Competition Commission v/s Federal Mogul

The judgment

The court's own file

IN THE COMPETITION APPEAL COURT OF SOUTH AFRICA Case No.: 33/CAC/Sep03 In the matter between : FEDERAL-MOGUL AFTERMARKET SOUTHERN AFRICA (PTY) LIMITED Appellant and THE COMPETITION COMMISSION First Respondent THE MINISTER OF TRADE AND INDUSTRY Second Respondent J U D G M E N T 23 SEPTEMBER 2004 DAVIS J P and JALI J A INTRODUCTION This is an appeal by Federal-Mogul Aftermarket Southern Africa (Pty) Limited, (“the Appellant”) a company duly registered and incorporated in accordance with the company laws of the Republic of South Africa against the decisions of the Competition Tribunal (“the Tribunal”) under Case No. 08/CR/Mar01 delivered on the 28 th January 2003 (“the first decision”) and a decision delivered on the 21 st August 2003 (“the second decision”). In the first decision, the Tribunal found that appellant had acted in contravention of section 5(2) of the Competition Act No. 89 of 1998, as amended, (“the Act”). Pursuant to granting the first decision, the Tribunal had to make a decision about 2 whether for this contravention, the appellant was to pay any penalty as contemplated in the Act. In its second decision, the Tribunal ordered the appellant to pay an administrative penalty of three million Rand (R3 000 000,00) in terms of section 59(3) of the Act. On the 9 th September 2003, the appellant lodged an appeal in which it challenged the first and second decisions of the Tribunal. In its Notice of Appeal, the appellant, briefly, contended that: 1. The Tribunal was mistaken in law and in fact in finding that the Appellant had contravened section 5(2) of the Act; 2. Section 59 of the Act is unconstitutional to the extent that it permits the Tribunal, an administrative body, to impose a discretionary penalty for contraventions of the Act. Accordingly, the Tribunal should not have exercised any power under section 59 to impose any such penalty on the appellant; 3. In any event, the penalty of three million rand (R3 000 000,00) on the appellant by the tribunal was not an appropriate “penalty” taking into consideration the various factors listed in section 59(3) of the Act. ALLEGED BREACH OF SECTION 5(2) OF THE ACT. The complaint referred by the Competition Commission (‘the Commission’) alleged that appellant had entered into an agreement with distributors of its Ferodo brake products to fix the discount off list-price and at which such distributors should on-sell such products to the retail sector. Further, it was alleged that appellant penalized the complainant for selling at a higher discount by reducing the complainant’s rebate in respect of purchases of his products. 3 Section 5 of the Act provides as follows: “5 Restrictive vertical practices prohibited (1) An agreement between parties in a vertical relationship is prohibited if it has the effect of substantially preventing or lessening competition in a market, unless a party to the agreement can prove that any technological, efficiency or other pro-competitive, gain resulting from that agreement outweighs that effect. (2) The practice of minimum resale price maintenance is prohibited. (3) Despite subsection (2), a supplier or producer may recommend a minimum resale price to the reseller of a good or service provided – (a) the supplier or producer makes it clear to the reseller that the recommendation is not binding; and (b) if the product has its price stated on it, the words ‘recommended price’ appear next to the stated price.” The Tribunal held that section 5(2) prohibits the practice of minimum resale price maintenance without the necessity of establishing that an agreement exists to maintain minimum prices. 4 Mr Unterhalter, who appeared together with Mr Wilson on behalf of appellant, submitted that the purpose of prohibiting resale price maintenance was to prevent the conclusion of agreements between manufacturers and dealers which, in effect, would require the manufacturer to enforce a horizontal price fixing arrangement between such dealers. It was not, in his view, aimed at preventing manufacturers from enhancing the efficiency of their distribution structures. Relying on the doctrine developed in US v Colgate and Company 250 US 300 (1919), Mr Unterhalter contended that the US Supreme Court had held that the Sherman Act 26Stat 209(1890) was not designed to ‘restrict the long recognized right of a trader or manufacturer to announce in advance the circumstances under which he will refuse to sell’. Accordingly, when a manufacturer announces its intention not to deal with price cutters and dealers respond by not cutting prices it could not be said that there was a violation of the Sherman Act because there was no vertical agreement in existence for the purposes of section 1 of the Sherman Act (or in the South African context, section 5 of the Act). According to Mr Unterhalter, this limitation allows a manufacturer the freedom to conduct its relationship with its dealers in a manner which enhances efficiency. There could be many per-competitive reasons why a manufacturer may want to stipulate the price at which its goods are sold in the market, including the prevention of free riding, the preservation of brand image, the incentivisation of multi brand dealers to trade in the manufacturer’s product, the avoidance of dealer concentration, the provision of an extensive availability of products, promotion of entry into the market. 5 For these reasons, Mr Unterhalter submitted that, to establish resale price maintenance, it was necessary to show that the manufacturers’ coercion of the non-compliant dealer arises out of a “vertical agreement” to which the manufacturer is a party and is not merely the product of the manufacturer’s “unilateral decision” to impose such restraint. Great care should be taken before critically applying principles borrowed from the United States or indeed other competition law regimes. When examining the jurisprudence of the United States, it is important to bear in mind the observation made by Robert Litan and Carl Shapiro in their useful review article, ‘Anti-Trust Policy during the Clinton Administration: (Working paper CPC 01 -22: Competition Policy Centre: University of California, Berkeley)’ at 15: ‘Developments in federal anti-trust enforcement in particular over the last century….reflect shifting views over time and public attitudes towards business as well as scholarly thinking about the appropriate role of government intervention in the market with the aim of ensuring competition’. To invite this Court to interpret section 5 of the Act through the prism of United States jurisprudence requires more than a ritual incantation of dicta gleaned from a particular decision(s) of the US Supreme Court. It demands an examination of the jurisprudential underpinning of the particular judgment cited, (which as Litan & Shapiro note, is often a product of its time) and dominant 6 economic thinking when the judgment was delivered, its congruence with the broad policy and socio-economic objectives of the Act and, consideration as to whether the cited dicta fit the express wording of the Act. This cautionary remark should, itself, be located within the broader role of comparative law. While comparative jurisprudence can be informative it needs to be applied carefully. In his speech, Comparative Law in Constitutional Adjudication delivered in Johannesburg on the 20 th March 2004, at the opening of the Constitutional Court, Sir Sydney Kentridge Q.C. advocated a “measured and careful use of foreign materials”. He went on to highlight some of the shortcomings in the use of foreign law, which have been referred to by other writers on the subject as follows:- “Professor Christopher McCrudden of Oxford has written, with more learning than I can muster, on the problematical aspects of the use of comparative law in right cases. He quotes critics who have said that foreign authorities which, may at the will of the judge be used or ignored are, when cited, no more than confirmation of the judge’s opinion rather than a force, which shapes that opinion. Conflicting foreign precedents are easy enough to find. The term “cherry-picking” has been used. And it has been said that foreign authority is no more than a source of comfort for the judge who has to make a difficult or controversial decision. 7 There is also a very practical problem in the use of comparative law, and that is the problem of language. In English-speaking countries, the great majority of counsel and (I respectfully venture to say) the vast majority of judges, cannot readily find their way into the rich jurisprudence of, say, Germany or France. Even when some of that material is translated the legal concepts used and their historical backgrounds are not always within the grasp of a foreign lawyer” (Pages 12-13) Notwithstanding the abovementioned warning, the careful use of comparative law is welcomed and appropriate especially where the provisions being considered are similar. However, “the Court’s own Constitutional text must be paramouont”. (Kentridge Q.C., supra page 24). The same holds true of the Act. In the present context, for example, there is not only one stream of thought which can be derived from an examination of US decisions. Thus in Yentsh v Texaco Inc. 630 F.2D 46 at 53 (2dCir. 1980), where the court held ‘Threats of termination as long as they secured adherence to the fixed price, have been deemed to trespass beyond the boundaries of Colgate ….thereby triggering a finding of an illegal combination….The combination with retailers arose because their acquiescence in the suggested prices was secured by threats of termination’. See also the qualifications expressed in United States v Parke Davis and Co 362 US 29(1959) at 46. 8 In the present case, the express wording of section 1 of the Sherman Act is distinguishable from section 5(2) of the Act in that provision is not made for the requirement of an ‘agreement’ in section 5(2) of the Act nor that an agreement be necessary to show evidence of a prohibited practice. Significantly, section 5(1) of the Act expressly provides for an agreement between parties in a vertical relationship being prohibited, whereas section 5(2) employs the word ‘practice’. The drafters of the Act clearly regarded resale price maintenance as an egregiously anti competitive activity and wished to state so in terse and clear terms. The wording of the section indicates that to establish a contravention thereof, it suffices to produce evidence which shows that a supplier has imposed on its distributors a price at which its goods are to be resold and the distributors are thereby induced to comply with this minimum price on pain of a sanction for non-compliance. There is no justification for the application of foreign dicta that not only may be at odds with an express purpose of the Act but the result of which would lead to support for an interpretation which is at war with the express words of the section. The need to prove the existence of an agreement certainly places a greater burden on the complainant or the respondent. In Bundesverband der Arzneimittel – Importeure eV v Commision of the European Communities (cases C-2/01 and C-3/01P dated 6 January 2004 the European Court of Justice said ‘It is important to note that this case raises the question of the existence of an agreement prohibited by Article 85(1) of the Treaty. The mere concomitant 9 existence of an agreement which is in itself neutral and a measure restricting competition that has been imposed unilaterally does not amount to an agreement prohibited by that provision. Thus, the mere fact that a measure adopted by a manufacturer, which has the object or effect of restricting competition, falls within the context of continuous business relations between the manufacturer and its wholesalers is not sufficient for a finding that such an agreement exists.’ (at para 141) The express omission of the word ‘agreement’ in s 5(2) thus reduces the burden of proof which rests with respondent. A ‘practice’ connotes a form of repetitious or habitual conduct of a kind which can be discerned from the evidence as being known and recognized to the interested parties. See the more restricted definition given within the particular context to ‘unfair labour practice’ in Marievale Consolidated Mines v President, Industrial Court 1987(2) SA 485(1) at 498 B- D. No unilateral determination of minimum resale price. Mr Unterhalter submitted that even if the Tribunal was correct in holding that it was sufficient in order to establish a contravention of section 5(2), by showing that a unilateral determination of minimum resale price backed up by a sanction for non-compliance has been made by a manufacturer the Tribunal had erred in finding that appellant had unilaterally determined a minimum retail price and backed such price up with a sanction for non-compliance. 10 This submission requires an analysis of the facts. The factual matrix. The complaint was filed in November 1999 by one Koos Erasmus, the managing director of Pee Dee Wholesalers (Pty) Ltd. (“PD”). He began to trade as PD in 1999 having previously been employed as district sales manager with one of appellants largest customers, Midas Limited. Initially, he had some difficulty in being permitted to distribute appellant’s products on behalf of PD. Although there was a considerable dispute regarding subsequent events, it does appear that Erasmus was put in contact with Mr Peter Sutherland and his son David who had been long time distributors of appellant’s products. They traded under the name Pee and Dee Wholesalers Natal (“PDN”). According to Peter Sutherland, Mr Taylor of appellant made an approach in which he suggested that Sutherland permit Erasmus to use Pee and Dee Wholesalers’ name to trade in Gauteng. By contrast, Taylor testified that the initial approach had come from the Sutherlands. Whatever the correct version, it is common cause that Erasmus began business in April 1999 as PD. At that time it appeared that appellant’s pricing of its products operated off a standard structure of rebates with a scale of monthly purchases being a sole determinant of the rebate actually received by any given customer. The maximum discount available to the larger purchasers of appellant’s products was 47,5%. 11 In turn, distributors supplied the products to the market at the appellant’s list price less a discount that was smaller than the rebate given to them by the appellant. The difference between the rebate granted and a discount which had to be extended by the wholesale distributors to the customers represented the distributor’s margin of profit. According to the evidence of Mr Brian van der Bijl, who had been employed by appellant from 1987 to 1999, the distributors sold appellant’s products to their retail customers at the appellant’s list price less a discount of between 35% to 38%. After PD entered the market, a price war erupted between Midas Limited and other distributors in the Gauteng area. Erasmus called for a meeting of distributors during the week of 24 th to 28 th May to discuss the price war that had erupted. On 28 May 1999 Erasmus, Mr Hill of Stop-it-Friction, Mr Le Roux from Midas, Taylor and Mr Van der Bijl of appellant, attended a meeting. At this meeting, a number of the wholesalers demanded appellant to discipline Midas which in their view had initiated the price war. It appeared that Midas had initiated the price war in response to the considerable success that PD enjoyed in obtaining a greater share of the business of the sale of appellants products at the direct expense of Midas’ market share. Erasmus and the other wholesalers had unsuccessfully urged appellant to restore order to the pricing of appellant’s products, which order had been significantly disrupted by Midas’ decrease in the price at which it sold appellant’s products. Indeed, according to Taylor, at the meeting of 28 May 1999 ‘there was a request made to me. The parties declared that they had a number of trading discounts, which 12 wasn’t precise in any formal manner. They also indicated that they had a variety of settlement discounts which was the manner in which that they, generally, would secure an order or secure an account. It became apparent that I was going to be asked to try and enforce some kind of level at which they should all operate. So the question was put to me, could I enforce an agreed level to which I responded it was impossible’(sic). Taylor testified that he had warned Erasmus not to become involved in a price war: ‘You can be involved in a price war. I mean you might get some additional volume out of it, that’s your prerogative. From my point of view, as I want to emphasize, is that he was a distributor, he wasn’t there for the next six months, it was there for an extended period of time and we expected that to continue into the future. So to enter into a situation that compromises that situation for us was risky, it was unnecessary’. On the 5 October 1999 Taylor and Van der Bijl met with Erasmus. Taylor accused Erasmus of participation in the price war and notwithstanding Erasmus’ protestation to the contrary, Taylor informed Erasmus that he had instructions that PD’s rebate was to be cut to 40% with immediate effect. Appellant’s case before the Tribunal was that creditworthiness featured prominently in the determination of the rebate granted to a particular customer. According to the evidence of Mr Nel, the managing director, Taylor and Mr Moll, 13 the financial director, appellant’s rebate structure was