Brief Summary

Competition — Referral from High Court — Prescription period under Competition Act — Plaintiffs alleged damages from defendants for breach of restraint of trade and fiduciary duties — Defendants countered with claims of plaintiffs' anticompetitive conduct — Legal issue arose whether prescription period in section 67(1) of the Competition Act applies to court referrals — Tribunal held that the prescription period does not apply to referrals made under section 65(2)(b) of the Act, as it pertains to complaint procedures, thus allowing the matter to be heard on its merits.

Comprehensive Summary

Summary of Judgment

1. Introduction

The proceedings took the form of a preliminary objection (point in limine) before the Competition Tribunal of South Africa. The Tribunal was required to decide a narrow question of statutory interpretation concerning whether a time-bar in the Competition Act applies to a referral made to the Tribunal from a civil court.

The matter arose from civil litigation in the Western Cape High Court, in which companies in the Linpac group (as plaintiffs in that court) sued two former directors (as defendants in that court) for substantial damages allegedly flowing from breaches of restraint of trade agreements and fiduciary duties. During those High Court proceedings, the defendants raised, as part of their defences, allegations that the plaintiffs’ claimed turnover and profits were derived from conduct that contravened the Competition Act 89 of 1998, and that this unlawfulness precluded recovery of damages.

Because the High Court is precluded from determining whether conduct contravenes the Competition Act (exclusive jurisdiction lies with the competition authorities), the High Court referred the competition-law issue to the Tribunal under section 65(2)(b) of the Act. After the referral was lodged at the Tribunal, the plaintiffs raised the present point in limine, contending that the referral was time-barred by section 67(1) of the Act.

The general subject-matter of the dispute before the Tribunal was therefore not the underlying merits of the alleged cartel or predatory pricing, but the applicability of the Act’s three-year limitation period to a court-to-Tribunal referral mechanism under section 65(2)(b).

2. Material Facts

It was common cause that the two defendants in the High Court action had been employed as directors in companies within the plaintiffs’ group and had been bound by restraint of trade agreements preventing competition with their employer. The plaintiffs alleged that, in breach of those restraints and in breach of fiduciary duties owed as directors, the defendants formed a rival company, Lion Packaging (Pty) Ltd, which competed with the plaintiffs. On that basis, the plaintiffs claimed damages of R187 million, jointly and severally, in the High Court proceedings.

It was also material that the defendants initially pleaded in December 2007 without relying on the Competition Act, but later filed amended pleas in 2011. In those amended pleas, the defendants alleged that, if the plaintiffs had suffered damages, they were not entitled to recover them because the turnover on which damages were premised had been achieved through the plaintiffs’ unlawful conduct.

The defendants’ amended pleas alleged contraventions of the Competition Act, specifically cartel conduct (price fixing and market division) in contravention of section 4(1)(b)(i) and section 4(1)(b)(ii), and predatory pricing in contravention of section 8(d)(iv). The defendants contended that the plaintiffs’ profits were the product of such unlawful conduct and therefore could not ground a delictual damages claim.

Pursuant to those pleadings, the defendants sought and obtained an order from the High Court on 24 October 2011, apparently by consent, referring the relevant competition-law issue to the Tribunal in terms of section 65(2)(b). The High Court order directed that the defendants were to file a complaint referral with the Tribunal within 20 business days. The referral was filed with the Tribunal on 18 November 2011.

The plaintiffs’ point in limine turned on the timing of the alleged prohibited practices. The parties were in agreement on the dispositive factual premise for the preliminary issue: if section 67(1) applied, then (on the common cause facts) the referral would have been brought more than three years after the prohibited practice had ceased, with the result that the Tribunal would be barred from entertaining it. The factual chronology relevant to prescription was therefore not in dispute; the dispute was purely whether section 67(1) applies to section 65(2)(b) referrals.

3. Legal Issues

The central legal question was whether the limitation provision in section 67(1) of the Competition Act—stating that a complaint in respect of a prohibited practice may not be initiated more than three years after the practice has ceased—applies to a referral made to the Tribunal by a civil court under section 65(2)(b).

This was a dispute of law, specifically one of statutory interpretation and the classification of procedural pathways under the Act. The Tribunal was not asked at this stage to determine the merits of the alleged cartel conduct or predatory pricing. Instead, the Tribunal had to determine whether the referral mechanism invoked by the High Court is subject to the same temporal limitation applicable to complaint initiation under the Act’s conventional complaint procedure (notably under section 49B, read with sections 50 and 51).

A further legal issue, addressed as part of the interpretive enquiry, concerned the implications of exclusive jurisdiction under section 62(1), the institutional design of the Act (including the role of the Competition Commission in complaint proceedings), and whether excluding section 65(2)(b) referrals from section 67(1) is consistent with constitutional considerations, particularly the right of access to a court or appropriate tribunal in section 34 of the Constitution.

