. Cir. 1984) , comity is
described as the “ degree of deference that a domestic forum must pay to the act of a foreign
government not otherwise binding on the forum” The Laker decision goes on to say on the same page
that “ When the foreign act is inherently inconsistent with the policies underlying comity, domestic
recognition could tend either to legitimise the aberration or to encourage retaliation, undercutting the
realisation of the goals served by comity. No nation is under an unremitting obligation to enforce
foreign interests which are fundamentally prejudicial to those of the domestic forum” at 937 para D.
20
Thus when a court is approaching a comity problem it needs to be clear if it is
applying the first or second kind. With judicial comity a court is saying – it has
jurisdiction but asks whether it should decline to exercise it because of comity
to another nation. With prescriptive comity a court is asking whether its
legislature has given it jurisdiction in the first place. That question it resolves
by determining whether its legislature, having regard to the comity it is
presumed to have extended to other sovereign nations, has given to the
statute an extraterritorial dimension. It will thus only conclude that it has
jurisdiction if it is satisfied that was the lawmaker’s intention.
But the distinction amounts to more than a fine academic point. For as Scalia
J points out, practice has shown that when exercising judicial comity, courts
are generally reluctant to give up a jurisdiction which has been conferred upon
them. With prescriptive comity this reluctance may be less apparent since
they have to decide whether jurisdiction has been conferred on them in the
first place. 43
Scalia J concludes that the issue in Hartford is one of prescriptive comity.
The Court had to decide how far Congress had intended the Sherman Act’s
extraterritorial reach to extend. Based on the Restatement he argues that:
“ a nation having some basis for jurisdiction should nonetheless refrain
from exercising jurisdiction when that exercise would be
unreasonable.”
Ansac argues that in interpreting section 3(1) we are faced with the task of
determining prescriptive not judicial comity.
What Ansac seeks to take out of the dissent in Hartford is that a statute must
be interpreted in such a way that the legislature’s assertion of extraterritorial
jurisdiction is reasonable. When Scalia J considers what reasonableness
jurisdiction is reasonable. When Scalia J considers what reasonableness
entails he refers to various factors, which need not be repeated here, but
amongst which he mentions “ the character of the activity to be regulated”,
and the “extent to which the activity takes place within the territory of the
regulating state”.
But again this is stated in the context of comity or prescriptive comity as
Scalia J preferred to characterise it. The Court in Hartford was grappling with
the issue of exercising jurisdiction over a reinsurance regulatory regime
43 See page 652 of the judgment of Scalia J fn 9 “ Some antitrust courts, including the Court of
Appeals in the present cases, have mistaken the comity at issue for the ‘comity of the courts,’ which
has led them to characterize the question presented as one of abstention that is, whether they should
‘exercise or decline jurisdiction’….As I shall discuss, that seems to be the error the Court has fallen
into today. Because courts are very reluctant to refuse the exercise of conferred jurisdiction, confusion
on this seemingly theoretical point can have the very practical consequence of greatly expending the
territorial reach of the Sherman Act”.
21
governing London markets. Scalia J makes his remarks in the context of one
nation respecting the sovereign rights of another by limiting the reach of its
laws. It is far removed from the facts of this matter where such a conflict does
not arise.
The debate in Hartford is about the application of a hard conflict based on
adjudicative jurisdiction versus prescriptive comity based on a
reasonableness test. None of this supports or is pertinent to the rule that
Ansac commends us to follow, as it does not lead to the conclusion that
effects must be deleterious before a state can assume jurisdiction.
The case that comes closest to the approach commended by Ansac is a
decision of Ninth Circuit in Metro Industries v Sammi 44. Ansac stresses the
fact that this is a post Hartford decision. Here the court was faced with
considering whether a practice amongst Korean firms, constituting a private
system of mutual intellectual property recognition which firms were bound by
commercial practice to accept, amounted to a system of market division
which although occurring in the Korean market should be treated as a naked
market division agreement and hence to be treated as a per se restraint
under US law in terms of the Sherman Act. The court held:
“Because conduct occurring outside the United States is only a
violation of the Sherman Act, if it has a sufficient negative impact on
commerce in the United States, per se analysis, is not appropriate.
Indeed, when the alleged illegal conduct occurred in a foreign country,
we must examine the impact on commerce in the United States before
we can determine that we have subject matter jurisdiction over the
claim.”45
Later on the court went on to conclude that:
“Foreign conduct cannot be examined under a per se rule…Application
“Foreign conduct cannot be examined under a per se rule…Application
of the per se rule is not appropriate where the conduct in question
occurred in another country” 46
Ansac argues that this case is authority for three propositions in
relation to conduct that takes place outside a court’s jurisdiction –
a) one has to show a negative impact
b) it has to be a sufficiently negative impact
c) one has to distinguish between per se rules as they impact
44 Metro Industries v Sammi Corporation 82 F.3d 839 (9 th Cir. 1996)
45 at page 843 of the judgment
46 at page 845 of the judgment
22
domestic firms and foreign conduct.
Whilst Ansac concedes that our statute allows less flexibility in the
classification and continual reclassification of conduct as falling under the per
se and rule of reason approach that characterises the US courts approach to
the Sherman Act, it argues that under section 3(1) we are allowed such an
approach.
Botash and the Commission urge us not to follow the Metro case. Firstly the
case is hardly authoritative as it reflects the views of one Circuit and there is
no indication it has been followed elsewhere. Given that it appears to
contradict the Supreme Court’s approach in Hartford that is not surprising.
They also argue, more importantly, that the approach in the case is
conceptually flawed as the court muddles comity (an international law issue)
with substantive issues (the content of which is the subject for the domestic
law of the state asserting its jurisdiction). Furthermore it creates a distinction
between foreign based and domestic cartels without applying any principle to
justify the distinction.
It is certainly true that Metro has not received much support from leading
commentators. Eleanor Fox says of the approach taken in Metro 47:
“Some jurists feeling bound to apply Hartford but sensing an
illegitimacy in American condemnation of certain acts abroad, have
shifted to second best grounds, perversely creating a different
substantive standard for foreign defendants and US defendants”.
