On 24 June 2020, the Constitutional Court (the Court) handed down a landmark judgment allowing the Competition Commission (the Commission) to investigate and prosecute cartel conduct that ceased more than three years before the investigation started. In a significant victory for the Commission against what it sees as technical challenges to its enforcement action, this judgment clears the way for the Commission to pursue older cartel conduct so long as it can show good cause. While the judgment is undoubtedly significant, a range of issues will need to be probed in future cases including whether the Competition Tribunal (the Tribunal) will robustly verify the Commission’s requests for condonation of non-compliance with the three-year time limit and whether this approach will apply to the Commission’s prosecution of other prohibited practices.
The case arises from an investigation by the Commission into alleged collusive tendering between furniture removal companies. While the investigation was initiated in 2010, a number of other companies (including Pickfords Removals SA (Pty) Limited (Pickfords)) were added in 2011. When the investigation was referred to the Tribunal, Pickfords argued that, out of 37 allegations of collusive tendering involving Pickfords, 14 allegations were time-barred on the basis of the 2011 initiation date. Pickfords relied on section 67(1) of the Competition Act, which states “A complaint in respect of a prohibited practice may not be initiated more than three years after the practice has ceased.”
At first instance, the Tribunal agreed with Pickfords that the Commission could not prosecute conduct that ceased three years before the 2011 initiation. On appeal, while the Competition Appeal Court (CAC) agreed that the Commission was time-barred from going beyond three years, it was of the view that the 2011 initiation was only an amendment of the 2010 initiation. According to the CAC, the trigger event for the three-year period under section 67(1) of the Competition Act was the 2010 initiation.
In a further appeal to the Court, the Commission maintained that the Tribunal was empowered to condone non-compliance with the time-limit in section 67(1) of the Competition Act if good cause was shown. Section 58(1)(c)(ii) of the Competition Act provides that the Tribunal may condone, on good cause shown, any non-compliance with a time limit set out in the Competition Act. At first instance, the Tribunal had taken the view that this provision was not applicable to section 67(1) of the Competition Act.
After agreeing with the CAC’s position that the trigger event was the 2010 initiation, the Court framed the key question in the appeal as whether section 67(1) of the Competition Act should be interpreted either as a hard line provision resulting in the matter’s prescription after the three-year period or as a procedural time-bar open to condonation in the event of non-compliance.
In opting for the latter interpretation, the Court was ultimately persuaded by the adverse effect of an absolute substantive time-bar on the Commission’s work as a public body acting on behalf of the public interest as well as the implications for private litigants in follow-on litigation. Moreover, the Court was opposed to rewarding cartelists for the covert nature of their activities and penalising the Commission for failing to act within the three-year period against conduct that it would invariably have no knowledge of.
The Court added that condonation should not be a mere formality and will depend on the facts of each case. In applying section 58(1)(c)(ii) of the Competition Act, the Tribunal will need to take a range of factors into account such as the extent and cause of the delay, the effect of the delay on the administration of justice and other litigants, the reasonableness of the explanation for the delay, the issue(s) to be raised in the matter, and the prospects of success. The extent to which the Tribunal applies these criteria will be closely monitored with the concern that, despite the Court’s utterances, condonation may become a formality given that the Commission could always point to the administration of justice and key issues of public policy.
The judgment has been strongly welcomed by the Commission who has repeatedly expressed frustration as what it sees as technical arguments by respondents seeking to evade accountability under the Competition Act. While the judgment is undoubtedly significant, the implications will need to be probed in other cases. For example, in focussing on cartel conduct, it is possible that the Court sought to leave untouched the application of section 67(1) of the Competition Act to other types of enforcement action (such as the prosecution of vertical agreements or abuse of dominance). Also, it could be questioned whether, given the Court’s rationale, the judgment applies to other horizontal coordination (i.e. not covert) that could be classified as cartel conduct under the Competition Act.
The author would like to thank Mbali Msimang for their assistance in writing this blog.