Not in the public interest: Competition Appeal Court dismisses appeal to vary settlement agreement by removing admission of guilt

The Competition Appeal Court (CAC) recently confirmed the Competition Tribunal’s (Tribunal) decision (discussed here) to dismiss the request by Life Wise (Pty) Ltd t/a Elan Auto Body (Eldan) to remove its admission of liability from the approved consent agreement that it had entered into with the Competition Commission (Commission).

4 May 2022 3 min read Competition Law Alert Article

At a glance

  • The Competition Appeal Court (CAC) upheld the Competition Tribunal's decision to dismiss Eldan's request to remove its admission of liability from the approved consent agreement with the Competition Commission.
  • The CAC clarified that once a consent agreement is approved by the Tribunal, both the Commission and the respondent firm cannot amend it without the Tribunal's approval. The Tribunal has a limited power to amend its orders in cases of errors or ambiguities.
  • The CAC determined that Eldan failed to demonstrate exceptional circumstances to support an amendment to the consent order based on the cancellation of customer contracts and being a small, medium, or micro enterprise (SMME) owned by historically disadvantaged persons (HDI). Lack of legal representation during the signing of the consent order was not considered a valid reason for amendment either.

The CAC confirmed that once the Tribunal has approved a consent agreement, even if both the Commission and the respondent firm seek to amend it, they cannot do so without the Tribunal approving the amendment. The CAC also affirmed that the Competition Act 89 of 1998, as amended (Act) affords the Tribunal an express but limited power to amend its own orders (curtailed to instances where the order contains errors or ambiguities).

On the other hand, while the CAC noted the Tribunal’s assertion that the Act also affords it an additional general power to amend its own orders if a respondent firm is suffering hardship due to changed circumstances or where there are exceptional circumstances, it did not decide the point since there was no argument that the Tribunal did not have this power, nor did the Tribunal exercise this power to amend its order. Similarly, while not pronouncing on the issue, the CAC also noted the Tribunal’s finding that it could grant a consent order if the respondent firm had not made an admission that it had contravened the Act.

The question before the CAC was therefore limited to whether the Tribunal erred in its finding that Eldan had not made out a case for an amendment to the consent order based on exceptional circumstances. In response to the three grounds Eldan raised in support of its variation, the CAC reaffirmed the Tribunal’s findings and held as follows:

  1. Cancellation of customer contracts: The CAC confirmed that cancellation of customer contracts did not amount to exceptional circumstances. The fact that customers would decide to terminate the services of a firm involved in collusion was held to be wholly predictable and, further, contravention(s) of the Act leading to private consequences in addition to public enforcement by the competition authorities was not considered novel. The CAC noted its difficulty in understanding how the excision of the admission of guilt would affect customer attitudes.
  2. Small, medium or micro enterprise (SMME) owned by historically disadvantaged persons (HDI): On this score, the CAC confirmed that even if Eldan were to exit the market, it did not mean that it would not be replaced by another SMME or HDI-owned firm. To this end, the CAC also made the following notable distinction:
The public policy in the Act to promote small and HDI businesses is aimed at preventing such firms from being excluded by anticompetitive behaviour. It is entirely a different matter to argue that this policy of inclusiveness justifies ameliorating the consequences of anticompetitive behaviour of firms that fall into this class.”
  1. No legal representation: Based on the facts, Eldan could not be regarded as an indigent litigant.

With regard to consent orders more generally, the CAC added that:

The decision to sign a consent order with an admission has certain advantages to a firm. It may result in a lower administrative penalty and more favourable terms to the firm than if it refused to make the admission. It is thus by no means conclusive that lack of legal representation at the moment of signing led to a sub-optimal legal decision.”

Based on the competition authorities’ approach to variation, the decision to enter into a consent agreement with or without an admission of guilt should be properly considered (balancing the costs and benefits of each approach) prior to having it confirmed by the Tribunal. Respondents would be well advised to obtain legal advice timeously on this score.

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