The Competition Commission may have lost a Supreme Court of Appeal (SCA) challenge to its investigation of two dairy processors, but now questions are being raised about the wider implications for other investigations.
The legal fraternity is divided about just how wide-reaching the ruling could be, with some arguing that all clients who have been investigated by the commission need to go back to check for implications of the ruling, whereas others argue that the ruling will impact on only a handful of cases at the most.
Last week the court ruled in favour of Woodlands and Milkwood, two dairy processors that the commission had begun investigating in 2005. The court set aside the commission’s case against the two on the basis that the initiation of the investigation was “seriously flawed”.
Key to the court’s decision was that it ruled that two summonses issued by the commission against the dairy processors were void because they were too wide in their application.
The judgment states: “I do not accept the submission on behalf of the commission that these far-reaching invasive powers may be used by the commissioner for purposes of a fishing expedition without first having initiated a valid complaint based on reasonable suspicion.”
Industry insiders have pointed out that the 2005 investigation dates back to a time when Menzi Simelane, the head of the National Prosecuting Authority, was the competition commissioner and the commission has become a much more disciplined and sophisticated body since then.
The court has previously found against the Simelane-led commission in a case brought by Pretoria Portland Cement, in which the court found that Simelane had used deception to gain access to PPC’s premises. The court was scathing about the commission’s abuse of power.
Although law firms such as Webber Wentzel and Edward Nathan Sonnenberg have since issued statements about the implications of the SCA judgment, Werksmans Attorneys’ head of competition law, Paul Coetser, says the implications of the court decision are far narrower than people want to believe.
“People are getting a little hysterical,” says Coetser. ‘The whole system is not going to come crashing down. “There may be one or two cases that are affected,” says Coetser. “However, upon closer scrutiny it will probably be discovered that a large majority of the commission’s referrals have been robust.”
Coetser says that when the Competition Amendment Act is promulgated it will give the commission the power to launch market investigations, which will resolve the issues raised by the court’s judgment.
He says that the majority of the commission’s successes, including its cartel-busting activities, have come about through its corporate leniency policy (CLP), which gives companies an opportunity to receive leniency in exchange for informing on its fellow colluders and testifying against them before the Competition Tribunal.
Coetser says the CLP process will not be affected by the court ruling. Webber Wentzel’s statement on the judgment “calls into question a number of other cases currently under investigation or already referred to the Competition Tribunal”.
Webber Wentzel’s Robert Wilson says the commission should take note of the ruling, as ‘antipathy” to legal processes, as is sometimes displayed by some commission officials, will eventually undermine the commission’s current legitimacy and effectiveness. Webber Wentzel’s Martin Versfeld says that the commission has often been “too robust” when exercising its powers to summons individuals”.
Versfeld says respondents under investigation by the commission or before the tribunal in referral proceedings need to revisit the commission’s initiation of the complaint against them and study it to make sure it complies with the court’s requirements as laid out in the judgment.
Edward Nathan Sonnenberg’s statement notes that the court’s decision brings welcome relief to firms under investigation and/or receiving summonses to produce documents or give evidence to the commission. “It remains to be seen how this landmark ruling will impact on current and future investigations by the commission,” the statement reads.
The statement warns that unless the commission takes note of the ruling and its requirements for investigations it will face multiple challenges in the future. Competition commissioner Shan Ramburuth says the implications of the ruling are not clear as yet and the commission’s lawyers are studying the judgment.