She cites Metro‘s holding that the per se rule is inapplicable to foreign
conduct as “contrary to most authority.” 48
Nippon Paper Industries 49 is the most recent example of the US courts
exercising extraterritorial jurisdiction. There the First Circuit held that
activities abroad having substantial and intended effects within the US
activities abroad having substantial and intended effects within the US
could form the basis of a prosecution under section 1 of the Sherman
Act. The facts were that Japanese firms were part of a conspiracy to fix
paper prices in the US.
“ We see no tenable reason why the principles of comity should shield
NPI from prosecution. We live in an age of international commerce,
where decisions reached in one corner of the world can reverberate
around the globe in less time than it takes to tell the tale. Thus, a ruling
47 Eleanor M. Fox: National Law, Global markets, and Hartford: Eyes wide shut. Antitrust Law
Journal, Vol. 68, page 77
48 Fox op cit page 78, footnote 14.
49 United States v Nippon Paper Industries Co Limited 109 F.3d 1 (1 st Cir. 1997)
23
in NPI’s favour would create perverse incentives for those who would
use nefarious means to influence markets in the United States,
rewarding them for erecting as many territorial firewalls as possible
between cause and effect.” 50
Its conclusion is that comity:
“ is more an aspiration than a fixed rule more a matter of grace than a
matter of obligation. In all events its growth in the antitrust sphere has
been stunted by Hartford Fire…. “
The leading case in point in Europe is the Woodpulp51 decision of the
European Court of Justice in 1985.
A number of woodpulp producers established outside of the EC (as it was
then known) had created a price cartel eventually charging their customers
within the EC. The Commission found them to have infringed Article 85 (now
81) of the Treaty of Rome.
The producers involved were exporting and selling in the EC either directly or
through the medium of agents. The matter came on appeal to the ECJ. One of
the points the Court had to decide upon was an argument by the producers
that it would be contrary to international law to regulate conduct restricting
competition adopted outside the EC merely because of the economic
repercussions produced within the EC.
The Advocate General urged the Court to find the producers liable on the
basis of the ‘ effects doctrine’, which had not been formally recognised in EC
law as a basis for jurisdiction 52. According to the Advocate General the only
criteria for jurisdiction is the “direct, substantial and foreseeable effect.” 53
The Court said the infringement of Article 85 consisted of two elements – 1)
the formation of the agreement and 2) its implementation.
Since the implementation element had taken place within the EC the conduct
was covered by the territoriality principle. Recall that in our earlier discussion
we had pointed out that the distinction between the effects doctrine and the
we had pointed out that the distinction between the effects doctrine and the
objective territorial principle was that in the latter an element of the offence
had to take place in the territory of the state exercising jurisdiction. By
50 See Nippon Case, page 8.
51 Official Journal of the European Communities No L 85/1 – Woodpulp IV/29.725.
52 He said “ Although the court has not, in its decisions to date formally upheld the effects doctrine
with regard to the application of competition law to undertakings outside the Community it does not
imply that it rejects this doctrine.” At page 9189.
53 See pg 932
24
classifying the contravention of Article 85 into an agreement and an
implementation element the Court was making use of the objective territorial
principle, one that is widely accepted in international law, and avoided
following the invitation of the Advocate General who hoped the court would
utilise the opportunity to recognise the more controversial effects doctrine.
After Woodpulp an American Assistant Attorney General observed that as a
practical matter the Woodpulp decision was very close if not indistinguishable
from the so –called effects test as applied by the US courts. This contention
was hotly denied by Sir Leon Brittan, the then Competition Commissioner who
said that the Court of Justice did not endorse the effects doctrine. Brittan goes
on to say that the specific use of the word ‘implementation’ rather than
‘effects’ suggested to him that implementing conduct has to be ‘direct,
substantial and foreseeable’ for jurisdiction to be engaged. 54
Griffin remarks that any practical effect between implementation and ‘effects’
is likely to be limited to a few rare situations such as concerted refusals to buy
or sell from the EU. Yet there are those who argue that implementation could
include omissions within the EU such as refusals to supply. 55
However in contrast Alford argues that the territorial principle means that a
state can exercise jurisdiction only where a consummating act within a states
territory was a constituent element of an agreement made abroad.
“With omissions there is no consummating act within the Community
that can justify the assertion of jurisdiction on objective territorial
grounds. Thus for the implementation approach to remain faithful to the
Community’s professed desire to assert jurisdiction solely on the basis
of the Territorial principle, it appears necessary to exclude certain
traditional antitrust violations from its jurisdictional purview.” 56
traditional antitrust violations from its jurisdictional purview.” 56
Thus the European Union has not followed the effects doctrine instead opting
for a form of objective territorial jurisdiction that many think is little different to
the “effects doctrine”.
Closer to home we have the Zimbabwean case of S v Mharapara.57 Here a
Zimbabwean official had stolen an item from a Zimbabwean embassy in a
foreign country. On appeal it was argued for the accused that the
Zimbabwean courts had no jurisdiction over the offence since it had taken
54 See Griffin op cit page 186. Some writers felt the decision not to adopt the effects doctrine was
motivated by Europe’s long and antagonistic conflict with the United States over the ambit of the
latter’ antitrust laws. It would have been awkward if Europe had gone the same route. (See Christoph
Wedder , A Survey for Principal decisions of the European Court of Justice Pertaining to International
law, European Journal of International Law Vol 11 No 1.
55 Griffin op cit page 187
56 Griffin op cit page 187 quoting Roger Alford footnote 130
57 Sv Mharapara , 1986 (1) SA 556(ZS)
25
place wholly within a foreign territory. The Zimbabwean Supreme Court
rejected this and stated that:
“Thus a strict interpretation of the principle of territoriality could create
injustice where the constituent elements of the crime occur in more than one
State or where the locus commissi is fortuitous so far as the harm flowing
from the crime is concerned. Any reluctance to liberalise the principle and
adopt AngloAmerican thinking could well result in the negation of the
object of criminal law in protecting the public and punishing the wrongdoer. A
more flexible and realistic approach based on the place of impact, or of
intended impact , of the crime must be favoured.” 58 (Our emphasis)
An inconsistency in approach in the case law might be resolved if there was
consistency amongst the academic writers. Regrettably there is not.
