2 January 2014

Constitutional Court Judgment: The Competition Commission v Pioneer and Others

On 18 December 2013, the Constitutional Court (Court) handed down a unanimous judgment dealing with an adverse costs order furnished by Competition Appeal Court (CAC) against the Competition Commission (Commission).  The Commission applied to the Court to have the costs order against it set aside.

Lerisha Naidu, Senior Associate in the Competition Practice at Cliffe Dekker Hofmeyr explains that while the Court acknowledged that it is generally not in the interests of justice to grant leave to appeal to it on questions of costs only, the Court noted that the relevant issues transcended the specific merits of the case brought before it.  In fact, in deciding that leave to appeal to it be granted, the Court indicated that the case called for an exercise in legal interpretation, the outcome of which would impact on the fulfilment of the purposes of the Competition Act (Act).

Naidu notes that having granted leave to appeal, the Court proceeded to consider the merits of the matter, the factual foundations of which arose from a merger notification submitted to the Commission by Pioneer Hi Bred-International Incorporated (Pioneer) and Pannar Seed (Proprietary) Limited (Pannar) (collectively referred to as the merging parties).  When the Commission prohibited the merger, Pioneer and Pannar requested that the Competition Tribunal (Tribunal) reconsider the Commission's decision.  The Tribunal also prohibited the merger.

“Against this background, the merging parties appealed to the CAC seeking an order that the Commission pay the merging parties' costs incurred in respect of both the CAC and the Tribunal proceedings.  The CAC upheld the merging parties' appeal, ordering the Commission to pay the costs of the merging parties in respect of both the CAC and Tribunal proceedings,” she says.

In this context, the Court considered whether the CAC is statutorily empowered to award costs against the Commission in its own proceedings; the CAC has the power to award costs against the Commission in Tribunal proceedings; and on the facts, if the CAC exercised its discretion to award costs against the Commission judicially.

Naidu says that in undertaking the interpretative exercise required to engage with the legal questions posed, the Court noted that "the interpretation advanced here must allow the Commission sufficient institutional autonomy to reach and defend honest and independent decisions".

“In this regard and turning to the provisions of the Act, the Court observed that while the Act recognises the CAC"s power to award costs in proceedings before it, the exercise of that power is expressly qualified by "requirements of law and fairness".  Accordingly, in exercising its discretion, the Court called upon the CAC to be mindful that "[i]t is undesirable for [the Commission] to be inhibited in the bona fide fulfilment of its mandate by the threat of an adverse costs order".

“Within the rubric of this overarching principle and on the question whether the CAC could award costs against the Commission in relation to its own proceedings, the Court held that the mere zealous defence of its position should not render the Commission vulnerable to an adverse costs order,” Naidu explains. 

Samantha Brener, a candidate attorney in the Competition practice says that the CAC's disagreement with the Commission's position would not, in the Court's view, justify an adverse costs order by the CAC.  While the CAC is statutorily empowered to grant costs in respect of its own proceedings, the "fairness" qualifier would require that the Commission's conduct be, for example "unreasonable, frivolous or vexations" for a costs order to be justified.

Brener explains that on the question whether the CAC possessed the power to award costs against the Commission in respect of Tribunal proceedings, the Court held that the CAC's powers to award costs were confined to its own proceedings only and did not extend to Tribunal proceedings (which, said the Court, even the Tribunal was not empowered to make).

“Having regard to the above and on the facts of this case, the Court held that the CAC did not possess the power to award costs against the Commission in respect of the Tribunal proceedings. The Court also found that  the CAC's power to award costs against the Commission in respect of its own proceedings is statutorily contemplated, this discretion must be properly exercised.  As the judgment of the CAC does not indicate "mala fides, irregularity or unreasonable conduct by the Commission" and does not implicate unfairness, the Court held that the Commission should not have been mulcted with costs in respect of the CAC proceedings,” she says.

Brener notes that in light of the principle that the Commission must be allowed to fulfil its mandate "without fear, favour or prejudice", the judgment confines the granting of adverse cost awards in the CAC and against the Commission to extremely limited circumstances constrained by the dictates of fairness. 

Naidu adds, “The judgment also appears to preclude the granting of adverse costs awards against the Commission in respect of Tribunal proceedings, even where it may have acted in a vexatious, frivolous and/or unreasonable manner.  It therefore appears that the threat of adverse costs in relation to such conduct only becomes real in respect of proceedings taken on appeal.”

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