The Competition Appeal Court issued a rare adverse costs order against the Competition Commission for acting ultra vires by issuing a divestiture directive against African Rainbow Capital (ARC) following the Fresh Produce Market Inquiry, and threatening that non-compliance with the directive could result in the Commission applying to the Competition Tribunal to make the divestiture directive an order.   

The Competition Act makes it clear that the power to make a divestiture order is reserved for the Tribunal and that the Commission is obliged to recommend divestiture to the Tribunal in circumstances where it can be considered an appropriate remedy for anti-competitive conduct and effects. The Commission’s divestiture directive forced ARC to bring an urgent review application before the Competition Appeal Court seeking an order declaring that the Commission had acted beyond the scope of its legislated powers.   

In making the adverse cost order, the Court said it was aware of the precedent set by the Constitutional Court that, when the Commission is litigating in the course of fulfilling its statutory duties, it is undesirable for it to be inhibited in the bona fide fulfilment of its mandate by the threat of an adverse cost order against it. However, in this case, the Commission’s divestiture powers and duties were unambiguous. The Commission failed to fulfil its statutory duty to recommend a divestiture to the Tribunal, and in doing so, the Commission tried to bypass its statutory framework, breaching the principle of legality. In the circumstances, a costs order against the Commission was justified. The ruling emphasises that the Commission's statutory authority is limited to recommending divestiture and serves as a crucial reminder to the Commission of the regulatory boundaries set by the Competition Act.