Dugard, 59Oppenheim and Brownlee suggest different theories for the
exercise of extraterritorial jurisdiction. Dugard and Brownlie both refer to the
direct and substantial test. 60 Oppenheim prefers to speak of a “sufficiently
close connection.” However Oppenheim also states that there are numerous
bases on which extra territorial jurisdiction may be exercised. These are
identified as “ a sufficiently close connection, or some substantial interest or a
direct and substantial connection or exceeding effects which are only
incidental and insubstantial. “
Mann ‘s test is a close connection; Akehurst’s is which state feels the primary
effects as opposed to the secondary effects. 61
It is thus clear that there is no consistent approach to extraterritorial
jurisdiction, either in the case law or amongst the writers. What common
thread might be identified amongst those who refer to ‘effects’ is some
attempt to limit the notion, but even then they are divided as to how this
should be achieved. Most seem to see this limit as quantitative hence
should be achieved. Most seem to see this limit as quantitative hence
language such as ‘substantial’ or ‘not incidental’. Some see a causal link
58 At 5634
59 Dugard for instance refers to Mharapara as authority for jurisdiction because of the place of impact.
60Prof Akehurst warns against the use of direct by referring to the example of a cartel in country A
using a middle man in country B to export to country C where the effects are felt (See British
Yearbook of International Law, Volume: 1972 to 1973, page 197)
61 Prof Akehurst submits on page 154 “ that jurisdiction can be claimed only by the State where the
primary effect is felt. In order to determine whether the effects are primary or secondary, it is
necessary to take two factors into account: 1) Are the effects felt in one State more direct than the
effects felt in other States? 2) Are the effects felt in one State more substantial than the effects felt in
other States?” He refers to another leading authority, Prof Mann, on page 182 and says: “ Mann adopts
a more sophisticated approach since he considers that the principle of territoriality is too crude He
argues that a State may not apply its law unless there is a close connection between the State and the
person, thing or event to which the law is to be applied; two or more States may sometimes have
concurrent legislative jurisdiction, but lex fori should not apply where it has no substantial connection
with the facts.
26
necessary hence direct or sufficiently close or the use of primary or
secondary. Others regard intention as an essential element. What seems to
be lacking throughout is authority for Ansac's interpretation that the effect
must be harmful. 62
This is not surprising because the Ansac approach, by requiring one to
attribute a harmful aspect to effect, leads to a situation where a rule of
international law as to the parameters of extraterritorial jurisdiction becomes a
rule of substantive law dealing with the content of the domestic law.
International law on jurisdiction cannot be employed to do this.
If the test for a customary law obligation is constant and uniform usage then
Ansac has failed to establish this. Not even those cases in United States law,
which might be given the most sympathetic reading for Ansac come close to
advancing its interpretation 63. Moreover these judgments do not enjoy
support in the United States let alone a wider audience. In Timberlane the
Court itself acknowledges the absence of a consensus. Yet this is the case
that Ansac relies upon as a cornerstone of its argument. 64
Most of the cases in which language to limit ‘effect’ is utilized concern
cases where the relative rights of states are concerned. It is in this
context that language to limit effects is utilised not as a basic concept
of jurisdiction as is pointed out by Brownlie:
“..the sufficiency of grounds for jurisdiction is an issue normally
considered relative to the rights of other states and not as a question of
basic competence.” 65
62 Botash says if there is a consistent international rule then the most
that can be said is that where there is only a slight effect or where the
effect is wholly remote from the jurisdiction of the state seeking to
exercise it, then jurisdiction would be declined. This they argue is a
much weaker test than 'direct and substantial' as it is a negative test.
much weaker test than 'direct and substantial' as it is a negative test.
They also argue that on the facts of this case the implementation of the
Ansac agreement might well constitute a substantial connection and
therefore we do not need to choose between the tests. (Record pg
182)In the intervenors’ amended papers they allege in par. 22 the
extent of Ansac’s supply of the SA market in 199899. This
approximates to 33% of the market in ’98 and 29% in ’99, which is not
materially disputed by Ansac who in answer only suggest that Botash
enjoys 75% of the market.
63 The closest of course is the Metro decision on the need to distinguish between local and foreign
cartels. Yet that case as we have stated cannot be elevated to establishing a rule of international law.
64 “ Even among US courts and commentators, however, there is no consensus on how far jurisdiction
should extend.” See Timberlane pg 610
65 See Brownlie – Principles of Public Law pg. 2989.
27
The case law and literature offer no support for Ansac’s view that
‘effects’ must be interpreted as negative effects to comply with
international law.
d) Comity
The argument on international law cannot end here on a finding that there is
no clear international rule to support Ansac’s interpretation of ‘effect’. We
must also consider whether comity, be it of the judicial or prescriptive variety,
requires us to come to a different conclusion.
Before we do so it is necessary to consider briefly the provisions and
history of the WebbPomerene Act as in our view an evaluation of it
indicates that comity considerations are not implicated on the facts of
this case.
The Export Trade Act, more commonly known as the WebbPomerene
Act was enacted in 1918. It exempts from the Sherman Act, co
operation agreements and/or associations between independent firms
in relation to exports from the United States provided their activity has
no anticompetitive effect on commerce within the United States.
The legislative history of the Act indicates that its purpose was to protect
American firms trading overseas who had to compete in foreign markets
against domestic cartels. In US v. Concentrated Phosphate Export
Association 66 Judge Marshall, who delivered the majority opinion, said:
“The WebbPomerene Act was passed ‘to aid and encourage our
manufacturers and producers to extend our foreign trade’…. Congress
felt that American firms needed the power to form joint export
associations in order to compete with foreign cartels.”
