THE COMPETITION APPEAL COURT OF SOUTH AFRICA

Case No: 157/CAC/Nov 2017
2018 – 10 - 12

In the matter between:

CONTINTNENTAL TYRES SOUTH AFRICA (PTY) LTD	1st Appellant 

GOODYEAR SOUTH AFRICA (PTY) LTD	 2nd Appellant

and

THE COMPETITION COMMISSION OF SOUTH AFRICA 	1st Respondent 

APOLLO TYRES SOUTH AFRICA (PTY) LTD	2nd Respondent 

BRIDGESTONE SOUTH AFRICA (PTY) LTD		3th Respondent 

SOUTH AFRICAN TYRE MANUFACTURERS		 4th Respondent 
CONFERENCE(PTY)LTD

JUDGMENT

UNTERHALTER J INTRODUCTION

1.	The appellants before us, Continental Tyres South Africa (Pty) Ltd ("Continental") and Goodyear South Africa (Pty) Ltd ("Goodyear") are respondents in a complaint that the Competition Commission ("the Commission ") has referred to the Competition Tribunal. The complaint alleges that Continental and Goodyear, with others, have engaged in price fixing.

2.	Continental sought the production by the Commission of its record of investigation. Goodyear sought discovery from the Commission. The Commission disclosed the documents sought, save for three classes of documents: certain correspondence between the Commission and the complainant, Parsons Transport (Pty) Ltd; transcripts of certain interrogations conducted by the Commission in the course of its investigation; and certain correspondence between the Commission and Bridgestone South Africa (Ply) Ltd, the leniency applicant.

3.	Continental and Goodyear made application to the Competition Tribunal ("the Tribunal") to compel production of the documents the Commission had declined to disclose. The Commission opposed on the basis that the documents were either protected from disclosure by litigation privilege, alternatively, the documents constitute restricted information in terms of Commission Rule 14, and, for this reason, may not be disclosed.

4.	The Tribunal, save for granting Goodyear access to the transcript of Mr Wustmann, since it had already been disclosed to Continental, dismissed the applications. Continental and Goodyear appeal to this Court. Continental does so on the more limited basis that ii seeks only the transcripts. Goodyear persists in seeking the production of the documents in all three classes.

5.	Since both Continental and Goodyear appeal the Tribunal's dismissal of their applications for the production of the transcripts, I deal firstly with this issue. I then consider the remaining issues raised by Goodyear's appeal: the production of the correspondence with the complainant and the leniency applicant.

THE TRANSCRIPTS

6.	The transcripts, to which Continental and Goodyear seek access, record interrogations conducted by the Commission with a number of persons who were issued with a summons in terms of 49A of the Competition Act 89 of 1998 ("the Act"). These interrogations took place at different times in the period 5 May 2009 -11 September 2009.

7.	The Commission contends in the first place that the transcripts are protected by litigation privilege. The Supreme Court of Appeal in Arcelormittal set out the requirements that must be met for a litigant to claim litigation privilege. First, the privilege protects communications between a litigant or her legal advisor and a third party that come about for the purpose of a litigant's submission of the communication to a legal advisor for legal advice. Second, at the time that the communication takes place, litigation must be pending or contemplated as likely,

8.	Other features of the privilege have been emphasized. The privilege is not assumed, it must be established. The privilege is a right to withhold from disclosure evidence that might otherwise be of value and require production. The privilege protects important values that underpin the litigation process. But the privilege also restricts the production of evidence, and evidence is the lifeblood of the duty of a Tribunal or Court to find the facts. Accordingly, a litigant who claims the privilege must prove the facts that establish the right asserted.

9.	The Commission, in its answering affidavits to the compelling applications, could not have adopted a more perfunctory approach to its assertion of litigation privilege. It contented itself with the following averment:

"Both the correspondence and the transcripts to which Continental seeks access were obtained for the purpose of pending or anticipated litigation against the respondent parties to the referral."

10.	This averment fails to state facts. It simply asserts, in truncated form, the requirements that would need to be established by facts in order to claim the privilege. Elsewhere in the answering affidavits, the Commission simply claims that the documents sought are protected by the privilege. But a claim does not afford proof.

11.	In order to overcome this absence of proof, the Tribunal, and now the Commission before us, sought to rely on what are described as inferences that may be drawn from common cause facts on the papers. This is not a warranted approach. When a person asserts litigation privilege, they must clearly adduce the evidence they rely upon to establish the privilege and make that plain in the answering affidavit so that the applicants who seek disclosure understand the case that is sought to be made out to resist the disclosure of documents. It will not suffice to trawl the record to find common cause facts from which inferences might be drawn. That is a case neither pleaded nor intelligible from the papers, but an exercise of ex post reconstruction.

