10 Dec 2013

Corporate & Commercial Law Department Update, Leniency doesn't get firms off the civil damages hook

Practice Area(s): Corporate & Commercial |

The fines imposed by the Competition authorities are supposed to promote compliance and competition through deterrence.  The primary purpose of a damages award is compensation for the person who has suffered harm.  It is important to remember this when dealing with damages claims and class actions, especially in light of the growing awareness around civil claims for conduct found to be anticompetitive.

Section 65 of the Competition Act, 89 of 1998 ("the Act") gives the Competition Tribunal ("Tribunal") and Competition Appeal Court ("CAC") divided jurisdiction in relation to civil actions arising from competition offences between the Tribunal and CAC and the ordinary courts.  Except for the Tribunal's power to confirm consent orders that contain damages awards in terms of section 49D, only civil courts may award damages to those who have suffered loss because of anticompetitive conduct.

So how does Joe Bloggs recover damages for harm which he suffers because of a firm's anticompetitive conduct?  First the Tribunal or CAC has to find that the firm has committed a competition offence.  Then Joe Bloggs has to get a certificate from the Tribunal or CAC certifying that the conduct in question has been found to be a prohibited practice.  He then takes that certificate with his claim to the ordinary Courts.  The Courts are bound by the competition authorities' findings.  That is not the end of the matter though, because Joe Bloggs not only has to prove that that firm has committed a competition offence (which the certificate does for him), he then has to prove that that offence caused his loss.   And that is much easier said than done. 

There is a much greater awareness around the issue of claiming civil damages for anticompetitive conduct in South Africa but there are only 2 cases in which damages claims have been instituted.  They are the Children's Resources Center Trust and Others v Pioneer Foods (Pty) Ltd and Others (50/2012) [2012] ZASCA 182 ("CRC case") and Imraahn Ismail Mukaddam v Pioneer Foods (Pty) Ltd and Others [2013] ZACC 23 ("the Mukaddam case").  So far, no damages awards have been made by the Courts.

The CRC and Mukaddam case did not succeed in showing the claimants the money.  They did develop our law, much as that is cold comfort for the claimants.  The CRC case is authority for the principle that class actions are recognized in our law, not only for constitutional claims, but also in other appropriate cases.  It also laid down the requirements for class actions. The Mukaddam case made it clear that class action claims are subject to a broad interests of justice enquiry in terms of the Constitution.

It is important for firms to remember that, although they may have been granted leniency in terms of the Commission's Corporate Leniency Policy, they may still face civil liability for anticompetitive conduct.  In Premier Foods (Pty) Ltd v Norman Manoim N.O. and Others (38235/2012), Premier Foods asked the court for an order declaring that the Tribunal and its Chairperson could not lawfully certify that Premier Foods' conduct was a prohibited practice under the Act because Premier Foods had been granted leniency by the Commission following its participation in the bread price fixing cartel.  When the respondents in the price fixing cartel complaint claimed civil damages for the loss that they claimed to have suffered, Premier Foods applied to court for this order. The High Court held that the competition authorities' certification of commission of a prohibited practice merely records a finding which has already been made.  So, despite the leniency application, Premier Foods still faced the civil damages claim because it had confessed to price fixing.  The lesson is that even leniency doesn't get you off the civil damages hook.

Jennifer Finnigan Contact 031 575 7406 and finnigan@wylie.co.za

Sally Mashiane Contact 031 575 7418 and mashiane@wylie.co.za