Nedlac reported that extensive discussions had now been held and summarised the areas in which the constituents of government, labour and business had reached agreements. There was no need to change the current policies on current jurisdiction, but there must be a clear allocation of roles, the conclusion of formal agreements should be more precise, and dispute resolution provisions must be included in the Memoranda of Agreement. Drafts should be published for public comment. There had been widely divergent opinions in the area of complex monopolies. The concept finally agreed upon was “conscious parallel conduct”. The original provision of the Bill was to be substantially altered, and a concentrated market would need to be defined. It had been agreed that the inclusion of the procedure for market inquiries was positive, but there must be specification of the legal tests before commencement of an inquiry. The terms of the inquiry also should be published in a different way, with time limits specified. There were also changes to the reporting, including mention of any confidential information not included in the report, but which could be accessed by labour under certain conditions.
Business and government believed the legal test should be applied at the start of the inquiry whereas labour believed that an inquiry could be commenced, and the legal test applied at a later stage. There had been considerable concerns about the provisions regarding excusal from complaints, as it did not appear to align with the current policy on leniency, but new text had been approved. In regard to personal liability there had again been substantial differences of opinion, but a robust process had led to more agreement. The inclusion of the principle was agreed upon, as the law should respond to the demands of society. Negligence was not an appropriate standard and the Bill’s current wording thus needed to be changed. The wording around the treatment of evidence obtained before the Competition Tribunal was also unsound, and new wording had been proposed around the evidential burden and the findings of the Tribunal. In future firms would not be permitted to pay or subsidise the fines imposed upon directors.
The representatives of labour briefly summarised those areas in which there had not been agreement, which included a proposal that no mergers be filed during the annual shut down from 16 December to 7 January, publication of consent orders, increases in penalties for firms for the duration of their conduct, and an automatic enquiry into fair prices. As a matter of policy, labour requested that employment considerations should be placed on an even footing with competition. Members asked that the process as well as the roles be clearly set out, that a full investigation of the structure of corporate business in South Africa should be undertaken, and that, in respect of labour’s suggestions, concrete proposals be put forward. The interdependence amongst few firms in a concentrated market was elaborated upon. It was suggested that the Competition Commission should regularly update the Committee on the Memoranda of Agreement and how they were dealing with the various sector regulators, as also how they were monitoring effects of competition on smaller enterprises.
The Department tabled its proposed recommendations, based on the discussions at Nedlac. In clause 1, a new definition of “deserving of leniency” was accepted. No amendments were proposed to Clauses 2, 5, 7, 8, and 9. Clause 3 now provided for a new subclause (c) to be inserted into Section 3(2) of the Competition Act and section 3(3), relating to concurrent jurisdiction, was to be amended. Clause 4 of the original Bill had been substituted with a new clause; the Department explained the policy and said that the redraft now set out the threshold, consideration of behaviour and the remedies. The provision would deal with a concentrated market. In clause 6 there were mostly technical amendments, but the conditions under which the Commission could conduct a market inquiry were also being clarified, with amendments being made to Section 43B(1) of the Act. The original Clause 8 was now being replaced, referred to the definition of “deserving of leniency”, and noted that a new subclause provided that the decision to award leniency would not preclude a complainant from applying for a declaration or applying for an award of civil damages under Section 65 of the Act. nor from applying for an award of civil damages in terms of Section 65 of he Act. Clause 10 related to penalties. A new clause was added (to be renumbered clause 11) including an offence for obstructing the course of justice in providing false information to the Tribunal. The existing clause 11 (to be renumbered) deal with the criminal liability of directors and companies, sought to clarify the burden of proof, and provided for a rebuttable presumption; the onus remained with the State but an accused could defend himself. Provision was being made under a new sub-clause (4) that the Competition authorities could make representations to the National Prosecuting Authority. A new subclause (6) was added to prohibit a firm from paying a fine imposed on a director. Clause 13 now included public comment on dispute resolution agreements. The Committee, having considered each clause, adopted the Bill. The Committee further adopted its report.
Competition Amendment Bill (the Bill) New Economic Development and Labour Council (Nedlac) briefing
Mr Umesh Dulabh, Chief Financial Officer, Nedlac, tendered apologies for the Chief Executive Officer, and reported that the three constituencies of Nedlac, being business, government and labour, had now met.