12.	The Commission simply failed to adduce evidence to make out a case for the privilege. And that ends the Commission's claim that it is entitled to resist disclosure on the basis of an assertion of privilege.

13.	However, even reliance on inference from common cause facts, a flawed approach, renders ambiguous outcomes that fail to establish the privilege.

14.	There were three actions taken by the Commission, reflected in the papers, that are consistent with the contemplation of litigation by the Commission. First, the Commission executed a warrant of search and seizure on 4 April 2008 under powers granted under section 46 of the Act. Second, on 24 April 2009, the Commission initiated its own complaint. Third, in May 2009 the Commission issued summonses pursuant to its powers in section 49A to interrogate various persons. It was the exercise of these powers that gave rise to the interrogations, and in turn, the transcripts that are sought by Continental and Goodyear.

15.	On 11 September 2009, Bridgestone filed a marker and thereafter a leniency application. I return to the significance of this conduct. But given the timing of Bridgestone's marker, the Tribunal appeared to accept, correctly, that this was not a fact relevant to whether the Commission already contemplated litigation as likely during the period 5 May 2009 - 11 September 2009 when it conducted the interrogations at issue in this case.

16.	The Tribunal considered that the execution of the search warrant, reflected in a letter attached to the papers, permitted of the reasonable inference that the Commission then contemplated litigation as likely. This inferential reasoning is flawed. A warrant can be obtained not only when the Commission has information that a prohibited practice has taken place or is likely. It is also competent to issue a warrant under section 46 if there are reasonable grounds for the judge or magistrate to believe that anything connected to an investigation is in the possession or under the control of a person in the premises. A warrant may be issued in the course of an investigation and without any affirmative belief on the part of the Commission that a prohibited practice has taken place. The warrant may be issued to assist the Commission to find evidence of the complaint under investigation. No evidence may be forthcoming. The mere fact that a warrant is obtained and executed does not establish that the Commission had sufficient evidence so as to contemplate litigation as likely.

17.	Since the Commission failed to state in its affidavits on what basis it obtained the search warrants, the mere execution of the warrants does not give rise to the inference that its investigation had proceeded to the point that the Commission had secured evidence sufficient to consider litigation likely. The execution of the warrants is consistent with the contemplation of litigation. But consistency is not the same as proof that the Commission contemplated litigation as likely.

18.	The initiation of the Commission's own complaint on 24 April 2009, without more, provides no better basis for drawing the required inference.

19.	The complaint is attached to the papers. The initiation statement references what it describes as allegations of price fixing. The allegations, it is said, may amount to an infringement of section 4(1)(a) or (b) of the Act. The complaint is said to be required so as to broaden the scope of the investigation.

20.	The initiation statement, unsurprisingly, does not state whether litigation is likely. Its purpose is to frame the scope of the investigation. The statement can say no more than that the allegations may amount to an infringement of the Act. The initiation of the complaint does not anticipate the outcome of the investigation. Whether there is ultimately sufficient evidence of an infringement is the purpose of the investigation.

21.	It follows that the initiation of the investigation by the Commission. without more, does not establish whether the Commission contemplated litigation as likely. It may have done, but the Commission was required to put up the facts as to what the investigation had yielded to that point and whether litigation was considered likely or not as a result. This the Commission failed to do.

22.	That the Commission issued summonses in order to interrogate various persons takes the case for the asserted privilege no further. Section 49A provides that the Commission may summon any person to furnish information on the subject of the investigation. The power is widely framed precisely because the Commission should not have to exercise the power only in circumstances where it already has sufficient evidence to contemplate litigation as likely. The power of summons may be exercised to secure such evidence. But the issue of the summons is simply equivocal as to what evidence the Commission has already found and hence whether litigation is likely.

23.	Accordingly, the Commission cannot establish, based on inference from the facts relied upon, that it considered litigation at the relevant time to be likely. Hence, the Commission's assertion of litigation privilege must fail.

24.	I make two further observations on this aspect of the matter. First, it is the failure of the Commission to put up the facts that gives rise to the conclusion that the case for the privilege has not been made out. It is not that such evidence, if it exists, is difficult to adduce. It simply requires that the Commission references what the Commission knew at the relevant time that made litigation likely. Second, if a court is too ready to assume without proper proof that litigation was contemplated by the Commission, similar reasoning will have to apply to those persons who are subject to investigation, permitting them to claim privilege on the same slender assumption that the receipt of a summons entails the likelihood of litigation. That would protect the communications of persons whose communications would otherwise be open to investigative scrutiny by the Commission - an undesirable limitation upon the investigative remit of the Commission.

25.	Finally, Mr Gotz, who appeared with Ms Lewis and Mr Nyangiwe for Goodyear, made an ambitious and important submission that the Commission could not assert litigation privilege as might an ordinary litigant because the Commission exercises investigative powers akin to police powers and the fruits of its investigations are subject to production as a matter of fairness. The argument invoked by way of analogical authority the constitutional principles applied in Shabalala.  There is no need to determine this issue because the Commission has not established its right to claim the privilege, and hence the attenuation of that right does not arise for consideration.

26.	The Commission contended before the Tribunal, and does so again before us, that quite apart from its reliance on litigation privilege, the transcripts are immune from production as restricted information as provided for in Commission Rule 14(1)(d)(ii)(bb) ("the rule"). The Tribunal upheld this contention. The Tribunal found that the rule affords the Commission even more generous protection than does litigation privilege as a necessary adjunct to the discharge by the Commission of its investigative functions.

27.	Goodyear and Continental contest the Tribunal's findings on various grounds, including the Commission's failure squarely to invoke the rule in its affidavit or adduce facts in support of the rule's application.

28.	The threshold question however is this: is the rule available to the Commission when documents are sought from it by a litigant against whom the Commission has referred a complaint to the Tribunal?

29.	The rule must be read together with Commission Rule 15. Rule 15(1) permits any person to inspect or copy any Commission record, subject to the restrictions set out in this rule.

30.	Plainly any person is a very wide class, and might seem to include persons who are respondents in the referral of a complaint by the Commission to the Tribunal. Certain of the sub-rules in Rule 14 may lend support to this construction because there are types of restricted information that remain restricted only to the point of referral or non­ referral by the Commission. 

31.	However, this is not the correct construction of Rule 15. It is precisely because the class of "any persons" is so wide that the regime of exclusion that is set out in Rule 14 cannot be of application to the class of persons constituting litigants who are respondents in a referral brought against them by the Commission. The Commission has duties of disclosure to respondents that ii does not have to the public at large. The Commission is engaged upon adversarial litigation with respondents in proceedings of great consequence for the public and the respondents. Such litigation must be fair. One aspect of fairness is disclosure. The Commission is given large powers to conduct investigations. The yield of that investigation must be disclosed to respondents, unless it is privileged, and subjected to an appropriate confidentiality regime.

32.	The matter may be tested in this way. If the Commission obtained an exculpatory statement from a witness in a consultation with that witness recorded in a minute, and this minute formed part of the record on the basis of which the Commission decided to refer a complaint to the Tribunal: could the Commission avoid production of this minute under Rule 14(1)(d)(i)(cc)? Plainly not. The duty to give exculpatory statements to a respondent is an attribute of fairness.

33.	The majority of the Constitutional Court has recently held that a public body subject to judicial review has a duty to disclose the record of its decision that is not co-extensive with its duty to make disclosures of information to the public under PAIA

34.	For like reasons, Rule 15 cannot be interpreted expansively to be of application to respondents in referral proceedings because the Commission has a duty to disclose all relevant documents (absent a valid claim of privilege) so as promote truth finding and fairness. A regime of restriction of application to respondents that was wider than the protection already given by privilege would damage the fairness of proceedings. That is not an interpretation of Rule 15 that should lightly be countenanced.

35.	Rather, Rule 15 should be understood to create a regime of access by the public to information held by the Commission. This Court has held Rule 15 to be a rule of public access, and we affirm that position.

36.	A respondent secures disclosure as a litigant under the powers conferred on the Tribunal by Sections 52 (1) read with Tribunal Rule 22 (1)(c)(v). It is the Tribunal that determines the duty of litigants to make discovery. Rule 15 of the Commission Rules cannot be read as a derogation from the Tribunal's powers to stipulate for a regime of disclosure that ensures a fair and effective hearing for the litigants.

37.	If Rule 15 is read to apply to litigants then it would create a restrictive regime of disclosure, favouring the Commission - one of the litigants before it That could not have been the intention behind Rule 15.

38.	find that Rule 15 read with the rule is not of application when a litigant seeks discovery of documents. Accordingly, the Commission could not rely upon the rule to resist production of the transcripts.

39.	In any event, in so far as the Commission sought to rely on the rule, it had to set out the facts as to how disclosure would frustrate its deliberative process. This it has failed to do. And for this reason also, the Tribunal fell into error in finding that the rule could be invoked to prevent production of the transcripts.

40.	Goodyear has been at pains to point out that it never sought the disclosure of a Commission record under Rule 15. Rather it sought discovery. That is accepted by the Commission. I have found that Rule 15 does not restrict the disclosure of documents to a litigant who seeks discovery.

41.	Continental did seek the record under Rule 15. But it did not do so as a member of the public but as a litigant. As such, it sought what is in effect discovery, and no different result is warranted in its case.

42.	In the result, the Commission has failed to provide a defensible basis for resisting disclosure of the transcripts: it has not established litigation privilege; the rule is not of application when a litigant seeks discovery; and even if it was, the Commission has failed to set out facts that permit of the rule's application.