That this was intended and understood to be a cynical policy to allow
firms to do in someone else’s backyard what they could not do at home
is apparent from the comment of Senator Pomerene who bluntly said:
“(W)e have not reached that high plane of business morals which will
permit us to extend the same privileges to the peoples of the earth
permit us to extend the same privileges to the peoples of the earth
outside of the United States that we extend to those within the United
States”..67
66U.S. v Concentrated Phosphate Export Association , 89 S.Ct. 361 U.S. 199, 21 L.Ed.2d 344
67 Extract from the Congressional record which is quoted in the Phosphate Export Ass’n judgment
.Also see page 366 of the judgment where Congressman Charles C. Carlin of Virginia is quoted as
28
What emerges is that there is nothing in the WebbPomerene Act that
requires the members of Ansac to trade as an association, and Ansac rightly
concede this. Furthermore, the Ansac membership agreement permits the
association to exclude territories from its ambit of operation. 68
Members of Ansac are therefore under no legal compulsion to trade in the
Republic as a WebbPomerene association. 69
There is thus no need for us to find a hard conflict in the manner
contemplated by the majority in the Hartford case. Nor do not need to decide
which view of comity to prefer in interpreting the Act. Even under the test of
Scalia J for the minority in Hartford, which is not to exercise jurisdiction if that
exercise would be unreasonable, we see no reason to decline.
On the facts of this case as pleaded there is nothing unreasonable in
the exercise of jurisdiction over the Ansac agreement if it has economic
effect within the Republic. The conduct sought to be impugned is
ordinarily unlawful in the United States and hence the need for it to be
exempt and restricted to foreign trade.
Indeed the cases where courts have declined jurisdiction on the basis of
comity are rare. 70 As the court in the Laker case put it:
“ when push comes to shove, the domestic forum is rarely
unseated.”71
saying: ” I am frank to say that personally I have no sympathy with what a foreigner pays for our
products; I would like to see the American manufacturers get the largest price possible. But if by
indirection we are going to set up a system which is going to fix a higher price eventually at home,
through a combination as suggested in this bill, I think you can very well see that such a system is a
very dangerous one.”
68 Clause 3(d) of the Membership agreement: Exclusion of Sales or Territories: The Board of
Directors may exclude from any or all Ansac procedures such specific Export Sales or Export Sales
Territories as shall be specified by and pursuant to resolution adopted by affirmative vote of directors
representing all of the Members; any such resolution shall be rescinded, amended or modified only
upon affirmative vote of directors representing all of the Members.
69 Furthermore, as stated on page 1456 of the Antitrust Law Developments Volume II, (fourth
edition), Section of Antitrust Law, American Bar Association: “ Nor does it provide any immunity from
prosecution under foreign antitrust laws. ”
70 Botash indeed asserted they could find no such case and Ansac did not controvert this.
Botash conclude that the case law suggests that comity plays a limited role in limited
circumstances and that states have considerable latitude in the extraterritorial application of
their national law and this is wholly consistent with the Lotus case.
71 In Laker Airways v. Sabena, Belgian World Airlines, 731 F.2d 909 (1984) on page 948
par 40 of the case the court expressed the scepticism about whether courts were best qualified
to perform the balancing act required in comity: “Interest balancing in this context is hobbled
by two primary problems (1) there are substantial limitations on the court’s ability to conduct
a neutral balancing of the competing interests, and (2) the adoption of interest balancing is
unlikely to achieve its goal of promoting international comity.” The court says the tests for
balancing usually consist of a long list of national contacts to be weighed against those of the
29
5) Conclusion
It is commonly accepted that domestic legislation and law enforcers are
entitled to assume extraterritorial jurisdiction. It is equally commonly
conceded that fundamental economic factors – the object of antitrust
regulation – give antitrust a powerful extraterritorial dimension. Professor
Eleanor Fox, the noted antitrust and international law scholar, expresses it
pithily:
“ Competition Law is national, markets are global, and there is the
rub.”72
In its reading of the case law Ansac has confused two issues. One is the
basis on which one may ‘assume’ jurisdiction over extraterritorial conduct
and the other is the ‘justification’ for the extraterritorial reach of legislation.
Clearly in the case of the latter, countries through the mouths of their courts
justify such legislation in international law because the ‘effects’ on them are
harmful. This language is to be found in Alcoa, Laker and the opinion of
Advocate Darman in Woodpulp73. What the courts are stating is the trite
proposition that one does not seek to prohibit activity that is not harmful or in
the language of Alcoa ‘reprehended’. That is a completely different
foreign country. Their usefulness breaks down when deciding to select one forum’s
jurisdiction over another. It categorises these contact in three ways. (1) those that one
already takes into account when deciding whether a court has jurisdiction and thus take the
matter no further (2) those that allow one to identify the fact that respective sates may have an
interest but don’t allow enable one to decide which to prefer and are thus neutral and (3)
those that allow one to distinguish between competing claims. It is these latter which the court
suggests “incorporate purely political factors which the court is neither qualified to evaluate
comparatively nor capable of properly balancing. One such proposed consideration is the
degree to which the desirability [of restrictive practices] is generally accepted. We doubt
whether the legitimacy of an exercise of jurisdiction should be measured by the substantive
content of the prescribed law.”
72 Eleanor M. Fox: National Law, Global markets, and Hartford: Eyes wide shut. Antitrust Law
Journal, Vol. 68, page 73.
73 In Laker in a most eloquent passage the court explains, “ Even if invisible, the radiating
consequences of anticompetitive activities cause economic injuries no less tangible than the harmful
effects of assassins bullets or thieves telephonic impulses. Thus legislation to protect domestic
economic interests can legitimately reach conduct occurring outside the legislating territory intended
to damage the protected interests within the territory. As long as the territorial effects are not so
inconsequential as to exceed the bounds of reasonableness imposed by international law, prescriptive
jurisdiction is legitimately exercised….." Certainly the doctrine of territorial sovereignty is not such an
artificial limit on the vindication of legitimate sovereign interests that the injured state confronts the
wrong side of a oneway glass, powerless to counteract harmful effects originating outside its
boundaries which easily pierce its ‘sovereign’ walls, while its own regulatory efforts are reflected back
in its face.” (See Laker pg 923)
30
proposition to the notion that harms must be established to found jurisdiction.
The first proposition relates to justification the second to procedure and
confusing the two leads to an error in analysis and the absurd result for which
Ansac contends.
We utilize section 3(1) to establish whether the conduct is economic
activity having an ‘effect’ within the territory. Once we establish
evidence of ‘effect’ we do not inquire into its nature, as that is a
substantive issue that takes place when we evaluate whether a
prohibited practice has been established.
The issue of harm is dealt with in the substantive provisions of the Act.
This is the logical place for it to be addressed since one does not stand
convicted simply because a tribunal assumes jurisdiction. That being
the case the foreign respondent is in the same position as the domestic
one.