Ms Lorraine Lotter, Business Convenor, Nedlac Trade and Industry Chamber, said that Nedlac had the task of looking at Bills, often from widely diverging viewpoints. Despite the short time period there had been substantial agreement reached. There had been agreement that certain anti-competitive behaviour could not be supported, as well as the need for important and effective competition law.
The first area for discussion was concurrent jurisdiction, where there had been agreement that there was no need to change the current policies. However, the current Competition Act (the Act) was silent on the position of final authority of regulators. It had been agreed that there must a clear allocation of roles, and that a framework of cooperation must be provided. It was also important that all stakeholders understand the different relationships. Therefore it had been agreed to revise the Bill's wording. The approach to conclusion of formal agreements had been strengthened, there was a more precise setting out of what was expected, and a mandatory provision for dispute resolution was introduced. To increase public awareness of the existence and content of agreements, it would be helpful to have drafts also published for public comment.
In the areas of complex monopolies there had originally been widely divergent opinions. It was necessary to deal with the conduct of firms in highly competitive markets. The best concept it could reach was "conscious parallel conduct". The interdependence of a few firms in the market needed also to be addressed. The final agreement had been to ensure that the Bill addressed the intention of dealing with conduct that was being "committed" by more than one firm, and to integrate this with existing provisions in the Act on investigation. In order to conduct an investigation, there must be understanding of the market share, the result of anticompetitive conduct, a set procedure and offence. Another challenge had been to define conscious parallel conduct. This had now been agreed upon as consisting of conduct by two or more firms, acting in a highly concentrated market, who were aware of each other's conduct, and, being so aware, were conducting their affairs in a manner that restricted competition between them. There was also agreement that there was a need to understand a highly concentrated market. It could not be defined exactly. There must be understanding of how many firms were involved, and the size of them. Draft wording was being produced.
In regard to market inquiries, there had also been some disagreement. The understanding was that this was to provide for procedures. Nedlac agreed that the inclusion of provisions was positive. It was agreed that the clause must provide for publication by authorities, the process, and how the outcomes were to be managed. Nedlac thought that some areas could be improved. If there was a legal test before commencing an inquiry, that should be linked to a subpoena power. The existing subpoena powers in the Act could be used. The question was to define the test and decide at what stage it should be introduced. There had been some changes to the way of publishing the terms. The companies who were the subject of the inquiry should be given some idea of the length of time the inquiry was likely to take, as the inquiries should not be open-ended. Therefore there should be publication of the estimated time, but provision that if necessary there could be further publication of any extension, to keep both the firms and the public informed.
On the question of reporting there had been some changes. Currently, labour were able to access confidential information around mergers (as defined by the Competition authority) in some circumstances, but not, until now, in respect of a market inquiry. Nedlac believed that the report should contain a statement, where applicable, that certain confidential information had not been included in the report, but that it was available, and should identify who was the owner of that, to allow application to be made for accessing that information.
There was still not agreement as to the stage in the process when the legal test for a market inquiry should apply, and the exact nature of the legal test. Business and government believed that this legal test should be applied at the beginning of the inquiry. It was only applied in respect of the anti-competitive outcomes and not in the case of public interest inquiries. The nature of the legal test had been supported by government and business to the effect that "the authorities had reason to believe". Labour had proposed a different kind of test. Labour also believed that there should be the possibility to begin the enquiry without the test, and for it to be brought in only later.
In regard to excusal from complaint, all constituents were worried about the language in the Bill because it was not aligned with the current policy on leniency. Government then proposed new text that had addressed the concerns.
On the matter of personal liability there were widely divergent views. At the beginning, business was opposed to the principle, but following a “robust process” there had been agreement that personal liability should apply. The elements of personal liability were the standard of behaviour that led to a criminal prosecution. If there was to be criminalisation of an offence for an individual, there must also be the possibility of leniency. There must be a decision on how to deal with the evidence flowing from the competition proceedings. There was agreement to incorporate criminalisation in the Bill because laws must respond to the demands of society. More recently, largely due to the success of the competition authorities, the public was increasingly aware of behaviour that should not be tolerated, and there was a demand for stringent deterrents. However, it was also necessary to ensure the rights of an individual to a fair trial. The parties were agreed that negligence (“ought to have known”) was probably not n appropriate standard, and the current wording could have been interpreted wrongly. Therefore the provision must be altered. In regard to the treatment of evidence, Nedlac agreed that the text of the Bill was unsound, with serious constitutional challenges. The dti proposed new wording was supported by business, but not labour. There was a question whether the Bill should say what would happen to the evidence, and this was still being debated as to whether the Bill should specify matters, or it should be left to the prosecutor to decide. Labour had proposed that if there was a finding against a firm, there should be a rebuttable presumption that the director knew of it and was therefore liable to criminal prosecution, but all were not agreed that this was constitutionally sound.
Nedlac had agreed that the principle of fines for directors be in the Bill, but some further work had to be done on the wording. In addition, the evidence from the proceedings needed to be worked on more.
Mr Eric Watkinson, representative of Labour (Food and Allied Workers Union), Nedlac, gave the views of labour on the matter. He said that there had been agreement on notification of trade unions in cases of mergers, by notice to go to the head, and not the regional office. Labour was concerned about “creeping concentration”, whereby small firms were being taken over by large firms, but that this trend was not being picked up because the mergers were falling below the merger threshold. Constituencies agreed that labour could be consulted on the matter, and there should be investigation into these types of matters by the Competition authorities. There was further agreement that there should be notification to trade unions who were subsidiaries in the parties to a merger, not only to those trade unions in the primary acquiring and target firms. Technical amendments to the new section 73A of the Act were agreed upon , whereby it would be an offence to obstruct the course of an investigation by the Competition authorities or to provide false information to both the Commission and the Tribunal.
Mr Watkinson then indicated that there was no agreement on further areas. Labour was concerned that there were examples of mergers filed during the December shut down, and had proposed there be a time block from 16 December to 7 January, where none could be filed. That was not supported by business and government. Labour asked for consent orders to be publicised in the Government Gazette summarised to Nedlac, to give more transparency on who had applied for a consent order and who was given leniency. This was not supported. It had also proposed an increase in penalties to the duration of conduct, and had also discussed an issue of automatic enquiry into fair prices, asking for some mechanism whereby the Competition authorities would recommend what a fair price should be. This was not agreed to, although there was agreement that a certain mechanism would be introduced after cartel findings. In regard to the purposes of the Competition Act, labour was concerned that the objectives of the Act suggested that competition was the overarching consideration, and employment was secondary to it. Labour proposed an amendment, but this was not agreed upon as it would have been a major policy shift. However, labour had asked that this policy be discussed at a future time.
Ms Zodwa Ntuli, Deputy Director: Consumer and Corporate Regulation, Department of Trade and Industry did not wish to comment save to say that the presentation reflected what had been done
Prof Ben Turok (ANC) noted that it seemed that in the discussion between the Competition Commission and the Department various turf wars had arisen, but seemed to have been put aside. The key word seemed to be "procedures". He said that the first step should be that the Competition Commission (CC) should do research on an inquiry, have the first chance to apply the leniency provisions, and only if that failed should the criminal proceedings follow. He thought that not only the roles, but also the process, should be clearly set out.
Ms Ntuli noted that the investigation process by the CC was entrenched in the Act. The CC would have the power to proactively initiate investigations as well as to respond to complaints submitted to it. It would investigate, and would refer matters to the Tribunal to adjudicate where necessary. Sometimes the CC might find the need to negotiate settlement, which would be done through a consent order. Where there was an application for leniency, the CC could decide to give such leniency to a particular firm. The Department of Trade and Industry (dti) was now seeking to introduce the element of personal liability to criminalise conduct of individuals. That would be pursued in the criminal courts. In that case, after the CC had investigated, it could initiate the process of prosecution through the National Prosecuting Authority (NPA). What was now being proposed in fact took no powers away, but merely clarified the roles. The processes of leniency or criminalisation would run separately. Now there was also agreement to extent leniency to individuals. She reiterated that Chapter 5 dealt with the process and Chapter 6 dealt with the process of civil action. Chapter 7 dealt with the offences that would be going to the criminal court.
Prof Turok said that the legislation did not seem to make this process clear. He thought that a clause should be included to set out that process. The lack of clarity had led to the misunderstanding.
Prof Turok then raised a concern that the Committee and the dti had no proof of the structure of corporate business, nor a portrait of corporate South Africa (other than what could be gleaned from “Who Owns Whom”, which was incomplete). He had previously asked the CC to come to the Committee with a researched report on the structure of corporate business in South Africa. He thought Parliament should send a formal instruction to the CC to engage consultants and present a full "picture" of corporate South Africa so that there was understanding of what the "collective" meant and where collective dominance was taking place.
