Battle to firm up competition law

The Competition Commission and Competition Tribunal believe their work is being hamstrung by the Competition Appeal Court and the Supreme Court of Appeal, whose understanding of economic principles is lacking, according to role players in the competition authorities.

Recent comments by former Competition Tribunal chairperson David Lewis in his book Thieves at the Dinner Table confirm this, as he roundly attacked recent judgments made by the Competition Appeal Court.

The legal fraternity, on the other hand, believes that the judgments by the appeal court are vital as they will scupper attempts by the competition authorities to abuse their powers when prosecuting offenders and force the Competition Commission to conduct more rigorous investigation to prevent the legal challenges it is facing in a number of cases.

Bowman Gilfillan’s head of competition law, Jean Meijer, said the Competition Commission saw any question about due process as technical in nature and as an impediment to its work, but this was part of the legal system.

More than 12 of the 34 cases the commission has referred to the tribunal for prosecution are on the backburner owing to several legal challenges before the appeal courts.

Technical-legal issues
In an attempt to rectify this backlog, the commission sought earlier this year to take a number of test cases directly to the Constitutional Court for judgment so that these technical-legal issues could be sorted out, once and for all.

However, the Competition Commission was dealt a blow last week when two eagerly anticipated Constitutional Court judgments were handed down that will have an impact on how the commission investigates and prosecutes companies that fall foul of the Competition Act. The cases were in the fertilizer and block-foam industries.

In the fertilizer industry, the commission was appealing against a judgment handed down by the Competition Appeal Court that overturned an earlier Competition Tribunal decision to allow the commission to amend its case against Omnia Fertilizer and Yara South Africa.

The commission had sought to include a charge of collusion between the two companies based on evidence it had received from Sasol, which had settled with the commission over its participation in anti-competitive practices.

The Competition Appeal Court took the view that the information provided by Sasol did not relate to the complaint that was referred and therefore the referral could not be amended.

In the block-foam case, the commission also sought to amend its referral to include allegations of additional violations of the Competition Act and the holding companies of a number of the foam manufacturers in the hearing. The tribunal allowed the amendment to the referral, but its decision was overturned by the Competition Appeal Court.

Last week, the commission was refused the right to appeal to the Constitutional Court in both these cases and will now have to lodge appeals before the Supreme Court of Appeal instead.

In the fertilizer case, the Constitutional Court argued that the commission had unduly delayed lodging its appeal before the court and that its explanation for this was not acceptable.

The Constitutional Court ruled that it was preferable for the appeal to be heard by the Supreme Court of Appeal, as it did in the block-foam case.

Meijer said the commission needed to be a lot more careful in the investigative stage than it was at present.

Martin Versfeld, the head of competition law at Webber Wentzel, said he welcomed the decisions by the Constitutional Court.

Better investigations
“The appeals process must be followed,” he said. “The commission wanted to avoid the Supreme Court of Appeal as it has shown itself to be sympathetic towards the respondents.”

Versfeld said the commission should initiate its complaints “more carefully” and conduct “better investigations”.

These legal challenges were natural and were part and parcel of establishing the jurisprudence for competition law in South Africa he said.

Heather Irvine, the head of competition law at Norton Rose, said the Constitutional Court judgments set useful precedents and would result in the court not being unduly burdened.

Revealing that she represented clients in both of the cases recently ruled on by the Constitutional Court, Irvine said the commission could do much more thorough investigation and that sometimes the commission referred cases before it was certain what the case was.

Irvine said the reason the commission was taking these fights all the way was because of the “prescription provision” in the Competition Act, which says that the commission can refer anti-competitive practices to the tribunal only if the practices ceased less than three years ago.

A number of the commission’s cases would fall away if it had to refer the cases to the tribunal a second time Irvine said.

A competition lawyer who refused to be named said the commission was “reluctant to admit that if they did their work properly, they wouldn’t have these problems”.

In Thieves at the Dinner Table, Lewis said that the Competition Appeal Court had “erred” in some important cases and that this was because the court had no expert economists as assessors.

“I am constrained to note the marked lack of experience of the Competition Appeal Court bench in the area of competition law,” wrote Lewis. “Only one of the judges who have sat on the bench of the Competition Appeal Court has had any experience in practicing competition law at the bar and relatively slight experience at that.”

Lewis wrote that the court’s “manifest lack of regard” for the commission and the tribunal undermined the entire competition law regime, including the court itself.

“I recall the despair that I felt when I first experienced a reversal by the Competition Appeal Court, despair that frequently turned to intense frustration when I saw the errors that were regularly made by the court,” wrote Lewis. “There were several grounds on which we were reversed and they are indicative of the rather mechanistic, unimaginative approach that the Competition Appeal Court has adopted in its task of building a new body of competition jurisprudence.”

Irvine said she did not think it was a bad idea to include people with substantial economic expertise in the Competition Appeal Court. “The economists could guide the lawyers,” she said. “It would be very helpful.”

Meijer said that despite Lewis’s comments about the attitude of the Competition Appeal Court, she did not believe there was a serious problem. “I’m not sure if all of Lewis’s comments are fair. They have made some bad decisions, but it’s a complicated area of law. These teething problems are to be expected. Things will settle down as our jurisdiction matures.”

The Competition Commission said this week that it still had to discuss the Constitutional Court judgments with its senior council before it could comment publicly.

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Lloyd Gedye
Lloyd Gedye
Lloyd Gedye is a freelance journalist and one of the founders of The Con.

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