based on three factors, namely volumes sold, creditworthiness and strategic factors. Nel testified that the reason why he had initially refused to approve Erasmus as a distributor of appellant’s products, was that PD did not meet the requisite credit credentials nor did it have the necessary financial support. According to Nel, this was the major reason Erasmus had been encouraged by Taylor to associate himself with PDN. In support of this line of argument, Mr Unterhalter referred to a rebate schedule which indicated that PDN had been granted the maximum rebate, notwithstanding that its volume of purchases was significantly lower than other distributors which had been granted rebates of between 42.5% and 45%. In Mr Unterhalter’s view, the reason for this decision was not only did PDN have an impeccable record but it had strategic value to appellant as a result of its bulk purchases from appellant of a heavy duty lining in addition to its brake-pad purchases. Mr Unterhalter also referred to an affidavit deposed to by Mr Taylor, on behalf of appellant, in which he referred to three distributors whose rebates had been reduced purely for credit control reasons. Mr Unterhalter also emphasized the nature of complainant’s payment history. The complainant had been late in the payment of its May account, as well as its June account. Appellant had then sought to disallow a settlement discount enjoyed by complainant but this was restored on its June account on a once off basis by Mr Moll, the financial director. Notwithstanding these warnings, complainant was late in the payment of its July and August account. At a 14 debtors’ review meeting on 30 September 1999, Mr Moll mentioned the credit control department’s concerns about the status of complainant’s account. Moll informed the meeting of the size of complainant’s outstanding balance, that it was again late in paying its August account and that Erasmus had twice asked Moll for leniency in respect of the settlement discount. Taylor informed the meeting that he had discussed complainant’s trading operations with David Sutherland of PDN. David Sutherland agreed that the rebate should be reduced. On this basis, the Committee decided that the rebate should be reduced from 47.5% to 40% and Taylor had been mandated to so inform Erasmus. For these reasons, Mr Unterhalter submitted appellant’s decision to cut complainant’s rebate was related to credit risk and did not represent an enforcement of a vertical price fixing agreement. Evaluation. In our view, there are a number of difficulties with the argument that creditworthiness was the primary consideration in the decision to reduce PD’s rebate. In October 1999, PD put through an order of R652 000, the highest order that it had ever placed. Pursuant to this order, its credit limit exceeded R1.5 m. Although Mr Nel sought to explain this order in terms of it being ‘a rush order’ which had caught appellant’s administration by surprise, the magnitude of the order and the time at which it was accepted by appellant raise some disturbing questions as to the veracity of the argument concerning the nature of the role played by the creditworthiness of PD in the ultimate decision to reduce its rebate. 15 Furthermore, appellant had initiated a separate discount of 4% which was expressly designed to ensure prompt payment by its suppliers. It appeared that appellant sought to deal with prompt payment by way of this separate discount which was thus granted separately from the rebate under dispute in this case. The evidence before the Tribunal clearly points to the fact that the “customer rebates” had nothing to do with timeous payments of the accounts by the customers of the Appellant. However, it was the “settlement discount” of four per cent (4%), which was introduced to encourage timeous payments of accounts. No where in the papers nor in argument was any satisfactory explanation proffered as to why the four per cent (4%) discount was not discontinued as a sanction against PD for late payment. The most significant piece of evidence which contradicts appellant’s version of events was a letter sent by Mr Moll, the financial director, on 19 November 1999 to the Commission in which he sought to deal with the complaint which had been lodged by PD. The following passages of the letter are of particular significance: “The discount originally offered to Pee Dee was as a result of them trading as part of the P&D group which qualified them for a discount based on volumes which would have been purchased by this group. After discussion with Pee Dee, it was clarified that Pee Dee was not part of P&D Wholesalers CC (confirmed by P&D Wholesalers CC) and therefore 16 would not enjoy the volume discounts applicable to a group of that size. Conditions of supply were based on the credit application suggesting that the companies were connected. Pee Dee entered into a price war situation, which disrupted the market, causing problems for other Federal- Mogul users….. If Pee Dee continued to receive the larger discount, it would have affected the relationship Federal-Mogul enjoys with other wholesalers These wholesalers would have demanded higher discounts for the larger volumes they purchased, believing that Pee Dee were receiving a better deal for lower volumes. Federal-Mogul could not afford to match higher discounts to all its customers, as this would compromise its own profitability and ability to remain in this business….. The complainant left the business of one of our other customers, where he was a senior employee. On the basis of attracting new business, Federal- Mogul agreed to supply him, but it soon transpired that his focus was his previous employer’s customer base. Whilst this is acceptable: • The price war that Pee Dee embarked on was causing other customers to follow suit and reduced gross margins to 12%. Several appeals were made with the complainant to adjust his pricing as the margins attainable were insufficient to conduct 17 business effectively. In terms of free enterprise, it was unacceptable to Federal-Mogul as his appointment as a distributor was to attract new business and grow our market share. • The complainant’s payment record has been erratic and has consistently requested extension on his credit terms. In October he failed to meet an extended deadline for payment resulting in him being put on stop supply and we have subsequently had to obtain a court order to uplift unpaid for inventory.” (Record pages 56-59). In this letter, Mr Moll sought to answer all the key allegations raised by PD and respondent that the rebate was based on volume. In particular, he claimed that PD entered into a price war which had disrupted the market. He went on to say that, if PD continued to receive this discount, this practice would have affected the relationship which appellant enjoyed with other wholesalers. Accordingly appellant needed to take action against PD. Understandably, when he testified before the Tribunal, Mr Nel was pressed for an explanation of the contents of this letter. In particular, he was asked whether Mr Moll was telling the truth when he compiled this letter. To this he replied: ‘Well I didn’t say no he is not telling the truth what I said there are facts in there that I perhaps wasn’t happy about. In fact I read the letter afterwards, upon my 18 return and by and large I was fairly, reasonably happy with our response. There was no reason for me to outrightly reject it. There was a major concern from the Commission’s side. I would have thought that on the basis of our answer someone would have contacted me, either by phone or by fax or by letter as say to me listen we are not happy with this, would you please mind to come and explain yourself, would you please follow up on this, but you know it took more than a year for the Commission to do anything about this thing to take this further.’ Mr Nel then informed the Tribunal that he felt ‘reasonably happy’, with Mr Moll’s letter. He said that there was no reason to correct the letter, notwithstanding that when the case was properly ventilated before the Tribunal, it became apparent that this letter constituted a rather formidable‘smoking gun’. The least that could have been expected from Mr Nel, upon perusing so damning a set of concessions, was to speedily send a further letter to the Commission correcting the record. When asked as to why Mr Moll had referred to the price war situation ‘which had disrupted the market causing problems for other Federal-Mogul users’, Mr Nel replied ‘I think you should ask Mr Moll about that. My interpretation of that was Mr Moll was involved or he sat in the credit control meetings where this was discussed. My question to Barrie Taylor at the time would have been ‘Barrie what do you know about PD Gauteng’. Why do you think are they not able to pay the account? And Barrie’s response to me was at the time Frik, it would seem as if it is not sustainable because there is a price war 19 out there and no doubt they are involved in the price war. So Mr Moll would have picked up those comments and what he tried to say there is the bits and pieces that he would have picked up from that’. Mr Nel thus suggests that, apparently in a careful and responsible fashion Mr Moll who responded to a complaint about alleged anti competitive behaviour conducted by appellant of which he was the financial director, merely picked up ‘bits and pieces’ of conversations to which he was a party and formulated his response accordingly. The explanation only has to be so stated so as to be rejected. Moll’s attempt to reconstruct the letter were particularly unpersuasive. One example from the record suffices: Mr Coetzee:…..what did you mean with the words ‘which disrupted the market? Mr Moll: Disrupting payment to me on account. It indicates a possible situation of late payment, cash flow problems. Mr Coetzee But the word market then…. Mr Moll: Market is the general market. Mr Coetzee: General market. And how would the late payment by a client affect other Federal Mogul users? 20 Mr Moll: Well then all, Federal Mogul’s probably not the right word there, its Ferodo users would be involved in the price war. Brake pad purchases, customers, people involved in the brake pad market. Mr Coetzee: But reading that sentence as it is written there the price war disrupts the market and this disruption in the market is the concern to other Federal Mogul users so my question to you is, how would the disruption in the market affect the other users? Mr Moll: It’s….a price war would affect all the players in that market. Mr Coetzee: And how would that be problematic. Mr Moll: They would be, there would be cutting of prices in that market. Mr Coetzee: And would that be a concern to Federal Mogul or would that be a concern to the users? Mr Moll: I don’t know. I couldn’t answer you. It would be a concern from the creditor’s point of view, yes. By contrast there is a plausible reason for the contents of Mr Moll’s letter, namely that he described accurately the very objective of appellant in reducing PD’s rebate. Significantly, the approach adopted by Mr Moll in his letter was supported by the testimony of Mr van der Bijl, who testified on behalf of the respondent. In describing the meeting of 1 October 1999, he said that Erasmus had been informed that PD’s discount rate had been reduced by respondent to 40% because it had followed the price war, despite having been requested not to do so. 21 When this evidence is viewed holistically, it is clear that appellant did not wish to drive PD from the market. Indeed, it did not withhold supply, notwithstanding PD’s payment record. However, once Erasmus had entered the price war and had acted contrary to the understanding regarding the pricing of its products, appellant moved to discipline PD by reducing its rebate in order to ensure that the pricing policy which it adopted was followed by its suppliers. For these reasons, there is no basis by which to interfere with the finding of the Tribunal which in our view, correctly described appellant’s conduct thus: ‘We can only conclude that the reduction in the rebate was intended to illustrate to Erasmus and other actual or would-be transgressors the consequences of not playing by the rules. What was required of Erasmus was some evidence of his willingness to adhere to the pricing conventions in the industry – we infer that this is the ‘conduct’ that Taylor cryptically asked Erasmus to ‘reflect on’ when they met on the 1 st October.’ Appellant’s ‘approach’ to the rebate was of regular and reasonably predictable conduct and was coupled to a clear intent to enforce ‘the approach’ and thus constituted ‘a practice’. THE CONSTITUTIONAL ARGUMENT. In the second part of the Notice of Appeal dated the 9 th September 2003, the Appellant set out the grounds of its appeal in respect of the second decision being, an appeal against findings of fact and/or rulings of law based upon the following grounds: 22 “1. The Honourable Tribunal erred in finding that the penalties in terms of s 59 of the Act do not constitute the type of punishment that requires a respondent to be afforded the constitutional protections afforded to an accused by s 35(3) of the Constitution. The Honourable Tribunal should have found to the contrary. 2. The Honourable Tribunal erred in not holding that s 59 of the Act was unconstitutional. The Honourable Tribunal should have held that the provisions of s 59 are unconstitutional on the grounds that: 2.1 the administrative penalties provided for in s 59 are punitive in nature; 2.2 therefore, respondents in s 59 penalty hearings should be afforded the criminal law protections contained in s 35(3) of the Constitution; 2.3 these protections are not provided for in the Act; 2.4 accordingly, the provisions of s 59 are unconstitutional to that extent. 3. The Honourable Tribunal erred in applying the provisions of s 59 of the Act to the appellant. The Honourable Tribunal should not have applied such provisions to the appellant on the grounds that they are unconstitutional.” Mr Unterhalter, who appeared together with Mr Wilson on behalf of appellant, cited a number of judgments from Canada, United States and the European 23 Court of Human Rights in support of his contention that section 59 was unconstitutional. Whilst foreign law is commonly used for purposes of persuading a court, however, it is of concern where it is clearly being used out of context and, more important in disregard of a clear South African legal position. The remarks of Sir Sydney Kentridge cited above are equally applicable in this context. Comparative law notwithstanding the highest court in South Africa has delivered a judgment in Nel v le Roux N.O. and Others 1996 (4) BCLR 592 (CC) which is of great relevance to the present dispute. In Nel, the court had to decide on the constitutionality of the provisions of section 205 of the Criminal Procedure Act No 51 of 1977 (“CPA”) as against the provisions of section 11 (1) read together with section 25 (3) of the Constitution of the Republic of South Africa Act No 200 of 1993 (“The Interim Constitution”). The facts of the matter, as gleaned from the headnote were briefly that the Applicant, Mr Nel had received a subpoena in terms of section 205 (1) of the CPA requiring him to appear before a magistrate for examination in connection with information relating to offences with which, one Hoogakker who was associated with Mr Nel had been charged. Prior to the commencement of the examination the applicant raised the constitutionality of section 205. The matter was referred by the Witwatersrand Local Division of the High Court, to the Constitutional Court in terms of section 103 (4) of Act 200 of 1993, the interim constitution, for adjudication. In the Constitutional Court, Mr Nel contended, that the provisions of section 205 were inconsistent with the various fundamental rights contained in chapter 3 of the interim constitution. Mr Nel further contended that the summary procedure of section 189 (1) of the CPA, which was incorporated in section 205 by reference, thereby providing for the recalcitrant examinee to be sentenced to 24 imprisonment in a summary manner for a refusal to answer questions, infringed his constitutional right not to be detained without trial as contained in section 11 (1) of the Interim Constitution. Mr Nel further contended that the summary procedure as contained in section 205 of the CPA infringed his section 11 (1) right because it dispensed with the rights to a fair trial, which are enumerated in section 25 (3) of the Interim Constitution. Section 205 provides for a procedure whereby a person who is likely to give material or relevant information as to any alleged offence but who will not furnish such information in the ordinary cause, may be required by a judicial officer to appear before him for examination by a representative of the prosecuting authority. If such person furnishes the information prior to the stated date, the obligation to appear falls away. However, if he fails to do so it makes provision for the imposition of a term of imprisonment for a period not exceeding two (2) years on a person who is required to give evidence but refuses to do so, unless the person so refusing has a just excuse for his refusal. This provision is by reference derived from the provisions contained in section 189 of the CPA. The Constitutional Court held that the provisions of section 205 of the CPA were not unconstitutional. The court also made it clear that section 205 should be applied in a procedurally fair manner. This