The spirits at the Competition Commission were certainly high when the Constitutional Court (“the Court”) ruled in favour of the Competition Authorities^[1] by holding that Senwes did indeed contravene section 8(c) of the Competition Act.^[2]

The issue before the Court was a consideration of the interpretation to be given to the nature and breadth of the powers afforded the Tribunal in terms of the Act. The need for such an enquiry was born from the use of the term ‘margin squeeze’ by one of the experts testifying on behalf of the Competition Commission. The Tribunal found that Senwes had indeed contravened section 8(c) in that it was guilty of a so-called margin squeeze, however the initial referral to the Tribunal did not make use of this term and so the dispute as to the Tribunal’s ability to have considered evidence relating to a possible margin squeeze began.

The Court agreed with the conclusion drawn by the SCA that the complaint did not cover a possible margin squeeze and thus the outcome was dependent on the interpretation of the Tribunal’s powers – did the Tribunal exceed its statutory powers as held by the SCA?

It was this question which led the Court to decide that there was indeed a constitutional issue at stake, the very rule of law itself, as exceeding its statutory powers would violate the principle of legality.

The Court undertook an analysis of the Tribunal’s functions, including the power to adjudicate complaints and decide whether there has been a contravention of section 8(c). This latter section is couched in terms which are wide enough to allow the Tribunal to consider any abuse of dominance, provided that the complaint was properly referred – there is no need for the Tribunal to ‘put a label on the contravention’,^[3] it merely has to decide whether or not an abuse of dominance has been proven to exist. Furthermore the Court held that section 52(1), which formed the central tenet of the SCA’s decision, does not define the Tribunal’s powers but merely sets out the procedure to be followed in conducting a hearing and the SCA’s approach to this section was flawed as it ‘conflates matters of jurisdiction and procedure’.^[4]

The Court also found that although the Tribunal failed to rule on Senwes’s objections relating to the leading of evidence on margin squeeze, this did not result in the hearing being unfair as Senwes knew that the complaint against it was centred on section 8(c) and it was therefore given enough opportunity to refute said allegations. Thus the Court upheld the Tribunal’s decision, merely deleting the Tribunal’s reference to margin squeeze.

What are the consequences of this decision? How will this affect Senwes and, more importantly perhaps, competition law in general?

No costs order was made against Senwes as the Commission is an organ of state, and no fine has been or may be imposed on Senwes as a first-time section 8(c) contravention is not one of the contraventions listed in section 58 for which administrative fines may be imposed for a first time offender.

The fact that the Court has confirmed the Tribunal decision may, however, lead to possible civil claims by grain stores to whom Senwes charged differential storage rates, however the likelihood of such a civil claim succeeding is slim, as such an action has to date not been successful in South Africa.

The potential impact of this case on competition law in general is far reaching. Following this decision, firms that are called on the red carpet may face considerable uncertainty regarding the exact scope and extent of the possible charges which the Tribunal may consider against them. This will be especially true if the Court’s approach is upheld by it in the two competition law cases awaiting its decision, namely Yarra and Loungefoam.

The charges will no longer necessarily be limited to those listed in the referral and further charges could come to light depending on the evidence presented to the Tribunal – although the Court in Senwes stated that a firm will already be aware of the particular contravention to which the charge relates, a changing landscape of charges can lead to difficulty in attempting to refute allegations and may lead to an unfair playing field in which the Commission will always have the upper hand.

However the potential scope of the judgment is not yet clear, what for example, will happen if the evidence in question gives rise to an entirely different contravention as is the case in Loungefoam - will the Tribunal be allowed to simply consider this as part of the initial complaint or will the Senwes judgment be restricted to situations where the same contravention is in question? We think not.

Article prepared by Misha Post (Candidate Attorney) and overseen by Jac Marais (Partner in the Adams & Adams Commercial Department)

Notes:
[1] Competition Commission of South Africa v Senwes Limited CCT 61/11 [2012] ZACC 6.
[2] Act 89 of 1998.
[3]  (n1 above) at paragraph 28.
[4]  (n1 above) at paragraph 49.