Mr Shan Ramburuth, Commissioner, Competition Commission agreed that this request had been made, but the CC was dealing with matters on a case by case basis. He thought that the Industrial Strategy Project had done a survey, but this was a useful suggestion.
Prof Turok said that if labour wanted employment to be a prime consideration, then they should come with a proposal and suggest how this could be done.
Mr Watkinson said that an amendment had been proposed. The Act current set out that its purpose was to “maintain competition, in order to….”and that stated objectives were then set out, which included employment considerations. Labour had proposed that, similar to the wording of other legislation, including the National Environmental Management Act, that the wording should be along the lines of “the purpose of the Act is: a) to promote and maintain competition” and that the other objectives should then follow as listed additional objectives. The other proposal was that the Competition authorities were not taking “decent work” into account when considering mergers and investigations. There was a debate about "to promote employment and decent work" but it was eventually decided to leave this wording to reflect “promote employment and advance the social welfare of South Africa”.
Prof Turok though that this was an acceptable proposal, although the changes to the text did not, in his view, add very much. He thought that there was a need to be more specific so that clauses actually supported the objectives.
Ms Ntuli said that this would be considered. |
Mr Tony Ehrenreich, Provincial Secretary, Western Cape, Congress of South African Trade Unions, representing Labour at Nedlac, said Cosatu agreed with this and would take up the invitation to have further engagement to ensure that there was expression given to the intention to create employment.
Mr S Njikelana (ANC) agreed that this was commendable, because labour was a vital component. Bad competition could lead to bad employment policy.
Mr Njikelana said that reference was made to interdependence amongst the few firms. He asked for further elaboration on this.
Mr Fungai Sibanda, Chief Director: Policy and Legislation, dti, said that when firms competed, they would do so on the basis of supply and demand. In a concentrated market, with a few large players, they would act in an interdependent manner, along the lines of an unwritten code, making similar decisions without actually reaching a formal agreement. Instead of competing they would be very conscious of what others were doing and would act in a similar manner. It might not be a problem all the time, but would be when the outcome was that competition was restricted.
Mr Njikelana understood that the legal test was still under discussion, but he would like to know the reasons why there was not full agreement.
Ms Nomfundo Maseti, Director: Consumer and Competition Law, dti, said that the constituencies had agreed that the market inquiry should incorporate subpoena powers to obtain information during the market inquiry. It must be understood that a market inquiry was not into one firm, but was a general inquiry to discover why the market was uncompetitive, and hopefully uncover the hindrances to the achievement of the purposes of the Act. If these subpoena powers were to be introduced, then there must be a legal test, or reasonable grounds for the inquiry. The difference of opinion between the parties related to the stage at which that legal test must be introduced. From a practical point of view the CC probably needed to use the subpoena powers up front to obtain documents or to call people in, after publishing the notice of the Inquiry. Perhaps the legal test also needed to be broadened to incorporate some market triggers. Labour had felt that the legal test did not necessary have to be proved at the very beginning.
Mr Njikelana noted the proposal for standards of behaviour for personal liability, and he asked what that would entail.
Ms Maseti noted that there had been criticism of the Bill that it seemed to rely upon negligence in order to determine liability, and there was discussion whether that negligence was enough to hold a person criminally liable. The dti accepted that it might pose a challenge and the wording had been reconsidered.
Mr Njikelana questioned the payment of directors' fines by companies. He had understood that directors should be personally liable, and enquired how the company could pay.
Ms Maseti said that if firms were permitted to pay fines on behalf of directors there would be no real deterrent. Dti wanted to introduce a clause that would prohibit payment of fines by firms. In practice, firms would pay fines, but then recoup the money either from insurance policies covering loss caused by directors, or by raising prices.
Mr Njikelana hoped that the CC would regularly update the Committee on the Memoranda of Agreement and how they were dealing with the various sector regulators, as it was of interest how they would turn out.
Mr Njikelana also hoped that the Committee would consider seriously the concerns on smaller enterprises raised by Labour at Nedlac. If this was not addressed now, he thought that competition would be undermined, albeit in subtle ways.
Ms Maseti noted that the debate at Nedlac discussed creeping concentration and attempted to deal with this. The complex monopoly provisions were intended to deal with highly concentrated markets producing uncompetitive outcomes, and with regard to changes in he merger notification thresholds, dti would consult with labour to give input and make suggestions to the Minister.