It is by no means clear that the ‘effects test’ is an exception to extraterritorial
jurisdiction. Competition infringements are not easily categorised into
constituent elements, as might be a criminal offence so that we can determine
whether one of the elements took place on the asserting states territory. On
the other hand it is arguable that the ‘effect’ is always part of the transgression
of a restrictive practice and that to dissect it away from the restrictive practice
to which it adheres is artificial. On this basis the “effects doctrine” does not
differ from the assertion of objective territorial jurisdiction.
But even if that argument is considered unorthodox, there are sound reasons
in competition law for adopting the ‘effects’ based jurisdiction as our
legislature has done in section 3(1). Without such a doctrine one can easily
have a situation where the offenders reside in country A and plot to ‘effect’ the
market of country B. If we require that the restrictive practice has to have
market of country B. If we require that the restrictive practice has to have
some element in Country B before we can found jurisdiction there, we would
fail, but the anticompetitive effect would still be felt there leaving only country
A to exercise jurisdiction. There is no reason why it should do so when it has
no interest in prosecuting conduct not affecting its markets. 74
The ‘effects test’ seeks to avoid a juristic lacuna where restrictive practices
cross borders. We accept the doctrine is open to abuse by states exercising
jurisdiction when their connection to the conduct is only tangential. This does
not mean throwing it out. It means limiting it sensibly to avoid the de minimus
case. We do not need now to set that test out, as it is not relevant to the facts
of this case as the ‘effects’ if proved are not trivial. All we need to conclude is
74 There is also academic support for this approach. Akehurst states from page 195 to 197 that:
“Moreover it is often difficult to say what the constituent elements of a breach of antitrust law.
Restrictive practices can take so many different forms that laws do not attempt… Businessmen could
escape the jurisdiction of the State where the real effects of the transaction were felt, by making their
contracts, taking delivery of goods and making payments in some ‘antitrust haven’.”
31
that the requirement of harm or a deleterious effect is not the limitation that
the legislature intended.
Not only is there no basis in international law to support Ansac’s reading, but
also there is no practical foundation for it either. In effect it leads to a double
inquiry. First, one will have to inquire into whether the Tribunal has
jurisdiction. This entails a net balancing of pro and anticompetitive effects.
Then if a net harm is shown one proceeds with the substantive enquiry, which
might in a rule of reason case involve extensive duplication of the evidence.
In a per se contravention it would mean the leading of evidence in the
jurisdiction enquiry, which is then inadmissible in the substantive enquiry.
That aside from the other practical consequences already mentioned
such as the fact that the Commission has no jurisdiction to investigate
an alleged prohibited practice until it has been determined whether the
Act applies. Yet in order to determine whether the Act applies it needs
to establish the preponderance of harm over the procompetitive
considerations asserted by a respondent. This is a task the
Commission would have to perform, on Ansac’s reading, without the
aid of its investigative powers, which could only be assumed once it is
decided that the Act applies to the conduct in question.
We have little doubt that the legislature could not have contemplated
such a perverse outcome.
Ansac may wish to quarrel with the legislature’s decision to create a per se
prohibition in section 4(1)(b), but that does not justify reengineering the
interpretation of the Act to admit through a side door a defence of justification
which the legislature has pertinently banned from entering through the front
door.
The word 'effect' is used in our legislation in conjunction with the words
'economic activity'. This language is itself neutral and indicated that what the
'economic activity'. This language is itself neutral and indicated that what the
legislature sought to distinguish by the distinction between activity within and
effects within was the distinction between conduct of an economic nature that
took place within the Republic and conduct that took place outside the
Republic and which has an ‘effect’ within the Republic such as a boycott. 75
Recall that earlier in this decision we identified the fact that section 3(1)
establishes two bases for jurisdiction ‘economic activity within’ and
‘economic activity having an effect within’. If harm is to be read into
‘effect’ it must also be read into ‘economic activity within.’ It would be
illogical to have two different standards. That being so it would seem
curious that the legislature would choose to use neutral language both
75 Hartford would be an example of this. The behavior of the British firms amounted to a boycott of
United States firms except on certain terms.
32
in relation to economic activity and effect when it intended negative
connotations for both.
FINDING
We find that on an ordinary interpretation the word effect in section 3(1) is not
limited to adverse effects. Whilst the language may require some qualification
it is not a qualification related to the nature of the ‘effects’ but their extent.
What that extent should be we do not need to decide in this case save to
suggest they should not be trivial.
We further find that the interpretation contended for by Ansac is not
predicated upon a sound policy approach and that even if we felt
inclined to interpret the statute purposively that the purpose contended
for subverts rather than enhances the legislative intent.
We further find, that in any event, that Ansac has failed to establish a rule of
customary law that it supports its contentions as a matter of ‘constant and
uniform usage’ 76.
Accordingly Ansac’s exceptions must fail and the exceptions by the
Commission and Botash are upheld.
Part B
LOCUS STANDI EXCEPTION
The remaining exception that we have to deal with is Ansac’s exception to
Botash’s locus standi to claim the relief it seeks in its particulars of claim.
Ansac state that in order to be able to claim the type of relief it seeks Botash
must allege and prove that it was adversely affected by Ansac's conduct. This
is premised on the fact that at common law an applicant seeking relief by way
of an interdict for the breach of a statutory duty must allege and prove it has
suffered special damages unless the applicant falls within a class of persons
for whom the statutory duty was specifically intended. Since no such
allegation is made, Botash has not established its locus standi and
accordingly the pleadings are excipiable.
76 See Asylum case quoted earlier.
33
It is common cause between the parties that Botash ‘s pleadings lack such an
averment .We have to decide whether they need to for Botash to have locus
standi to seek the type of relief it does.
It is further common cause that the exception relates only to the relief
sought because it is in the form of an interdict, and not to Botash’s
participation as an intervenor.