THE CORRESPONDENCE

43.	Goodyear appeals the Tribunal's decision to refuse it access to the correspondence that took place between the Commission and the complainant, as also between the Commission and the leniency applicant.

44.	I consider first the correspondence between the leniency applicant and the Commission. The Tribunal found that the Commission could permissibly resist disclosure of these documents both on the grounds of litigation privilege and upon an application of the rule.

45.	Goodyear submitted that neither ground was properly pleaded or proven by the Commission. For reasons already stated above, these criticisms are warranted.

46.	However, it may be argued that whenever a leniency application is made its contents (including correspondence) constitutes privileged material in the hands of the Commission. The Tribunal considered this to be the holding of the Supreme Court of Appeal ("SCA'') in Arcelormittal.

47.	A careful reading of the case does not bear this out. The SCA emphasized that establishing privilege is a fact bound exercise. In that case it was the facts put up in the Commission's answering affidavit which made out the case for the privilege. In particular, the leniency application was the result of discussions with the Commission and its lawyers. It was made at the request of the Commission and contained information for the purposes of prosecuting a complaint against firms in the steel industry. There were specific factual averments made in the affidavit of the Commission that established the privilege.

48.	That was not done by the Commission in the case before us.

49.	Might it nevertheless be held that since the purpose of a leniency application is to obtain leniency in exchange for information and co­ operation that assists the Commission to prosecute other firms, an application for leniency must axiomatically be privileged in the hands of the Commission? This does not follow. A leniency applicant may make an application with insufficient information to place the Commission in a position to consider litigation likely. Of course to obtain conditional leniency, an applicant will seek to put up information of value to the Commission. But it is for the Commission to assess that information and determine whether to grant conditional leniency and, in the context of privilege, state on oath whether, at the time the leniency application was made, litigation was contemplated as likely. A successful leniency application will usually support this conclusion. But it is for the Commission to explain what it thought as to the likelihood of litigation in the light of the information that it had available. The mere making of an application for leniency, without more, does not establish the privilege.

50.	It follows that the paucity of facts offered by the Commission simply fails to establish the privilege claimed by the Commission. Even accepting that an application for leniency was made, this fact alone says nothing as to what the application contained and what effect it had on the Commission's contemplation of litigation.

51.	The claim of privilege must fail. And so too, for reasons already explained, the reliance that the Commission has placed on the rule is unavailing against a litigant seeking the production of documents.

52.1 deal finally, and briefly, with the last category of documents sought: correspondence between the Commission and the Complainant. Little is known of what these documents consist of, or even the dates on which they were written or received. The Commission does not say. Without a date, it is impossible to know what facts, if any, might be relevant to the contemplation of litigation by the Commission.

53.	The Tribunal rightly did not decide this aspect of the matter on the basis of privilege. It did however apply the rule. For reasons set out above, I do not find the rule to be of application.

CONCLUSION

54.	It follows that the Tribunal's decision dismissing Continental and Goodyear's application for disclosure by the Commission of the three categories of documents cannot be allowed to stand. The Tribunal found that the Commission enjoyed a privilege it had not established. The Tribunal inferred the privilege from facts that do not support this inference. And finally, the Tribunal allowed for the application to litigants of a rule of restriction, wider than litigation privilege, that is simply a public access rule. In this the Tribunal erred.

In the result the following orders are made: 

(a)	The appeals are upheld: 
(b)	The orders made by the Tribunal are set aside and replaced with the following: 

(i)	The Commission is ordered to disclose to Continental Tyres South Africa (Pty) Ltd and Goodyear South Africa (Pty) Ltd the transcripts listed in paragraph 95 of the Tribunal's decision;
(ii)	The Commission is ordered to disclose to Goodyear South Africa (Ply) Ltd the correspondence between the Commission and Bridgestone South Africa (Pty) Ltd, as identified in the revised schedule of the Competition Commission annexed to the founding affidavit as "CT6" ( "the revised schedule").
(iii)	The Commission is ordered to disclose to Goodyear South Africa (Ply) Ltd the correspondence between the Commission and Parsons Transport (Ply) Ltd, as identified in the revised schedule.

(c)	The Commission is to pay the costs of the appeals, including the costs consequent upon the employment of two counsel.

David Unterhalter
Acting Justice of the Competition Appeal Court

Appearances:

For the 1st Appellant:	Adv. JPV McNally SC and MJ Engelbrecht
Instructed by: 	Bowman Gilfillan Inc.

For the 2nd Appellant:	Adv. A Gotz, Adv. N Lewis and Adv. L Nyangiwe
Instructed by: 	Judin Combrinck Inc.

For the 1st Respondent: 	Daniel Berger SS and Sha'ista Kazee
Instructed by: 	Competition Commission of South Africa

Heard: 29 June 2018
Delivered:11 October 2018