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COMPETITION TRIBUNAL
REPUBLIC OF SOUTH AFRICA
Case Number: 08/CR/Mar01
In the matter between:
The Competition Commission of Applicant
South Africa
and
Federal Mogul Aftermarket Southern Africa (Pty) Ltd 1st Respondent
Federal Mogul Friction Products (Pty) Ltd 2nd Respondent
T & N Holdings Ltd 3rd Respondent
T & N Friction products (Pty) Ltd 4th Respondent
Administrative Penalty and Reasons for the Competition Tribunal’s Decision (non-confidential version)
Introduction
In our earlier decision on the merits of this matter we found that the first respondent had contravened section 5(2) of the Act.1
We postponed the issue of remedies for further evidence and argument. The only further evidence that we received was an affidavit filed by the first respondent from its managing director Mr. Frederick Nel.
The Commission has asked us to impose an administrative penalty upon the first respondent of eight million five hundred thousand Rand (R 8 500 000.00) The Commission had also sought a permanent interdict against the first respondent, but it later abandoned this prayer, so we need only consider the appropriateness of the administrative penalty remedy.
The Tribunal’s power to impose an administrative penalty arises from section 59(1) and (2) of the Act which states as follows:
(1)The Competition Tribunal may impose an administrative penalty only –
for a prohibited practice in terms of section 4(1)(b), 5(2) or 8(a), (b) or (d);
for a prohibited practice in terms of section 4(1) (a), 5(1), 8(c) or 9(1), if the conduct is substantially a repeat by the same firm of conduct previously found by the Competition Tribunal to be a prohibited practice;
for contravention of, or failure to comply with, an interim or final order of the Competition Tribunal or Competition Appeal Court; or
if the parties to a merger have –
failed to give notice of the merger as required by Chapter 3;
proceeded to implement the merger in contravention of a decision by the Competition Commission or Competition Tribunal to prohibit that merger;
proceeded to implement the merger in a manner contrary to a condition for the approval of that merger imposed by the Competition Commission in terms of section 13 or 14, or the Competition Tribunal in terms of section 16;or
proceeded to implement the merger without the approval of the Competition Commission or Competition Tribunal, as required by this Act.
(2) An administrative penalty imposed in terms of subsection (1) may not exceed 10% of the firm’s annual turnover in the Republic and its exports from the Republic during the firm’s preceding financial year.
At the outset the first respondent has taken a series of constitutional points concerning the competence of this type of remedy and it is these issues, which we first consider.
SECTION A - Constitutional point
The first respondent argues that section 59 of the Competition Act is unconstitutional in three respects.
Firstly, section 59 of the Competition Act authorises the Tribunal, in the circumstances set out in the section, to impose administrative penalties on firms found to have contravened the Act. These penalties, argues the first respondent, are civil in ‘name’ only, but are criminal in ‘kind’ as they are punitive in nature. For that reason a respondent, in prohibited practice proceedings where a penalty remedy is sought, should have the same rights as an accused person has in criminal proceedings, rights that are guaranteed by section 35(3) of the Constitution. The first respondent argues that on a proper examination these protections are absent from the Act in several material respects. We deal with these in more detail later.
Secondly, and we understand this as an alternative to the first point, that even if section 35(3) does not apply to a respondent in prohibited practice proceedings, then section 34 of the Constitution, which provides for the rights of persons to have access to courts, does. Yet again there is, in the view of the first respondent, a want of constitutional compliance, as the Tribunal is not an “independent and impartial tribunal or forum” as required by that section.
The third submission is that section 59 is substantially irrational and accordingly unconstitutional to the extent that it provides that a firm’s turnover should be used as a basis for determining a maximum penalty in terms of that section.
The Commission and the amici 2 submitted that all three constitutional points were without merit and that we should reject them. The Commission, however, argued that we have no jurisdiction to determine the constitutionality of our own statute, as we are not a court with the status of a High Court.3 The first respondent argued that all it sought was for us not to exercise our powers in terms of section 59. The tribunal is permitted, argues the first respondent, to decide whether section 59 is unconstitutional. If we decide it is not, we must not implement it. The amici in this respect took the side of the first respondent and, whilst conceding that there was no direct authority on this point, argued that some other decided cases might be persuasive, including a decision of the Canadian Supreme Court in Douglas /Kwantlen Faculty Association v Douglas College where the court held that:
“A Tribunal must respect the Constitution so that if it finds invalid a law it is called upon to apply, it is bound to treat it as having no force and effect.”4
As we have decided that the section is not unconstitutional we do not need to decide this jurisdictional point, and we have proceeded on the assumption that the first respondent and the amici are correct in this respect. In any event, we believe that should this matter be taken to another forum, that forum may find it’s useful to have the perspective of the body responsible for adjudicating competition matters.
Background
Prior to the Competition Act coming into force in 1999, its predecessor, the Maintenance and Promotion of Competition Act (Act No. 96 of 1979) had a bifurcated approach to what the present Act defines as prohibitive practices. Under the old Act, some restrictive practices were susceptible to civil remedies, which did not include penalties, whilst others, including resale price maintenance, were made offences and could only be enforced by criminal law.
There were few if any criminal prosecutions under the repealed 1979 Act. It is not hard to understand why. Competition cases are difficult to conduct not only because they are fact intensive, but also because they involve the application of both law and economics. Neither the Department of Justice nor the SA Police Service have people with any special skills in this area - nor would it have been worth their while securing them, since under the old Act the number of cases requiring prosecutions was too insignificant to warrant the investment. This led to the demise of enforcement and, not surprisingly, when the new Act was proposed, Parliament, in the explanatory memorandum, stated that decriminalizing restrictive practices was a deliberate policy choice to improve enforcement. The administrative penalty became a feature of the new Act. What the Act sought to achieve was to improve enforcement by making a specialist agency and adjudicative tribunal solely responsible.
At the same time the legislature intended to decriminalize anticompetitive actions, believing that in modern law administrative penalties sufficed. 5
“Infringement of competition legislation will not be subject to criminal sanction, the only exceptions being in respect of breaches of confidence, hindering the administration of the Act and failures to attend when summoned and to answer truthfully to the Commission.”6
This is the background to the present section 59, which provides an administrative penalty as a possible remedy to the Tribunal in the event of a finding that a respondent firm has contravened certain provisions of the Act. 7
The Respondent’s Argument in Terms of Section 35 of the Constitution
Section 35 (3) of the Constitution states:
Every accused person has the right to a fair trial, which includes the right-
to be informed of the charge with sufficient detail to answer it;
to have adequate time and facilities to prepare a defence;
to a public trial before an ordinary court;
to have their trial begin and conclude without unreasonable delay;
to be present when being tried;
to choose and be represented by, a legal practitioner, and to be informed of this right promptly;
to have a legal practitioner assigned to the accused person by the state and at the state expense, if substantial injustice would otherwise result, and to be informed of this right promptly;
to be presumed innocent, to remain silent, and not to testify during the proceedings;
to adduce and challenge evidence;
not to be compelled to give self-incriminating evidence;
to be tried in a language that the accused person understands or, if that is not practicable, to have the proceedings interpreted in that language;
not to be convicted for an act or omission that was not an offence under either national or international law at the time it was committed or omitted;
not to be tried for an offence in respect of an act or omission for which that person has previously been either acquitted or convicted;
to the benefit of the least severe of the prescribed punishments if the prescribed punishment for the offence has been changed between the time that the offence was committed and the time of sentencing ; and
of appeal to, or review by, a higher court.
Measured against section 35(3) of the Constitution, the first respondent submits that the Competition Act fails to comply with that constitutional standard in three respects:
The Tribunal is not a ‘court’;
A respondent is not afforded the benefit of the more exacting standard of proof in criminal proceedings, viz. proof beyond a reasonable doubt. Although section 35(3) is silent on the burden of proof, the first respondent argues that this right has been read into the section by the Constitutional Court interpreting sections 35(3)(h), (i) and (j) 8; and
A respondent is deprived of its right to silence.
Since all parties before us are agreed that we are not a court, at least in the conventional sense implied by section 35, and that proof in our proceedings is based on a balance of probabilities9, the first respondent is correct that, at least in these two respects, the Tribunals procedures fall short of section 35’s strictures. It is less clear whether the Act can be read as to deprive a respondent of a right to remain silent although the first respondent concedes that this was not an issue in the instant case. 10
Nothing turns on determining this latter aspect, because if the first respondent is correct about the first two aspects, its argument must succeed.
In order to determine this we have to decide –
whether section 35 of the Constitution is intended to apply to Tribunal hearings for which an administrative penalty may be imposed ?
if not, why not; and then further;
if not, whether our proceedings meet the standard set out in section 34 of the Constitution.
The success of the first respondent’s section 35(3) argument is dependent on the notion that the effect of section 59 is punitive in the criminal law sense – hence a contravention of the Act that leads to the order of such a remedy is the analogue of a criminal court imposing its stricture on a miscreant, at least in substance if not form, and that accordingly, if the demands of the Constitution are not to be frustrated the legislation must provide the contravening party no less rights than would their criminal law counterpart.
There is no authority presently in our law to support such a view and hence the first respondent’s case is so heavily reliant on European case law for its conclusions.
On the other hand, as the amici point out, what South African case law there is, albeit not directly in point, tends to indicate our courts’ reluctance to expand the notion of who is an accused person beyond its conventional notions in criminal law.
The leading case is Nel v Le Roux NO and others11, where the Constitutional Court had to decide whether the provision in the Criminal Procedure Act, which allows a judicial officer to imprison a recalcitrant witness, was unconstitutional because it did not meet the requirements afforded to an accused person in terms of the Interim Constitution. Amongst the grounds on which that section was attacked was the fact that the provision was incompatible with an accused person’s right to be presumed innocent and remain silent (section 25(3)(c)), and the privilege against self-incrimination (section 25(3)(d)).
Whilst the Court held that such a person was entitled to procedural fairness, the examinee was not entitled to section 25(3) rights,
“….for the simple reason that such examinee is not an accused facing criminal prosecution. The section 189(1) proceedings are not regarded as criminal proceedings, do not result in the examinee being convicted of any offence and the imprisonment of an examinee is not regarded as a criminal sentence or treated as such.” 12
This is where the first respondent ingeniously endeavours to use a case ostensibly against it to bolster its own argument. The first respondent argues that the lesson from Nel’s case is not that the Court is not prepared to extend the rights of an accused person to a non-criminal trial context. Rather the test resides in understanding the objective of the sanction. Reliance for this is placed on a remark by the Court later in the same passage where it states:
“If, after being imprisoned, an examinee becomes willing to testify this would entitle the examinee to immediate release; in American parlance such examinees ‘carry the keys of their own imprisonment in their own pockets’. The imprisonment provisions in section 189 constitute nothing more than process in aid of the essential objective of compelling witnesses who have a legal duty to testify to do so; it does not constitute a criminal trial nor make an accused of the examinee.”
Thus, the first respondent argues, Nel turns on the fact that the object of imprisonment of recalcitrant witnesses is coercive, not punitive. This case it argues, is therefore authority for the proposition that it is the ‘object’ of the sanction that is determinative and if the object is to punish as opposed to coerce, section 35(3) rights are still of application.
This is an interesting gloss on the Nel case but the first respondent cannot get round the clear language of the Court that the rights were not triggered for:
“the simple reason that an examinee is not an accused facing criminal prosecution.” 13
The first respondent also seeks to rely on the Baloyi14 case to reinforce this gloss. The question there was whether the alleged violator of an interdict in terms of the Domestic Violence Act (no 116 of 1998), who faced conviction and imprisonment (and a fine), was an accused person as contemplated in terms of section 35(h) of the Constitution. The Court held that such person was. The Court distinguished Nel’s case on the basis that the objective was:
“..not to coerce the will to desist from on-going defiance, but to punish the body for completed violation; and the convicted person carries no keys in his pocket – indeed there is nothing in the Act to suggest that he can be released early if either the complainant wishes or the judicial officer so decides.”15
However it is quite clear that Baloyi was not concerned with an administrative penalty whose objective is punitive. It was rather concerned with a statutory offence for which conviction and imprisonment were consequences for the transgressor. This is illustrated by the following passage from the decision:
“The language of the Act is clear. Section 6 is headed Offences and Penalties and says that a person who contravenes an interdict “shall be guilty of an offence and liable on conviction” to a fine or imprisonment for a period not exceeding twelve months. Section 3(4) states that the judicial officer shall enquire into the alleged breach and “(b) convict the respondent of the offence contemplated in section 6.”16
The European Convention cases
Devoid of any local authority that supports its proposition, the first respondent has turned to European case law for assistance. In terms of Article 6 of the European Convention a person charged with a criminal offence is afforded certain minimal rights. 17
It appears that in an evolving jurisprudence over some years, that the majority of the decisions handed down by the European Court of Human Rights, have been at pains to ensure that Article 6 is not too easily evaded, leaving member states with no fairness standard to adhere to in proceedings that may be seriously invasive of citizens’ rights. For this reason they have been at pains to find proceedings, despite their outward administrative law trappings, as criminal in nature and hence subject to the purview of Article 6.
As stated for instance in the Engel case, which dealt with disciplinary proceedings against military conscripts in the Netherlands armed forces, member states are free to classify anything as ‘criminal’ subject to the rights that the Convention protects. The converse, that is, classifying something as disciplinary instead of criminal is not subject to the same latitude.
“The converse choice, for its part, is subject to stricter rules. If the Contracting states were able at their discretion to classify an offence as disciplinary instead of criminal, or to prosecute the author of a mixed offence on disciplinary rather than on the criminal plan, the operation of the fundamental clauses of Article 6 and 7 would be subordinated to their sovereign will. A latitude extending thus far might lead to results incompatible with the purpose and object of the Convention. “18
The Engel case illustrates this distinction. The violation of Article 6 in this case was limited to the fact that the military discipline proceedings had taken place ‘in camera’ and hence did not constitute the public hearing that the Article requires.19
Our Constitution on the other hand, by virtue of section 34, ensures that fairness is not jettisoned from dispute resolution simply because a procedure is not characterized as criminal. In our law ‘non-criminal’ disputes must still comply with section 34. The right to a public trial, the issue in the Engel case, is, in terms of our Constitution, guaranteed not only in criminal proceedings (section 35(3)(c)) but also by section 34.20
The court in Engel developed three criteria for determining whether a person facing a proceeding was the subject of a ‘criminal charge’.
Whether the provision defining the offence belongs to the criminal system of the respondent State.
The nature of the offence.
The degree of severity of the penalty that the person concerned risked incurring.21
Noteworthy, in relation to the latter criteria, the court said the following:
“In a society subscribing to the rule of law, there belongs to the ‘criminal’ sphere deprivations of liberty liable to be imposed as a punishment, except those which by their nature, duration or manner of execution cannot be appreciably detrimental. The seriousness of what is at stake, the traditions of the Contracting states and the importance attached by the Convention to respect for the physical liberty of the person all require that this should be so.”22
It was argued for the government in a later United Kingdom case that this aspect of Engel, namely, the absence of any threat of imprisonment, is a powerful indicator that proceedings in which only a penalty may be imposed do not give rise to a ‘criminal charge’.23
However the Strasbourg Court has gone considerably further down the road on these matters and subsequent cases indicate that the court would find a ‘criminal charge’ in cases where penalties are sufficiently burdensome even though they may not entail the loss of liberty.
This expanded notion of “criminal” has not been uncontroversial, involving, in certain of the cases, spirited dissents. In dissenting the judges examined the fact that in certain countries a policy of decriminalisation had taken place for sound reasons. Among the reasons proffered are the removal of a moral judgment about the affected person’s behaviour and enhancing the efficiency of the legal system by removing minor offences from the criminal justice system and thereby reducing backlogs. Thus, decriminalisation, far from being a retrogressive policy that requires the redress of the Convention to correct, is a trend in modern societies faced with complex regulatory regimes.
A good example of this approach is found in the dissenting opinion of Judge Bernhardt in Ozturk v Germany24:
“ Thus the real problem in my opinion is whether the decriminalisation here under consideration is a legitimate exercise of national determination and whether it is in conformity with the object and purpose of Article 6. My answer is in the affirmative. The reasons for removing some minor offences from the field of criminal law, and for providing special sanctions and procedures for them, can hardly be considered unfounded or disguised.”
Another of the dissenting judges, Judge Matscher had this to say in the same case:
“I shall merely point out that decriminalisation is something very different from a mere switch of labels. Social changes and new attitudes, as well as technical and economic circumstances, are leading states to reassess the elements which go to make up criminal offences; thus certain comparatively minor offences, which nowadays are very common, have been removed from the criminal sphere and classified as regulatory offences. This has important consequences, which obliges us, in my view, to conclude that the nature of the offence itself has changed. The moral verdict is no longer the same, in other words, a regulatory offence no longer carries the blame which attaches to a crime; the court’s decision is not entered into the criminal record; nor do regulatory offences carry a more severe penalty in the event of recidivism, this being another feature of criminal law; investigatory measures are also limited - there may, for example, be none of those restrictions on the person’s liberty which apply in criminal proceedings (neither police custody, nor detention on remand, nor the interception of communication may be ordered).The sanctions, too, are fundamentally different. There is no imprisonment.” 25
Notwithstanding this dissenting opinion, the Strasbourg jurisprudence was further developed. In the case of AP, MP and TP v Switzerland 26 the court developed its notion of the nature of the offence in an important way. The first respondent has latched on to this decision and it is fundamental to its argument.
The majority of the court said the following:
“ As regards the nature of the offence, it is noted that tax legislation lays down certain requirements to which it attaches penalties in the event of non-compliance. The penalties, which in the present case take the form of fines, are not intended as pecuniary compensation for damages but are essentially punitive and deterrent in nature.27
Note that the argument of the first respondent in this case has been that the punitive and deterrent character of the administrative penalty under the Competition Act is what imbues it with its ‘criminal ‘ character. Yet in the same case, again a dissenting opinion by Judge Baka, who is joined by Judge Bernhardt, adopts an entirely different stance on this point:
“ I consider that the fine imposed by the authorities on the heirs in the instant case was fiscal in nature and not criminal. Such types of fine are designed to prevent tax evasion. In so doing their main purpose is to protect the financial interests of the state and in a broader sense those of the community. Their undeniably severe punitive character is not just to punish for the tax, which was withheld, but also to deter the offender, through the imposition of a financial penalty, from committing further offences and to deter other taxpayers from possible tax evasion in the future… It is more justified, however, to point to the fact that while the incorrectly declared income was significant and the imposed fine ‘not inconsiderable’ no entry was made in the criminal record of P’s heirs, thus excluding the assumption that the fine was criminal in character.”28
Thus, unlike the majority who bundle the deterrent and punitive aspects of the penalty, Judge Baka separates them and finds only the latter indicative of the existence of criminal character. He goes further to discern the dominant purpose for the fine and, finding it not to be punitive even though it has some aspects of punishment, concludes that it is not criminal.
The critique of the majority approach in Strasbourg has not been confined to some eloquent dissents. In the UK in the Han case the majority of the Court, albeit following Strasbourg, did so with the greatest reluctance as appears from their decision. 29The court found that although their system of administrative penalties for certain tax contraventions was not consistent with the Convention in terms of the European case law, it was not an unfair system. Unlike the UK court we are not obliged to follow the dominant European approach if we feel that the dissenting arguments are more forceful and in accordance with our own system.
The impact of the Strasbourg jurisprudence and the Han case impacted directly on competition jurisprudence in the NAPP 30 case recently heard by the United Kingdom’s Competition Commission Appeal Tribunal (CCAT).
