Whis­tle-blower’s le­niency plea made pub­lic

Business Day - Business Law and Tax Review - - BUSINESS LAW & TAX REVIEW - Jocelyn Katz, Wade Graaff & Le­bo­gang Pha­l­adi

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.

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