4. Court’s Reasoning

The Tribunal began by explaining the structural context for how competition issues can arise in civil litigation and how the Act allocates adjudicative responsibilities. It reaffirmed that substantive competition issues fall within the exclusive jurisdiction of the competition authorities under section 62(1), reflecting the legislative intent that a coherent body of competition jurisprudence be developed by specialist institutions. At the same time, civil courts adjudicate common-law disputes, and section 65(2) provides a mechanism to address situations where a civil dispute includes an issue concerning conduct prohibited by the Act.

The Tribunal distinguished between two pathways into the Tribunal’s adjudicative process. The first is the conventional complaint referral route, involving the Competition Commission as investigator and (ordinarily) prosecutor, and proceeding under the complaint procedures (including section 49B). The second, relevant here, is the court referral route under section 65(2)(b), where the civil court refers a competition issue to the Tribunal if it is not frivolous or vexatious and if resolution is required to determine the final outcome of the civil action.

In addressing whether section 67(1) applies to court referrals, the Tribunal first considered the ordinary language of section 67(1). It emphasised that section 67(1) speaks of a “complaint” and the act of “initiat[ing]” a complaint. By contrast, section 65(2)(b) uses the language of “refer” and does not employ the terminology of “complaint” or “initiation”. The Tribunal regarded this linguistic distinction as significant, finding that section 67(1) is framed in terms that fit the complaint procedure and do not naturally extend to court referrals.

The Tribunal then adopted a functional approach to test whether section 67(1) could sensibly be applied to court referrals. It noted that section 67(1) presupposes two ascertainable dates: when the practice ceased and when the complaint was initiated. In the complaint procedure context, the “initiation” date has a recognizable procedural meaning (linked to the lodging of a complaint with the Commission or the Commission initiating an investigation). In the court referral context, however, identifying an equivalent “initiation” date was problematic, because multiple candidate dates could be proposed (the pleading date, the High Court’s referral order date, or the date the referral papers were filed at the Tribunal), none of which neatly aligns with the function served by complaint initiation. The Tribunal treated this difficulty as reinforcing the conclusion that section 67(1) was not designed to govern section 65(2)(b) referrals.

A further interpretive indicator was drawn from section 65(2)’s reference to “conduct that is prohibited” rather than “prohibited practice”. The Tribunal noted that “prohibited practice” is a defined term linked to Chapter 2 contraventions, whereas section 65(2)’s broader phrasing suggested that the court referral mechanism could encompass matters beyond Chapter 2 (including, for example, issues linked to Chapter 3 on mergers). Because section 67(1) is framed as a bar on initiating “a complaint in respect of a prohibited practice,” the Tribunal considered this as another sign that section 67(1) was not intended to cover section 65(2) referrals.

The plaintiffs’ principal submission relied on a policy argument: that the Act is primarily concerned with public enforcement and that it would be anomalous if the court referral route permitted competition issues to be adjudicated without the time-bar that constrains complaint proceedings. The Tribunal accepted that the Act’s overall schema is largely public in character, but it rejected the premise that section 65(2)(b) must therefore be assimilated into the public complaint model. It reasoned that section 65(2)(b) exists to solve a specific institutional problem created by exclusive jurisdiction—namely, enabling civil courts to obtain a binding competition-law determination from the Tribunal when necessary to resolve a private civil dispute.

A key aspect of the Tribunal’s reasoning was that section 65(2)(b) is structurally distinct from public complaint proceedings because it bypasses the Commission entirely. The Tribunal treated the Commission’s absence as a strong indicator that section 65(2)(b) proceedings are private in character, limited to the litigants in the civil action, even where the alleged competition contravention (such as cartel conduct) may involve other market participants who are not parties to the civil litigation. This private circumscription also had remedial implications: the Tribunal reasoned that, in a court referral, the Tribunal’s determination should logically be confined to what is required for resolving the civil action, rather than triggering the full suite of public-law consequences typical of public complaint enforcement.

In response to the plaintiffs’ reliance on other provisions, the Tribunal rejected the argument that section 65(2)(a) (requiring a civil court to apply an existing Tribunal or Competition Appeal Court order) implied that section 65(2)(b) referrals must share the same public character as prior complaint-based orders. The Tribunal considered section 65(2)(a) to be aimed at avoiding redundant adjudication, not at characterising the nature of section 65(2)(b) proceedings.

The Tribunal also considered the plaintiffs’ reliance on section 58(1)(a)(v) (competence to declare conduct a prohibited practice “for the purposes of section 65”). It held that section 58 sets out powers “in addition to” other powers and is not exhaustive. On the Tribunal’s reading, an order issued under section 65(2)(b) is a declaratory order directed at enabling the civil court to decide the dispute before it, rather than an order that necessarily founds a civil damages action as contemplated elsewhere in section 65.

