Competition Law damages and their quantification in South African law

Abstract

thesis investigates the question of private competition damages actions arising from contraventions of the South African Competition Act 89 of 1998. The South African Competition Act has been actively and successfully enforced for almost 15 years. Great success has been achieved by the Competition Commission in uncovering cartel conduct and prosecuting contraventions of the Competition Act. The successful prosecution of contraventions of the Competition Act has resulted in contravening firms being ordered to pay millions of Rand in administrative penalties. Despite the success achieved by the competition authorities in uncovering contraventions and prosecuting contravening firms and gains for the fiscus in administrative penalties, the real victims of the anti-competitive conduct have to date failed to recover any compensation for the loss and damage caused by contraventions of the Competition Act. Section 65 of the Competition Act expressly acknowledges the right of persons who have suffered loss or damage as a result of a prohibited practice to recover private damages in the civil courts. However, the Act is silent on the way in which parties are to institute these actions. In addition, a survey of South African law shows that the South African law of damages remains untested when called upon to assess and quantify complex private competition damages. This thesis endeavours to contextualise the damages action referred to in section 65 of the Competition Act in order to provide clarity on the nature of the action and how a claimant may recover private damages arising from contraventions of the Competition Act. More developed foreign jurisdictions such as the European Union and United States are investigated in order to shed light on how private damages are dealt with in those jurisdictions, and how salient aspects of these damages regimes might assist with the development of South Africa’s approach to private competition damages actions. From this investigation, it appears that private damages actions arising from a contravention of the Competition Act should be recognised as a civil delictual action. Given the powers of discovery within the South African civil procedure, together with the duty of claimants to provide, and the courts’ quest to be provided with all relevant information, including expert evidence and opinion, it is submitted that no significant adjustments to South African law are required for the successful prosecution of private competition damages actions. However, the quantification of private damages continues to present challenges that have to be overcome - albeit that these challenges are not novel to competition law. In order to address the complexities of quantifying competition damages, the use of various economic models that may assist litigants and courts in assessing and estimating the extent of damage caused by a contravention of the Competition Act, are suggested and discussed. It is evident that the South African civil courts allow the leading of expert evidence to assist with the assessment and quantification of damages; however, the retention of the South African judiciary’s discretion to assess damages on the available evidence in the most beneficial and appropriate way remains a fundamental feature of civil damages assessment in South Africa. Existing structures within South African law are investigated, along with the procedural framework that serve as important building-blocks for the development of a successful culture of private competition damages actions and the development of a coincidental ancillary deterrent against contraventions of the Competition in the form of private damages actions. The fundamental requirements already exist within South African law for the enforcement and development of private competition damages actions in terms of section 65 of the Competition Act. These include liberal discovery procedures, favourable provisions pertaining to legal practitioners entering into contingency fee arrangements, and most recently, the acceptance and recognition of class actions for civil damages claims. In order to facilitate a claimant’s access to information and documents necessary for the proper formulation of a private competition damages action, recommendations are made to facilitate easy access to information germane to the bringing about and quantification of private damages actions. This will give further credence to the creation of effective structures for the administration of the provisions of the Competition Act, and facilitate, promote, and strengthen a further disincentive against contraventions of the Act in the form of private damages actions. It is recommended that a costs limitation be imposed on parties litigating for private damages arising from contraventions of section 65 of the Competition Act. Each party should be liable for its own costs, thereby achieving a balance between preventing frivolous and opportunistic litigation and facilitating, promoting and advancing the launching of private competition damages actions by the public. The public are in turn safe-guarded by the fact that large corporations cannot utilise the litigation costs and costs exposure as a tactic to discourage litigation.