Com­mis­sion pro­ce­dure with­stands chal­lenge

Business Day - Business Law and Tax Review - - BUSINESS LAW & TAX REVIEW - Justin Balkin & Sarah Man­ley

Com­pe­ti­tion Com­mis­sion fi­nally scores one on com­pe­tence chal­lenge to com­plaint re­fer­ral

PARA­MOUNT Mills (Para­mount), one of the re­spon­dents in the al­leged milled white maize car­tel, ap­plied to the Com­pe­ti­tion Tri­bunal to have the Com­pe­ti­tion Com­mis­sion’s com­plaint re­fer­ral against it dis­missed. Para­mount’s le­gal rep­re­sen­ta­tives ar­gued that the re­fer­ral was in­com­pe­tent, as no proper case against Para­mount had been made in the re­fer­ral. The ap­pli­ca­tion fol­lowed on the heels of the tri­bunal’s dis­missal of the com­plaint re­fer­ral against SAB on ju­ris­dic­tional grounds (fol­low­ing a line of Com­pe­ti­tion Ap­peal Court and Supreme Court of Ap­peal de­ci­sions against the com­mis­sion for non­com­pli­ance with cor­rect pro­ce­dure in com­plaint ini­ti­a­tions and re­fer­rals).

The ba­sis for the claim that the re­fer­ral was in­com­pe­tent was that it did not meet the test of le­gal­ity and in­tel­li­gi­bil­ity re­quired by the re­cent ap­peal court de­ci­sion in the Wood­lands case and the sub­se­quent re­quire­ment in the Lounge­foam de­ci­sion that the pa­pers be­fore the tri­bunal must meet the stan­dard of an ap­pli­ca­tion in mo­tion pro­ceed­ings (the “le­gal­ity test”). Para­mount also claimed that the com­plaint had pre­scribed (the “pre­scrip­tion point”).

In ar­gu­ing the le­gal­ity test, Para­mount re­lied on the ap­peal court’s state­ment in the Wood­lands case that “the com­mis­sion must at the very least have been in pos­ses­sion of the in­for­ma­tion con­cern­ing an al­leged prac­tice which ob­jec­tively speak­ing could give rise to a rea­son­able sus­pi­cion of the ex­is­tence of a pro­hib­ited prac­tice”. Para­mount ar­gued that the com­mis­sion’s re­fer­ral did not sat­isfy this re­quire­ment.

Fur­ther, on the ba­sis of the Lounge­foam de­ci­sion, Para­mount ar­gued that the com­mis­sion is re­quired to re­fer a prima fa­cie case on the pa­pers to the tri­bunal. Para­mount’s le­gal rep­re­sen­ta­tives ar­gued that a re­fer­ral on af­fi­davit by the com­mis­sion was equiv­a­lent to ap­pli­ca­tion pro­ceed­ings and the tri­bunal should con­duct it­self as a court in mo­tion pro­ceed­ings. Thus, if no prima fa­cie case was made out in the com­mis­sion’s re­fer­ral, then the mat­ter ought to be dis­missed.

The tri­bunal re­jected these ar­gu­ments, not­ing that the court in Lounge­foam was not con­cerned with the na­ture of the tri­bunal’s pro­ceed­ings, but with the proper pro­ce­dure to fol­low when seek­ing to ad­duce additional facts on af­fi­davit.

Fur­ther, the tri­bunal dis­missed Para­mount’s in­ter­pre­ta­tion of the Wood­lands de­ci­sion, hold­ing that Wood­lands was ir­rel­e­vant in this case, on the ba­sis that Wood­lands was not at all con­cerned with the con­tents of the com­mis­sion’s re­fer­ral, but rather with the va­lid­ity of the sum­mons and ini­ti­a­tion state­ment.

Para­mount had also re­ferred to the Net­star case and ar­gued that, on the ba­sis of this case, the ini­ti­a­tion of a com­plaint was likened to a sum­mons and must con­tain suf­fi­cient par­tic­u­lar­ity and clar­ity to sur­vive the test of le­gal­ity and in­tel­li­gi­bil­ity.

Yet again, the tri­bunal dis­missed this on the ba­sis that Wood­lands was not con­cerned with the con­tents of the re­fer­ral. Nev­er­the­less, the court in Net­star made it clear that the test of le­gal­ity and in­tel­li­gi­bil­ity does not re­quire “a level of pre­ci­sion that is de­manded in plead­ings but does mean that the party against whom that al­le­ga­tion is made must be able to know what the charge is and be able to pre­pare to meet and re­but it”.

