Removing the sword of Damocles: Do claims for damages from competition law infringements prescribe?

August 1st, 2022
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In 2013, 15 construction companies settled allegations of collusive tendering with the Competition Commission (the Commission) in terms of the Commission’s Construction Fast Track Settlement process. These firms admitted to rigging numerous bids, including bids for public infrastructure and World Cup stadia, to give the illusion of a competitive tender process to the client (Corruption Watch ‘Construction firms settle collusive tendering cases with R 1.5 billion in penalties’ (https://corruptionwatch.org.za, accessed 2-7-2022)). Almost a decade later, can these clients still claim damages from these firms for not submitting competitive bids, or have their claims prescribed?

This question is analysed below by describing the relevant provisions of the Competition Act 89 of 1998 and Prescription Act 68 of 1969 together with relevant case law. This legal framework is then applied to claims for damages resulting from contraventions of the Competition Act to determine whether such claims are susceptible to prescription in terms of the Prescription Act.

Relevant legal provisions
  • Competition Act

Section 65 of the Competition Act provides that a person who has suffered loss because of a prohibited practice, such as collusive tendering or price fixing (prohibited practice) may claim damages from the firm that engaged in the prohibited practice (infringing firm). The person’s right to claim damages only arises when the Competition Tribunal or Competition Appeal Court (the competition authorities) finds that the infringing firm contravened the Competition Act by engaging in a prohibited practice. Following this declaration, the person harmed by the prohibited practice may only institute proceedings with a certificate from the competition authorities confirming the infringing firm’s conduct as a contravention of the Competition Act.

The person claiming damages may also claim interest on those damages. Section 65(10) indicates that ‘interest on a debt in relation to a claim for damages in terms of this Act’ commences from when the above certificate is issued.

  • Prescription Act

Section 11 of the Prescription Act sets out the periods of extinctive prescription for certain debts. Section 11(d) provides a catch-all provision, according to which any debt, not specifically mentioned in the section, prescribes after three years.

Section 12 regulates when prescription commences. Section 12(1) indicates that prescription will commence as soon as the debt is due. In Makate v Vodacom Ltd 2016 (4) SA 121 (CC) the Constitutional Court confirmed that ‘debt’ in this context means something ‘owed or due: something (as money, goods or service) which one person is under an obligation to pay or render to another’ (at para 85).

Such a debt becomes due when a creditor is aware of the minimum facts that are necessary to institute the claim (Minister of Finance and Others v Gore NO 2007 (1) SA 111 (SCA) at para 17). In other words, when everything has happened which entitles the creditor to institute the claim (Truter and Another v Deysel 2006 (4) SA 168 (SCA) at para 16). Based on this understanding, a debt is not yet due where there is a legal impediment preventing the creditor from instituting the claim. However, the courts have held that a creditor cannot postpone the commencement of prescription by its own action or inaction when faced with a surmountable obstacle to its claim (see Frieslaar NO and Others v Ackerman and Another (SCA) (unreported case no 1242/2016, 2-2-2018) (Petse JA (Seriti and Mocumie JJA and Mokgohloa AJA concurring)) at para 41).

Section 12(3) provides further that ‘a debt shall not be deemed to be due until the creditor has knowledge of the identity of the debtor and of the facts from which the debt arises’. However, a creditor is deemed to have such knowledge of the debtor and the debt if they could have acquired such knowledge through reasonable care.

Can competition law damages prescribe?

A claim for damages resulting from a prohibited practice is a claim for money that the infringing firm owes the person who suffered loss from the prohibited practice. In Nationwide Airlines (Pty) Ltd (in liquidation) v South African Airways (Pty) Ltd 2016 (6) SA 19 (GJ) such a claim was classified as delictual (at para 1). It follows that a claim for damages resulting from a prohibited practice is a ‘debt’ as contemplated by the Prescription Act. Section 65(10) of the Competition Act supports this finding, as it expressly refers to such a claim for damages as a ‘debt’ in relation to interest on that debt.

This debt becomes due when the competition authorities find that the infringing firm has contravened the Competition Act. The decision of the competition authorities will identify the infringing firm and describe its conduct as a prohibited practice. In terms of s 12(3) of the Prescription Act, the creditor could be deemed to have knowledge of this information as the competition authorities publish their decisions containing this information, which can be accessed online by exercising reasonable care. This information, together with the knowledge of the damage suffered, should be sufficient information to institute a claim for damages.

The requirement of a certificate in s 65 of the Competition Act does not preclude prescription from commencing. Section 65’s requirement for a certificate does bar the claim for damages until the competition authorities certify that the conduct constituting the basis for the proposed action has been found to be a prohibited practice. However, this legal impediment is not outside of the creditor’s control. The creditor is at liberty to request such a certificate at any time after the competition authorities’ decision. In this way, prescription would run from the competition authorities’ decision and an apathetic creditor cannot prevent the commencement of prescription by its own inaction.

Based on the above, the Prescription Act does apply to claims for damages contemplated by s 65 of the Competition Act. Pursuant to s 11 of the Prescription Act, s 65 claims for damages are susceptible to prescription three years after they fall due. It follows that claims for damages against the construction firms that settled in 2013 have prescribed in terms of the Prescription Act.

Quentin du Plessis BSocSc (Philosophy, Politics, and Economics) (Cum Laude) LLB LLM (Cum Laude) (UCT) is a legal practitioner at the Rivonia Group of Advocates in Johannesburg. Layne Quilliam BCom (Law) (Cum Laude) (UJ) LLB (Cum Laude) (UJ) LLM (Competition Law) (Rhodes) is a legal practitioner at Advocates Group 21 in Johannesburg. 

This article was first published in De Rebus in 2022 (August) DR 8.

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