The relief sought by Botash is: 77
a) An order declaring that the first respondent is party to an
agreement, alternatively an arrangement, further alternatively, a
decision to fix selling prices, trading conditions and to divide the
market, according to customers and territory, for the export of soda
ash in South Africa contrary to section 4(1)(b)(1) and (ii) of the
Competition Act (“the prohibited practices”);
b) An order that the first respondent desist from engaging in the
prohibited practices;
c) An order that the second respondent shall not act as the agent of
the first respondent whilst the first respondent engages in the
prohibited practices;
d) In the alternative to b) above, an order that the first respondent
cease the supply of soda ash, directly or indirectly, to the South
African market and desist from soliciting orders for soda ash in the
South African market;
e) In the alternative to c) above, that the second respondent shall not
act as the agent of the first respondent to supply soda ash or solicit
orders on behalf of the first respondent in the South African market;
f) Further or alternative relief;
g) Costs to suit.
(Note that the relief that the Commission seeks is different and hence
this has become an issue.)
Ansac argues that absent a showing of adverse effect Botash has not made
out a case for relief either at common law or in terms of the Act. If one has not
established harm to oneself one has no interest, in the legal sense, in the
outcome of a proceeding.
outcome of a proceeding.
Botash has several responses to this. It denies that it was not
adversely affected by Ansac’s conduct, however for the purpose of
these proceedings, a prohibited practice complaint in terms of section
4(1)(b), it is not relevant for it to make such an allegation.
77 Page 9, par. 30 of the First and Second Intervening Applicants’ Amended Particulars of Claim
34
Secondly, Botash argues that even in terms of the common law test it falls
within the category of persons entitled to relief. 78
Thirdly it states that in terms of an agreement with Ansac regarding
intervention, the latter is deemed to have consented to its locus standi either
by operation of waiver or estoppel.
Finally Botash argues that as an intervenor in terms of the Act, it is
entitled to seek relief in the manner it has, because its right to intervene
is a statutory one derived from the Competition Act and not the
common law. On this argument whatever the requirements of the
common law are they are irrelevant to these proceedings.
We will only consider this final argument for if Botash succeeds on this
point we need not decide the others.
However before we consider if they have locus standi based on a statutory
right it is useful to examine the common law.
The common law requirements for an interdict for breach of a statutory duty
are succinctly expressed in the Verstappen case 79:
“In order to determine whether a member of the public has locus standi
to prevent the commission of an act prohibited by statute, the first
enquiry is whether the Legislature prohibited the doing of the act in the
interests of any particular person or class of persons or whether it was
merely prohibited in the general public interest. If the former, any
person who belongs to the class of persons in whose interests the
doing of the act was prohibited may interdict the act without proof of
any special damage. If not, the applicant must prove that he has
suffered or will suffer such special damage as result of the doing of the
act. These principles are clearly set forth, inter alia, in Patz v Greene &
Co (supra); RoodepoortMaraisburg Town Council v Eastern
Properties (Pty) Ltd 1933 AD 87 and the Jacobs case (supra).”
Properties (Pty) Ltd 1933 AD 87 and the Jacobs case (supra).”
The rationale for this rule emerges in one of the early cases where Wessels J,
as he then was, in Dalrymple and Others v Colonial Treasurer 80, held:
'The person who sues must have an interest in the subject
matter of the suit, and that interest must be a direct interest . . . .
78 It argues that as a competitor of firms who are party to an alleged prohibited agreement, it falls
within the class of persons section 4(1)(b) is intended to protect.
79 Verstappen v Port Edward Town Board 1994 (3 ) SA 569(D) at 574.
80 1910 TS 372 at 390.
35
Courts of law . . . are not constituted for the discussion of
academic questions, and they require the litigant to have not only an
interest, but also an interest that is not too remote.' 81
The case law thus establishes two categories of persons who may have
locus standi. The first, who can show that they are a member of a class the
legislature intended to specially protect need not show proof of damage, the
second, if the legislation is enacted not for the protection of a special class
but in the interests of the general public, must prove special damages.
Ansac argues that the Competition Act was enacted in the public interest and
not in the interest of any particular class of person. Accordingly Botash may
only establish locus standi if it makes the necessary averment that it
sustained damages as a result of the conduct complained of.
Botash argues that as a competitor of Ansac in the relevant market
implicated in the complaint referral it has locus standi as a member of a
particular class hence it falls into the first category and proof of damage or
injury is unnecessary. We need not examine the validity of this contention
because we are able to decide this matter on another ground.
Botash’s principal argument as we have seen, is that their locus standi is
derived from the Act. The common law rules only become relevant if the Act
is silent on this aspect.
Botash is the complainant in this matter. After having instituted
proceedings by way of interim relief by agreement between all the
parties this relief was abandoned and both the Commission and Botash
filed complaint referrals.
Botash thus enjoy locus standi as an intervenor in our proceedings and this
status was formalised in our Tribunal decision of 7 September 2000 (Case No
81 Although the traditional common law formulation has been followed by many courts the rigidity of
its application has more recently been moderated or questioned. In Jacobs en 'n Ander v Waks en
Andere 1992 (1) SA 521 (A) the following was said at 533J 534E:
'In die algemeen beteken die vereiste van locus standi dat iemand wat aanspraak maak op regshulp 'n
voldoende belang moet h ê by die onderwerp van die geding om die hof te laat oordeel dat sy eis in
behandeling geneem behoort te word. Dit is nie 'n tegniese begrip met vasomlynde grense nie.”
According to Prest “ The broad based and flexible approach adopted by the Appellate Division in
Jacobs’ case is likely to herald an era in which the courts will be less astute to deny locus standi and
more ready to enquire into the merits of what might turn out to be unlawful conduct; in other words, to
deal with the issue of locus standi in a practical manner rather than a formalistic one.” In Steel and
Engineering Industries Federation And Others v National Union of Metalworkers of South Africa (1)
1993 (4) SA 190 (T) Myburgh J remarked obiter
“..I have doubts whether such a formalistic approach is acceptable in today's circumstances. For the
purposes of this appeal, however, I will adopt that approach.”
