Whistle-blower’s leniency plea made public
However, documents must be remitted to Competition Tribunal to determine the confidentiality claim
THE Competition Commission was recently ordered by the Supreme Court of Appeal to release a leniency application filed by a whistle-blower (Scaw SA (Pty) Ltd) in a steel cartel to certain other members of the same cartel.
The SCA’s order to release the documents was subject, however, to the decision being remitted back to the Competition Tribunal to determine the confidentiality claim (which parties are entitled to submit when providing the commission with information) submitted by the leniency applicant.
The SCA held that the commission was correct in asserting that the leniency documents are protected by “litigation privilege” (the privilege that protects communications between a litigant or his legal adviser and third parties if such communications are made for the purpose of pending or contemplated litigation), and therefore not discoverable during the litigation. However, the commission’s decision to refer to the documents in its founding papers meant that the commission waived its right to protection, thereby rendering the documents discoverable.
The origin of this landmark decision is an investigation by the commission against alleged prohibited practices in the steel industry that began more than five years ago. In 2008 the commission initiated a complaint against, inter alia, ArcelorMittal SA Ltd, Cape Gate (Pty) Ltd and Scaw, accusing them of engaging in cartel conduct in contravention of the Competition Act, No 89 of 1998. Following searches by the commission at the premises of various companies as part of the investigation, Scaw elected to file a “marker” and, thereafter, a leniency application, with the commission. Scaw was granted conditional immunity from prosecution by the commission, and as a result of the information received from Scaw, including the information in the leniency application, and from its own investigations, the commission concluded that the respondents had engaged in prohibited practices in contravention of the Competition Act.
As a result, the commission referred a complaint against Cape Gate, ArcelorMittal and various other steel manufacturers to the tribunal for adjudication, alleging that they had engaged in various forms of price-fixing, information-sharing and market division in the steel industry. After the commission delivered its founding affidavit, ArcelorMittal and Cape Gate sought access to the commission’s record as well as to the leniency documents in order to respond properly to the allegations. The commission provided some documents to ArcelorMittal but refused to hand over the remaining documents, including the leniency application. As a result, Cape Gate and ArcelorMittal applied to the tribunal for access to the various documents, including the leniency application. In support of its application ArcelorMittal and Cape Gate cited the fact that the leniency application was referred to by the commission in its founding papers and the well-established rule of the High Court Uniform Rules of Court, which permits any party, after delivering a notice to any other party in whose pleadings or affidavit there is reference to a document, to inspect and copy the document. The tribunal granted ArcelorMittal discovery of three documents, referred to in the referral affidavit, but for the rest dismissed both applications.
ArcelorMittal and Cape Gate appealed the tribunal’s decision to the Competition Appeal Court. At the Competition Appeal Court, the commission once again argued that the leniency application was protected by litigation privilege. The Competition Appeal Court failed to determine whether the leniency application was protected by litigation privilege but simply referred the matter back to the Tribunal. On appeal to the SCA, in criticising the Competition Appeal Court the SCA stated that “the order of the Competition Appeal Court — or rather, its failure to rule upon the order made by the tribunal, which is what was before it on appeal — has created a dilemma for all the parties”. The SCA went on to say that “strictly, an appeal lies against an order of a court... I think it is clear that they cannot be left in that position and we ought to accede to their unanimous request to resolve these issues, notwithstanding that strictly there was nothing to appeal”.
The SCA was therefore left to consider whether the various documents, including the leniency application, were discoverable. In this regard, it held that Scaw’s leniency application came into existence at the instance of the commission for the purpose of prosecuting firms alleged to be part of a cartel, as well as the fact that the purpose for the preparation of leniency applications was to support the envisaged litigation against the cartel. Although the commission managed to fulfil the requirements for claiming litigation privilege, the SCA found that the commission waived such privilege by openly referring to the leniency application in its complaint referral against ArcelorMittal and Cape Gate. Before access could be granted to ArcelorMittal and Cape Gate, the SCA held that the matter should be referred back to the tribunal to consider Scaw’s claims of confidentiality.
In this regard, the SCA raised doubts and indicated that Scaw made no attempt to bring any information within the ambit of the definition of “confidential information”. The SCA, however, sent the matter back to the tribunal to make a determination in this regard. The SCA therefore upheld ArcelorMittal and Cape Gate’s appeal.
The decision has raised question marks about the sanctity of a leniency application submitted by a self-confessed cartel member. In this regard there has been some debate in the legal fraternity as to whether leniency applicants should secure undertakings from the commission or insist that the commission not refer to the application in a manner that jeopardises the litigation privilege. While current leniency applicants may consider scurrying to consider avenues in an attempt to save their applications from possible disclosure, one cannot deny that the SCA judgment is welcome for competition law jurisprudence.
The SCA, with its well rounded expertise in legal matters — as opposed to purely competition lawrelated matters — provided muchneeded clarity on the issue of leniency applications and litigation privilege to parties concerned in a seemingly well-reasoned judgment. Providing this clarity can only be positive, as the commission and leniency applicants (current and prospective) will no doubt likely sit up and take note of the lessons to be learned in this matter. This judgment may well be one of the SCA’s last decisions on competition law in light of the Constitution Seventeenth Amendment Act, which intends to prevent the court from hearing competition law-related appeals. This will require the tribunal and the Competition Appeal Court to take a more active stance in determining matters of a more legal and procedural nature to provide litigants with their desired relief in the future.
Jocelyn Katz is a director, Wade Graaff an associate and Lebogang Phaladi a candidate attorney in the ENS competition law department.