In a dramatic decision handed down on 13 September 2010 in the
case of Woodlands (Pty) Ltd and Milkwood Dairy (Pty) Ltd v The
Competition Commission, the Supreme Court of Appeal (SCA)
upheld an appeal against an order of the Competition Appeal Court
(CAC) and found that the complaints initiated by the Commission
against the appellants were set aside. The court further directed
the Commission to return all documents and copies in its possession
belonging to the appellants.
The Commission alleged that the appellants were involved in fixing
prices of raw milk. A complaint had been lodged against certain
firms and as consequence the Commission initiated a full
investigation into the milk industry, without qualification or
specific complaints against them.
The essential issue before the Court was whether the complaint was
valid in light of the requirements set out in section 49B of the
Competition Act. If the Commission had referred an invalid
complaint to the Tribunal, then the Commission acted beyond its
power and the subsequent referral could be set aside.
In setting out the requirements of a valid complaint initiation,
investigation and referral, the SCA's approach may be
summarised as follows:
The Commissioner must at the very least have been in possession
of information 'concerning an alleged practice' which,
objectively speaking, could give rise to a reasonable suspicion of
the existence of a prohibited practice.
The Commissioner must direct an inspector to investigate the
complaint after it has been initiated.
The complaint must be initiated against 'an alleged
prohibited practice'. It may not be initiated against an
industry. According to the SCA, "a suspicion against some
cannot be used as a springboard to investigate all and
The initiation and subsequent investigation must relate to the
information available or the complaint filed by a complainant.
The Act presupposes that the complaint (subject to possible
amendment and fleshing out) as initiated will be referred to the
Only once a complaint has been initiatedmay the commissioner
summon persons for purposes of interrogation and production of
In the present case the commissioner initiated the complaint
against the entire industry "oblivious to the fact that he
was supposed to initiate a complaint against an alleged prohibited
practice and that this should have led to a direction to an
inspector to investigate".
The SCA held that the 2006 complaints were the direct consequence
of an invalid initiation procedure and without the invalid
complaint initiation and subsequent investigation these complaints
against the appellants would not have seen the light of day.
This decision bucks a recent trend where the competition
authorities have tended to favour substantive concerns over
procedural fairness in relation particularly to alleged cartel
activity. In an interesting observation the court stated
"The so-called 'administrative penalties' (more
appropriately referred to as 'fines' in s 59(2)) bear a
close resemblance to criminal penalties. This means that its
procedural powers must be interpreted in a manner that least
impinges on these values and rights."
The SCA disagreed with the CAC that:
"...because it is difficult to establish the existence of
prohibited practices a generous interpretation of the
commission's procedural rights would be justified. This
approach would imply that the more difficult it is to prove a
crime, such as corruption, the fewer procedural rights an accused
The Court held:
"I do not accept the submission on behalf of the
commission that these far-reaching invasive powers may be used by
the commissioner for purposes of a fishing expedition without first
having initiated a valid complaint based on a reasonable suspicion.
It would otherwise mean that the exercise of this power would be
unrestricted because there is no prior judicial scrutiny as is the
case with a search warrant under s 46."
This judgment will be of interest in a number of ongoing
investigations and prosecutions currently pending before the
competition authorities. While seemingly limited in its scope, it
may signal a turning of the jurisprudential tide in relation to
procedural matters brought before the Tribunal and the relevant
The case affirms that respondents in prohibited proceedings under
the Act are entitled to enforce their rights to due process. This
is appropriate given the potentially severe consequences of an
adverse finding in such matters.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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