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Norvatis SA and Main Street 2 t/a New United Pharmaceutical Distributors (22/CR/B/Jun01) [2001] ZACT 21 (2 June 2001)
.RTF of original document
THE COMPETITION TRIBUNAL
THE REPUBLIC OF SOUTH AFRICA
CASE NO: 22/CR/B/Jun01
Concerning the matter between:
NORVATIS SA (PTY) LTD
1st Applicant
ROCHE PRODUCTS (PTY) LTD
2nd Applicant
INGELHEIM PHARMACEUTICALS (PTY) LTD
3rd Applicant
BRISTOL MYERS SQUIBB (PTY) LTD
4th Applicant
SCHERING (PTY) LTD
5th Applicant
ABBOTT LABORATORIES SA (PTY) LTD
6th Applicant
SANOFI-SYNTHELABO (PTY) LTD
7th Applicant
BAYER (PTY) LTD
8th Applicant
ELI LILLY SA (PTY) LTD
9th Applicant
WYETH SA (PTY) LTD
10th Applicant
AVENTIS PHARMA PTY) LTD
11th Applicant
INTERNATIONAL HEALTHCARE DISTRIBUTORS
12th Applicant
(PTY) LTD
and
THE COMPETITION COMMISSION
1st Respondent
MAIN STREET 2 (PTY) LTD t/a NEW UNITED PHARMACEUTICAL
DISTRIBUTORS (PTY) LTD
2nd Respondent
NATAL WHOLESALE CHEMISTS (PTY) LTD
t/a ALPHA PHARM DURBAN
3rd Respondent
MIDLANDS WHOLESALE CHEMISTS LTD
t/a ALPHA PHARM PIETERMARITZBURG
4th Respondent
EAST CAPE PHARMACEUTICALS LTD
t/a ALPHA PHARM EASTERN CAPE
5th Respondent
FREE STATE BUYING ASSOCIATION LTD
t/a ALPHA PHARM BLOEMFONTEIN (KEMCO)
6th Respondent
PHARMED PHARMACEUTICALS LTD
7th Respondent
AGM PHARMACEUTICALS LTD
t/a DOCMED
8th Respondent
L’ETANG’S WHOLESALE CHEMISTS CC
t/a L’ETANGS
9th Respondent
RESEPKOR (PTY) LTD
t/a RESKOR PHARMACEUTICAL WHOLESALERS
10th Respondent
_____________________________________________________________________
Reasons
BACKGROUND
1.
On the 2nd May 2001 the Competition Commission referred to us a complaint by the 2nd to 10th respondents in this matter alleging that the applicants, together with MSD (Pty) Limited (another pharmaceutical manufacturer that
is not party to these proceedings), engaged in practices prohibited by Chapter 2 of the Competition Act 89 of 1998 as amended (the
Act). Specifically the Commission alleged that the applicants and MSD (Pty) Limited contravened sections 4(1)(a); 4(1)(b)(i); 5(1);
8(c); and 9(1)(c)(ii) of the Act.
2.
The complaint referred to us was lodged with the Commission by the respondents on the 11th October 1999; and was accepted by it on the 17th of February 2000. Prior to the Act being amended by Act 39 of 2000, which came into effect on the 1st of February 2001, the Commission was required to formally accept a complaint submitted to it for investigation. Thereafter in terms of the previous Commission rule 19(2) the complaint once accepted had to be referred
to the Tribunal within one year after the date of acceptance as opposed to the date of submission. In terms of the amended Act the requirement for formal acceptance of the complaint was dispensed with and the time period for referral
– still one year – began running from the date of submission.
3.
On the 1st June 2001, in response to the referral of the complaint against them, the applicants instituted review proceedings in the High Court
to have the complaint referral by the Commission set aside. (We deal with the grounds for the review application below.) On the same
day the Tribunal received an urgent application by the applicants to stay the referral proceedings pending the finalisation of the
review application in the High Court and condoning their non-compliance with the Tribunal Rules relating to time limits with reference
to the filing of their answering affidavits.
4.
At a hearing held on the 6th June, at the request of the Commission the hearing of the stay application was postponed until the 13th June. The Commission indicated that it would oppose the application for a stay and needed time to prepare. In order that the postponement
not prejudice the applicants we made an order suspending the passage of days in the referral proceedings pending our decision in
the application for a stay. The Commission elected not to file an answering affidavit and argued the matter on the basis of the applicants’
founding papers.
5.
When the hearing resumed on the 13th June the applicants argued that we should stay the referral proceedings because if they succeeded in the review application in the
High Court the referral would be struck down rendering the proceedings in the Tribunal nugatory.
6.
In the review proceedings before the High Court the applicants seek to have the complaint referral by the Commission set aside on
two grounds. Firstly it is contended that in terms of section 50(5) of the Act as amended, the Commission is time barred from referring
the complaint to us and must accordingly be regarded as having issued a Certificate of Non-referral.
7.
Secondly, the manner in which the complaint was referred by the Commission is alleged to constitute a breach of the applicants’
common law right to audi alteram partemand, as such, is procedurally unfair administrative action in terms of sections 3 and 6 of the Promotion of Administrative Justice
Act and a violation of section 33(1) of the Constitution. The applicants claim that the Commission acted unfairly because (1) it
did not give them access to material evidence adverse to them or a summary thereof, to enable them to respond thereto; (2) they were
not afforded a hearing to dispute the material evidence adverse to them prior to the Commission taking its decision to refer the
complaint; and (3) the Commission has failed to substantiate allegations upon which its referral of the complaint is based.
DECISION
8.
The application for a stay of the proceeding of the Tribunal in case 22/CR/B/Jun01 is denied. Reasons for this decision follow.
REASONS
Jurisdiction
9.
The parties appearing before us in this matter have devoted considerable time to a discussion of weighty jurisdictional matters. In
essence the applicants allege that the Commission acted ultra vires by referring this matter to the Tribunal outside of the prescribed
time limit. The determination of whether the Commission was competent or not to do so is a jurisdictional issue and, in terms of
the Applicant’s reading of section 62 of the Act such a question is a matter over which the Competition Appeal Court (CAC)
and the High Court have jurisdiction but not the Tribunal. Secondly, the Applicant alleges that certain of its constitutional rights
have been violated by the procedures employed by the Commission in referring this matter to the Tribunal. The Tribunal, continues
the argument, similarly has no jurisdiction to decide constitutional matters because constitutional issues are part of the concurrent
jurisdiction of the CAC and the High Court but not the Tribunal. Accordingly, since the review is concerned with jurisdictional matters
and constitutional matters the Tribunal is barred from any enquiry that presupposes a decision on the merits of the review proceeding
initiated in the High Court. Given then that the Applicant has discretion whether to approach the High Court or the CAC it is fully
within its rights to approach the High Court and this is what it has done.
10.
The Commission, on the other hand, argues that the review falls within the boundaries of the Tribunal’s exclusive jurisdiction
and that it is fully competent, indeed, from a jurisdictional point of view, it is uniquely competent, to hear the review at issue
here. In essence, the Commission argues that the jurisdictional matters raised are not those, the adjudication of which is reserved
for the High Court. As for the constitutional violations alleged, it is suggested that these are invoked precisely in order to give
matters clearly within the Tribunal’s jurisdictional competence a constitutional cast. The Commission argues that the taking
of jurisdictional and constitutional points is in the nature of a mere device to place beyond the Tribunal’s reach a matter
actually within its jurisdiction. At very least, contends the Commission, the Tribunal enjoys concurrent jurisdiction with the High
Court and, as such, it is jurisdictionally competent to enquire into the merits of the review. Moreover, argues the Commission, even
if jurisdiction was found to be concurrent the principle that parties first exhaust the domestic remedies provided, that is those
remedies specifically provided by the statute in question, dictate that the Competition Tribunal, or if that forum was found to be
jurisdictionally incompetent, the CAC, hear this matter.
11.
In our view this discussion sets the sights too high. The matter of granting a stay does not require a decision regarding the jurisdictional
boundaries of the Tribunal. This appears to us to be the judicial equivalent of constructing a garden shed on foundations intended
to support a skyscraper. The Tribunal has been asked to grant a stay of its own proceedings and its competence to do this has not
been questioned. Accordingly all that is required is that we decide the basis for making this decision and that we then proceed to
decide it. Our decision with respect to the stay in no way purports to derogate from the High Court’s competence to decide
the merits of the review. Nor does it purport to decide whether the Tribunal (or the CAC) enjoys concurrent, much less exclusive,
jurisdiction in the review proceedings. The Tribunal has not been asked to conduct a review. This has been asked of the High Court.
