South Africa: Prohibited Practices

Last Updated: 22 February 2012
Article by Webber Wentzel's Competition Practice Group

From a prohibited practices perspective, some of the main legal developments in South Africa were (i) the CAC and the Supreme Court of Appeal's (SCA) scrutiny of the Commission's initiation of complaint investigations, (ii) the Commission's introduction of a fast-track settlement process in respect of its cartel investigations in the construction sector, (iii) new guidance from the CAC on the method of calculating penalties for prohibited cartel conduct; and (iv) the dismissal of an attempted class action damages claim pursuant to a finding of anti-competitive conduct.

The Commission came under significant scrutiny by the courts in a number of cases regarding its initiation and referral of complaint investigations to the Tribunal, following the SCA's Woodlands decision in 2010. In particular, the CAC and the SCA have now ruled in the Woodlands, Loungefoam and Yara & Omnia cases that a complaint referred to the Tribunal by the Commission cannot extend beyond the scope of the complainant's original complaint. The CAC held that it is improper for a party which was not initially cited in a complaint to be brought within the ambit of a complaint by an amendment of the Commission's complaint initiation or a referral. If new evidence comes to light during the course of an investigation that other parties were involved in alleged prohibited conduct, the Commission must initiate new investigations in respect of each additional party not covered in the original complaint. In this regard, the CAC emphasised that the Competition Act requires that the sequence of events in the process must be (i) a complaint into alleged prohibitions is initiated with the Commission; (ii) that complaint is then investigated by the Commission; and (iii) the complaint is referred to the Tribunal. This approach was also followed by the Tribunal in the Commission / SAB case, as the Tribunal considered itself bound by the decisions of the higher courts. The Commission has subsequently brought an appeal of the SCA's decision in the Yara & Omnia case before the Constitutional Court. The Constitutional Court's judgment is pending and it will be interesting to see whether the Constitutional Court will agree with the SCA and CAC's restrictive approach to the Commission's powers in complaint investigations.

Following the Commission's prioritisation of cartel enforcement in the construction sector, the Commission also introduced a "fast-track settlement" procedure to entice construction firms to come forward with information on collusive tendering. The purpose of the process was to allow the Commission to fast-track investigations and their resolution by inviting firms that were involved in bid-rigging to apply and engage in "bulk" settlement of complaints. The Commission's hope was that construction firms would be encouraged to come forward in order to settle on financially advantageous terms and in the process the Commission would obtain information on those firms that did not use the process. This process was in line with the use of similar fast-track settlement procedures in other jurisdictions, such as those introduced by the European Commission in 2008 and other national authorities in Europe. The Commission required firms to submit applications in which they disclosed their involvement in bid-rigging, the projects and the other firms involved, as well as provide undertakings to co-operate with the Commission and cease anti-competitive conduct. Penalties imposed on firms that came forward are to be calculated in accordance with the number of contraventions, whether the applicant had won or lost the bids, the size of the contracts and whether the applicant had settled any claims for damages. A number of construction firms have made use of the Commission's fast-track settlement process and finalisation of these matters is still in process.

In 2011 the Southern Pipeline cases resulted in the setting a new guidance on the method of calculating administrative penalties for price-fixing contraventions. In summary, the methodology adopted by the CAC for calculating an administrative penalty is as follows:

  • as a starting point for the initial calculation of the penalty, regard should be had to the "affected turnover" of the firm. This refers to the turnover in the relevant product market affected by the anti-competitive conduct;
  • the affected turnover figure is then multiplied by the number of years the firm was engaged in the cartel arrangement(s);
  • this product is adjusted (up or down) with reference to the various factors set out in section 59(3) of the Competition Act (for example, the nature, gravity and extent of the contravention, loss or damages suffered as a result of the conduct, profit derived from the conduct, the degree to which the firm co-operated with the Commission, etc.); and
  • if the adjusted total exceeds 10% of the firm's total annual turnover in the financial year preceding that in which the administrative penalty is imposed, the final penalty is then limited to a 10% cap.

While the CAC's methodology provides some greater clarity on the calculation of administrative penalties for cartel contraventions, it does however leave a number of important questions unanswered. For instance, it is still not clear what constitutes a relevant "firm" for purposes of applying the 10% cap. This may have significant implications where the "firm" involved in cartel conduct is an unincorporated division of a large parent company - i.e. would the 10% cap apply only to the turnover of the division involved in cartel behaviour, or would it apply to the turnover of the parent company, which may include turnover of other subsidiaries and divisions that were not involved in the cartel? It is also not clear how one converts into a percentage of turnover the various factors in section 59(3) to be taken into account. This uncertainty may well result in further litigation on the appropriate methodology for calculating administrative penalties in future.

We also foresee further developments in the law regarding civil damages claims pursuant to findings of anti-competitive conduct, potentially in the form of class action claims against firms that contravene the Competition Act. Last year, the Western Cape High Court denied several groups leave to appeal a decision to deny them a class action suit against the major bread companies for their role in price-fixing of bread products. While South Africa currently does not have a great tradition of class action litigation, in future class actions could become more important regarding civil damages claims pursuant to anti-competitive conduct.

In addition, the CAC's recent dismissal of SAA's appeal in the SAA / Comair & Nationwide matter (against the Tribunal's finding of an abuse of dominance by SAA in providing override incentives to travel agents) provided a platform for affected parties to institute civil proceedings in respect of damages suffered as a result of SAA's conduct. Comair has subsequently filed a damages claim against SAA in the High Court. This follows Nationwide's damages claim in 2006 against SAA for a previous abuse, which was ultimately settled. Further successful damages claims against firms that contravene the Competition Act will certainly fuel this area of litigation in future, particularly for firms that suffer loss as a result of anti-competitive conduct, and also for contraveners that will have to oppose damages claims.

All in all, 2011 was an eventful year in the competition law arena in South Africa. We are looking forward to another interesting year ahead and we thank you for your continued support.

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.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions