22 July 2019


International Cases

Omnia fertilizer limited v. Competition commission of south africa

South Africa

14.02.2018

MRTP/ Competition Laws

The Commissioner may initiate a complaint against an alleged prohibited practice

Present is an application for a dismissal of a complaint referral brought at the instance of the third respondent Omnia Fertilizer Limited ("Omnia"). The complaint referral was brought by the Competition Commission on 4 May 2005 against Sasol,' Yara2 and Omnia in which it alleged that, the three respondents engaged in collusion in the form of price fixing and market allocation in the markets for nitrogen derivative products used in the manufacture of fertilizer ("the complaint"). Sasol has since settled the matter with the Commission and has provided the Commission with assistance in the prosecution of the matter. Omnia has previously attempted to challenge the validity of the complaint but ultimately failed in its endeavour by the decision of the SCA in Competition Commission v. Yara. In Yara, the SCA held that the complaint referral and subsequent amendments brought by the Commission against the three respondents were valid on the basis of a tacit initiation by the Commission. The basic contention by Omnia was that the complaint referral was invalid because the initiation was unlawful in that, the requirements of Section 49B had not been met.

Section 49B refers to the Commissioner. The Commissioner may initiate a complaint against an alleged prohibited practice. The Commissioner is obliged to spur on his or her inspectors to act without undue delay. Section 49B(3) like 49B(1) does not prescribe how the inspector should be directed by the Commissioner, nor does it limit an inspector to investigate only one complaint at a time. An inspector under the Competition Act has search and seizure powers as well as investigative functions. While no formalities for the appointment of an inspector are provided for in the Act, Commission Rule 6 provides that the Commissioner, in writing, may assign any function or power to a member of the staff of the Commission, either generally or in connection with a particular matter. The direction by the Commissioner also does not require any formalities. The Commission on affidavit relies upon two dates for a valid tacit initiation against Omnia namely 4 May 2005 and 26 November 2006. If Omnia's conduct as alleged in the two documents had ceased three years prior to the any of the two dates, the onus is on Omnia to show this and nothing prevents it from raising that defence in the hearing of the merits. In order to satisfy the test for rationality the Commission would only be required to prove that there was a rational connection between the Nutri-Flo complaint and its decision to initiate.

In the words of the SCA in Woodlands, all that was required was a "reasonable suspicion" arising from the Nutri-Flo complaint to warrant the investigation against Omnia.' The Commission is required under the Competition Act to investigate all complaints are lodged with it, it may elect to non-refer a matter to the Tribunal after a period of investigation under Section 50 but it is not entitled to refuse to initiate an investigation into an alleged contravention of the Act. In the Commission's referral and subsequent amendment affidavits in instant case, it has indicated that, the basis of its referral was the Nutri-Flo complaint which led to it investigating the conduct of the three respondents mentioned in the complaint. Omnia seeks a dismissal of a case in which it is purported to be a member of a long standing cartel with Sasol and Yara. Sasol has already admitted to the alleged conduct. Cartel conduct is considered to be the most heinous offences in competition law where damage to consumers, customers or suppliers as the case may be is presumed to be egregious and far-reaching. This is why Section 4(1)(b)(i)- (iii) of the Act affords a Respondent no justification grounds once the conduct has been proved. While the Commission has taken a long time to investigate the complaint against Omnia, Omnia is not blameless in causing the delay.

While cartels are considered to be most egregious offences under competition law they are difficult to prove because by their very nature they are conducted in secret and under cover of some or other pretext. Cartel prosecutions are seldom successful without a whistle-blower's participation and this is why the Commission encourages firms to come forward through its corporate leniency policy. The facts of this case bear testimony to that. Until Sasol came forward and admitted its culpability, the Commission did not have the exact dates and places of the alleged collusive meetings. These details were handed over by Sasol as part of its settlement arrangements with the Commission.

It was the inclusion of the details in the Commission's referral that, Omnia sought to oppose and which ultimately became the subject matter of the Yara decision. Omnia has a case to answer and it is not only the Commission that is pointing a finger at it. Its erstwhile cartel member has provided chapter and verse of the meetings that allegedly took place. Finally, there is the element of public interest in bringing litigation to finality. For more than 12 years Omnia has had the shadow of cartel conduct hanging over it. No doubt this might have had and continues to have adverse effects on its business. At the same time members of the public, consumers and customers of Omnia are all entitled to have an outcome on the merits of the egregious conduct that, Omnia is accused of rather than on a mere technical point. The conclusion of present matter on the merits would be in the interests of all concerned. Omnia has not made out a proper case for a dismissal based on delay-induced prejudice.

Tags : Compliant Referral Tacit initiation Validity

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