Powers of Competition Commission tested

The Constitutional Court heard two key cases involving the Competition Commission this week that have major ramifications for the commission’s ability to police anti-competitive practices.

Many members of corporate South Africa will be waiting for the Constitutional Court’s judgments with bated breath, as the rulings could have a direct impact on their own tussles with the commission.

The two cases heard this week involve Senwes, the grain storage and trading company, and fertilizer companies Omnia Fertilizer and Yara South Africa. Netstar and South African Breweries will also be paying close attention as the commission’s cases against them could be reinstated on the back of rulings in its favour.

Competition commissioner Shan Ramburuth has said that the Con­stitutional Court proceedings are important to the future of how the commission does its work.

The commission has put 14 cases on hold because of the legal challenges.

“These cases are about how widely the commission can conduct its investigations,” said Werksmans competition department head Paul Coetser. He said that, if the Constitutional Court ruled against the commission, it would have to go back and lodge a new complaint if it discovered anti-competitive conduct that was not specified in the complaint initiation, and the same would apply if it discovered anti-competitive conduct by a party not named in the complaint initiation.

He also said that if this conduct was discovered three years after it had ceased the commission would not be able to pursue the parties it suspected of anti-competitive conduct.

Senwes is accused of having engaged in a margin squeeze in the grain market. Effectively, it is accused of reducing grain traders’ profit margins by charging them a higher price for storage than the price it charged farmers for storage.

The commission referred its complaint to the Competition Tribunal on December 20 2006 and in early 2009. The tribunal ruled following a hearing that Senwes was guilty of anti-competitive practices.

Senwes then took the case to the Competition Appeal Court, which dismissed its appeal in March 2010. The case then went to the Supreme Court of Appeal, where Senwes’s appeal was upheld in June 2011.

The Supreme Court of Appeal ruled that the margin squeeze was not pleaded in the commission’s initial complaint and therefore the tribunal was not allowed to rule on this conduct. The commission argued that the margin-squeeze conduct was mentioned in the witness statements in its case and that Senwes had eight months to prepare to defend itself against this conduct.

“We submit that the Supreme Court of Appeal approach unduly curtails the tribunal’s inquisitorial or investigative powers and serves to undermine the object and purpose of its proceedings,” argues the commission in its heads of arguments.

What the Constitutional Court is being asked to decide is the full extent of the tribunal’s powers during hearings to determine anti-competitive practices.

In the Omnia and Yara case, the two fertilizer companies are accused of being part of a cartel along with Sasol. The commission’s initial case was referred to the Competition Tribunal in May 2005, and in May 2009 Sasol entered into a consent and settlement agreement with the commission in which Sasol admitted to colluding with Yara and Omnia and paid a fine of R250-million.

Then, in October 2009, the commission applied to the tribunal to amend its referral affidavit to include details of alleged collusive meetings between Sasol, Omnia and Yara, which was granted in February 2010 in spite of being opposed by Omnia and Yara.

However, in March this year, the Competition Appeal Court upheld an appeal against the tribunal’s ruling.

The commission, which had leave to appeal to the Supreme Court of Appeal, decided to take the matter to the Constitutional Court instead.

The key to this case is the additional information about alleged collusive meetings that was supplied by Sasol when it settled.

Yara and Omnia argue that the original complaint laid by Nutri-Flo did not contain any allegations about the prohibited practices the commission is now attempting to prosecute it for. The commission argues that complainants cannot be expected to know all of the anti-competitive practices taking place by all parties when it lodges its initial complaint.

Lloyd Gedye

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