Agri Wire (Pty) Ltd and Another v Commissioner, Competition Commission, and Others

• Jurisdiction: South Africa
• Judge: Nugent JA, Leach JA, Tshiqi JA, Wallis JA and Pillay JA
• Judgment Date: 27 September 2012
• Citation: 2013 (5) SA 484 (SCA)
• Docket Number: 660/2011 [2012] ZASCA 134
• Hearing Date: 30 August 2012
• Counsel: SJ du Plessis SC (with K Hopkins) for the appellants. G Marcus SC (with I Goodman) for the first and second respondents. W Trengove SC (with J Wilson and MM le Roux) for the third respondent.
• Court: Supreme Court of Appeal

Wallis JA and Pillay JA (Nugent JA, Leach JA and Tshiqi JA concurring): A

[1] Cartel conduct, where ostensible competitors collude to set prices, or terms of trade, or divide markets, fix tenders or engage in similar conduct, is one of the most difficult types of anti-competitive behaviour B to identify, prove and bring to an end. This is because a successful cartel is conducted secretly and its continued success depends on its members not breaking ranks to disclose their unlawful behaviour to the competition authorities. In a number of jurisdictions, the response of the competition authorities has been to introduce policies that offer either C complete or partial leniency to cartel participants, who break ranks and disclose the existence and nature of the cartel, and provide evidence that enables the authorities to pursue and break the cartel, by bringing it before the appropriate tribunal.

[2] The Competition Commission (the commission), which, in the form D of the competition commissioner, is the first respondent in this appeal, has adopted such a policy. This is the corporate leniency policy (CLP) that is in issue in this appeal. The appellants, to whom we shall refer as Agri Wire, challenge the legal basis of the CLP. They contend that evidence obtained by the commission from the third respondent, Consolidated E Wire Industries (Pty) Ltd (CWI), in terms of the policy was unlawfully obtained. They say that this, in turn, tainted the commission's referral of a complaint of alleged cartel behaviour in the wire and wire related products sector of the South African market to the Competition Tribunal in terms of s 51 of the Competition Act 89 of 1998 (the Act). Agri Wire accordingly sought to review and set aside the referral, F together with certain ancillary relief, in proceedings before the North Gauteng High Court, which dismissed the application, but granted leave to appeal to this court.

The referral

[3] CWI is a member of a larger group of companies operating generally G in the steel industry. Its parent company was the subject of an investigation by the commission. A decision was taken at group level to undertake an internal audit aimed at identifying all anti-competitive conduct by the parent company or any other company in the group. Pursuant to this audit CWI indicated that it had been involved in a cartel, H and identified the other members as being Agri Wire and the fourth to twelfth respondents, none of which have played any part in this litigation. CWI accordingly approached the commission under the CLP and disclosed the existence of the alleged cartel and the information it had relating to the operation of the cartel. In consequence of that disclosure the commission granted it leniency on a conditional basis in I terms of the CLP, conducted an investigation and referred the allegations concerning the cartel to the Competition Tribunal (the tribunal).

[4] In its referral to the tribunal, the commission cited Agri Wire and the fourth to twelfth respondents. It claimed an order declaring that they had contravened s 4(1)(b)(i), (ii) and (iii) of the Act; an order directing them J to refrain from engaging in the conduct constituting those alleged

Wallis JA and Pillay JA (Nugent JA, Leach JA and Tshiqi JA concurring)

contraventions; and the imposition of an administrative penalty of 10 % A of the annual turnover of each participant in the 2008 financial year. CWI was also cited as a respondent but no relief was sought against it. The commission explained that this was because it had sought and been granted conditional leniency in terms of what it described as the 'Applicant's corporate leniency policy'. In those circumstances it had been cited 'purely for the interest it may have in these proceedings'. B

Agri Wire's complaints

[5] In attacking the grant by the commission of conditional leniency to CWI, Agri Wire sought an order declaring that the C grant was 'not authorised by any law and unlawful'. It also sought an order that the evidence obtained from CWI pursuant to the grant of conditional immunity was unlawfully obtained, and an order declaring that the complaint referral to the tribunal was unlawful and should be set aside. In the founding affidavit it described the main issue as being —

'whether or not it was competent for the [commission] to make D promises of conditional immunity to (CWI) to obtain evidence and, if it was not competent for it to do so, whether such evidence is inadmissible in subsequent proceedings'.

The argument was developed on the basis that the commission is a creature of statute and has only those powers conferred upon it under the E Act. It was said that the Act does not permit the commission to be selective in deciding which participants in a cartel it investigates and makes the subject of a reference to the tribunal, nor does it authorise the commission to grant immunity from a referral and a possible adverse adjudication, including the imposition of an administrative penalty, in consideration for the furnishing of information under the CLP. If it refers F a complaint concerning participation in a cartel to the tribunal, it is obliged, so the argument went, to refer the complaint in respect of all participants and to seek relief against all of them. The most that it can do to ameliorate the position of a 'whistleblower' is to ask the tribunal to take its co-operation into account in assessing the amount of any G administrative penalty, as it is entitled to do under s 59(3)(f) of the Act.

The corporate leniency policy (CLP)

[6] It is convenient at this stage, in order to understand the arguments on behalf of Agri Wire, to deal briefly with the contents of the CLP. H The policy is embodied in a document that has been published for information in the Government Gazette. [1] It records that it is difficult to detect or prove the existence of a cartel and that the CLP has been developed to encourage participants to break ranks and disclose information that enables the commission to tackle cartel behaviour. This information is I furnished 'in return for immunity from prosecution', the latter being the term used in the policy for a reference to the tribunal and adjudication on a complaint of cartel activity, in which an administrative penalty is

Wallis JA and Pillay JA (Nugent JA, Leach JA and Tshiqi JA concurring)

A sought. Clause 3.1 says that the CLP outlines the process through which 'the commission will grant a self-confessing cartel member . . . immunity for its participation in cartel activity'. That immunity is granted in return for full disclosure and full co-operation in pursuing the other cartel members before the tribunal. For the avoidance of doubt, clause 4.2 B states that immunity refers to immunity from prosecution before the tribunal in relation to the alleged cartel that is the subject of the application for immunity.

[7] A conspicuous feature of the CLP is that, wherever it refers to immunity being granted, it identifies the commission as the party that C grants immunity. Thus, in clause 5.3 it says, in regard to cartel activity outside South Africa, that immunity granted by another competition authority would not 'automatically qualify the applicant for immunity by the commission'. In clause 5.6 it is said that parties to cartels, who 'come clean' after the initial disclosure, do not qualify for immunity but the commission will explore with them the possibility of them receiving a D reduced fine. [2] Clause 6.4 warns those to whom 'the commission has granted immunity' that a grant of immunity does not prevent third parties from seeking civil or criminal remedies against them. In dealing with the immunity process, clause 9.1 states that at the initial stage 'conditional immunity is given to an applicant . . . to create a good E atmosphere and trust between the...