The issue arose as to whether the burden of proof should be criminal or the civil standard in a case for which a fine was being sought. The CCAT held that, although it was, in following Han, bound to find that its proceedings were subject to Article 6, and were, in this sense, ‘criminal’, it did not follow that:
“…these proceedings must be subject to the rules that apply to the investigation and trial of offences that are classified as criminal law offences for the purposes of domestic law.”31
The decision goes on to state:
“In our view it follows that neither Article 6 nor, the Human Rights Act 1998, in themselves oblige us to apply the criminal standard of proof as established in domestic law in cases where the Director seeks to impose a financial penalty in respect of alleged infringements of the Chapter I or Chapter II prohibitions under the Act.”32
From the cases that we have considered we would make the following observations:
The Strasbourg Court, faced with the Hobson’s choice of, on the one hand, applying Article 6 of the European Convention according to a very broad sweep set of criteria with the unintended consequences potentially flowing from this, or, on the other hand, having no procedural protections at all for many administrative proceedings, has opted in favour of an extended application.
These concerns, as the amici point out, are less pressing in our constitutional dispensation because the procedural protections of sections 33 and 34 remain applicable to non-criminal proceedings. Accordingly, the concern in Europe to develop an extensive notion of what is criminal in order to ensure that citizens have some measure of procedural protection is more compelling in Europe than it is in our circumstances.
Yet, even within the European jurisprudence there is a history of strong dissents that suggest that the expansive notion of what is criminal is problematic for nation states.
Note moreover that Article 6 of the Convention is less demanding than our section 35(3) - section 59 would certainly withstand scrutiny under Article 6. Noteworthy is the fact that in the Napp case, despite the CCAT finding that the Article 6 applied, it did not consider itself bound to adopt the criminal law burden of proof. As that Tribunal observed:
“Neither the ECHR itself nor the European Court of Human Rights has laid down a particular standard of proof that must be applied in proceedings to which Articles 6(2) or(3) apply, and still less that the standard should be that of proof “beyond a reasonable doubt” which is not a concept to be found in the domestic systems of many of the signatory states.”33
The minority decisions, in particular the Azturk and AP, MP and TP cases, distinguish between the deterrent and retributive purpose of penalties, holding that only the latter gives the penalty a criminal character. This distinction is relevant as it emerges again in other decisions and literature that we consider below.
The double jeopardy cases
Both the first respondent and the amici relied on several decisions in North American jurisprudence involving pleas of double jeopardy. In most jurisdictions this plea is typically raised when a person alleges that he or she is being tried twice for the same crime. The court in dealing with this plea has to develop an approach to classification, which helps it decide whether both proceedings are criminal in nature, in which case the plea succeeds or whether there is some distinction that renders the one proceeding non-criminal, and hence the plea fails. The first respondent and the amici commended us to consider the cases on this theme as they believe that the jurisprudence that has developed around this classification, will aid us in our effort in deciding whether section 59 imbues our proceedings with a criminal character.
In the case of Canada, the Supreme Court has developed a test to decide when a proceeding may be barred in terms of Section 11(h) of the Canadian Charter, their double jeopardy provision. The test laid out in the case of Wigglesworth34 states that an offence falls under section 11(h) if:
The proceedings are by their very nature criminal proceedings
The punishment invoked involves the imposition of true penal consequences.
According to Wilson J writing for the majority:
“.. a true penal consequence which would attract the application of section 11 is imprisonment or a fine which by its magnitude would appear to be imposed for purpose of redressing the wrong done to society at large rather to the maintenance of internal discipline within a limited sphere of activity.”35
Applying the test the court held that a disciplinary action brought against a policeman for assault in terms of the police code, a so-called ‘service offence’, did not bar subsequent criminal proceedings for the same assault because the fine imposed was designed to achieve a particular private purpose namely, discipline in the police force, and not to redress harm done to society as a whole.36
The Wigglesworth test was applied in a subsequent case, Shubley,37 where a prisoner had been disciplined for an assault and was placed in solitary confinement and thereafter charged in criminal proceedings. Again the question was whether subsequent criminal proceedings should be stayed on the grounds of double jeopardy. The majority of the court applying the test held that the prison disciplinary proceeding did not stay the criminal case. The minority, including Judge Wilson who had written the Wigglesworth decision, also applied the test but came to the opposite conclusion – the punishment they held was a true penal consequence and thus the accused was being punished twice. The question arises, what is a true penal consequence? The majority said that while a person such as a doctor or a policeman may be punished in both a disciplinary and retributive way, they might not be punished twice in a retributive way for the same offence.
What emerges from both these decisions is the recognition that punishment can have a retributive element and that it is this characteristic that makes a proceeding susceptible to being classified as criminal in nature. Whether the test otherwise recommends itself is open to question given its unpredictable outcome in Shubley. But the test seems to be designed to address specifically the problem of double jeopardy in disciplinary hearings that are followed by a criminal prosecution. It does not answer directly the question of whether the sanction itself was unconstitutional if not imposed by a criminal court. At best the cases suggest the government must choose its procedure.
In the United States, the Supreme Court has had a more robust approach to the problem. In United States v Ward 38 the court held that:
“Only the clearest proof will suffice to override legislative intent and transform what has been denominated a civil remedy into a criminal penalty “ 39
Ward was cited with approval in Hudson, the most recent Supreme Court decision on double jeopardy to which we were referred, where the court held that even in a case where a civil penalty is indicated, it would have to enquire further as to whether it was so punitive either in purpose or effect.40 In making this determination the court would apply the factors set out in an earlier case, Kennedy v Mendoza-Martinez,41 which it said provide useful guidance as to whether a sanction was civil or criminal in nature. These, the Court held, are:
whether the sanction involves an affirmative disability or restraint(that is, loss of liberty )
whether it has historically been regarded as a punishment
whether it comes into play only on a finding of scienter
whether its operation will promote the traditional aims of punishment
whether the behaviour to which it applies is already a crime
whether an alternative purpose to which it may be rationally connected is assignable to it
whether it appears excessive in relation to the alternative purpose assigned.
