Competition Law Part 5

Question 1

Enforcement

What are the different enforcement mechanisms?

Answer 1

Administrative Penalties
Interim Relief
Divestiture
Criminal Sanctions
Exemption
Corporate Leniency Policy
Private Claims for Damages and Class actions
Market Inquiries
Market Impact Studies

Question 2

Why is enforcement of the Competition Act important?

Answer 2

-Restores competitiveness in markets that have been impacted or affected by anticompetitive conduct
-Enforcement promotes access to markets and redress for consumers and competitors that are hard done by anticompetitive conduct
-It also fosters the realization of the state’s developmental goals

Question 3

Who may initiate complaint proceedings?

Answer 3

May be initiated against a prohibited practice by:
-the commissioner i.t.o s49B(1),s43(3)c.
-the public i.e any person i.t.o s49B(2)
- a competitor or a customer.

Question 4

What is the effect of instituting a complaint?

Answer 4

triggers Commission to direct inspector to investigate the prohibited practice and refer matter to tribunal for adjudication. S49B(3)

Glaxo Wellcome v National Association of Pharmaceutical Wholesalers: “complaint need not be drafted with precision or even refence to the Act, but allegations must be cognisably linked to particular prohibited conduct/practices”.

**Powers of Commission to investigate: Sections 46-49 - very extensive: **include search & seizure, summons & interrogation,

**Investigation: ** must be completed within a year - can be extended by agreement between the Commission and complainant or by an order of the Tribunal

Question 5

What did the Dawn Raids case state regarding the powers of a court when dealing with complaints?

Answer 5

• HC Judge, or Magistrate may issue a search warrant , if there is reasonable belief of existence of prohibited practice.
• Commission has power to examine any article that is related to the investigation and to attach or remove it s48.

Question 6

What is teh next stage after the commison has investigated the complaint?

Answer 6

Upon investigation, Commission may either:
Refer a matter to the Competition Tribunal for adjudication
Referral occurs in the following manner:
commission’s referral of it’s own complaint.
commission’s referral of a complainant’s complaint.

Issue a Notice of Non-Referral. S50(5)
What happens if Commission dos not refer complaint: complainant has right to refer its own complaint. S51(1)

Conclude a Consent Order: at any time during or after the completion of an investigation, the Commission may negotiate and conclude a Consent Agreement with any firm being investigated and make such agreement an order of the Tribunal.

Question 7

What are the enforcement mechanisms in mergers?

Answer 7

1. ADMINISTRATIVE PENALTIES.
2. DIVESTITURE.
3. INTERIM RELIEF.

Question 8

Under what circumstances may administartive penalties be enforced?

Answer 8

Sections 58(iii) and 59 Competition Tribunal may impose administrative penalties:

For:
a)per se prohibited Horizontal and Vertical practices
b)abuse of dominance e.g excessive pricing.
c) contraventions of merger provisions: implementing a merger without notification or approval or contrary to merger approval conditions
The administrative penalty:
First time offence: 10% of firm annual tern over and exports
Repeat offence: 25% of firm annual tern over and exports

Question 9

What are the factors in sec 59(3) that must be taken into account when imposing administrative penalties?

Answer 9

-the duration, gravity and extent of the contravention, behaviour of the respondent, level of profit derived from the contravention etc.
-the degree to which the respondent has co­operated with the Competition Commission and the Competition Tribunal;
(g) whether the respondent has previously been found in contravention of this Act;
(h) whether the conduct has previously been found to be a contravention of this Act or is substantially the same as conduct regarding which Guidelines have been issued by the Competition Commission in
terms of section 79.

Question 10

How are administrative penalties calculated according to the Southern Pipeline v Competition Commission case?

Answer 10

1.Determining the affected turnover in the most recent year in which the firm participated in the contravention
2.Basic amount on which to calculate the administrative penalty, being that proportion of the affected turnover relied on;
3.Where the contravention exceeds one year, the amount obtained in step two is multiplied by the duration of the contravention
4.If the figure from step three exceeds the cap provided for by S 59(2) of theCompetition Act, then the Tribunal rounds off the figure to the amount of the cap
5.Tribunal will consider the factors that might mitigate and/or aggravate the amount reached in step 4. This may be done by way of a discount or premium expressed as a percentage of that amount that is either subtracted or added to it
6.Step six: if the figure at step five exceeds the cap provided for in section 59(2), the Tribunal adjusts the figure downwards so that it does not exceed the cap.

Question 11

What is divestiture?

Answer 11

Tribunal: empowered to order a firm to dispose of or sell part of its business to remedy anticompetitive conduct or prevent anticompetitive conduct from occurring in the future.

Tribunal can order divestiture in relation to a mergers or prohibited practices

Question 12

How does the sec 60 merger divestiture operate?

Answer 12

Tribunal may ( S60 (1):

(a) order a party to the merger to sell any shares, interest or other assets it has acquired pursuant to the merger; or
(b) declare void any provision of an agreement to which the merger was subject.

Section 60(3) divestiture order made by the Competition Tribunal must be confirmed by the Competition Appeal Court.

Question 13

How does the sec 60(2) divestiture in prohibited practices operate?

Answer 13

Competition Tribunal may make an order directing any firm, or any other person, to sell any shares, interest or assets of the firm if the firm has contravened section 8 if the prohibited practice in question :
(i) cannot adequately be remedied in terms of another provision of this Act; or
(ii) the prohibited practice is substantially a repeat by that firm of conduct previously found by the Tribunal to be a prohibited practice

Question 14

Under what circumstances in interim relief granted?

