COMPETITION LAW CONSENT AGREEMENTS: THE PROS AND CONS OF A QUICK SETTLEMENT
Consent agreements are playing an increasingly significant role in the South African competition law regime as they are extensively used to resolve disputes. Hence most of the penalties for anti-competitive behaviour imposed to date originated from them. While consent agreements present a simple form of remedy as they bring about speedy resolution of disputes, they have caused more obscurity than clarity.
Since the inception of the Competition Act 89 of 1998 as amended, the Commission has negotiated more than 100 consent agreements with companies in various industries, including aviation, construction and grain storage. The Act empowers the Commission to enter into a consent agreement with a party at any time during, on, or after
the completion of investigations of alleged violations of the Act.
Consent agreements are entered into merely for practical reasons.
Firstly, they are a mechanism by which a party can expeditiously settle a matter and avoid litigation. In this regard, both the Commission and the party benefit as they avoid the potentially high cost of on-going legal proceedings. Entering into a consent agreement therefore spares the Commission from wasting resources on further investigations.
Secondly, a party may consider it better to be viewed as co-operating with the Commission than to be exposed to negative publicity and damning evidence in the public domain as a result of a trial.
When the Commission wishes to settle with a party by means of a consent agreement, it enters into a process of negotiations with that party. During those negotiations the key concern is the penalty that will be imposed. It is in a party’s interest to pay the penalty if it is similar to or less than what would possibly be imposed in a full-blown trial.
Once the consent agreement has been concluded, it is referred to the Competition Tribunal to be approved as a consent order, thereby giving it the same status as an order of the High Court.
The role of the Tribunal at this stage seems to be rather ceremonial, although in some instances it has gone beyond merely rubberstamping the agreement. In cases of ambiguity or vagueness, the Tribunal may for instance query why the consent agreement was entered into and the manner in which the penalty was determined.
This was the case in the recent South African Airways (SAA) consent agreement confirmed by the Tribunal on 6 June 2012, in which SAA settled three different complaints which were all at different stages:
• an air cargo complaint relating to SAA’s involvement in a cartel for fixing of fuel surcharges for air freight and cargo services;
• a Far East complaint over SAA’s involvement in a code-sharing agreement for the Hong Kong route; and
• a 2010 Soccer World Cup complaint stemming from an email received by SAA which could be potentially viewed as collusion.
The SAA consent agreement is particularly interesting because SAA made an admission of guilt and will pay a penalty for only the Far East complaint. It is an unofficial rule that parties entering into consent agreements should make an admission of guilt in respect of the complaint settled. Although this is not cast in stone, the SAA agreement seems to be an exception to the way consent agreements have been previously dealt with.
Where there is no admission of guilt, it is generally the case that the Commission and the party should show why such an admission was not made. In this case, the primary reason in the air cargo complaint seems to be that the Commission had insufficient evidence against SAA. In the 2010 Soccer world cup complaint, SAA fell short of the requirements of corporate leniency but no admission was sought.
The reasons for the lack of admissions and penalties seem rather obscure. Despite this, the Tribunal gave the agreement its seal of approval. In this consent agreement, like many others, the legal basis upon which approval was granted is unclear as the legal considerations were not adequately set out.
Consent agreements as a method of resolving competition law disputes raise some concerns, even though they may result in the same outcome as a final judgment. The primary concern is that they do not contribute much to clarifying the law.
Matters are resolved without hearing any evidence, findings on facts or legal analysis since legal issues are not dealt with. Consequently, many complex competition law issues are settled without any legal and judicial analysis, but with ‘simple’ decisions which do not interpret the law.
Most of these consent agreements, including the SAA agreement, concern cartel conduct prohibited under section 4(1)(b) of the Competition Act. Accordingly, the South African competition authorities have not developed a body of case law on cartel conduct such as exchange of information with competitors. This lack of case law makes it difficult for parties as they have close to nothing to guide them on how the Tribunal or the Competition Appeal Court will handle such complex cases.
In short, while consent agreements do result in quick settlements, they do not contribute much to the law due to their very nature.
The tragedy is that as a result of these quick settlements, South Africa does not have a substantial body of case law concerning cartel conduct and other anti-competitive conduct unlike other countries, such as the United States, which have a plethora of case law on various competition law issues.
The unanswered remaining question: is the benefit worth the cost?