was the court's conclusion, notwithstanding that Mr Nel could have been imprisoned if he refused to testify. No such consequences are imminent in the present case. The provisions of section 25 (3) of the Interim Constitution are similar to the provisions of section 35 (3) of Act 108 of 1996, the final constitution. MERITS 25 Notwithstanding the applicability of the judgment in Nel v Le Roux, it would be appropriate, in the light of the debate on comparative law, to consider the various arguments sourced in comparative law raised by the appellant’s counsel about the unconstitutionality of section 59 of the Act. The foreign authorities will be considered insofar as they may be relevant in interpreting the Act in the light of the final constitution. The appellant’s central submission was that the pecuniary penalties of section 59 of the Act upon a true appraisal, were criminal in nature and that the appellant in penalty hearings should have been afforded the protections contained in the provisions of section 35(3) of the final constitution. At the outset it is necessary to set out the provisions of s 59 of the Act and section 35 of the final constitution: Section 59 of the Act provides: “59. Administrative penalties (1) The Competition Tribunal may impose an administrative penalty only – (a) for a prohibited practice in terms of section 4(1)(b), 5(2) or 8(a) or (d); (b) for a prohibited practice in terms of section 4(1)(a), 5(1), 8(c) or 9(1), if the conduct is substantially a repeat by the same firm of conduct previously found by the Competition Tribunal to be a prohibited practice; (c) for contravention of, or failure to comply with, an interim or final order of the Competition Tribunal or 26 the Competition Appeal Court; or (d) if the parties to a merger have- (i) failed to give notice of the merger as required by Chapter 3; (ii) proceeded to implement the merger in contravention of a decision by the Competition Commission or Competition Tribunal to prohibit that merger; (iii) proceeded to implement the merger in a manner contrary to a condition for the approval of that merger imposed by the Competition Commission in terms of section 13 or 14, or the Competition Tribunal in terms of section 16; or (iv) proceeded to implement the merger without the approval of the Competition Commission or Competition Tribunal, as required by this Act. (2) An administrative penalty imposed in terms of sub-section may not exceed 10% of the firm’s annual turnover in the Republic and its exports from the Republic during the firm’s preceding financial year. (3) When determining an appropriate penalty, the Competition Tribunal must consider the following factors: (a) the nature, duration, gravity and extent of the contravention; (b) any loss or damage suffered as a result of the contravention; (c) the behaviour of the respondent; 27 (d) the market circumstances in which the contravention took place; (e) the level of profit derived from the contravention; (f) the degree to which the respondent has co- operated with the Competition Commission and the Competition Tribunal; and (g) whether the respondent has previously been found in contravention of this Act. (4) A fine payable in terms of this section must be paid into the National revenue Fund referred to in section 213 of the Constitution.” It is clear from the provisions of section 59(1), that the power of imposition of administrative penalties under section 59 of the Act is designed to achieve compliance with the provisions of the Act, in respect of those contraventions, which are listed in the sub-section. Section 35 of the Constitution stipulates: "35. (1) Everyone who is arrested for allegedly committing an offence has the right - (a) to remain silent; (b) to be informed promptly .... 35. (2) Everyone who is detained, including every sentenced prisoner, has the right - (a) to be informed promptly of the reason for being detained; (b) to choose, and to consult with, a legal practitioner, 28 and to be informed of this right promptly;..... 35. (3) Every accused person has a right to a fair trial, which includes the right - (a) to be informed of the charge with sufficient detail to answer it; (b) to have adequate time and facilities to prepare a defence; (c) to a public trial before an ordinary court; (d) to have their trial begin and conclude without unreasonable delay; (e) to be present when being tried; (f) to choose, and be represented by, a legal practitioner, and to be informed of this right promptly; (g) to have a legal practitioner assigned to the accused person by the state and at state expense, if substantial injustice would otherwise result, and to be informed of this right promptly; (h) to be presumed innocent, to remain silent, and not to testify during the proceedings; (i) to adduce and challenge evidence; (j) not to be compelled to give self-incriminating evidence; (k) to be tried in a language that the accused person understands or, if that is not practicable, to have the proceedings interpreted in that language; (l) not to be convicted for an act or omission that was not an offence under either national or international law at the time it was committed or omitted; (m) not to be tried for an offence in respect of an act or omission for which that person has previously been either acquitted or convicted; 29 (n) to the benefit of the least severe of the prescribed punishments if the prescribed punishment for the offence has been changed between the time that the offence was committed and the time of sentencing; and (o) of appeal to, or review by, a higher court." Section 35 of the final constitution provides for the rights of arrested, detained and accused persons. Section 35 (1) deals with the right of “everyone who is arrested for allegedly committing an offence.” The rights stipulated therein include, amongst others, the right to remain silent, to be informed properly of the right to remain silent and the consequences of not remaining silent, not to be compelled to make a confession, to be brought before court as soon as reasonably possible after their arrest, to be notified of the charge at the first court appearance and the reason for detention and to be released from detention if the interests of justice permit that. Clearly, Section 35 (1) sets out the rights of persons who have been arrested. These rights, by their very nature, are pre-trial or non-trial rights associated with criminal process, which will eventually lead the arrested person to a criminal court. It cannot be said that this right is to apply to anyone who has not as yet been arrested, for committing an offence, as it is the position in this case. Section 35 (2) deals with the rights of everyone who is “detained, including every sentenced prisoner.” The appellants are neither detained individuals nor sentenced prisoners. Accordingly, it is clear that the rights enunciated therein would not be applicable in the case of the appellants in this matter. 30 Section 35 (3) of the Constitution, which is of relevance to this matter makes reference to "Every accused person" having a right to a “fair trial”, which includes the rights set out in sub-paragraphs (a) to (o) of the sub-section. The right set out in section 35 (3) of the final constitution is similar to the right stipulated in section 25 (3) of the Interim Constitution in that both sections guarantee an accused person a right to a fair trial. The only difference might be in respect of the additional and specific rights stipulated in the sub-section. In Nel v le Roux N.O. (above), at page 600 F, Ackermann J held that the section 25 (3) (of the interim constitution) right to a fair trial accrues only to "an accused person". Similarly, section 35 (3) of the Constitution makes reference to rights, which are given to an accused person. The question for decision is whether the person who appears before the Tribunal for contravening section 5 (2) of the Act or any of the competent provisions of the Act, for that matter and who is likely to be sanctioned by the imposition of the penalties set out in section 59 of the Act, is an accused person as contemplated in the Constitution. Is the Appellant an accused person? Mr Unterhalter submitted that, upon a true appraisal, the appellant in this case should be regarded as an accused person and thus s 35 rights should be enjoyed by the appellant. This submission raises the question of the definition of an accused person. Mr Kennedy, who appeared together with Ms Kathree and Mr Maenetje for the first respondent, submitted that an accused person is a person who has been formally charged. In his argument, he went on to submit that a person is formally charged when he appears in court for the first time and the matter is 31 remanded. In this regard, he sought support from the