Changing the Playing Field - Class Actions in Competition Law

In recognising that competition contraventions impact heavily on consumers and businesses, there is an increased interest in class actions in competition matters. While the competition regulatory bodies are tasked with penalising the contraveners, the proceeds of administrative penalties imposed by the authorities do not reach those who suffered loss as effectively as would a direct damages claim.

In the last quarter of 2012, we saw a developing consciousness of the class action's application in competition law as a result of the Supreme Court of Appeal's judgment in Children's Resource Centre Trust v Pioneer Food & others. The judgment on the application brought in 2010 by NGOs and consumers for certification of a class action against bread producers, who were found guilty of fixing the bread price in 2007, is indicative of a worldwide trend toward accommodating class actions in the competition arena.

The SCA expressed itself in favour of making class actions available to consumers who had suffered losses as a result of contraventions of the Competition Act 89 of 1998 (the Act). It recognised the current dilemma in South African law where the class action is given express constitutional recognition, but has not been regulated by statute. The court therefore found it necessary to address the issue through the exercise of its inherent power to develop the common law in the interests of justice.

The SCA made it clear that a class action can be brought regardless of the presence or absence of a constitutional infringement. The judgement provides a platform for private enforcement, where the following factors for establishing a class action are present:

  • An identifiable class
  • A cause of action on triable issues
  • Common issues
  • A suitable representative

In addition to these factors, although not discussed in any great detail, a successful certification application will require a party to show that the damages claimed are ascertainable and capable of determination and that that there is an appropriate procedure for allocating the damages to the members of the class.

In its judgment, the court drew a distinction between the penalties that may be imposed by the Tribunal on parties found guilty of anti-competitive practices in terms of the Act and civil damages. The purpose of the legislated penalty is to act as a deterrent rather than to redress the harm caused to consumers by the particular contravention of the Act. The promotion of private actions can also be used as a further deterrent.

While small businesses and consumers have welcomed the opportunity to pursue class actions, the effect of the new approach in competition law remains to be seen. Although the SCA judgment is not all-encompassing in prescribing the adjudicative approach to class actions, it lays down a promising precedent that recognises the need for a class action remedy, but falls short in dealing adequately with the caution to be applied in preventing frivolous litigation.

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