The Tribunal further addressed resource-conservation rationales often associated with limitation provisions. It accepted that section 67(1) can serve to prevent scarce public resources (particularly those of the Commission) from being expended on stale matters. However, because the Commission is not involved in section 65(2)(b) referrals, that rationale did not carry the same force. The Tribunal also acknowledged that prescription-like limits can reduce opportunistic late raising of competition issues in civil proceedings, but it held that section 65(2)(b) contains its own filtering mechanism: the civil court must be satisfied that the issue is not frivolous or vexatious and that its resolution is required to determine the civil action’s outcome. The Tribunal referred to Astral Operations Ltd v Nambitha Distributors (Pty) Ltd as illustrating that civil courts do not lightly grant referrals when the statutory threshold is not met.

Constitutional considerations were also invoked. The Tribunal accepted the defendants’ submission that an interpretation extending section 67(1) to court referrals could constrain access to justice in a context where civil courts cannot themselves determine competition-law contraventions. It referred to section 34 of the Constitution and jurisprudence on the constitutional scrutiny of time-bars, including Mohlomi and the passage quoted from Brummer, treating these as supporting a reading of section 67(1) limited to the public complaint-initiation context rather than as a constraint on raising competition-law issues defensively through section 65(2)(b).

Finally, the Tribunal addressed prior Tribunal authority. It expressly stated that it departed from the approach taken in Leonard & others v Nedbank & others [2008] JOL 22212 (CT). It explained that the arguments developed in the present matter had not been raised or considered in Leonard, and that, with further experience in applying the Act, it considered the present interpretive approach to be correct.

On this cumulative reasoning—textual, functional, structural, policy-based, and constitutional—the Tribunal concluded that section 67(1) does not apply to section 65(2)(b) referrals, and must be read as limited to proceedings initiated under section 49B.

5. Outcome and Relief

The Tribunal dismissed the point in limine. It held that the referral under section 65(2)(b) was not barred by section 67(1), despite the common cause position that the alleged prohibited practice had ceased more than three years earlier.

As to costs, the Tribunal made no order as to costs, directing that each party should bear its own costs. It reasoned that the plaintiffs had acted reasonably in raising the preliminary objection because the legislation was not clear on the point and because they were entitled to rely on the Tribunal’s earlier decision in Leonard, which had supported their position.

Cases Cited

Leonard & others v Nedbank & others [2008] JOL 22212 (CT).

Astral Operations Ltd v Nambitha Distributors (Pty) Ltd [2013] 4 All SA 598 (KZD).

Competition Commission v Lounge foam (Pty) Ltd [2010] 1 CPLR 174 (CT).

Road Accident Fund and the Minister for Transport v Vusumzi Mdeyide CCT 10/10 [2010] ZACC 18.

Brummer v Minister for Social Development and Others [2009] ZACC 21.

Mohlomi v Minister of Defence 1996 2ACC 20.

Legislation Cited

Competition Act 89 of 1998, sections 4(1)(b)(i), 4(1)(b)(ii), 8(d)(iv), 49B, 50, 51, 53(1)(a)(iv), 58(1)(a)(v), 62(1), 62(5), 65(1), 65(2), 65(6), 67(1).

The Constitution of the Republic of South Africa, Act 108 of 1996, section 34.

Rules of Court Cited

No rules of court were cited in the judgment.

Held

The Tribunal held that the three-year limitation in section 67(1)—barring the initiation of a complaint more than three years after a prohibited practice has ceased—does not apply to referrals made by a civil court to the Tribunal under section 65(2)(b).

The Tribunal further held that section 65(2)(b) referrals are procedurally and functionally distinct from complaint proceedings initiated under section 49B, including in the language used by the Act, the absence of the Commission’s gatekeeping role, and the limited and private purpose of resolving a competition-law issue necessary for a civil court’s determination.

Accordingly, the preliminary objection based on prescription was dismissed, and no costs order was made.

LEGAL PRINCIPLES

Section 67(1) of the Competition Act is directed at the initiation of complaints within the Act’s complaint procedure framework (notably under section 49B), and its language (“complaint” and “initiated”) is not naturally or functionally applicable to a section 65(2)(b) court referral.

A referral under section 65(2)(b) is a mechanism designed to accommodate the Act’s regime of exclusive jurisdiction by allowing a civil court to obtain a specialist determination from the Tribunal on a competition-law issue necessary to resolve a civil dispute, subject to the statutory filters that the issue not be frivolous or vexatious and that its resolution be required for the civil action’s outcome.

The absence of a role for the Competition Commission in section 65(2)(b) referrals is a significant structural indicator that the section 65(2)(b) process is distinct from the public complaint enforcement model, and this distinction bears on whether procedural incidents of public complaint initiation—such as section 67(1)’s limitation—attach to court referrals.

In interpreting the Act, the Tribunal accepted that constitutional considerations regarding access to justice under section 34 of the Constitution form part of the interpretive matrix when a proposed construction would bar a party from having a competition-law issue determined by the only institution empowered to decide it on the merits in the context of pending civil litigation.

Linpac Plastics (SA) Pty Ltd and Another v Du Plessis and Another, In Re: Linpac Plastics Ltd and Others v Du Plessis and Others (019513) [2014] ZACT 64; [2014] 2 CPLR 516 (CT) (6 November 2014)