Should the High Court decide that this is not within its jurisdictional competence it will, as in the decision of Jali J in the matter
of Seagram Africa (Pty) Ltd v Stellenbosch Farmers Winery Group (Pty) Ltd and Others; case number 7759/00 CPD, doubtlessly decline
to decide the matter and direct the Applicant to approach the competent body, be it the Tribunal or the CAC.
12.
The applicants have obviously, by very dint of their application, conceded the Tribunal’s jurisdiction to decide whether or
not to stay its proceedings in respect of the Commission’s complaint referral in the case in question and this is what we shall
decide, no more and no less. In the hearing Mr. Puckrin, for the applicants, conceded that the Tribunal was not being asked to partake
in a mere formality, that it was, in other words, not being asked to issue a rubber stamp type approval. However he conceded a very
limited basis for that discretion. Relying upon Rule 33(4) of the Rules of the High Court, he argued that all that was at issue was
‘convenience’. The applicant’s understanding of convenience did not, it appeared, even extend to the question of the ‘balance of convenience’.
It was simply a question of administrative convenience, on the same footing as, for example, the decision to separate the hearing
of an in limine argument from the hearing on the substantive merits.
13.
Mr. Brassey, for the Competition Commission, took a somewhat broader view of our discretion. He contended that the Tribunal should
examine whether the review in question had any prospect of success. He argued that should we find that there was, indeed, no prospect
of success, we should then refuse to grant the stay.
14.
The convenience test is really not at issue here. Had we been asked to decide the review points ourselves the applicants may well
have approached us and, as a matter of convenience, asked us to first decide the review points before proceeding to the substantive
merits contained in the referral. In this instance, however, the review has been taken to another forum for consideration. We are
being asked to stay our proceedings whilst these issues are considered in the High Court. Certainly convenience is a factor to consider
in staying our proceedings. However there is a prior question to consider and that is, as Mr. Brassey suggests, the question of the
prospects of success.
15.
In the present situation the Tribunal is in an analogous position to that of the High Court under the interim constitution in relation
to the constitutional validity of statutes. Hence in Mhlungu Kentridge AJ, examined the nature of the High Court’s obligation under the interim Constitution to refer constitutional matters
to the Constitutional Court. The learned judge expressed it as follows:
“In s 103(4) of the Constitution, which deals with the referral to this Court of matters originating in inferior courts, the referring
Provincial or Local Division must in addition be of the opinion 'that there is a reasonable prospect that the relevant law or provision
will be held to be invalid'. … The reasonable prospect of success is, of course, to be understood as a sine qua non of a referral,
not as in itself a sufficient ground. It is not always in the interest of justice to make a reference as soon as the relevant issue
has been raised. Where the case is not likely to be of long duration it may be in the interests of justice to hear all the evidence
or as much of it as possible before considering a referral. Interrupting and delaying a trial, and above all a criminal trial, is
in itself undesirable, especially if it means that witnesses have to be brought back after a break of several months. Moreover, once
the evidence in the case is heard it may turn out that the constitutional issue is not after all decisive. I would lay it down as
a general principle that where it is possible to decide any case, civil or criminal, without reaching a constitutional issue, that
is the course which should be followed.”
16.
The principles at issue in deciding whether or not to grant a stay are, we submit, identical. Borrowing the words of Kentridge AJ,
in deciding whether to stay our proceedings ‘the reasonable prospect of success is, of course, to be understood as a sine qua non of a referral (read ‘stay’), not as in itself a sufficient ground’. Beyond the question of the reasonable prospect
of success is, once again to borrow the learned Kentridge AJ’s words, ‘the interests of justice’. Note that the
learned judge, in the paragraph cited, appears to cast the question of ‘justice’ in terms of the delay generated by a
referral – per definition a request for a stay, is a request for a delay and, following this judgment, an unwarranted delay
of a proceeding is unjust, the more so when the applicant fails to show that the referral has a reasonable prospect of success, that
is, that it will achieve nothing more than a delay, a digression. We should also point out that, in the context of the Mhlungu judgment the question of the inferior court’s jurisdiction to hear constitutional matters did not arise. It had no jurisdiction
and still the learned Judge concluded that it was not required to refer a constitutional matter to the Constitutional Court if it
did not pass the tests enunciated in the judgment, to recap, the sine qua non of a reasonable prospect of success, and, then, its decisiveness for the case and the interests of justice.