In Hudson the court observed that no one factor is controlling as they may point in different directions. 42
The court in Hudson differed from an earlier decision in Halper43 where the emphasis was on the constituent elements of punishment, namely retribution and deterrence. Commenting that Halper’s deviation from longstanding double jeopardy principles was ill-considered, the Hudson court stated:
“As subsequent cases have demonstrated, Halper’s test for determining whether a particular sanction is ‘punitive’, and thus subject to the strictures of the Double Jeopardy Clause, has proved unworkable. We have since recognized that all civil penalties have some deterrent effect. (The court then cites various cases)..If a sanction must be totally remedial i.e. entirely non-deterrent to avoid implicating the Double Jeopardy Clause, then no civil penalties are beyond the scope of the clause.” 44
Later the court developed this theme when it stated:
“But the mere presence of this purpose is insufficient to render a sanction criminal, as deterrence “may serve a civil as well as criminal goals…. For example the sanctions at issue here, while intended to deter future wrongdoing, also serve to promote the stability of the banking industry. To hold that the mere presence of a deterrent purpose renders such sanctions ‘criminal’ for double jeopardy purposes would severely undermine the Government’s ability to engage in effective regulation of institutions such as banks.”45
Although Hudson deals with the Double Jeopardy Clause in relation to civil penalties, an earlier decision of the Supreme Court in Atlas Roofing 46 held that an administrative penalty imposed for deterrent purposes withstood the due process requirements of the seventh amendment. Atlas Roofing was concerned with the issue of whether an administrative hearing in which a civil fine could be imposed violated the right to a jury trial in terms of the seventh amendment. The court held that:
“When congress creates new statutory rights it may assign their adjudication to an administrative agency with which a jury trial would be incompatible, without violating the Seventh Amendment’s injunction that jury trial is to be preserved in ‘suits at common law’. Congress is not required by the Seventh Amendment to choke the already crowded federal courts with new types of litigation or prevented from committing some new types of litigation to administrative agencies with competence in the relevant field.”47
The first respondent relies on Halper as authority for the proposition that the existence of a punitive element renders a proceeding criminal in nature. Apart from the fact that Halper is no longer authoritative on this point, the problem with this reliance on the double jeopardy cases is that they deal with a different problem of characterization to the one we have here, as we pointed out with the Canadian cases. They say, in effect, that when the government has available to it a criminal remedy and also a remedy that, although civil in appearance, has penal consequences, it cannot utilize both less it risk the successful invocation of double jeopardy. The cases do not decide that the impugned civil type remedy is unconstitutional because it fails to provide the transgressor with the procedural protection to which a criminal accused is entitled - they only require the government to make a choice of which procedure it wishes to utilize and Halper is clear on this.
A court’s answer to the question of when a proceeding exposes a person to double jeopardy may not be the same as its answer to the question of whether the proceeding affords the person adequate procedural protection given the nature of the proceeding. It is entirely probable that a court, anxious not to expose a citizen to overreach by the government’s many tentacles, may approach the first question more expansively than it would the second.
Thus, the case law, whilst useful in introducing certain tests and principles, cannot be decisive in respect of the issue we are called on to decide.
For this reason we see value in reframing the question that we have to decide:
Reframing the Question
Properly reframed the question is whether the remedy that section 59 affords the Tribunal is subject to adequate procedural protection for a respondent, given the nature of the sanction.
Despite the fact that in the case law that we have considered the courts have applied different classification tests or, even when applying the same tests, have come to opposing conclusions, one theme remains constant: the extent of procedural protection afforded is a function of the extent to which a proceeding or penalty encroaches upon a person’s rights. A continuum exists between these two values and, classic criminal law proceedings aside, when one moves along the continuum no bright line clearly demarcates when additional procedural protections must be afforded. The answer lies in each case in an examination of the procedure, its remedies and their purpose in each case. 48
The case law shows that courts no longer have a bipolar view of the law – that something is either criminal or civil. With the increasing trend of modern governments to extend administrative law and, at the same time, utilize administrative bodies to enforce it, that division has blurred. The courts recognize that administrative bodies will be enforcing the law through hybrids that are neither wholly criminal nor civil. Administrative bodies not only have the power to enforce the law within their domain but in some areas, competition law being one, are given their own tribunals to enforce it. In our constitution this trend is explicitly recognized in sections 33 and 34 of the Constitution.
Allied to this growth in the use of administrative institutions has been an increase in administrative, as opposed to criminal, penalties. As Professor Mann has put it at page 1847:
“The expansion of civil sanctions is part of a more general phenomenon that has characterized law in recent history. There has been a constant search for new ways to achieve social ends through the legal system.”49
Since the advent of the post-1994 order in South Africa we too have seen the legislature making increased use of administrative penalties as part of the enforcement of legal norms. The Competition Act is unexceptional in this respect. 50
The reasons for this are not hard to discern. When governments reserve new areas for public regulation they opt for enforcement by specialist, expert bodies capable of resolving issues speedily and efficiently. It is clear that, in so doing, they must have regard for a person’s constitutional rights. Precisely how government must guarantee those rights, so that they are not sacrificed on the altar of administrative efficiency, is less clear. The answer, in our view, lies in situating the transgression and its remedy in their proper place on the continuum.
The procedural ‘deficits’ in this case, as identified by the first respondent, are the lower burden of proof, the alleged lack of a right to silence and the fact that the tribunal is neither a court nor independent. We deal with the independence issue in the next section. We will deal with the issues of burden of proof and the status of the Tribunal relative to those of a court as part of an examination of where Competition Act transgressions, and the section 59 remedy lie on the continuum and then, in that context, examine whether these deficits are constitutionally fatal.
When deciding the classification of a transgression and, thus, the degree and content of procedural protection to which it is entitled, three broad areas of agreement are discernible from the case law referred to above.
These three broad areas seem to be:
What is the nature of the transgression? In other words is the transgression, by reference to its history and what it seeks to prohibit, typically of a criminal nature?
What is the nature of the penalty?
Is there a rational connection between the conduct the legislature seeks to prohibit and the sanction it imposes? The greater the disjuncture, the more likely is the sanction to be punitive in nature and, hence, the greater the degree of procedural protection that must be afforded.
In particular we ask whether section 59 is a criminal remedy and thus subject to procedural protection provided for in Section 35(3) of the Constitution. Our analysis will show that we have concluded that section 59 does not require the Competition Act to provide the heightened criminal law protection afforded by section 35(3) of the Constitution, and that although the procedure must comply with section 34 of the Constitution, it complies with that standard.
1) Nature of the transgression
As we indicated earlier, the legislature enacted the present Competition Act with the express intention of decriminalizing competition transgressions. It did so because of the enforcement failure associated with its predecessor where an array of contraventions were dependent on criminal law enforcement remedies.
Apart from the brief, and inglorious period of Government Notice 801 of 2 May 1986, which converted certain competition transgressions to crimes, there is no history to suggest that these contraventions have long been treated as criminal in our law.
