Previously published in Without Prejudice Vol. 12 No. 7, August 2012.
The legal fraternity, and particularly the competition law
sphere, has been eagerly awaiting the Constitutional Court's
ruling in the cases of Competition Commission and Yara South Africa
(Pty) Ltd, Omnia Fertilizer Ltd and Sasol Chemical Industries Ltd -
CCT81/11 [2012] ZACC 14 (Yara) and Competition Commission and
Loungefoam (Pty) Ltd, Gommagomma (Pty) Ltd, Vitafoam (Pty) Ltd,
Steinhoff Africa Holdings (Pty) Ltd, Steinhoff International
Holdings (Pty) Ltd, Feltex Holdings (Pty) Ltd and KAP International
Holdings (Pty) Ltd - CCT 90/11 [2012] ZACC 15 (Loungefoam).
Both these cases have practical implications on how the
Competition Commission (Commission) initiates and refers complaints
to the Competition Tribunal and will have an impact on a number of
pending referrals in which similar objections have been
raised.
The matters are also symptomatic of the on-going debate regarding
whether or not statutory bodies like the Commission should be
allowed the freedom to conduct their mandated duties. On the one
hand, competition authorities may argue that it is being hamstrung
by respondents raising "overly technical" points and by
courts that do not necessarily possess the necessary understanding
of economic principles central to competition law. On the other
hand, legal practitioners may argue that competition law is still
developing and legal challenges are natural and necessary in order
to establish competition jurisprudence within South Africa.
The judgments
On 26 June 2012 the Constitutional Court ended immense
speculation and legal debate when it handed down judgment in the
Yara and Loungefoam matters. It dismissed both of the
Commission's applications for leave to appeal earlier decisions
of the Competition Appeal Court (CAC) with costs.
The CAC previously ruled that the Commission could not amend its
complaint referrals to introduce new evidence and/or allegations,
or to join new respondents. Not only do both decisions highlight
the importance of due process in a regulatory environment, but
following these decisions, the Commission will now have to follow
the normal appeal procedure in both matters.
In the ordinary course, the Commission (or any would-be appellant
for that matter) seeking to appeal a decision of the CAC would be
required to either seek leave from the CAC to appeal the matter to
the Supreme Court of Appeal (SCA), or, if the matter concerns a
constitutional issue, seek leave from the CAC or the SCA to appeal
to the Constitutional Court. In specific instances, when it is in
the interests of justice to do so, leave from the Constitutional
Court may be sought directly. In both the Yara and Loungefoam
matters, the Commission (despite applying to the SCA for leave to
appeal), elected to seek direct access to the Constitutional Court,
effectively bypassing both the CAC and SCA.
Although the Commission's actions resulted in many people
accusing it of "forum shopping", the Commission explained
that not only was it entitled to seek direct access in terms of
legislation, but that the urgency and importance of settling the
disputed legal principles raised constitutional matters and
justified appealing directly to the Constitutional Court. The
Constitutional Court has only been requested to rule on competition
law issues on exception, as competition law is highly specialised
and has its own specialised court to hear appeals, the CAC.
Background
The background to each matter is briefly as follows: in the Yara
matter the Commission appealed a decision of the CAC, which found
that the Commission was not entitled to amend a complaint so as to
introduce a new complaint or new respondent unless a fresh
complaint alleging this has been properly initiated. The
Constitutional Court considered the Commission's condonation
argument, whether or not it was in the interests of justice to
grant leave to appeal and focussed on section 63(2) of the
Competition Act read with section 167(6) of the Constitution. In
essence, the majority judgment of the Constitutional Court held
that the Commission's delay in lodging this application was
excessive and that "the explanation that the Commission
attempts to advance is so manifestly unsatisfactory that it can
almost be rejected as no explanation at all" (para 34 of the
judgment).
The Constitutional Court held that the Commission had failed to
apply to the CAC in accordance with section 63(2) of the
Competition Act and that, for these reasons, the Commission's
applications stood to be dismissed. The court further held that
even if the condonation application was allowed, it was not in the
interests of justice to grant the Commission leave to appeal
directly to the Constitutional Court.
In the Loungefoam matter the Commission appealed the entire
judgment of the CAC. The CAC judgment found that, amongst other
things, any amendment including a new complaint should be initiated
before it could be referred. The majority decision of the
Constitutional Court considered similar factors to those in the
Yara judgment and found that, irrespective of one's
interpretation of section 63(2) of the Competition Act, the
Commission failed to seek leave from the CAC before approaching the
Constitutional Court and showed no compelling circumstances that
could justify a direct appeal.
Ultimately, the Commission failed to show that the SCA would not
deal with the matter expeditiously or bring finality to some or
even all of the issues between the parties. The Constitutional
Court held that the matter should to be dismissed on this basis
alone and thus found it unnecessary to decide condonation of the
Commission's seemingly excessive delay.
Both of the Constitutional Court's decisions accept that
issues concerning the powers of and function of any organ of state
raise crucial constitutional law questions. The Constitutional
Court however held that due process must be adhered to and that
these issues should first be considered by the specialist
competition court (the CAC), and then, if required, also the
SCA.
Implications
This development is arguably a substantial setback for the
Commission in what has been an extremely long and arduous journey
following the matter of Woodlands Diary (Pty) Ltd and Another v
Competition Commission 2010 (6) SA 109 (SCA) (Woodlands). The
merits of neither of the matters were considered by the
Constitutional Court and the applications were dealt with on
procedural grounds. The judgments were firmly based on
interpretations of the relevant statutes and rules of court with a
strong emphasis on the importance of due process. These matters are
the last in a chain of cases regarding technical challenges
questioning the Commissions' powers of investigation,
initiation and the referral of matters to the Competition
Tribunal.
All is however not lost for the Commission, as it still has
pending applications in both matters for leave to appeal before the
CAC and potentially the SCA. The minority judgments in both matters
in fact hinted that there may indeed be merit to the
Commission's cases. Whether or not these courts will entertain
the applications and/or whether or not the Commission will proceed
with these applications is uncertain, as pursuing the cases will
undoubtedly result in further delays.
Whatever the Commission chooses to do, both majority judgments of
the Constitutional Court stress the importance of due process and
procedure, and emphasises the fact that failure to adhere to the
legislative framework will not be tolerated. This is not only a
crucial lesson for the Commission, but must be borne in mind by all
within the legal field.
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