Mr Njikelana raised the introduction of mechanisms to determine prices after cartel pricing. The issue of prices was very sensitive. He asked labour to elaborate on this and to say at what stage they would like to see determination of fair prices being done. This linked to concurrent jurisdiction and sector regulators, who were to determine fair prices.
Mr Watkinson said that some sectors were not currently under a sector regulator. Labour suggested that once the CC had done the substantial work into inquiries, it should make a comment upon fair pricing. Labour had also asked whether the Competition authorities’ investigations would have been sufficiently detailed to be able to build a picture of the costs faced in industry and to determine their reasonableness. The Competition authorities had responded that they did not arrive at that level of detail through existing processes, and that it would be complex for them to make a suggestion on fair price within a market environment, or on sectors where there was no regulator. Labour was suggesting that the depth of the investigations be deepened to allow this. It had also in this context raised whether priority sectors could not be investigated, either by CC or at other structures.
Ms Maseti said, in regard to comments after an inquiry or after findings of price fixing, it was agreed that Nedlac should identify priority sectors and submit a summary to the Minister. In respect of the market inquiry provisions the Minister could then request the Competition authorities to do an inquiry into those priority sectors and particularly into the issue of fair pricing after the findings of a price fixing or cartel activity.
Dr P Rabie (DA) asked when the amended Bill was likely to be tabled to Parliament.
The Chairperson said that would depend on the other work but a tentative date for debate was 21 August..
Committee Deliberations on the Bill
The Chairperson noted that a document containing suggested wording had been prepared by the Department and had been tabled to Members. He said that the Committee should proceed to discuss the wording in that document.
The Chairperson read out the motion of desirability, and this was accepted.
Mr Johan Strydom, Senior Legal Adviser: Legal Services, Department of Trade and Industry, noted that the proposed amendments were based on discussions during the public hearings and Committee discussions. Some related to policy matters, but a number were of a technical nature. He suggested that the technical amendments be taken as accepted by the Committee. He noted that this document had also been made available to the State Law Advisors and Parliamentary Legal Advisers.
Mr Strydom noted that there was a proposed new definition of "deserving of leniency". This provided that if a person had provided evidence on an investigation into a prohibited practice, the Commission could decide that he was 'deserving of leniency" and that would become relevant when dealing with Section 50.
There were no questions
No amendments were being proposed.
Mr Strydom noted that this related to the application of the Act. There were some technical amendments. In addition a new subclause (c) was to be inserted into Section 3(2) of the Competition Act (the Act).
Mr Strydom also noted that that Section 3(3) was to be amended. This dealt with the principle of concurrent jurisdiction between the competition and other regulatory sector authorities. The question was how far the authority of the Competition authorities went. The new insertions would provide that the sector regulator would have the ability to establish conditions applying to that sector. The authority of the Competition Commission was now specified as "the primary authority to detect and investigate alleged prohibited practices within any industry or sector, and to review mergers."
Prof Turok noted that Clause 3(3)(a) was using the word "concurrent jurisdiction" and he wondered whether that was not conflicting with the new subclauses (i) and (ii) now being proposed.
Mr Strydom said that it was the intention of this amendment to ensure that concurrent jurisdiction would remain, but that the roles of the authorities were being properly defined. That was why (i) was introduced to set the specific role of the sector authority, to establish conditions, and why (ii) stated that if there was then a prohibited practice in any sector, it would primarily be the role of the Competition authorities to investigate, no matter in which sector those prohibited practices were found.
Prof Turok accepted the explanation. There were no further questions.
Mr Strydom noted that this clause had originally dealt with complex monopolies. The whole clause was now being substituted with a new clause, as set out. This new provision now raised the threshold of the market share from 45% to 75%. It also dealt with the parallel conscious conduct.
Mr Strydom asked the dti to advise the Committee of the policy thinking.
Mr Sibanda noted that it had been agreed at Nedlac that the clause must be reviewed. There were three parts to the proposal. The three elements now being covered were the threshold, consideration of how the firms in the concentrated market were behaving that would lead to the investigation; and the remedies. The dti intended to target the concentrated markets. In order for the provision to kick in, the biggest five firms had to account for 75% of the market, and in addition it had to be shown that two or more of those five firms were behaving in a manner that suggested parallel conduct or conscious coordination. In addition, the conduct must have the effect of substantially preventing or lessening competition. There was also provision for a defence for firms to justify the conduct. If it was proven that the anti competitive defects outweighed the competitive gains, then they could be found guilty of complex monopoly conduct.