judgment in Sanderson v Attorney General Eastern Cape 1998 (2) SA 38 (CC) at paragraph 18. We agree with Mr Kennedy’s submission in this regard and in particular, are persuaded by the view that a person becomes an accused person in a criminal trial after being charged, for reasons which we now set out. The final constitution does not define what is an accused person. Similarly, the CPA does not define what is an accused person. It has been argued that in order to allow for a distinction between arrested and accused person it makes good sense to interpret "accused" in section 25 (3) of the Interim Constitution and section 35 (3) of the Constitution to refer to someone who has been formally charged. (See Chaskalson et el Constitutional Law of South Africa 27 – 25). In Du Preez v Attorney-General of the Eastern Cape 1997 (3) BCLR 329 (E) at 338 C, the court held that a person is not charged until he is advised by "a competent authority" that a decision has been taken that such person is to be prosecuted. Section 179 (2) of the Constitution, read together with section 20 of the National Prosecuting Act No. 32 of 1992 vests the power to institute and conduct criminal proceedings on behalf of the State and to carry out any necessary functions incidental to instituting and conducting such criminal proceedings in the National Prosecuting Authority. This Authority shall for all purposes be exercising such power on behalf of the Republic of South Africa. It is clear that, in reading the Du Preez case above, together with the section 179 of the Constitution, for a person to be charged the National Prosecuting Authority must be involved. Where the National Prosecuting Authority has declined to prosecute, then it will indicate as such. An individual can still be charged in a private prosecution in terms of section 7 and 8 of CPA. 32 Accordingly, if one, were to regard the appellant in this case as having been charged the National Prosecuting Authority should have been involved. In this case the only regulatory authority, which has been involved, was the Competition Commission. The Commission is not "the prosecuting authority" as envisaged in Du Preez, supra. Viewed thus, a complaint concerning the prohibition of minimum resale price maintenance in section 5 (2) of the Act can never be characterized as “a charge” of a criminal nature. An accused person, is a person who has been arraigned in a criminal trial. Criminal prosecutions are under the control and jurisdiction of the National Prosecuting Authority. Even before a private prosecution can be instituted in terms of sections 7 and 8 of CPA the National Prosecuting Authority has got to be involved. Mr Unterhalter submitted that the administrative penalty, which was imposed by the Tribunal is a form of a criminal punishment and thus the rights of an accused person as embodied in section 35 of the Constitution should be applicable before such a penalty can be imposed. Because it is not a charge of a criminal nature, section 59 of the Act does not direct that the requirements which are contained in the CPA relating to the putting of the charged to an accused person, the pleading to the charge, and the general character of a criminal trial should be observed in such a hearing. The rights referred to in section 35 (3) (a)-(b), (d), (e), (g), (h), (l), (m) and (n) of the Constitution are rights which have no meaning outside the criminal context. However in trying to define an accused person, and in the light of paucity of South African authority, it becomes necessary to look at other jurisdictions to see whether they might be of assistance. 33 In terms of Section 11 of the Canadian Charter on Human Rights and Article 6 of the European Convention on Human Rights, a person is entitled to fair trial rights when he is "charged with an offence". In Wigglesworth v R 1987 (32) CRR 219 (SCC), a case dealing with section 11 of the Canadian Charter of Rights and Freedoms, which includes the phrase "charged with an offence",Wilson J noted that section 11 of the Canadian Charter contained terms like “tried”, or “presumed innocent until proven guilty” and “reasonable bail”, which had no meaning outside “the criminal or quasi-criminal context”. In support of a narrow approach to section 11, Wilson J observed: “Unless the section is restricted to criminal or penal matters there may be serious difficulty in giving the section a reasonably consistent application. The particular content of the various rights set out in section 11 may well vary according to the type of proceeding if a broader definition is given to the opening words of the section. It is beyond question that those rights are accorded to those charged with criminal offences, to those who face the prosecutorial power of the State and who may well suffer a deprivation of liberty as a result of exercise of that power.” (at 236) Wilson J then went on to say: “There is also a fundamental distinction between proceedings undertaken to promote public order and welfare within a public sphere of activity and proceedings undertaken to determine fitness to obtain or maintain a licence. Where disqualifications are imposed as part of a scheme for regulating an activity in order to protect the public, disqualification proceedings are not the sort of ‘offence’ proceedings to which section 11 is applicable. Proceedings of an administrative nature instituted for the protection of the public in accordance with the policy of a statute are also not the sort of ‘offence’ proceedings to which section 11 is applicable. But all prosecutions for criminal offences under the Criminal Code and for 34 quasi-criminal offences under provincial legislation are automatically subject to section 11. They are the very kind of offences to which section 11 was intended to apply” (at 236). The Wigglesworth test was subsequently reaffirmed in R v Shubley (1990) 46 CRR 104 (SCC). See in particular McLachlin J (as she then was) at 113. In Han & Another v Commissioner of Customs and Excise [ 2001] 4 All ER 687(A) the majority of the court concluded that the imposition of penalties on taxpayers for evasion of value added tax constituted a criminal charge within the meaning of Article 6 of the European Convention. In the majority judgment Potter CJ concluded thus: ‘Mr Parker relies upon the absence of any risk of imprisonment. He submits that the principal concern in Engel’s case was that, in a society subscribing to the rule of law, deprivations of liberty liable to be imposed as a punishment belong to the ‘criminal sphere’ (see (1976) 1 EHRR 647 at 678-679 (para 82), quoted at (56) above). Thus the absence of any threat of imprisonment in the instant cases is a powerful indicator that the penalties do not give rise to a criminal charge. He also submits that the maximum penalty to which the court should have regard should not be the figure of 100% of the tax due, because the starting point for the tribunal’s deliberation is the level of the penalty actually imposed, taking into account mitigation. Miss Sharpston asserts that the Strasbourg jurisprudence has moved on since Engel’s case and that the subsequent decisions demonstrate that the scale of the penalties involved in the instant cases, whether before or after mitigation, and bearing in mind their penal and deterrent (as opposed to compensatory) effect, are sufficiently burdensome to render the charge criminal under the third criterion. She also submits that it is the exposure of the taxable person at the time of charge, namely to 100% of the tax alleged to have been evaded, which the court should take into account. 35 I am reluctantly persuaded that the submissions for the respondents must prevail, as they prevailed before the chairman below. I am reluctant, because in my view the rationale for the VAT civil penalties scheme was convincingly propounded in the Keith Report as a just balance between the legitimate interests of Customs and Excise in improving the collection of a tax in relation to which widespread evasion was prevalent, and the interests of the taxpayer in avoiding the travails of a criminal prosecution and the stigma of conviction of a criminal offence of dishonesty in cases of deliberate evasion. It also represented a sensible rationalization of the schemes for collecting tax and penalizing evasion as between Customs and Excise on the one hand and the Inland Revenue on the other. Nor am I aware of any widespread dissatisfaction or allegations of injustice in relation to the procedures followed since the adoption of the Keith Report recommendations by legislation. I am nonetheless persuaded by what I regard as the clear state of the Strasbourg case law in relation to a case of this kind.’ (at paras 73-74). But, as noted by Sir Martin Nourse in a minority judgment, the majority judgment which followed the jurisprudence of the European Court of Human Rights (see for example, AP v Switzerland (1997) 26 EHRR 541) overlooked that this jurisprudence reflected ‘widely differing traditions and institutions of the contracting states’. (at para 104). In short, this jurisprudence was shaped by different systems of civil administration. For this reason, this Court should give greater weight to principles which are congruent with our legal system such as the approach adopted by the Canadian Supreme Court which in turn finds resonance in the approach adopted in Nel v le Roux (supra). Further support for this conclusion is to be found in a number of other judgments of the Constitutional Court. In Ferreira v Levin and Others; Vryenhoek and Others v Powell and Others 1996 (1) BCLR 1 (CC), the court stated that section 25 (3) rights accrue textually, only to “every accused person”. They are 36 rights, which accrue, in the subjective sense when a person becomes “an accused person” in a criminal prosecution. The court went on to state that the appellant in the matter was not an accused person as he was to be examined in terms of section 417 of the Companies Act. In Geuking v President of the Republic of South Africa and Others 2003 (3) SA 34 (CC) at 52 A-C, a case dealing with extradition in terms of the Extradition Act 67 of 1962, where the Applicant was going to eventually face imprisonment, the court held that a person facing extradition is not an accused person for the purposes of the protection afforded by section 35 (3) of the Constitution. Administrative Penalty Mr Unterhalter further submitted that the imposition of a pecuniary penalty under section 59 of the Act constitutes a form of criminal punishment such as to trigger the criminal protections afforded by section 35 (3) of the Act. Some of the features of the penalty, which makes it clear that it constitutes a form of criminal punishment are, inter alia, that it is punitive and deterrent in nature, it requires proof of “mens rea” on the part of the respondent. The fine is extremely severe. The provisions of the Act clearly draw distinction between those provisions, which are followed by a criminal sanction, and those, which are followed by an administrative penalty. The provisions which are followed by an administrative penalty are set out in section 59 (1) of the Act and those which are followed by criminal sanction as set out in the Act, inter alia, breaches of confidence, (section 69) hindering the administration of the Act (section 70) and failure to attend when summoned (section 71) to and to answer fully or truthfully to the Commission (section 72). (See also Explanatory Memorandum to the Competition Bill (B98- 98) page 68). 37 In our view, the payment of an administrative penalty can never be equated to the imposition of a fine by a criminal court. The proceedings of the Tribunal, which eventually lead to the imposition of the administrative penalty, are civil and not criminal in nature. In criminal matters where fines are usually imposed, as opposed to civil matters where an administrative penalty may be imposed, the fine which is imposed has an alternative sentence usually, a term of imprisonment. The term of imprisonment comes into force in the event of the accused person failing to pay the fine, which has been imposed. In civil matters, similar to the matter before the Tribunal, in the event of a party failing to pay the administrative penalty, there is no alternative term of imprisonment, which can be imposed by the Tribunal. Consequently, in the event of the party failing to pay the administrative penalty, the remedy for the Tribunal or the affected party may be to proceed with an application for civil contempt of court or seek a conviction or judgement in terms of sections 73 and 74 read together with section 75 of the Act. This procedure is totally different to the one referred to above, as applicable in criminal matters. Thus, there is a clear distinction in the nature of the sanction, which is imposed. At this stage of the proceedings, the appellants do not “carry the keys of their own imprisonment in their own pockets”. In the present case, he is not even in close proximity of the prison cell. Furthermore, we are not sure whether the Tribunal can ever imprison an individual for whatever reason. The Tribunal is a creature of statute and it derives its powers from the enabling statute. The Tribunal does not appear to have such powers in terms of the Act, which is another indication of the civil nature of its proceedings. The Imposition of an administrative penalty. The administrative penalty which is imposed in terms of section 59 is not a fine or a sanction of a criminal nature because it does not form part of the criminal 38 record of a respondent who has been ordered to pay such as it will happen with a fine in a criminal court which ends up being recorded against personal records of the accused, in the SAP 69 form, as a previous conviction. The appellant’s submission will have the one consequence of blurring the distinction between those contraventions of the Act, which lead to a criminal sanction and those, which lead to an administrative penalty. We agree with the Tribunal that the decriminalization of restrictive practices was a deliberate policy choice to improve enforcement. Appellant’s counsel, also submitted that, the question whether proceedings are characterized as civil or criminal in nature must be determined by the reference to their purpose and context. Clearly, “the purpose and context” for the proceedings as suggested in National Director of Public Prosecutions v Phillips and Others 2002 (4) SA 60 (W) para 40 should be considered. The section 59 proceedings clearly point to them being proceedings of a civil nature as the purpose is not to punish criminals by imprisonment etc. and the context is corrective and non-criminal in nature. In the premises, notwithstanding the consequences flowing from section 59 of the Act, which might be suffered by the appellants, they have not been charged and thus are not to be regarded as accused persons as contemplated in section 35 (3) of the Constitution. The rights set out in section 35 (3) of the Constitution are reserved for those people who have been charged in criminal matters and who are likely to be sentenced to a term of imprisonment. It is the imprisonment aspect, which deprives a charged or accused person, of his liberty, which is sought to be 39 protected by the entrenchment of the rights, set out in section 35 (3). It is thus the threat of imprisonment which triggers off the rights set out in section 35 (3). The deprivation of liberty without due process, (as the American Courts refer to it), is the mischief with which section 35 (3) is trying to deal. The right to fair trial enunciated in section 35 (3) of the final Constitution is an all inclusive right, which seeks to safeguard the overriding principle of justice in any trial. Even then, the right is not absolute. In Mitchell and Another v Hodes and Others N.N.O. 2003 (3) SA 176 (CPD) it was held that a ruling by a Commissioner in a section 417 Liquidation Inquiry ordering the Applicants (Examinees in the inquiry) who had already been arrested and charged with, inter alia, fraud and contravention of the Companies, Income Tax and Value Added Tax Acts to testify was not unconstitutional, oppressive or unfair. The Applicants had contended that the said ruling violated their Common Law and/or Constitutional rights to a fair trial. The only protection, which can be claimed by a person who is subjected to a hearing similar to the one, which was before the Tribunal, is that the hearing should be procedurally fair or to seek protection of what is commonly referred to as the due process. We do not understand the appellant to be saying that the procedure, which was adopted by the Tribunal, was unfair. Thus, that is not an issue before this court. THE TRIBUNAL Mr Unterhalter further submitted that section 35 (3) of the Constitution gives every accused person a right to a fair trial, which includes, amongst others, the right “to a public trial before an ordinary court” (section 35 (3)(c ), “to be presumed innocent, to remain silent and not to testify during proceedings” (section 35 (3) (h) and the requirement that the criminal charges be proven beyond a reasonable doubt rather than on a mere balance of probabilities. 