Role of competition law in a democracy

November 1st, 2012

By Nomfundo Manyathi

The Competition Law Committee of the Law Society of the Northern Provinces held its annual breakfast in Rosebank, Johannesburg on 11 October. The guest speaker was Constitutional Court Justice Chris Jafta, who spoke on the importance of competition law in a constitutional democracy.

Justice Jafta spoke about the Competition Act 89 of 1998 (the Act), focusing on its objectives, the means it employs to achieve those objectives and the structures established to administer and enforce the Act, which he said was the primary source of competition law.

Justice Jafta said that, in passing the Act, government sought to, among others –

  • address the inequalities and imbalances of society created by apartheid;
  • promote and maintain competition in the economy in order to promote efficiency, adaptability and the development of the economy;
  • afford consumers access to quality goods and services at competitive prices; and
  • ensure that small and medium-sized enterprises have a fair opportunity to participate in the economy.

He said it was clear that the Act was passed to promote the values on which the Constitution is founded, particularly the values of equality, freedom and the advancement of human rights.

He added that the Act applied to all economic activity in the country except collective bargaining and collective agreements in terms of the Labour Relations Act 66 of 1995. Justice Jafta said it was unfortunate that ‘economic activity’ was not defined in the Act, adding that he was not aware of any court decision that defined the term but knew that some courts had commented on the breadth of these words.

Justice Jafta said that the Act was not only specific to activities within South Africa’s boundaries, as it also applied to activities that have an effect in South Africa. However, he said, the word ‘effect’ was wide and was not defined in the Act. By way of example, he said that if members of a cartel colluded outside the country, the purpose of which would reduce or eliminate competition between them in their operations in South Africa, the Act would apply.

Justice Jafta said that a producer of goods could not fix the price at which the goods must be sold to the public. ‘He can recommend a price and the produce must have the words “recommended selling price” next to the price,’ he said.

Justice Jafta said that the Competition Commission was tasked with evaluating complaints relating to price-fixing and collusion, approving applications for mergers and referring complaints to the Competition Tribunal, adding that an investigation of a complaint may be triggered in two ways: By the commission itself or by complaint from the public.

Justice Jafta said that if the commission was not satisfied that there had been a violation, it may decline to refer the matter to the tribunal. He added that if the investigation was prompted by a complaint from the public, the commission must issue a notice of non-referral, in which case the complainant may submit the same complaint to the tribunal. ‘But if the commission is convinced that the Act was breached, it may itself refer the matter to the tribunal for adjudication,’ he said.

Justice Jafta said that the tribunal is empowered to adjudicate matters, conduct investigations and impose punishment in terms of the Act. He said that the tribunal may also decide reviews and appeals against decisions of the commission.

He added that the tribunal is afforded latitude to adopt any procedure for its hearings. Unlike a court of law, he said it was not obliged to adhere to an adversarial process; it may go the inquisitorial route and may decide to have an informal hearing. However, the public must have access to its hearings, which must be held expeditiously and in accordance with the principles of natural justice.

‘Decisions and orders of the tribunal may be challenged on appeal to the Competition Appeal Court (CAC). Those who are aggrieved by the decisions of this court in other matters may challenge them in the Supreme Court of Appeal (SCA) or the Constitutional Court,’ he said.

Justice Jafta elaborated on the recent debate as to whether all three levels of appeal were necessary. ‘One school of thought, supported by Judge President of the Competition Appeal Court Judge Dennis Davis, favours only one level of appeal beyond the CAC,’ he said.

Those who support this view prefer appeals of the CAC to go directly to the Constitutional Court and those who oppose this view argue that the CAC is, in reality, the first court to hear competition law matters as the tribunal is not a court of law, he said.

Justice Jafta said the right to appeal against judgments of the CAC is subject to the provisions of s 63 of the Act and the rules of the court in which the appeal is lodged. Section 63 obliges an appellant to first apply to the CAC for leave to appeal and if that court refuses leave, the request may be made to the SCA or the Constitutional Court.

‘Insofar as the SCA is concerned, the need to apply first to the CAC is understandable; this is because once the CAC refuses leave, an appellant proceeds to the SCA. A similar process is followed with judgments of the High Court. But, when it comes to the Constitutional Court, a different process is followed, an appellant who has been granted leave by the CAC is still obliged to apply again to the Constitutional Court because only the Constitutional Court can grant leave,’ he said. He queried why an appellant should apply twice for such leave.

‘It falls on the commission and the tribunal to interpret and apply the Act without any guidance from the courts because, in the scheme of the Act, guidance only becomes available after their decisions have been challenged in court and this guidance comes in a trickle because every case is decided narrowly on the facts and the issues raised. There can be little doubt that both the tribunal and the Act are not a model of clarity and … these bodies have no precedent to consult in order to determine what is required from them; hence at times they look at other jurisdictions such as Europe and the United States,’ he said.

Justice Jafta warned that caution must be exercised in seeking guidance from foreign law as one must first consider whether the legal framework of that jurisdiction bears similarities to the South African Act. He said that if it did not, then it may be inappropriate to import it into South African law.

He concluded by saying that it was the responsibility of practitioners to lobby the relevant authorities to address these challenges, adding that some practitioners demanded that these be addressed by amending the Act.

Nomfundo Manyathi,

This article was first published in De Rebus in 2012 (Nov) DR 9.