Strategy documents pose competition law risk
HOW many of your company’s internal documents and reports would you be happy to put in front of the Competition Commission? Reports on market developments and competitive objectives littered with statements of how your business has the lion’s share of the market and is wiping out the competition with its aggressive strategies may impress shareholders, but they certainly will not find favour with competition authorities.
In the recent case between the Competition Commission and Telkom SA Limited, much of Telkom’s defence was destroyed by an internal memorandum and a document titled “WAR Strategy”.
The strategy document was drafted in response to a perceived threat posed by competition from value added network service providers.
It contained a number of damning statements, some of which contradicted the defences that Telkom sought to rely on and confirmed Telkom’s objective to avoid the risk of valueadded network service providers switching customers from Telkom to its competitor in the future.
In addition, an internal memorandum stating that it was arguable that the services provided by value-added service providers were “due and proper” certainly did not assist Telkom in trying to prove its central defence that these services were illegal.
Why do documents end up with the authorities?
Although internal documents are confidential, they are not always considered to be privileged.
In all litigation, parties are obliged to produce for inspection all documents relevant to the dispute, even confidential documents. These documents are made available to all opponents. Only legally privileged documents may be withheld.
Privileged documents include correspondence between parties and their legal advisors, but only to the extent that the correspondence was entered into in contemplation of litigation or for taking confidential legal advice. Correspondence between parties engaged in bona fide settlement negotiations is also privileged.
Internal documents and reports are not privileged. They have to be produced no matter how detrimental to your case they may be. This is so in merger hearings and in complaints about anti-competitive practices like price fixing or abuses of dominance.
In addition, the Competition Commission is entitled to remove and copy documents that are not privileged found during dawn raid inspections. What should you do? It is vitally important that you carefully consider the way in which your internal documents are drafted.
Where they are privileged, and you are seeking advice from your legal advisors in relation to potential non- compliance, make sure they are marked privileged and are stored separately in a manner that ensures that it is apparent that they are privileged.
Where they are not privileged, choose your wording carefully. In many instances, the content of the document is not, in fact, contentious or in contravention of the Competition Act, but the way in which it is drafted suggests that there is cause for concern. For example, avoid use of the words such as “market leader” or “dominant player”. Rather report strategies for gaining market share objectively. Do not try to impress shareholders to the detriment of the company.
Remember, what arrives on your desk may also arrive on the desk of the competition authorities.