An absolute or flexible restriction: Can prohibited practices be prosecuted three years after the practice ceased?

The matter concerned a complaint referral by the Competition Commission (Commission) in which the respondent, Pickfords Removals SA (Pty) Limited (Pickfords) was accused of engaging in 37 instances of collusive tendering in contravention of the Act.

Section 67(1) of the Act, as it was at the time, provided that “a complaint in respect of a prohibited practice may not be initiated more than three years after the practice has ceased”.

The key outcomes of the decision appear to be:

• Firstly, that a complaint initiation need not necessarily cite all alleged respondents at the outset and, depending on the facts, may be amended upon further investigation by adding new firms, without triggering a separate and new complaint initiation.
• Secondly, the prosecution of prohibited practice complaints initiated more than three years after the alleged illegal conduct ceased are met by a procedural time-bar in terms of section 67(1) of the Act, and not a wholly inflexible prescription defence. Nonetheless, the hurdle of showing good cause for condonation of non-compliance with section 67(1) of the Act must still be overcome.

Facts

In November 2010, the Commission initiated a complaint (2010 initiation) in respect of the broader furniture removal industry, but did not specifically cite Pickfords as a respondent to the investigation. In June 2011, Pickfords and other furniture removal firms were specifically cited in a further complaint initiation by the Commission concerning the same practices (2011 initiation). The 2011 initiation was in turn amended in June 2013, alleging the total of 37 instances of collusive tendering by Pickfords. In September 2015, the Commission referred a prohibited practice complaint to the Competition Tribunal (Tribunal), alluding to both the 2010 initiation and 2011 initiation. Pickfords excepted to the complaint referral, alleging (inter alia) that 14 of the 37 counts of the alleged collusive conduct were time-barred in terms of section 67(1) of the Act.

Trigger event

A determination of the correct ‘trigger event’ for the commencement of the running of the three-year period is crucial. On the facts, several counts of the alleged collusive conduct would only be timely if the 2010 initiation, as opposed to the 2011 initiation, was used as the trigger event.

In this regard, the Tribunal as the court of first instance, had found that the 2011 initiation was not an amendment of the 2010 initiation, but was a self-standing initiation. The Competition Appeal Court (CAC) overruled the Tribunal, finding the converse. Importantly, the particular facts of the case appear to have been highly relevant in leading the Court to side with the CAC on this score. For example, the Court noted that the 2010 initiation pertinently stated that the collusion was ‘ongoing’, foreshadowing the possible addition of further firms and, in the Court’s view, the 2011 initiation made it clear that it was intended to be an extension of the 2010 initiation.

The CAC nonetheless held that Pickfords only became a named party when the 2011 initiation occurred; “before that, the alleged prohibited practice did not involve it” such that, on the CAC’s analysis, the trigger event would have still been in 2011. It is in this regard that the Court departed from the CAC.

Having held that the Commission is required to be in possession of some information regarding an alleged practice “which objectively speaking, could give rise to a reasonable suspicion of the existence of a prohibited practice”, the Court ultimately found that the Commission need only have in mind some of the firms potentially involved in a prohibited practice to initiate a valid complaint, and the names of all the firms need not be included when the complaint is first initiated. 

In disagreeing with the CAC that the trigger event was the 2011 initiation, the Court held “…that approach misconceives the purpose and objects of the Competition Act, particularly the provisions relating to the initiation of a complaint. As stated, the emphasis in those provisions is on the prohibited practice concerned, not the names of firms or parties implicated in it.” The Court also emphasised the informal procedure used by the Commission.

Ultimately, in the Court’s view, the trigger event from which the three year period for purposes of section 67(1) of the Act was to be calculated was with reference to the 2010 initiation.

Does section 67(1) constitute an absolute time-bar?

The central issue was whether section 67(1) of the Act constitutes a substantive time-bar which places an absolute prohibition on the initiation of a complaint in respect of a prohibited practice more than three years after the cessation of that practice; or is merely a procedural time-bar, which can be condoned by the Tribunal in terms of its powers under the Act.

The Tribunal held that it could not condone non-compliance with section 67(1). The CAC agreed with this finding, having viewed the prescription provision as serving a legitimate purpose of barring investigations into cartel behaviour that ceased an appreciable time ago, and no longer endangered the public.

In overruling the CAC, and finding in favour of the procedural time-bar interpretation of section 67(1), the Court noted that a rigid interpretation could potentially subvert the Commission’s work as a public body by hindering it access to the Tribunal and could also possibly limit access to a civil court for potential claimants seeking damages arising from a prohibited practice. It was emphasized that “prescription is aimed at penalising negligent inaction, not the inability to act…cartels are by their nature secretive, [thus] it would be inequitable to penalise the Commission, which would invariably have no knowledge of, for instance, surreptitious price fixing by cartels, for its failure to act within the three-year period…[which] would be tantamount to rewarding cartels for their covert unlawful conduct and would not be in the interests of justice”. Imposition of an absolute substantive time-bar was also found to hypothetically encourage cartels to remain silent for a period of three years, in order to gain immunity for known prohibited activities.

Condonation

Section 58(1)(c) of the Act grants the Tribunal the power to condone, on good cause shown, any non-compliance of (inter alia) a time limit set out in the Act. Overruling the CAC, the Court found that this “expressly provides a general power of condonation, save for the [specific] exclusions”, and that condonation of non-compliance with the procedural time-bar of section 67(1) of the Act are within the Tribunal’s powers, when good cause is shown.

The Court however cautioned that condonation for non-compliance with section 67(1) does not provide a blank cheque for slothful litigation, as ‘good cause’ must still be shown, which depends on the facts of each case, with the overriding consideration being the interests of justice. To this end, relevant factors that may be considered include: the extent and cause of the delay; the effect of the delay on the administration of justice and other litigants; the reasonableness of the explanation for the delay; the issues to be raised in the matter; and the prospects of success.