In foreign jurisprudence the situation varies, although the modern trend is again away from the use of criminal law as a tool of enforcement against restrictive practices. The exception in some jurisdictions has been enforcement against cartels, where in the United States and Canada, and recently the United Kingdom, criminal law is used. 51 The reason for this is the concern that even huge fines were inadequate remedies against cartels and that only the prospect of imprisonment of senior executives would be an adequate remedy against corporate miscreants. This remedy thus places this species of transgression at a different point on the continuum and for this reason adherence to criminal due process standards is appropriate in those jurisdictions seeking imprisonment as a remedy.
Most competition law transgressions, however, fit uncomfortably into the cloth of the criminal law. Firstly the state of mind of the transgressor, whether we term this element ‘intention’ or ‘scienter’, is not typically an element of a prohibited practice.52 What the Act refers to as prohibited practices are typically acts by firms with market power who act in a manner that utilizes that power to exploit consumers or exclude competitors. What the Act is concerned about is the ‘effect’ of a firm’s conduct in the market place, not what it intended by that conduct. Hence the leitmotif of the word “effect” to be found in each of the core prohibitions.53
The Competition Appeal Court has recently observed in relation to dominance that:
“The concept of abuse is an objective one…”54
In doing so they followed the approach of the European Court of Justice in Hoffman-La Roche and Co AG v Commission of the European Communities55 where that court had noted:
“The concept of abuse is an objective concept relating to the behaviour of an undertaking in a dominant position which is such as to influence the structure of the market where, as a result of the very presence of the undertaking in question, the degree of competition is weakened and which, through methods different from those which condition normal competition in products or services on the basis of the transactions of commercial operators, has the effect of hindering the maintenance of the degree of competition still existing in the market or the growth of that competition.” 56
The first respondent has tried to argue that because the penalty in section 59 may only be imposed in limited cases, those which are so called ‘per-se’ violations and those where there has been a repeat of the same conduct, an element of knowledge of wrongdoing, of intent, is imputed as a threshold condition for the imposition of the penalty. On this basis, it is argued that key elements that are part of a criminal finding are present and, so, the protections available to a criminal defendant are required if penalties for these contraventions are to be imposed.
However, this argument confuses two notions, on the one hand, transgressions for which proof of a mental element is a requirement and on the other hand, transgressions, which are so notorious as being anticompetitive, that firms ought to know that they are wrong. In the case of the former, failure to prove mens rea must result in an acquittal. However, in the latter, proof of intent is not essential - it is rather the nature of the transgression itself and not the subjectivity of the respondent’s mind that makes the penalty competent.
The Act makes only a limited number of transgressions susceptible to a administrative penalty because it limits penalties to acts that are known to be anticompetitive precisely in order to reduce the incentive on the part of potential transgressors to engage in them. If a penalty was applied to all forms of anticompetitive behaviour, including those at the cusp of legality, lawful or even pro-competitive behaviour may be disincentivised. For this reason the penalty regime is limited to those deemed notoriously anticompetitive, the so-called per se transgressions, and to the repeat by a firm of conduct previously found anticompetitive. This approach is therefore premised on an incentive-based model not a criminal one.
Absence then of proof of a mental element as a component of a transgression is an indication of the fact that it is not criminal in nature. 57
As Areeda points out:
“The most fundamental reason for limiting intent inquiries is that the relevant intent – intent to harm one’s rival – is impossible to distinguish from the intent to behave competitively in a broad range of situations ….In such a setting an ‘intent’ not to harm a rival is tantamount to an intent not to compete.”58
In addition competition transgressions contain no moral or normatively condemnatory aspect. That is because the conduct itself is typically only objectionable when performed by firms with market power. It is hard to apply some normative standard to conduct whose legality is dependent on the protagonist’s share of the relevant market. Thus when it comes to an abuse case, the same act perpetrated by company A, which has market power, may be a prohibited practice, but is not in respect of firm B if it lacks market power. In addition prohibited practices are usually a matter of degree. Apart from the per se contraventions, most conduct that transgresses is a matter not of the inherent nature but of degree. Thus ‘recommending’ a minimum resale price is lawful, ‘maintaining’ it is not.
When we deal with the nature of the penalty we will take this theme of morally neutral contraventions further.
With criminal cartel prosecutions as the one exception, most jurisdictions enforce competition law violations with a lower burden of proof than they would in criminal matters. This is not surprising given the nature of the contraventions, which, as we have already stated, typically depend on an element of market power. A finding of market power requires an analysis of the relevant market, which in turn requires an analysis of whether certain products are substitutes for one another and therefore part of the relevant market. To require that, in a dominance case, the Commission must, for example, prove beyond a reasonable doubt, that a cola drink did not compete with other carbonated drinks, would effectively render the section unenforceable. That kind of certainty cannot be attained in such an evaluation, which must then, by its very nature be established on the balance of probabilities rather than on the elimination of doubt.
In the United Kingdom, as we noted earlier in the Napp case, the CCAT, held that the burden of proof in Competition cases involving penalties is the civil standard of proof although the CCAT cautioned that it needed to be strong and compelling evidence. This conclusion was reached notwithstanding the fact that Article 6 of the European Convention applied to the proceedings and that they were for that purpose to be regarded as ‘criminal ‘.
In Canada dominance cases are assessed by the civil standard, and whilst it is conceded that they do not impose penalties for these, they do impose far ranging remedies including divestiture - remedies firms may find far less palatable than penalties.59 In the United States dominance is an infringement of section 2 of the Sherman Act, a criminal statute, but the Department of Justice can proceed civilly for a breach and it frequently does so in monopolization cases, even though its remedies here are equitable rather than civil. Nevertheless in the United States private litigation plays a major role in ensuring compliance with the antitrust laws and for this reason plaintiffs are rewarded with treble damages. As Areeda states:
“Such a remedy not only compensates private persons for their injuries, but gives them a powerful financial incentive to enforce the antitrust laws.”60
Later he goes on to observe that although the private plaintiff need not act in pursuit of the public interest,
“Nonetheless the most obvious feature of the treble damage action is punishment “61
Treble damages are awarded on the basis of the civil burden of proof.
In South Africa the legislature’s choice of a civil as opposed to a criminal remedy arose out of a concern that competition violations were insufficiently policed under the old Act. This is specifically mentioned in the preamble of the Act:
“That apartheid and other discriminatory laws and practices of the past resulted in …… inadequate restraints against anti-competitive trade practices… .”
The literature on economic regulation suggests that lawmakers typically prefer to make transgressions of the law subject to a less demanding civil standard, as they fear that there may be under-enforcement if the activity was criminalized. The history of the failure of our predecessor the Competition Board in this respect is a matter of public record and tends to validate the theory in the literature. There is little doubt that our legislature would not contemplate reverting to the criminal law to act against anti-competitive conduct given our past experience.
