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Dennis Davis: COMMENT
13 Jul 2012 10:39
David Lewis at the Competition Commission Tribunal in Pretoria. (Lisa Skinner, M&G)
In the halcyon days following the birth of South Africa’s democracy, a range of key institutions were created that propelled the transition towards democracy and contributed to the transformation of society. The Constitutional Court, the Truth and Reconciliation Commission, a totally revamped South African Revenue Service and a new set of competition institutions quickly became part of the governmental landscape.
Their creation and record hold vital lessons for the future of our democracy. Thieves at the Table has the advantage of being authored by the central figure in these developments.
The government chose wisely when it appointed Lewis to chair the Competition Tribunal. He self-deprecatingly says some were puzzled about “how a former trade unionist … got so deeply involved in competition issues”. Yet a combination of trade union experience, a proven ability to build organisations under pressure, his role as the last chair of the old competition board, an academic background in development economics and a wonderful facility for language, as shown in this fluently written book, made Lewis the perfect candidate.
His account of the old board illustrates the challenges that would lie ahead. There was no institutional independence: the board saw itself as a division of the department of trade and industry. The applicable legislation did not cover key areas. Secrecy prevailed over the board’s decisions.
From this depressing foundation, Lewis documents the process that culminated in the new Competition Act of 1998 and the creation of the institutions made to implement its legislative ambition. The negotiating process leading to the Act was typical of the compromises of that time: business could hardly resist legislation promoting a true free market, but was wary of the newly elected government and its trade union allies because of concern that it would frame legislation to impose additional socioeconomic obligations based on considerations that had nothing to with competition.
The outcome was an Act that was not an orthodox competition statute, although it included all the key components: vertical and horizontal restraints, checks on the abuse of dominance and the regulation of mergers. But the Act included public interest criteria that reflected South Africa’s history and economic circumstances.
Lewis suggests that considerable credit for the Act must be given to the then trade and industry minister, Alec Erwin, and his chief director, Alastair Ruiters. It is regrettable that Lewis’s historical section derives mainly from memory and thus has not developed a comprehensive account of a remarkably thoughtful process.
The balance of the book covers key cases the tribunal heard. Lewis adroitly takes the reader through some of the most complicated questions vexing competition authorities, including whether regulation undermines or assists competition. The dangers of an incorrect balance between too much and too little prosecution are then linked to two other issues.
Notwithstanding the public interest provisions, there is a danger that competition law overreaches itself to supplement inadequate industrial policy. As Lewis writes, “an even greater danger to robust enforcement and that posed by courts stems from our economic policymakers and critical adherence to tired old formulations of industrial policy, and particularly to the thoroughly anti-competitive modes of economic governance that have generally accompanied these policies of choice”.
Thus, policymakers who seek to regulate key markets do not assume responsibility for these decisions, but misuse the competition authorities. For example, when the government is concerned about certain forms of foreign investment, it seeks to impose conditions that have little to do with a free and fair market, which requires the competition to overreach. Yet the question of what happens when the impediment to competition is based in institutional – not market – imperfections is hardly addressed.
A major theme is the balance of economics and law in the development of competition jurisprudence. There is no body of law in which economics and law are so inextricably interconnected. Courts need to see that the Act is mediated through myriad economic concepts. Lewis argues that, to the extent that an appellate court lacks expertise in economics, it should extend “an exceptional level of deference to the body that does possess expertise and economics” – even in the area of legal interpretation. This is an important issue. The book promises an exposition of the practical “interface between law and economics”, but unfortunately fails to provide one. Instead, the reader is entertained by the view that the tribunal inexorably came to the correct decision but the courts, particularly the Competition Appeal Court, got it absolutely wrong when it overruled the tribunal.
That any experienced adjudicator can suggest that he or she was always right when dealing with cases of exceptional complexity is breathtaking. In this, Lewis does a splendid book a disservice.
Lewis refers to a decision in the case of Netstar, which involved an alleged contravention of the Act in the form of an agreement or concerted practice that had the effect of substantially preventing or lessening competition in the market. A complaint had been initiated by a rival of Netstar regarding its conduct in jointly setting industry standards with the Vehicle Security Association of South Africa.
The tribunal upheld the complaint, finding that such an agreement did exist. Subsequently, in a meticulous judgment, Judge Malcolm Wallis, one of the most distinguished jurists this country has produced in the contemporary era, upheld the appeal. Although the reasons should not detain us, it is important to cite the following passage from his judgment: “A reading of its [the tribunal’s] decision in the light of the record conveys that it highlighted every piece of evidence that could be construed as casting the conduct with the appellants in an unfavourable light and disregarded or discounted all the evidence to the contrary. There is considerable force in the criticism by appellants that in places it substituted speculation for legitimate inference.”
Lewis suggests that Wallis “for no apparent reason other than that he disagreed with the tribunal’s decision held that the tribunal had acted in bad faith”. This serious, unsubstantiated allegation is at war with the reasons given in the judgment. Lewis had retired by then, so had he read the voluminous record? It beggars belief that so serious a claim, on no informed basis, can be made.
Numerous similar criticisms in the book take issue with appeal judgments that have nothing to do with economic expertise and everything to do with plain fact-finding.
The fig leaf of economic expertise, used to rubbish courts when a judgment is disliked, falls into the present pattern of not simply criticising court decisions, but also seeking to reduce the court’s powers in the process. Correctly, Lewis is concerned about the government undermining independent competition institutions, yet he conveniently forgets that the Competition Appeal Court is one of those institutions.
These criticisms of Lewis’s book notwithstanding, there is much to admire in it: it compellingly examines the complexity of competition enforcement and the continued challenges to true competition in South Africa.
Dennis Davis is judge president of South Africa’s Competition Appeal Court
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