There was now also provision for an investigative mechanism, unlike the previous version of the Bill. The new wording now also provided a mechanism for a remedy. Once it was established that the biggest five firms accounted for 75%, and were coordinating, resulting in high entry barriers and the exclusion of other firms, or excessive pricing of the supply, then the CC could refer one firm, having a 20% share, to the Competition Tribunal. The Tribunal could make an order requiring those firms to cease the behaviour, or place certain conditions that would correct the conduct complained of.
Prof Turok asked for an example of the technological, efficient or other pro-competitive gains named in 10A(1)(c)
Mr Sibanda said that the Act already provided for certain defences in the Act - such as Section 4(1)(a) and Section 8. Whenever there was anti-competitive conduct that had the ability to lessen competition, the firms could raise a defence that their conduct was in fact also producing pro-competitive gain. An example might be two firms engaging in a joint venture that resulted in a new product in the market, which might outweigh the anti-competitive aspects.
Mr Njikelana asked what had informed the number of five firms.
Mr Sibanda replied that other models and methodologies were used to measure concentration. This number was used as an assessment of who was likely to account for 75% of the market share.
Mr Njikelana noted that 10A(1)(a) also related to supply, and asked how the supply to five or fewer firms could set an uncompetitive environment.
Mr Sibanda said that this would relate to the instance where five or less major buyers could exert power on their suppliers in order to lower prices – citing the possibility of this being done with the large supermarket chains.
Mr Strydom said that no amendment was being proposed.
Mr Strydom noted that this was dealing with market inquiries. Most of the amendments were of a technical nature, and most simply related to change of the word "enquiry" to "inquiry". An "enquiry" would be merely seeking information. An "inquiry" went beyond a mere enquiry into deeper investigation.
Mr Strydom noted that the clause was intended to amend Section 43B(1). The conditions under which the Commission could conduct a market inquiry were being set out. The CC would have to meet the conditions that it had reason to believe that any feature or combination of features of a market for any goods or services prevented, distorted or restricted competition within that market, or that the inquiry had to achieve the purposes of that Act.
The terms and references must be gazetted. The scope and times must therefore be included. New subclauses were being set out for Clause 43B, to deal with the publication and it was noted that there was now also allowance for amendment of the time frames, and publication of the report within the time set out in the terms of reference.
Members had no questions.
Mr Strydom noted that there were no amendments proposed
Mr Strydom set out that this clause had been rejected. The clause had related to the insertion of the definition of leniency. There was now a new clause being proposed that would clarify the position. Subclause (1)(a) provided for the CC being able to certify that a person was deserving of leniency, and (1)(b) provided that the CC should refer the case to the Competition Tribunal if no certification of leniency took place.
Mr Strydom described the new subsections also being added. He noted that Dr S Rasmeni (ANC) had previously raised a comment about the possibility of an award to a person who had suffered damages. The new clause now provided that the decision to award leniency did not preclude a complainant from applying for a declaration, nor from applying for an award of civil damages in terms of Section 65 of the Act. There was already provision for a civil damages award under the Act, and this could now be incorporated into the consent order.
Clauses 8 and 9
Mr Strydom said that these clauses were not being amended.
Mr Strydom said that the amendments were purely technical, providing for insertion of a new clause to make the penalties apply
New Clause 11
Mr Strydom noted that this new clause would also relate to offences. There would be a new offence relating to obstructing the course of justice. It was already an offence to provide false information to the Competition Commission, but, due to an error, it had not been an offence to provide false information to the Tribunal, and the new clause was correcting this discrepancy.
Existing Clause 11 (to be renumbered)
Mr Strydom noted that there was a substantive amendment in this clause. This related to the criminal liability of directors and companies. Mr Strydom referred to section 68 of the Act. He explained the difference between the standard of proof on the balance of probabilities, or beyond a reasonable doubt.
Mr Strydom reflected upon what was currently in the Bill, which had been criticised. He summarised that certain of the sub clauses had dealt with action with intent, and others had dealt with actions that were not deliberate, but rather negligent. He said that the new clauses grouped the offences more properly. A person would be committing an offence if he caused the firm to engage in prohibited practices. Clauses (a) and (b) dealt with intent, and the (i), (ii) and (iii) subclauses dealt with negligence.
