Concourt rules against Senwes in conduct case

FMCG SUPPLIER NEWS

IOL Business - Apr 13th 2012, 08:14

Senwes, one of the most powerful and profitable agri-businesses in the country, faces the possibility of having to divest its grain storage facilities following yesterday’s ruling by the Constitutional Court. The ruling also opens the way for parties who believe they suffered from the company’s anti-competitive conduct to take civil action against Senwes. 

This first-ever ruling by the Constitutional Court on a competition case not only has considerable implications for Senwes, but on a broader perspective indicates that the court is supportive of the powers of the competition authorities. If this perspective is borne out in two other competition cases considered by the Constitutional Court, namely “Yarra” and “Loungefoam”, it is likely that firms will be discouraged from challenging the competition authorities on all manner of technical points.

Lawyers who have studied the Senwes judgment said yesterday that while the wording was carefully crafted to avoid creating a precedent, it did seem that the Constitutional Court acknowledged that the powers of the competition authorities represented a constitutional issue. The judgment states: “The tribunal was established to exercise powers in the interest of the general public by creating and maintaining ‘markets in which consumers have access to, and can freely select, the quality and variety of goods and services they desire’.”

It adds: “The tribunal plays a vital role in creating an open economic environment in which all South Africans can have equal opportunities to participate in the national economy” and notes that a correct interpretation of the tribunal’s powers is essential to its effectiveness in the fight against these practices. The Constitutional Court rejects the Supreme Court of Appeal’s (SCA) limited interpretation of these powers stating that such an interpretation “may seriously undermine the objectives for which the act was passed”.

The SCA’s limited interpretation of the competition authorities’ powers has encouraged several companies facing anti-competitive allegations by the competition authorities to challenge the authorities on procedural grounds.

Last year, explaining why it was appealing a number of cases to the Constitutional Court, the commission said that the cumulative effect of decisions made by the SCA constrained its ability to investigate anti-competitive conduct and also compromised the rights of third parties to lodge complaints of anti-competitive conduct.

Yesterday’s Senwes ruling, in a case that was first lodged with the Competition Commission in 2003, confirmed the decision by the Competition Tribunal’s that Senwes did contravene section 8c of the Competition Act.

The Constitutional Court has referred the matter back to the tribunal so that the parties could determine a remedy.

Senwes chief legal adviser Elmarie Joynt said the company was studying the decision. Joynt noted that, in terms of the act, Senwes could not be fined for a contravention of Section 8c.

However, competition commissioner Shan Ramburuth, who welcomed the Constitutional Court’s ruling, said the potential remedies available to the tribunal included “structural” or “behavioural” directives. Ramburuth said that given the nature of the contravention, which is that Senwes was giving farmers who traded with them a better storage rate than farmers who did not, the divestiture of its storage facilities was one possible remedy. See Business Watch