Supreme Court of appeal delivers ruling regarding the enforcement of civil claims against successful leniency applicants

On 4 November 2015, the Supreme Court of Appeal (SCA) delivered its judgement in respect of Premier Foods Proprietary Limited’s (Premier Foods) challenge to the Competition Tribunal’s powers under s65(6) of the Competition Act (Act). This judgment relates to a procedural matter that required clarification and impacted on the civil damages claims brought against the firms that participated in the so-called bread cartel.

Section 65(6) of the Act sets out the basis on which a person, who suffered loss or damage as a result of collusive conduct, may institute a civil claim for damages. Such a person must obtain a certificate from the Chairperson of the Tribunal or the Judge President of the Competition Appeal Court, certifying that the conduct constituting the basis for the action has been found to be a prohibited practice in terms of the Act. For damages to be claimed for loss or damage caused by collusive conduct claimants must first obtain such a certificate.

Premier Foods was the leniency applicant in the bread cartel and - due to the leniency awarded to it - it was not prosecuted with the other members of the cartel and was not party to the referral by the Competition Commission. Premier Foods, as a leniency applicant, participated in the hearing before the Tribunal and assisted the Commission in prosecuting the matter. The Tribunal’s ultimate finding was that “[d]uring December 2006, Pioneer, Premier and Tiger Brands contravened s4(1)(b)(i) and (ii) of the Competition Act”.

The claimants in the class action, in line with the provisions of the Act, consequently applied to the Chairperson of the Tribunal for the relevant certificate based on this finding by the Tribunal for purposes of instituting a class action against the firms involved in the bread cartel. The issuing of the certificate was, however, opposed by Premier Foods. Subsequently, Premier Foods launched an application for declaratory relief relating to the Tribunal’s jurisdiction under s65 of the Act. Premier Foods’ opposition was based on the fact that a certificate could not legitimately be issued against it as the complaint was not referred against it and it was not party to the proceedings before the Tribunal. Additionally, Premier Foods argued that its right to be heard would be infringed should a certificate be issued against it in respect of proceedings that were not referred against it.

During 2013, the High Court found that the Tribunal has jurisdiction to issue a s65 certificate in respect of Premier Foods’ involvement in the bread cartel, irrespective of whether it was cited as a party in the referral or not. It is this decision that was the subject of Premier Foods’ appeal to the SCA.

The question that arose was whether the complaint by the Commission as it relates to Premier Foods fell within the ambit of the referral despite Premier Foods not being cited as a respondent and no relief being sought against Premier Foods in the complaint referral (a jurisdictional requirement to enable the Tribunal to make a finding against a respondent that it engaged in prohibited conduct).

The SCA overturned the decision of the High Court in favour of Premier Foods and found that the Tribunal did not have the power to grant an order declaring that Premier Foods engaged in prohibited conduct, as Premier Foods was not part of the referral and although it admitted liability as a leniency applicant a finding against it would result in‘liability to legal process through oblique or informal acquaintance’(a concept that was rejected by the Constitutional Court in National Union of Metalworkers of South Africa v Intervalve (Pty) Ltd & Others[2014] ZACC 35).

The SCA found that as a result of this lack of jurisdiction on the part of the Tribunal, the order declaring that Premier Foods engaged in prohibited conduct was a nullity. As the Tribunal had no jurisdiction to make the declaration against Premier Foods, there is no conduct that can be certified for purposes of the institution of a civil claim.

The SCA did not decide on whether a leniency applicant can be referred to the Tribunal and stated that it would consider this question once it is appropriately raised before it. This decision, accordingly, leaves some uncertainty as to whether the Tribunal could ever competently declare that a leniency applicant engaged in prohibited conduct, with the result that a certificate for civil prosecution can be issued. It is clear that the citation of a leniency applicant in the complaint referral is not sufficient to establish this jurisdiction and a leniency applicant must be fully engaged in a referral before a competent declaration can be made against it. The latter being an unlikely situation as the premise of the Commission’s corporate leniency policy is to ‘reward’ cartel members that blow the whistle through not subjecting these parties to prosecution or the imposition of an administrative penalty even though cooperation in the prosecution of the cartel is a requirement to be awarded leniency.

The Commission announced that on 25 November 2015 it applied for leave to appeal this decision to the Constitutional Court, following a similar application by the victims of the bread cartel filed with the Constitutional Court on 23 November 2015.