1 August 2009

Summonses should not amount to "fishing expeditions"

About five years ago, the Supreme Court of Appeal in The Pretoria Portland Cement Co Limited and Another vs Competition Commission and Others 2003 (2) SA 385 (SCA) (Portland Cement) stated that it would - '... not allow persons or businesses to be subjected to an abuse of power and must also make it clear to the Commission that it also is subject to the Constitution and the law and must accordingly mend its ways in certain respects.'

In an interlocutory application brought by Woodlands and Milkwood (collectively referred to as Woodlands) against the Competition Commission in the notorious milk case, Woodlands challenged the lawfulness of the Commission's summonses, pursuant to which the Commission had interrogated employees of Woodlands and obtained certain documents, before initiating the milk complaint referral against, amongst others, Woodlands. Woodlands, amongst other relief, required the complaint against it to be declared invalid.

In the words of the Commission, the purpose of the summonses was to gather information regarding a complaint initiated by it 'to establish whether there is any anti-competitive behaviour in 'any level' of the industry. Through this we allowed ourselves the opportunity to evaluate the entire industry'.

Woodlands argued that the summonses were vague and overbroad, thus invalid. Another gripe was that the process of interrogation had been unfair as the Commission had apparently led Woodlands to believe that it was providing information regarding an investigation in which Woodlands was not implicated. This was clearly wrong as Woodlands found itself to be a respondent in the subsequent milk complaint referral.

The Tribunal agreed that the summonses were void by vagueness. The Competition Act in its present form empowers the Commission to investigate prohibited practices and mergers in relevant markets only. And not, as the Commission wished to do, the entire milk industry and all practices, some of which are not prohibited.

The minimum requirement of a valid summons under the Competition Act is the identification of the prohibited practice in a summons with sufficient particularity. It is unfair and an infringement of constitutional rights, to expect of an addressee of a summons to cobble together the ambit of the summons from the nature of the information requested or type of document demanded. In Woodlands' case, the Commission's summonses fell short of the minimum standards.

The Tribunal was not prepared to go as far as Portland Cement by nullifying the complaint against Woodlands due to the Commission's unlawful acts. Instead, it ordered that a copy of the evidence collected unlawfully from Woodlands be preserved in the offices of its Registrar, with proper consideration to be given to its admission as evidence at the hearing of the milk case, if it is shown to be just and equitable in the circumstances.

The Commission now has the opportunity to vindicate its unlawful actions if it can show on application that the evidence obtained pursuant to the unlawful summonses and that its manner of interrogation, did not violate Woodlands' right to fair administrative process.

In future, it can be expected that the Commission will be more careful in the execution of its functions. Nevertheless, it is important that summonses of the Commission are always assessed properly before complying as it may be difficult to manage the consequences of complying with an unlawful summons.

Petra Krusche,
Director, Regional Practice Head: Competition

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