Feature article: SA’s competition policy is not constitutional

Fundamental rights are absolute and exist apart from any law. The protection of fundamental rights is the duty of the state which does so by prosecuting those who transgress these rights in terms of “No person shall be deprived of life, liberty, or property, without due process of law” as summed up by the Fifth Amendment to the US Constitution. It is not possible to raise fundamental rights as a defence against punishment for violating the fundamental rights of others.

When a violation of fundamental rights occurs, due process follows the normal everyday legal process and has a logical sequence

  1. Specific laws exist to protect fundamental rights (legislative function).
  2. A person is suspected of violating these specific laws.
  3. An investigation is conducted to establish if, prima facie, the person has violated the specific law (investigative function).
  4. If the investigation indicates the person violated the specific law, a decision to prosecute must be made and a clear indictment issued; the person becomes the accused (prosecutorial function).
  5. A trial must take place before an impartial judiciary adhering to historical due process procedures (judicial process).
  6. If found guilty, the judge imposes an appropriate sentence. 

The process involves four independent entities: legislative, investigative (police), prosecutorial and judicial. Fundamental constitutional theory requires that the state functions within the constraints of the separation of powers: the executive; the legislature and the judiciary. In South Africa, however, a number of institutions have been created which violate both the due process requirement and the separation of powers. These new institutions can be said to be unitary states within the state where separate activities and functions have been unified in one entity. These entities operate partly in terms of Administrative Law but mostly outside of the constraints of the separation of powers. The Competition Commission is an example of this new phenomenon.

For example, if before a private sector company can merge with another, the state decided it has to be consulted, then the state must have a method and system to arrive at a decision. Ordinarily, this process would be governed by Administrative Law which imposes certain restrictions on arbitrary government action. But, under the Competition regime, to this Administrative Law function was added functions which belong to Criminal Law. In doing this, the Competition regime evolved into a unitary state within the state.

In this guise, the Competition regime has imposed billions of rand in fines and penalties on companies, thus taking private property. The taking of private property can be done only in terms of the due process requirements, requirements that the current Competition regime does not meet. Its claims that firms have violated the provisions contained in chapter 2 of the Competition Act 89 of 1998 (ss4-10) have garnered billions of rand for the government.

Specific Laws protecting fundamental rights

A typical, specific Competition regime “law”, set out in s4(1)(b)(i) of the Competition Act, reads as follows: “An agreement between firms is prohibited if it is between parties in a horizontal relationship and if it involves directly or indirectly fixing a purchase or selling price or any other trading condition.” It is difficult to see what fundamental right this “law” protects. What if bread manufacturers agree to sell bread below the usual market price in poverty stricken areas? It is clear that the customers in those areas would benefit from the lower bread price, but then, prima facie the above law is breached. This law would benefit customers if it prohibited firms from acting in concert to increase the price to above the market price. But, from the way the law is worded, it is breached if the price is either increased or decreased. It is difficult to see how this law can protect any fundamental right or be of benefit to society.

To make sense of this law, in any case involving a contravention because the prices were either lowered or raised, the state must quantify the harm done to specific consumers. Where the price was below the market price, consumers benefited and it is difficult to see how a court could convict the firms. In the case of increased prices, the extent of harm is clear. It is thus essential to quantify the “damage” one way or the other. In the multibillion rand fine cases, I know of no case where the harm has been quantified. This law is fundamentally flawed.

So why would Parliament pass such a meaningless flawed “law”? The answer is that Parliament did not. All “laws” in terms of which the Competition regime operates emanate from the regime itself. It makes proposals that are largely for its own benefit and, when sent to Parliament, are merely rubber stamped. The regime, therefore, has captured the legislative power for its own benefit. The Competition regime is the de facto legislator.

An investigation to establish that specific laws have been violated (investigative function)

The due process procedure requires that where a violation of the law is suspected, the South African Police Service (SAPS) or other appropriate independent agency investigate. It would be a violation of due process and separation of powers if the same body investigates, prosecutes and judges the accusation. Yet this is exactly what happens where the Competition regime is involved. The Competition Commission carries out the investigation and never hands the matter over to SAPS, nor does it hand the docket over to the National Prosecutor. The Commission can enter into an agreement with the accused which usually involves the accused paying a fine. Is this the Commissioner acting as policeman or as prosecutor? There is no functional separation within the investigative function.