Mr Strydom said that a new sub clause (4) was also now being added to the proposed new Section 73. This provided that if, under 73(3), the Commission found that the application of leniency would be justified, it could request that the person not be prosecuted, or make submissions to the NPA in support of leniency for any person prosecuted for the offence.
Mr Strydom said that there were two obstacles in the path of the State if it wished to prosecute a person, because currently the State almost had to obtain a consent order admitting to the fact that there was illegal conduct, or have a finding by the Tribunal of illegal conduct. Failing that, there could be no prosecution of an individual. If one requirement had been met, then an element of the statutory offence was that the person caused the firm to engage in that prohibited offence. Every element would have to be proved beyond a reasonable doubt. Page 8, line 11 of the Bill currently provided that a finding by the Competition Tribunal would be "conclusive evidence" of the fact that the firm engaged in that conduct. This operated as an irrebuttable presumption against the accused, and would not stand constitutional scrutiny. Therefore dti was now suggesting that the finding, being an element of the offence, should bear a different evidentiary value. It should be reflected as “conclusive proof, in the absence of evidence to the contrary”. This would, in his view, make it clear that the finding had a certain status, but that it was open to the accused to rebut that status. The accused could show that the Competition authorities were wrong in making that finding, and it must be borne in mind that the finding would only have been reached on the balance of probabilities, whereas the burden of proof in criminal matters was “beyond a reasonable doubt”. He submitted that this was similar to the position where the same offence could attract both criminal and civil actions, with different standards of proof.
Prof Turok asked if the onus was now being placed on the accused.
Mr Strydom noted that, constitutionally, the State could not shift the onus of proof on to the accused. The onus remained with the State. If the accused did not give evidence to the contrary - for instance by choosing not to give evidence, or by not mentioning the matter - then the finding of the Tribunal would be regarded as conclusive.
Mr Mongamezi Kweta, State Law Adviser, Office of the Chief State Law Adviser, said that normally the State would produce evidence that the firm had engaged in a practice. The State would be able to call the witnesses. The State would still have to prove that the accused director engaged in the practices, but he would have the chance to defend himself.
Prof Turok noted that if the accused did not give evidence, this could raise an unfortunate inference in the mind of the presiding officer.
The Chairperson said that there was a right to silence.
Mr Strydom referred to Section 62 of the principal Act, which gave some indication of the status being given to these kinds of findings by the Competition authorities. This had been quite an issue with the Department of Justice, as they felt that the competition authority was given an elevated position when it came to jurisdiction, because the Competition Tribunal and Appeal Court had exclusive jurisdiction on certain matters. While this was not necessary the motivation for inserting this clause in the Bill, he would say that it did not amount to shifting the onus; it merely called on the accused to rebut a presumption. There were several other pieces of legislation with the same principle.
Mr Strydom then noted the power being given under the new sub clause (4). He did not wish to express a view, but said there were some doubts whether it was infringing on the authority of the NPA. Once Parliament had deemed fit to create a statutory offence, it was within the authority of the NPA to do the necessary if there was commission of that offence.
Prof Turok said that the NPA could refuse to take the Competition authorities representations into account.
Mr Strydom agreed that ultimately it would be the decision of the NPA whether to prosecute or not.
Mr Strydom also pointed out that a new sub clause (6) was being added, to cater for the situation where a firm would insure itself against a director's fine, or pay the fine for a director. The firm was now being expressly prohibited from paying any fine that may be imposed, or from indemnifying, reimbursing, compensating or defraying the expenses of that person unless the prosecution was abandoned or the person was acquitted
Mr Njikelana asked why there was reference being made to one firm.
Mr Sibanda noted that the provision of complex monopoly conduct was intended to deal with two or more firms. He explained that it would be conduct of more than one firm. He agreed that the reference should be changed to "firms"
Mr Strydom noted that this clause now provided that there should be public comment on anything gazetted. He also noted that dispute resolution clauses would be included.
The Chairperson noted that each Clause of the bill had been read out. Because there was now a quorum, he called upon Members to take a decision on the clauses and the Bill.
Adoption of Bill
The Committee unanimously accepted the Bill.
The Chairperson read through the Report of the Committee
The Committee accepted the Report.
The meeting was adjourned.
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