36
49/CR/A/Jul00). 82
Tribunal Rule 46 (1) states:
46(1) At any time after an initiating document is filed with the Tribunal,
any person who has a material interest in the relevant matter may
apply to intervene in the Tribunal proceedings by filing a Notice of
Motion in Form CT 6, which must –
(a) include a concise statement of the nature of the person’s
interest in the proceedings, and the matters in respect of which
the person will make representations;
The requirement in the rule is thus the existence of a ‘material interest’. The
same language is to be found in section 53 of the Act which regulates the
right to participate in a hearing. It states:
53(1) The following persons may participate in a hearing, in person or
through a representative, and may put questions to witnesses and
inspect any books, documents or items presented at the hearing:
a) If the hearing is in terms of Part C –
(i) the Commissioner, or any person appointed by the
Commissioner;
(ii) the complainant, if –
aa) the complainant referred the complaint to the
Competition Tribunal; or
(bb) in the opinion of the presiding member of the Competition
Tribunal, the complainant’s interest is not adequately represented by
another participant, and then only to the extent required for the
complainant’s interest to be adequately represented;
(iii) the respondent; and
(iv) any other person who has a material interest in the hearing,
unless, in the opinion of the presiding member of the
Competition Tribunal, that interest is adequately represented by
another participant, but only to the extent required for the
82 At no stage did Ansac object to Botash’s locus standi to seek the kind of relief it sought
notwithstanding that at the time of our order the complaint referrals of both parties had been served on
it.
37
complainant’s interest to be adequately represented;
Botash has demonstrated that it has a material interest. It is a competitor of
Ansac and has a substantial share of the market in which the alleged
restrictive practice is being perpetrated. As the United States Supreme Court
pointed out in Socony, if collective behaviour interferes with the price
mechanism in the market then this in itself is harmful. As a competitor they
clearly have an interest in ensuring that market forces operate freely and
without unlawful private restraint 83.
There is nothing in the language of the provisions we have cited to suggest
that a complainant or an intervenor must show damage or injury to establish
locus standi at a hearing.
The requirements for qualifying, as a complainant, are even less
exacting. A person is a complainant if that person:
“has submitted a complaint in terms of section 49B(2)(b)”
That section simply states:
49B(2) Any person may –
(b) submit a complaint against an alleged prohibited practice to
the Competition Commission in the prescribed form.
What is also clear from the Act is that a complainant can bring a complaint
referral at its own instance if the Commission has issued a notice of non
referral. (See section 51(1))
The content of a complaint referral is contained in the Tribunal’s rules
and forms. Form CT 1(3) which is the form required when a
complainant as opposed to the Commission institutes the complaint
referral says the complainant must set out a concise statement of the
relief or order sought. (See page 2 of the form)
It is clear that there is nothing in the Act that requires a complainant to
83The Court stated:“Any combination which tampers with price structures is engaged in
unlawful activity. Even though the members of the price fixing group were in no position to
control the market, to the extent that they raised, lowered or stabilized prices they would be
directly interfering with the free play of market forces. The Act places all such schemes
beyond the pale and protect that vital part of our economy against any degree of
interference…It [Congress] has no more allowed genuine or fancied competitive abuses as a
legal justification for such schemes than it has the good intentions of the members of the
combination .” See United States v Socony Vacuum Oil Co US 150 (1940)
38
have suffered damages in order to have locus standi to bring a
complaint referral in terms of section 51and Ansac concede this.
That being so the only question that remains is whether a complainant
who is an intervenor to seek relief must make such a showing.
Is there any policy reason why a complainant not granted a non
referral, but granted the right to intervene, should be burdened with a
greater requirement? Ansac argues that section 53 deals only with the
rights to participate in a hearing in the manner contemplated in sub
section (1) viz. questioning of witnesses and the inspection of
documents. This subsection does not provide for the right to claim
relief. It does not as counsel for Ansac expressed it ”create a roving
right for busybodies to come before the Tribunal”
We do not agree that section 53 is exhaustive of the procedural rights
of intervenors. The permissive language of subsection (1) suggests
that it is descriptive of, but not exhaustive of, these rights. The section
deals with procedural rights at a hearing and does not purport to deal
with the right to claim relief of any party let alone of intervenors.
Section 21(4) of the Act read with section 27(2) provides for the
Tribunal rules to deal with the manner and form of participation in
Tribunal procedures. That section is the authority in terms of which
Rule 46, which provides for intervenors’ rights, is formulated. Rule 46
places no limitations on intervenors’ rights and leaves the Tribunal with
a large measure of discretion in this regard. Subrule (2) of the Rule is
perfectly clear in this regard. It states:
46(2) No more than 10 business days after receiving a motion to
intervene, a member of the Tribunal assigned by the Chairperson must
either –
a) make an order allowing the applicant to intervene, subject to any
limitations –
i) necessary to ensure that the proceedings will be orderly and
expeditious; or
i) necessary to ensure that the proceedings will be orderly and
expeditious; or
ii) on the matters with respect to which the person may
participate, or the form of their participation;
Thus an intervenors rights are set out in both section 53 and in Rule
46. They are complementary to one another and there is no
contradiction between the two. Thus we find that reading the Act and
rules there is:
39
1. no impediment to an intervenor seeking an order for relief;
and
2. no requirement that it can only seek relief if it has alleged
special damage.
This then deals with the textual issues. However, as important, is that
Ansac’s submissions do not fit within the policy of the Act for a number
of reasons.
In the first place to equate relief being sought from an administrative
tribunal in a proceeding that is inquisitorial in character to that of the
court in a common law adversarial suit is erroneous. The reason is that
unlike the common law court, which grants relief to the private litigant
the Tribunal, grants relief that is in the public, not private interest. As
the CAC has observed in a case concerning interim relief:
“The Tribunal is the statutory body which has been entrusted by the
Legislature with the duty, inter alia, of identifying, adjudicating and
remedying practices by Chapter 2 of the Competition Act. The
decisions, which it takes must reach the outlawed behaviour wherever
it is identified. Where the evidence shows that the ‘prohibited practice’
is applied to and affects a wider group than just the complaining parties
then the Tribunal would, if it were to limit the application of its order, be
exercising its discretion without taking all the circumstances into
account.”84
The fact that public and private interests may often coincide does not detract
from the importance of the distinction. Nor is the Tribunal bound to give the
relief sought by parties in their pleadings. The wording of section 27(1)(a) and
58(1)(a) is that the Tribunal may make an appropriate order in relation to a
prohibited practice:
27(1) The Competition Tribunal may –
(a) adjudicate on any conduct prohibited in terms of Chapter 2,
to determine whether prohibited conduct has occurred, and if
so, to impose any remedy provided for in this Act
58(1) In addition to its other powers in terms of this Act, the
58(1) In addition to its other powers in terms of this Act, the
Competition Tribunal may –
a) make an appropriate order in relation to a prohibited
84 See Glaxo and others v Terblanche D and others , Competition Appeal Court Case No:
03/CAC/Oct00, on page 30.