Answer 14

For complaints involving the violation of Chapter 2 of the Act (Prohibited Restrictive Horizontal and Vertical Practices and Abuse of Dominance

-Interim relief is not available in merger cases

Question 15

What are exemptions and when are they available?

Answer 15

being absolved from legal consequences or responsibility that follows prohibited conduct.

Exemptions are regulated under s10 of the Act: allows firms to apply to the Commission to have any anticompetitive agreement or practice or categories of anticompetitive agreements or practices exempted.

Question 16

When may an exemption be granted in terms of sec 10?

Answer 16

Commission may grant exemption if agreement or category of agreements leads to:

maintenance or promotion of export; entry into markets by SMSEs and firms owned by HPDIs; stopping decline of a sector; economic development in designated sectors; and promotion of employment

Question 17

What are the two avenues after an exemption application has been received?

Answer 17

1.Grants conditional or unconditional exemption: if agreement or practice meets requirements of subsection 3

2.Refuse exemption: if practice or agreement does not constitute prohibited practice OR does not meet requirements of subsection

Question 18

When may the commission revoke a sec 10 exemption?

Answer 18

1.Exemption was granted on the basis of false or incorrect information
2.a condition for exemption is not fulfilled.
3.reasons for the granting of the exemption no longer exist.

Question 19

Can the competition tribunal+ competition apeal court make out a claim for damages?

Answer 19

They cannot make out a claim for damages

> Act provides mechanism for private parties to institute claims and class actions for damages in High Court against firms found guilty of contravening the Act

Question 20

Can a person who was awarded damages under a consent order also pursue civil damages?

Answer 20

Not permitted to pursue further civil damages under sec65(a)

Question 21

What are the contents of the notice filed with the CT when a person has suffered loss through prohibited conduct?

Answer 21

**Files a notice from Chairperson of the CT or Judge President of CAC with the Registrar of the High Court.
**
1.the notice certifies that the conduct which constitutes the basis of the damages action was found to be a PP under the Act.

2.includes date of finding, and sections of the Act under which the Competition Tribunal or CAC made its findings.

3.The notice is “binding on a civil court and conclusive proof of its contents” s65(7)

Question 22

What is the effect of a review of the CT proceedings to the CAC?

Answer 22

suspends the right to commence a civil action for damages.

Question 23

What is S49E Corporate Leniency?

Answer 23

The provision empowers the Commission to grant leniency to a firm that has engaged in cartel conduct : Price fixing; Division or allocation of markets; and Collusive tendering.

> If an applicant for CL meets all the req of the CLP, it will gain immunity , as it’s conduct will not be referred to the CT for adjudication and therefore it will not be subject to an administrative penalty.

Question 24

What are the conditions for granting corporate leniency?

Answer 24

• Be the first member of the cartel to provide the Commission with sufficient information to institute proceedings.
• Commit to continuous co-operation with the Commission until it’s investigations are finalized .
• Provide complete and truthful disclosure of all information available to it.
• Immediately halt the cartel activity.
• Not alert cartel members that it has applied for leniency.
• Not destroy, falsify or conceal information, evidence and documents relevant to any cartel activity.
• Not make misrepresentations concerning the material facts of any cartel activity.
• Not act dishonestly
  *

Question 25

What are the sec73A criminal sanctions for being involved with a cartel?

Answer 25

A person commits an offence if
while a director of a firm / in a managerial position causes that firm to engage in cartel or knowingly acquiesce in the firm engaging in cartel conduct.

A person convicted of this offence is liable to a fine of up to ZAR500,000 or to imprisonment for up to ten years or both.

Under section 73A(4)(a) and (b) of the Competition Act, the Competition Commission:
a)May not seek or request the prosecution of a firm or person that is deserving of leniency.

b)May make submissions to the National Prosecuting Authority in support of leniency for any person or firm prosecuted for an offence.

Question 26

What are the other criminal sanctions for offences outside sec 73A?

Answer 26

in the case of any other offence (other than the s 73A) a person is liable to a fine not exceeding R10 000 or to imprisonment for a period not exceeding six months, or to both a fine and imprisonment

Question 27

What is a market inquiry?

Answer 27

is a formal inquiry into the general state of competition, the levels of concentration and structure of a market without necessarily referring to conduct or activities of any particular firm

> Competition Commission must decide whether any feature of the market, including structure and levels of concentration, restricts or distorts competition.
If the Competition Commission decides that any feature of the market has an adverse effect on competition, it must determine the appropriate action to be taken to remedy, mitigate or prevent the adverse effect

Question 28

What is the effect of a market inquiry?

Answer 28

**Competition Commission must publish a report in the Gazette. **It must also submit a report to the Minister with recommendations, which may include;

-Recommendations for new or amended policy, legislation or regulations.
-The Commission may also make recommendations to other regulatory authorities

Question 29

What are market impact studies and how are they conducted?

Answer 29

The Competition Commission may study the market impact of any decision, ruling or judgment of the Competition Commission, Competition Tribunal or Competition Appeal Court.

In conducting a market impact study, the Commission may request any firm to provide it with any information it may need to compile its impact study report.

The Commission must submit its report to the Minister and publish its report in the Government Gazette within 15 business days after submitting its report to the Minister.

The Minister must table in the National Assembly any impact study report it receives from the Commission within 10 business days after receiving the report of the Commission