Not only may the use of a criminal standard in this respect lead to an under-deterrence problem from the perspective of the enforcer, it may also from the perspective of the target lead to an over-enforcement problem. Our legislature, whilst regarding competition law infringements as very serious, does not believe that they should be visited with the wrath and consequences of the criminal law. Furthermore they believe that these transgressions are most efficiently policed and enforced by specialist agencies not by our already crowded courts.
We conclude that neither the nature of the prohibitions, their history, the legislative intent or policy informing their treatment, suggests that prohibited practices are, in substance, akin to crimes.
2) Nature of the penalty
It could of, course, be argued that, even if competition law transgressions are best left as civil law violations, it does not follow that they should then be visited by ‘punitive’ remedies such as an administrative penalty, when other remedies are available. It is true that the Act does conceive of a range of remedies, other than the administrative penalty, for a violation, but not every case commends itself to such a remedy, nor may they prove to be a sufficient deterrent. It would significantly undermine the effort to curb anti-competitive practices if all that a miscreant firm was faced with after being found in violation was a cease and desist order.
Hence for a species of violations the Act makes the imposition of a penalty competent. Since, as discussed earlier, many antitrust contraventions may not be clear to firms, the Act limits the imposition of a penalty to those which are either sufficiently well known to be anti-competitive or where a firm is a repeat offender, that is, to circumstances where the transgressor ought to have known that the particular conduct was unlawful.
The case before us is an example of why a penalty is the only proper remedy. If the remedy were limited to an interdict, it would pay firms to transgress the section until detected and then to agree to abide by a cease and desist order. This is clearly an unsatisfactory situation.
Furthermore, penalties may loom larger in the choice of remedies sought by the Commission than may be the case in respect of their counterparts in the better-resourced developed countries. Complicated behavioral remedies, which would entail ongoing monitoring and enforcement over a period of time, may be beyond the resources of the Commission. A penalty as a deterrent raises no such problems.
It is as well to examine now an issue, which we avoided in the previous discussion on the case law, namely the question of whether punishment has a single or multifaceted objective. We are of the opinion that much of the case law on which the respondent sought to rely failed to make this distinction, which is absolutely crucial in ascertaining the appropriate procedural safeguards a remedy attracts.
Writers on the subject have repeatedly distinguished between various goals for the imposition of punishment.
Yeung argues that traditional criminal law offers five theories for punishment, namely retribution, deterrence, incapacitation, rehabilitation, restitution, and compensation.62 She states that of these, only retribution and deterrence are relevant to regulatory penalties and compete as a possible theoretical basis for them. While Yeung argues that a penalty regime should include both elements and suggests that ultimately the two are impossible to untangle, other writers such as Rubin63 suggest, after considering the same theories of punishment that:
“Of these purposes, deterrence would appear to be the dominant one in the case of administrative remedies. Compensation and inducement to take legal action are essentially irrelevant, while punishment, a puissant but ambiguous idea, turns out to be little more than deterrence when it is factored into its part.”64
He develops this ambiguity theme by looking at the way the notion has been used in the literature and he then comes to the conclusion that:
“Punishment as a reason for imposing administrative fines, is a complex concept that must be parsed to be assessed with any clarity. ..For present purposes, it is useful to distinguish among different functions of punishment, the classic ones being deterrence and retribution.
He goes on to argue that it is difficult to conceive that legislatures intend that administrative agencies’ civil penalties are intended to be retributive because society does not construe these institutions sufficiently highly to bestow them with the regard to serve this purpose. As he puts it in a memorable phrase:
“It seems unlikely that most people believe that so biblical a purpose as retribution should be assigned to these technocratic, unpoetic institutions.”65
He concludes that:
“ We are left with one dominant purpose for administrative penalties namely deterrence. This term is itself derived from criminal law however; a more administrative one is law enforcement, or compliance. The obvious purpose of imposing penalty on a private actor is to induce that actor to obey a legal rule. The message is not the moral judgment ‘you are a bad person’ but rather the pragmatic instruction ‘cut it out’. This distinction can be derived from the nature of the sanctions, the nature of the underlying violation, and from the conception of administrative law.”66
As Feinberg has noted, penal sanctions for regulatory offences do not constitute punishment, even though the imposition of such sanctions visits ‘hard treatment’ on the transgressor, because they do not convey “reprobative symbolism” which he regards as the essence of punishment.67
Mann notes the growth in our legal systems of what he terms ‘deterrence ideology’, which, he argues, has led to a decrease in the difference between the purpose of criminal and civil law:
“Deterrence ideology with its philosophical background of law and economics, became a significant causal factor in the growth of punitive civil sanctions.”68
Case law also distinguishes between deterrent and retributive effects of punishment. In one jurisdiction, Australia, which is the system closest to ours (indeed our section 59(3) appears to have been modeled on their section 76 of their Trade Practices Act), the courts have repeatedly emphasized this point.69
In NW Frozen Foods v ACCC 70 the Federal Court of Appeals held that the purpose of the administrative fine is not punishment but deterrence. The court quotes with seeming approval from French J in TPC v CSR Ltd:71
“ The principal and probably the only object of the penalties imposed by section 76 is to attempt to put a price on contravention that is sufficiently high to deter repetition by the contravenor and by others who might be tempted to contravene the Act.
They then quote Lee J (293) who said that:
“ the object to be served by s 76, namely, to promote competitive conduct in trade or commerce by use of penalties sufficient to deter acts that would tend to be destructive of such competition”72
The mantra of the duality of deterrence is repeated in ACCC v Rural Press and Others73 where the court stated:
“ I am also mindful in assessing the level of the pecuniary penalty, that it is directed to deterrence of acts that would tend to be destructive of competition. That deterrence has two facets. They are the deterrence of the individual contravener from engaging in conduct in contravention of the Act in the future, and the deterrence of other traders from engaging in conduct in contravention of the Act.”74
Whilst some Australian judges have expressed reservations about whether deterrence is the sole criteria, this does appear to be the dominant view.75
We now examine the section itself. In the first place we note that section 59(2) places a ceiling or cap on the maximum penalty that can be imposed. This is set at 10% of the offending firm’s turnover during the firm’s preceding financial year. The fact that it is set out in this way and not, as in section 74, which provides a set maximum penalty for criminal offences, suggests that the legislature intended the penalty to be relative to the economic impact of the respondent in the market, that is, the greater the turnover of the firm, the greater the potential for it to be penalized.76 This relative, as opposed to absolute cap, is more consistent with a deterrent than a punitive model, because given that a deterrent model is incentive-based it requires greater administrative penalties to be imposed on larger players.
None of the factors set out in section 59(3) is inconsistent with a deterrence model, although, we acknowledge that it is not pure in this respect. All the factors listed either deal with the information the Tribunal would need to address in setting a administrative penalty or in order to achieve the two aims of deterrence namely, deterrence of the respondent and deterrence of others contemplating the same conduct.