40
practice, including
(i) interdicting any prohibited practice;
(ii) ordering a party to supply or distribute goods or
services to another party on terms reasonably
required to end a prohibited practice;
(iii) imposing an administrative penalty, in terms of
section 59, with or without the addition of any
other order in terms of this section;
(iv) ordering divestiture, subject to section 60;
(v) declaring conduct of a firm to be a prohibited
practice in terms of this Act, for the purposes of
section 65;
(vi) declaring the whole or any part of an agreement to
be void;
(vii) ordering access to an essential facility on terms
reasonably required;
If the Tribunal has the discretion to grant relief not sought by the referring
party then it is less significant as to whether a party seeking relief has
suffered special damage or not. 85
The Tribunal in ordering relief is considering redressing the harm
created by the restrictive practice in general terms; it is not remedying
the private loss of any party. To characterise the Tribunal’s function in
this regard properly we need to observe that it is not granting relief to
any party, it is granting relief appropriate to redressing a restrictive
practice.
Furthermore an intervenor is not someone who originates an action. An
action is either brought by the Commission or the complainant in the
case of a nonreferral. The rights of the intervenor are then ancillary
and dependant on the preexistence of a complaint referral. That being
so, concerns about ‘busy bodies’ or the Tribunal resolving issues only
of an academic nature, the very policy concerns that inform the
common law policy, are less compelling in our proceedings. Granted
an intervenor can prolong a matter, but that can be controlled by
limiting the ambit of its involvement, as Rule 46 and section 53 both
provide.
limiting the ambit of its involvement, as Rule 46 and section 53 both
provide.
85 This is of course subject to the caveats contained in the Competition Appeal Court’s Glaxo decision
see footnote 67 above where the Court held “ While it is clear that the Tribunal is not necessary limited
to granting the exact relief set out in the notice of motion, it was only permitted to grant alternative
relief where
• a case was made out for that relief on the papers;
• appellants were apprised of the alternative relief contemplated; and
• appellants are granted a full hearing in respect of such alternative relief.
41
The legislature’s policy far from being concerned to protect the institutions of
the Act from ‘busy bodies’ seems to be to encourage as much participation in
deliberations as this is considered to be healthy for arriving at optimal
decisions. To understand what happens in a market one must hear from its
participants– customers, suppliers, competitors etc. 86To come to conclusions
about market behaviour without their participation can only impoverish the
process of adjudication.
The legislature has clearly adopted a policy of low threshold requirements for
locus standi in relation to a number of procedural rights the Act affords. This
is noticeable in:
1. The low threshold requirements to qualify as a
complainant (section 49B)
2. The recognition of a party’s rights to intervene
on the basis of ‘material interest’. (Section
53(1)(a)(iv))
3. Persons can appeal against the grant of an
exemption application if they have a
‘substantial financial interest’. 87(Section
10(9))
It is also difficult to see why a party should be allowed to intervene and be
afforded the procedural rights that section 53(1) affords and then not be
entitled to argue for the imposition for relief at the end unless it has shown
damages.
Furthermore no showing of damages is required in Tribunal procedures
either as a matter of substantive or procedural law. 88 The only exception is
section 49 C(b)(i) which in interim relief procedures requires the Tribunal in
deciding whether to grant interim relief to have regard to the “need to prevent
serious or irreparable damage to the applicant”
The reason for this is the fact that the Tribunal is not competent to award
damages. It is thus unlikely that the legislature would have regarded the
common law test for locus standi for breach of a statutory duty contingent on
common law test for locus standi for breach of a statutory duty contingent on
a showing of special damages to extend to relief in a body not competent to
award damages.
If Ansac is correct we would need to hear evidence that Botash had
sustained damages to decide locus standi. This despite the fact that we have
no jurisdiction to award damages or need to hear evidence that a complainant
86See section 8 for the reference to all these, and section 5,and 9
87 Material interest and financial interest are less exacting than proof of special damage.
88 The award of damages is expressly reserved for civil courts .See sections 62(5) and 65(6).
42
has suffered damages in order to make a finding on the substantive issue of
whether there is a prohibited practice. It would impose upon us an entirely
superfluous enquiry premised on the application of a common law rule whose
justification, paradoxically, is the elimination of adjudication of matters that are
academic.
Ansac are however not prejudiced by the intervenors’ prayer for relief
in the form of an interdict. If we should find that a prohibited practice
has been established then Ansac is still entitled to be heard on the
subject of relief. Relevant to such an enquiry is whether the relief
sought by Botash is appropriate relief. To deny Botash the right to
argue for such relief and for Ansac to dispute it would be to deny the
Tribunal the opportunity to consider the appropriateness of a possible
remedy. Allowing our procedures to be used to air such a debate is a
proper exercise of our discretion in arriving at what is ‘an appropriate
order’. Foreclosing the possibility of such a debate as a gesture to a
formal rule, lifted out of common law adversarial proceedings, is neither
consonant with the objectives of the Act nor with our duties to perform
a public function.
We find accordingly that Botash has locus standi to seek the relief it does in
terms of the Act. Accordingly we do not need to consider whether it has
established its locus standi in terms of the common law as in the alternative it
does, nor do we need to consider whether Ansac has waived its rights to
object.
The Ansac exception based on locus standi is dismissed with costs.
ORDER
We make the following orders:
1) The exceptions by Ansac to the Commissions and
Botash’s pleadings in respect of section 3(1) are
dismissed.
2) The Commission’s and Botash’s exceptions to the
answer in Ansac’s respective pleadings are upheld.
3) Ansac’ exception to Botash’s locus standi to apply for
relief by way of an interdict is dismissed.
relief by way of an interdict is dismissed.
4) Ansac is to pay Botash’s costs in respect of all these
applications including the costs occasioned by the
employment of two counsel.
43
30 November 2001
N. Manoim Date
Concurring: D. Lewis and D.R. Terblanche
44