Power construction (west cape) (pty) ltd power construction (pty) ltd v. The competition commission of south africa - (02 May 2017)

It is permissible to add a firm to an existing complaint subsequent to an investigation. Initiation does not require any level of formality

MRTP/ Competition Laws

Present appeal is against an order of Competition Tribunal in which Tribunal dismissed a series of in limine objections raised by Appellants. On 1st September, 2009, Respondent, initiated a complaint against several identified firms in construction industry as well as "other firms, including joint ventures in construction industry" for allegedly engaging in prohibited practices, including collusive tendering in form of cover pricing. Neither of Appellants was identified in complaint. Following upon this complaint, Respondent conducted an investigation, in course of which it received information of widespread, pervasive anti-competitive conduct in the industry. On 1st February, 2011, Respondent published an Invitation to Firms in Construction Industry to Engage in Settlement of Contraventions of Act. Second Appellant, acting through its chairman, responded to this initiative by way of a letter addressed to Respondent. On 15th April, 2011, Appellants provided information with regard to N1 contract. On 23rd November, 2011, Respondent wrote to Appellants informing them that its (Respondent's) investigation revealed details of unlawful conduct regarding N1 contract for which they were to be held accountable. Letter invited Appellants to engage in settlement discussions with Respondent over contravention that occurred. Appellants had confessed to contravention of Act on 15th April, 2011. Nevertheless, they elected not to settle matter with Respondent. On 17th December, 2014, Respondent referred dispute to Tribunal. Tribunal's decision, concluded that, September 2009 initiation had met the requirements for a valid initiation. It, accordingly, dismissed point in limine that, referral against Appellant was jurisdictionally invalid. Similarly, it held, on basis of its approach to evidence, that effect of first Appellant's actions continued until 17th February, 2009, when H & I received final payment for a tender which had been subject of collusion. Accordingly, impugned conduct had not ceased three years prior to initiation of compliant by Respondent on 1st September, 2009.

Section 49 B of Competition Act, 1998 provides that "Commissioner may initiate a complaint against an alleged prohibited practice". Section 49 B (3) of Act, provides that, upon initiating or receiving a complaint in terms of section, "Commissioner must direct an inspector to investigate complaint as quickly as practicable". In terms of Section 50 of Act, at any time after initiating a complaint, "Commission may refer complaint to Tribunal'. In Woodlands Dairy (Pty) Ltd v Milkwood Dairy (Pty) v Competition Commission, Court dealt with requirements of a valid complaint initiation and referral. In Woodlands, it appears that, Competition Commissioner initiated, without any qualification, a full investigation into milk industry. He did not initiate a specific complaint against an alleged prohibited practice of specified firms which would then have led to a direction to an inspector to investigate. SCA held, with regard to initiation statement, that it must be based on a reasonable suspicion that, a prohibited practice had taken place. On basis of dicta, it is held that, if an investigation by Respondent takes place and during course of, or as a result thereof, it learns of further parties which may have committed prohibited practice, complaint, from which these firms were initially excluded, can be amended to so include them, triggering further consequences as set out in Section 50 of Act.

In Competition Commission v Yara 2013 (6) SA 404 (SCA) Court, said that, "Since no formalities are required, Section 49 B (1) seems to demand no more than a decision by Commission to open a case. That decision can be informal. It can also be tacit. Applying Woodlands and Competition Commission v Yara 2013 (6) SA 404 (SCA) together to facts of present dispute, conclusion reached is that, Respondent initiated a complaint against 19 construction companies. Complaint highlighted possibility that, other firms could be included in complaint. Pursuant to this initiation, on 1st February, 2011, Respondent issued its "Invitation to Firms in Construction Industry to Engage in Settlement of Contravention of Competition Act' in which it invited firms which had committed infringements under Act, to provide particulars of any contravention and to engage in settlements in respect of such conduct; thereby circumventing the need for more formal and intricate legal procedures to be followed. It was in response to this invitation, on 31st March, 2011, that first Appellant submitted details pertaining to five of its projects in which prohibited practices had taken place. Four days later, further details were provided with respect to second appellant's involvement in the N1 tender.

As a result of this letter, Respondent generated a further letter on 23rd November, 2011 inviting Appellants to settle in accordance with February invitation. Significantly, in this letter, Respondent made it clear that, Commission will initiate prosecution proceedings against Appellant’s firm at Competition Tribunal. This passage was a clear reference to Section 50 of Act which provides that, Respondent may refer a complaint to Tribunal. Manifestly, in either April or in November, 2011, Appellants had been added to initial complaint in this case, not as a result of an investigation which had taken place but, in this case, as a result of appellants' own response to the February invitation. In this case, it was Appellants which volunteered relevant information to Respondent, as a consequence of which they were added as parties to a valid complaint, admittedly informally. Viewed accordingly, this addition falls within framework set out in the dicta in Woodlands and Yara read together. Respondent included Appellants as part of entities specified in complaint of September, 2009. Given that, judgment in Woodlands accepts that, it is permissible to add a firm to an existing complaint subsequent to an investigation and that judgment in Yara recognises that, initiation does not require any level of formality, evidence clearly indicates that Appellants were made the subject of a referral in April, 2011. Even if, this is not correct, at best, for Appellants this addition then took place pursuant to letter of Respondent to Appellants dated 23rd November, 2011.

In Paramount Mills (Pty) Ltd v Competition Commission, it was observed that, prohibited conduct does not end or cease with conclusion of agreement fixing selling price. It continues to exist and its effect continues to be felt when future prices, agreed upon pursuant thereto are implemented. In present case, prohibited practice was that of collusive tendering, in terms of Section 4 (1)(b) (ii) of Act, as a result of which second Appellant agreed to submit a tender to SANRAL with express purpose of keeping alive a tender process for maintenance of a stretch of N1 project. This action was to ultimate benefit of H & I. Appellant was thus, a party to a prohibited practice of collusive tendering. Contract that flowed from this practice and was inextricably linked to prohibited practice ended, when last act relating thereto was performed, namely receipt of final payment to H & I: this payment was completion of obligations in terms of a contract which was product of a prohibited practice that occurred on 17th February, 2009. It follows that, prohibited practice ceased on 17th February, 2009. As the initiation, on finding of this Court, took place in 2011, provisions of Section 67 (1) of Act are of no assistance to Appellants. The in limine point raised in respect of prescription was correctly dismissed by Tribunal.

Relevant : Woodlands Dairy (Pty) Ltd v Milkwood Dairy (Pty) v Competition Commission, Competition Commission v Yara 2013 (6) SA 404 (SCA)

Tags : COLLUSIVE BIDDING INVESTIGATION SETTLEMENT INVITATION