Even a factor such as the degree of co-operation with the Commission and Tribunal, although superficially more associated with the mitigation notions of criminal law, has an incentive logic to it, and thus is consistent with the goal of deterrence as it incentivises firms to settle with the authorities.
Notably absent from the criteria are any notions of moral judgment or censure characteristic of criminal law. As Coffee77 points out one of the features of the criminal law is its deliberate intent to inflict punishment in a manner that maximizes stigma and censure.
Nor are there any consequences of the penalty apart from the possibility that it may be taken into account if the firm was again subject to a penalty. But this again is perfectly consistent with a deterrence model, that is, if someone has been awarded an administrative penalty, and again contravenes the Act, the penalty may have to be increased the next time around as compliance had been insufficiently incentivised.
Nor do penalties impose upon a firm any disability as a criminal conviction sometimes does. 78 Further the legislature’s choice of the word ‘penalty’ as opposed to ‘fine’, the latter a term usually associated with the language of criminal law, is again indicative of its civil aspect.79
We do not suggest that section 59 exhibits a ‘pure’ deterrent model devoid of any retributive element. We do however suggest that it is by far the dominant element, and that retribution is insufficiently a determinant in the final mix to alter the categorization of the penalty into a punitive one.
For this reason the sanction imposed by section 59(3) is insufficiently retributive in character to render it punitive in nature in a manner that requires the heightened protections afforded by section 35(3).
3) Rational connection
We discuss this aspect in relation to the broader rationality challenge, which we deal with below, so it is unnecessary to repeat these issues here.
Section 34 of the Constitution (the fairness standard)
It is noteworthy that the first respondent’s attack in terms of section 34 of the Constitution has been confined to the issue of independence. It has not suggested that, were section 34 to be the governing section, the Act fails to provide the necessary degree of procedural fairness required by the Constitution. We submit that the Act does so and, apart from the deficits explicitly mentioned earlier, would even comply with section 35(3). One of the most notable features of the new Act which has not been previously mentioned is the deliberate separation of what was once a single competition agency with combined investigative and decision making functions into two separate bodies. In prohibited practice cases such as the one in casu the Commission acts as the prosecutor but cannot adjudicate, and the Tribunal adjudicates but cannot prosecute. Both bodies are institutionally separate as we elaborate on below. Secondly, the Act has an elaborate set of procedures, from the requirements for a complaint referral, to the nature of the way hearings are conducted, designed to ensure compliance with the Constitution’s mandate of fairness.
A prohibited practice hearing, even where a section 59 penalty is competent, finds itself located on the continuum at a place where the level of procedural protection afforded is consonant with the severity of the proceeding.
Section 34 of the Constitution (the independence issue)
The first respondent’s second attack is based on section 34 of the Constitution. This section states that:
Everyone has the right to have any dispute that can be resolved by the application of law decided in a fair public hearing before a court or, where appropriate, another independent and impartial tribunal or forum.
As already noted, the first respondent does not appear to contend that it did not receive a fair hearing in terms of our proceedings.80 The Act and the Rules clearly make ample provision for a fair hearing and were the Tribunal not to follow such a proceeding it would clearly expose itself to review.
What the first respondent relies on is that the Tribunal is, in its opinion, not an independent and impartial tribunal or forum. As we understand it the nub of the issue is not impartiality but independence. The first respondent asserts that the Tribunal is not independent as it forms part of the executive and that Tribunal members should be viewed in the same way as public servants.
A reading of the Competition Act shows that this contention is not well-founded. The legislature has taken several steps to ensure the independence of the competition institutions not only from the executive but also from one another.
In terms of section 20(1) of the Act the Competition Commission:
“(a) is independent and subject only to the Constitution and the law;
(b) must be impartial and must perform its functions without fear, favour or prejudice.
Section 20(3) goes on to state that:
“Each organ of state must assist the Commission to maintain its independence and impartiality, and to effectively carry out its powers and duties.”
These provisions apply equally to the Tribunal in terms of section 26(4).
Apart from this unambiguous statement in the legislation, which mirrors the language of section 34 of the Constitution, by its specific reference to the institution’s independence and impartiality, the Tribunal is functionally independent of the executive in the sense that none of its decisions require consultation with or the ratification of the executive.81
In the case of the Tribunal additional measures are taken to ensure that members have relative security of tenure. Tribunal members are appointed by the President on the recommendation of the Minister of Trade and Industry for a period of five years.
During the period of their appointment they may only be removed from office if they become disqualified or in the limited circumstances set out in terms of section 29(5)(b) namely –
“(i) serious misconduct;
(ii) permanent incapacity; or
(iii) engaging in any activity that may undermine the integrity of the Tribunal.
Only the President on the recommendation of the Minister can remove a Tribunal member from office.
In the Van Rooyen82 case the Court observed that:
“There is a difference between being nominated by the executive to perform a duty which calls for an independent decision and being chosen by the executive to perform a duty in accordance with its wishes. If the power to recall is subject to objective criteria consistent with the Constitution, that power is not constitutionally objectionable “83
In our view, the appointment and removal of the Tribunal members, in terms of the Act, conforms with this observation by the Court. Thus although members are subject to appointment by the executive it is clear from the Act that members are appointed to perform an independent function. Secondly, as far as removal is concerned the power to recall is subject to objective criteria.
The fact that members are appointed by the executive has been held not to contravene the separation of powers in the Van Rooyen case:
“The mere fact, however, that the executive and the legislature make or participate in the appointment of judges is not inconsistent with the separation of powers or the judicial independence that the Constitution requires.”84
In the Freedom of Expression case Hlophe ADJP (as he was then) observed:
“It is well established that there are degrees of independence. Indeed it is not every tribunal that can be as completely independent as a court of law is expected to be. The independence of courts of law and administrative bodies cannot be measured by the same standard.”85
As far as financial independence is concerned, section 34(2) states that:
“The Minister may not during the term of office of a member of the Competition Tribunal reduce the members salary, allowances or benefits.
The financial provisions that relate to the Tribunal and Commission that are set out in section 40 and 41 of the Act indicate that the institutions are:
financed by Parliamentary appropriation:
have their own accounting officer
Report to Parliament annually on their activities and finances.
These provisions indicate that the institutions report to Parliament and not to the executive albeit that the Minister is their conduit to Parliament.
In our view these features of the Act, coupled with the manner in which the Tribunal functions, indicate a relationship of independence from the executive that meets the requirements of section 34.
The constitutional attack in respect of this aspect must accordingly also fail.
Rationality argument
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