The tri­bunal found Para­mount had al­ready demon­strated that it un­der­stood the charges against it and was able to plead thereto.

The tri­bunal con­cluded on the le­gal­ity point that there was suf­fi­cient in­for­ma­tion in the com­mis­sion’s af­fi­davit to en­able Para­mount to un­der­stand the case against it and to an­swer it. The tri­bunal stated fur­ther that, if a party finds the com­mis­sion’s re­fer­ral to be in­ad­e­quate, the proper rem­edy is to ob­ject thereto and to pro­vide the com­mis­sion with an op­por­tu­nity to rec­tify it. Para­mount’s ar­gu­ments re­quired a stan­dard of plead­ing from the com­mis­sion that would ef­fec­tively cre­ate a stan­dard of le­gal­ity for the com­mis­sion higher than that en­joyed by par­ties in crim­i­nal pro­ceed­ings. The stan­dard is not so high in a com­plaint re­fer­ral that, if not met, it must be dis­missed.

De­spite not be­ing prop­erly pleaded by the ap­pli­cant, the tri­bunal al­lowed Para­mount to ar­gue its pre­scrip­tion point. Sec­tion 67(1) of the Com­pe­ti­tion Act pro­vides that a com­plaint in re­spect of a pro­hib­ited prac­tice can­not be ini­ti­ated more than three years af­ter that prac­tice has ceased. This lim­its ex­pen­di­ture of re­sources into in­ves­ti­ga­tions of con­duct that have long ceased.

The tri­bunal re­it­er­ated that whether or not an ini­ti­a­tion is time barred can­not be de­cided on the ba­sis of le­gal ar­gu­ment alone. A party wish­ing to rely on sec­tion 67(1) has to show facts, which would or­di­nar­ily be within its own knowl­edge, to show that such con­duct had in fact ceased. As such, the onus is on Para­mount and not the com­mis­sion in this in­stance.

Ac­cord­ing to the tri­bunal, even if it had ac­cepted that sec­tion 67(1) cre­ates no ev­i­den­tial bur­den on the party seek­ing to rely on it, the en­quiry re­mains one of fact. Self ev­i­dently, in or­der to de­ter­mine whether con­duct which con­sti­tutes a pro­hib­ited prac­tice has ac­tu­ally ceased, the con­duct must in the first in­stance be fully de­scribed. How­ever, Para­mount de­nied that such a prac­tice oc­curred at all and re­lied on the com­mis­sion’s plead­ings to ar­gue the point. In this re­gard, the com­mis­sion’s af­fi­davit refers to car­tel ac­tiv­i­ties “dur­ing the pe­riod 1999 up to at least Jan­uary 2007” and al­leges price fix­ing agree­ments in­volv­ing fu­ture con­duct. Con­se­quently, the pre­scrip­tion chal­lenge can only be de­ter­mined af­ter ev­i­dence has been led and the facts are fully ven­ti­lated.

For this rea­son, the ap­pli­ca­tion based on sec­tion 67(1) failed, but the pre­scrip­tion point will still be open to Para­mount to raise at the end of the hear­ing, af­ter all the ev­i­dence has been led and tested.

Af­ter a long line of cases against the com­mis­sion on pro­ce­dural is­sues, the com­mis­sion has tri­umphed. How­ever, this ap­pli­ca­tion did not deal with ma­jor is­sues such as those raised in Wood­lands and Lounge­foam. A true in­di­ca­tion of the va­lid­ity of the com­mis­sion’s pro­ce­dure will be seen at Sen­wes’s ap­peal hear­ing be­fore the Con­sti­tu­tional Court next month. The ap­peal traces back to a find­ing of the tri­bunal that Sen­wes con­tra­vened sec­tion 8(c) of the Com­pe­ti­tion Act by en­gag­ing in con­duct con­sti­tut­ing a mar­gin squeeze. How­ever, such con­duct was not in­cluded in the com­mis­sion’s re­fer­ral to the tri­bunal and, there­fore Sen­wes ar­gued that the re­fer­ral was in­com­pe­tent.

Justin Balkin is a di­rec­tor and Sarah Man­ley is an as­so­ci­ate in the com­pe­ti­tion law depart­ment at ENS.

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