The era of class action is about to begin

1 Oct 2012 3 min read Article

South Africa is on the threshold of an era of damages actions following findings of anticompetitive conduct in businesses. This is according to Nick Altini, National Head of the Competition Practice at Cliffe Dekker Hofmeyr. 

“In the fourth quarter of this year, the Supreme Court of Appeal (SCA) will hear appeals on two certification applications brought by two classes against the bread bakers that admitted to, or were found to have colluded on the price of bread. All indications are that the damages that will be sought from each bread baker, if the classes receive certification to proceed on their current proposed basis, will be in the hundreds of millions of rands and may dwarf the contravention penalties already paid for these offences,” Altini says.

Altini explains that a class action is a legal action brought by one person or small group of persons on behalf of a much bigger, wider group of people who could not bring their claims individually. Class actions are foreign to our common law, and while prevalent in many jurisdictions, have only found form in South Africa, relatively recently through the interim, and later final Constitution where it is provided that a person may seek to vindicate the constitutional rights of a group of persons who's rights are under threat. A similar provision exists in the Consumer Protection Act now, and one or two other pieces of legislation. Class certification is a process whereby the class essentially obtains a court's prior permission to sue as a class and the parties to the matter will receive guidance from the court as to how the matter should be run.

“What we have never had, until now, is anyone seeking to sue for damages that are not based on an infringement of constitutional rights, outside of a law or rule of court that expressly permits this, which is invariably present in jurisdictions that do recognise class actions for damages.

“In the bread matters, the classes are trying to assert that collusion, at least in so far as bread is concerned, constitutes a violation of constitutional rights but one class (the so called class of bread consumers) also seeks, in the event that this fails, to have a class action for damages based only on an infringement of the Competition Act.

“We will find out in due course, whether the Supreme Court of Appeal agrees that anticompetitive behaviour could infringe upon rights contained in the Bill of Rights and also whether if this is not the case, the Competition Act contemplated this kind of redress when it provided that victims of anticompetitive conduct can sue for damages,” Altini notes.

“If these matters proceed,” says Altini, “they will, inevitably, give rise to class actions in future against firms that have already settled with the Commission or been found guilty of contraventions. They may also encourage damages actions in the more conventional sense where there are identifiable plaintiffs.  In other words, you may take it as given that it will increasingly be the case that the penalty paid or agreed will not be the end of a firm’s exposure for contravening the Competition Act.

Altini says that what all of this indicates is that compliance, preventive measures, awareness of market circumstances and realistic and constant assessments of business practices, both past and present, as well as employee conduct are obligatory and a fundamental aspect of any corporate governance strategy.

“Competition law compliance is a legal and, arguably, moral imperative, and should form part of every reputable firm's corporate governance strategy. The price of such compliance may well be insignificant in comparison to the price in money, management time, risk exposure and anxiety that is payable following even one brief tryst with the competition authorities,” he adds.

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