17.
As we shall elaborate below we do not believe that the review has any reasonable prospect of success largely because the High Court
itself has already decided both review points against the Applicants. It has, in other words, fallen at the first hurdle erected
by Kentridge AJ’s dictum in the Mhlungu judgment.
Commission is time barred
18.
The Applicants argue in their review application that in terms of section 50(5) of the Act as amended the Commission is time barred
from referring the complaint and must accordingly be regarded as having issued a notice of non-referral.
19.
Section 50(5) provides:
(5)
“If the Competition Commission has not referred a complaint to the Competition Tribunal, or
issued a notice of non-referral, within the time contemplated in subsection (2), or the extended period in subsection (4), the Commission
must be regarded as having issued a notice of non-referral on the expiry of the relevant period.”
20.
Subsection (2) provides that the Commission must refer a complaint to the Tribunal within one year after it was submitted to it; and
subsection (4) provides that before the one-year period allowed in subsection (2) expires, the Commission may extend it by agreement
with the complainant or by application to the Competition Tribunal.
21.
The Applicants argue that even though the complaint was lodged with the Commission before the Act was amended the above section applies
by virtue of section 23(5) of Competition Second Amendment Act 39 of 2000. This section states:
“Any proceedings that were pending before the Competition Commission, Competition Tribunal or Competition Appeal Court before the date
of commencement of this Act must be proceeded with in terms of the principal Act as amended, except to the extent that a regulation
under section 21(4) or 27(2) of the principal Act as amended, or a rule of the Competition Appeal Court, provides otherwise.”
22.
The applicants argue that section 23(5) renders the amendments to the relevant sections of the Act – specifically including
the amended Section 50 - retrospective and therefore applicable to the Commission’s complaint proceedings.
23.
Clearly at the time that the amendments came into effect the complaint was still under investigation by the Commission. The applicants
argue that since neither sections 21(4) nor 27(2) are applicable to this matter, which is common cause between the parties, section
50(5) of the Act as amended applies. Accordingly, in the absence of proof that the Commission either reached an agreement with the
complainants (the 2ndto 10threspondents in these proceedings) or received an order from the Tribunal extending the time period allowed for investigation, which
otherwise, the Applicants argue, expired on 11 October 2000, the Commission must be regarded as having issued a notice of non-referral
and is time barred from referring the complaint to the Tribunal. It is submitted by the applicants that the Commission therefore
acted outside of its jurisdiction in referring the complaint to us when, by virtue of section 50(5), it was deemed to have issued
a notice of non-referral.
24.
On the applicants’ argument, the provisions of section 50(5) apply retrospectively by virtue of section 23(5). It appears to
be common cause that if the provisions of section 50(5) apply only prospectively, the Commission’s referral was timeous. It
follows therefore that the Applicants can only succeed on this point if they can establish that the provisions of section 50(5) are,
as they argue, retrospective in nature.
25.
It is common cause that there is a strong presumption against the retrospective application of legislation. It is also common cause
that a statute can expressly be given retrospective effect and that in such a case the presumption does not operate. The matter becomes
more complicated however as the courts have at times distinguished between the retrospective effects of changes to procedures on
the one hands and changes to substantive rights on the other. Thus even though a statute may appear through express language to operate
retrospectively the extent of the retrospective effect may be open to some doubt.
26.
In the Mhlungucase Kentridge AJ stated:
“It is however not always easy to decide whether a new statutory provision is purely procedural or whether it also affects substantive
rights. Rather than categorizing new procedures in this way it has been suggested one should simply ask whether or not they would
affect vested rights if applied retrospectively ….”
27.
The Applicants argue that section 23(5) is express in its application to procedural issues, that the issue of the time bar is a procedural
matter and hence the new legislation applies retrospectively and the Commission in consequence is time barred. They find support
for their approach in a recent decision of the CAC in Norvatis SA (Pty) Ltd and Others v New United Pharmaceutical Distributors (formerly Mainstreet 2 (Pty) Ltd) and Others