An accused is charged with violating the specific laws

At the onset of the due process procedure, the accused must be furnished with an indictment indicating the specific charge. Frequently, in competition matters, the accused is not served with an indictment. Instead, the “charges” evolve as the process gets underway, or, as in most cases, the accusation is merely a formality. The end goal of the process is not a prosecution before a court but rather to force a confession out of the accused. The supposed violation is never proven by the production of evidence. It is never tested in a court of law. The result is a form of institutionalised extortion.

A decision to prosecute the accused and the formulation of the indictment (prosecutorial function)

Within the Competition regime the usual prosecutorial function is not adhered to. The case is never handed over to the National Prosecuting Authority. In fact, if the modus operandi of the Competition regime is examined, it is not clear whether any prosecutorial process exists at all. There is no clear distinction between the investigative and prosecutorial functions,

When an investigation is complete, the docket should be handed over to the independent body of the National Prosecutor to decide if sufficient evidence exists to go to trial. This does not happen in the Competition regime. The Act says that the Competition Commission will refer the matter to the Competition Tribunal. In the due process system, matters are not referred to the courts. They are prosecuted before the courts. So in the due process system it is not clear what “refer to” is supposed to mean. Once referred to the Tribunal, does the Tribunal have its own prosecutors, i.e. is it part of the prosecutorial or of the judicial function?

What should happen is the docket should be handed over to the National Prosecutor and if the National Prosecutor is convinced a crime has been committed, refer the matter to a Grand Jury as in the USA, or a Committal Magistrate (or Justice of the Peace) as in the UK. South Africa has long since abandoned this practice in favour of a summary trial, but even this does not apply to the Competition regime. It decides itself whether to ‘prosecute’, which violates the fundamental constitutional safeguard of sending a docket to an independent general prosecutorial authority and does not follow the due process of law.

A trial before an impartial judiciary adhering to historically established due process procedures.

Instead of an indictment and trial before the ordinary courts, the accused appears before the Competition Tribunal. Again, in line with the unitary state within the state, an in-house adjudicating body becomes involved which is not part of the judiciary or of the ordinary courts. The Competition regime thus has its own “judiciary”.

The imposition of the appropriate sentence

One of the most important functions of the judiciary is to determine the appropriate sentence, the most important requirement being that the punishment must fit the crime. This can be traced back to the Code of Hammurabi, known through the millennia as the LexTalionis, It is imperative that an estimate of the harm caused be quantified so that it can be determined if the punishment fits the crime. The Tribunal is not bound to meet this requirement nor does it do so.   

A strange procedure of punishment has evolved from the Competition Commission (the investigative arm) of convincing the accused to enter into a so-called consent agreement, to admit guilt and pay an enormous fine, in some cases in excess of R1bn. This is institutional extortion. The accused is given the option to either plead guilty or let the Tribunal impose the maximum penalty of 10 per cent of turnover. This violates the Lex Talionis. It is akin to saying that in the normal world, SAPS (the investigative arm) can impose a billion rand fine on an accused and if the accused does not comply, SAPS has an agreement with the court that it will impose a multibillion rand fine. The punishment should have nothing to do with the investigative arm and it should fit the crime. The Competition regime meets neither of these requirements.

This method of extortion is well-known in history. Under the Spanish Inquisition, the accused could either plead guilty and hand over all of his property or protest his innocence and be tortured until he confesses and then hand over all of his property before being burnt alive at the stake. Most chose the first option. In the USA, the same thing has happened. In murder cases the accused are given an option: plead guilty to a crime they did not commit or go to court and be sentenced to death. Most choose prison. With the advent of DNA, over 300 convicted murderers have been found to be innocent.


The Competition regime violates the constitutional due process requirements needed for the rule of law, especially when imposing penalties. There is an urgent need to remove these activities from the Competition regime and restore the normal procedures which exist in the separation of powers system. These should be assigned to SAPS, the National Director of Public Prosecutions and the normal courts of the land. There is no reason why this should not have been the case all along.

Professor Robert W Vivian is professor of Finance & Insurance at the University of the Witwatersrand and a member of the FMF’s Rule of Law Advisory Board. This article may be republished without prior consent but with acknowledgement to the author. The views expressed in the article are the author’s and are not necessarily shared by the members of the FMF.


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