40 Accordingly, if section 59 hearings do trigger the protections contained in section 35 (3) of the Constitution, then section 59 of the Act is unconstitutional to the extent that it permits pecuniary penalties to be levied without regard to such protections, and accordingly, the Tribunal should not have imposed such penalties. Whilst we have already made findings about the provisions of section 35 (3) of the Constitution above, we venture to deal with the Appellant’s other arguments. The question of whether the Tribunal is not “an ordinary court” within the meaning of section 35 (3) (c) should not be difficult to resolve. If one considers the nature and composition of the Tribunal, it is not a court of law. – (see South African Technical Officials Association v President of the Industrial Court and Others 1985 (1) SA 597 (A) at 610 G – 612 H; De Lange v Smuts N O and Others 1998 (3) SA 785 (CC) at paras 68 – 75 and 89, Van Rooyen and Others v The State and Others 2002 (5) SA 246 (CC) at paras 29 and 35 and Freedom of Expression Institute and Others v President, Ordinary Court Martial and Others 1999 (2) SA 471 (C) at paras 17, 18 and 21). In accordance with the provisions of section 68 of the Act the contraventions of the Act, need only be established on a balance of probabilities. If the contraventions were criminal in nature the standard of proof would have been the criminal standard of proof beyond reasonable doubt. The position with regard to the right to remain silent, is dealt with in section 56 (1) to (3) of the Act. According to these sections, every person giving evidence at the hearing of the Tribunal must answer any relevant questions. The law regarding a witness’ privilege in a criminal case in a court of law applies equally to a person who provides information during a hearing. The Tribunal may order a person to answer any question, or to produce any article or document, even if it is self-incriminating to do so. 41 The fact that section 56 (1) of the Act compels a recalcitrant witness to testify does not make that provision unconstitutional. In Nel v Roux (supra) at para 11, it was held that a recalcitrant examinee who in refusing or failing to answer a question triggers the possible operation of the imprisonment provisions of section 189 (1) of the CPA is not, an accused person for purposes of the protection afforded by section 25 (3) of the Interim Constitution. Mr Unterhalter proceeded to argue that the Tribunal before which the appellants appeared was not an “impartial entity” as anticipated by the court in the le Roux case because, as amongst others, the members of the Tribunal are not independent and impartial because they are appointed by the Minister of Trade and Industry and is not presided upon by Judges of the High Court. Section 34 of the Constitution does recognize the settlement of disputes before Tribunals in that it gives every citizen the right to “have any dispute that can be resolved by application of law decided in a fair public hearing before a court or where appropriate, another independent and impartial Tribunal or Forum.” Section 20 read together with section 26 (4) of the Act guarantees the independence of the Tribunal and makes its members to be only subject to the Constitution and the law. It also confirms that members of the Tribunal must be “impartial” and they must perform their functions without “fear, favour or prejudice”. It is clear that when you read section 20(1) together with section 26 (4) of the Act, the independence anticipated or protected in terms of section 21 is not only independence from the Executive arm of the Government but also from the Competitiion Commission which plays an investigative and not an adjudicative role. (see Simelane N.N.O. and Others v Seven Eleven Corporation (SA)(Pty) Limited and Another 2003 (3) SA 64 (SCA) paras. 12-17). 42 While stipulating the independence of the Tribunal may not necessarily guarantee that such independence and impartiality will be protected, there are other provisions in the Act, which re-enforces the principle of independence and impartiality of the Tribunal. The President of the Republic of South Africa appoints members of the Tribunal (section 26 (3). The appointment by the President gives the independence to a large extent of most of the Tribunal, even though that is done and the process which is followed is through nomination by members of the public or through the Minister’s initiative (section 26 (2). The members of the Tribunal, viewed collectively, must comprise sufficient persons with legal training and experience to justify the requirements of section 31 (2) (a). Each member of the Tribunal must have suitable qualifications and experience in economics, law, commerce, industry or public affairs and be committed to the purpose and principles enunciated in section 2 of the Act (section 28 (1) and (2). An office bearer of any party, movement, organization or body of a partisan of a political nature may not be a member of the Competition Tribunal (section 28 (3). The members of the Tribunal are appointed for a fixed term of five (5) years and they may resign whenever they wish to do so. The President or the Minister may only remove members of the Tribunal where they have committed misconduct or they are disqualified in terms of section 28 (3) and section 29 (5). (See section 29). This provision once again gives members of the Tribunal independence and also guarantees them that although they may be dismissed, they cannot be dismissed arbitrarily, which has been perceived to be another form of ensuring the independence of Judicial Institutions. Independence has degrees and the independence of various institutions cannot be measured by the same standards. (See Freedom of Expression Institute and Others v President of Ordinary Court Martial and Others 1999 (2) SA 471 (C) at 483). 43 The remuneration of the Tribunal is established after consultation between the Minister of Trade and Industry and the Minister of Finance. Such remuneration, which has been agreed upon, may not be reduced during the term of office of the members of the Tribunal. This once again guarantees independence and impartiality of the members of the Tribunal in that it gives the members a degree of financial security which is essential for their independence. In the light of the aforegoing, we disagree with Mr Unterhalter’s submission in this regard. The Tribunal as contemplated in the Competition Act is an impartial body. There is no merit in his attack of the Tribunal as not being impartial and independent. Accordingly, we find that there can be nothing unconstitutional about the Tribunal imposing an administrative penalty as it is empowered to do by the Act. APPROPRIATENESS OF THE PENALTY The appellant challenges the appropriateness of the penalty on the basis that the Tribunal erred in determining that the amount of R3 million was an “appropriate” penalty to impose on the appellant within the meaning of section 59(3). The appellant submits that the amount of the penalty is excessive in that the Tribunal failed to give proper weight to the mitigating factors raised by the appellant. In our view, the Tribunal’s approach to determining an appropriate penalty was correct, namely that the legislature’s intention in providing for a per se prohibition against minimum resale price maintenance and for the imposition of administrative penalties against first time offenders, indicates the serious nature of the contravention and its deleterious impact on competition. Nor can we fault the Tribunal in its approach that deterrence was the primary purpose of the imposition of an administrative penalty. 44 Section 59 of the Act sets out the bare fundamentals of a framework for determining the amount of the administrative penalty. Further, section 59(3) requires that the Tribunal “must” consider the factors in subsections (a) to (g). Having said that it must be pointed out that section 59 involves the exercise of its discretion by the Tribunal. The Tribunal is expected to exercise its discretion judiciously having regard to the factors listed in section 59(3) of the Act. We find that the Tribunal carefully weighed all of the factors in the light of the evidence before it. For purposes of this judgment we find it unnecessary to launch into a full discussion into each of the factors in subsections (a) to (g). It must be said that in considering the facts the Tribunal, where a dispute of fact arose, made its findings based on the appellant’s own version. While the Tribunal was alive to the fact that one of the purposes of imposing an administrative penalty was deterrence, it did not lose sight of the fact that it must be fair to the appellant. In our view the Tribunal applied a balanced approach not over-emphasising any of the factors to the detriment of the appellant. One such example of the Tribunal’s application of its discretion was its finding, in favour of the appellant, that the appellant’s turnover, for purposes of determining the penalty, will be in the infringing line of business only that is the turnover in Ferodo products only and not the appellant’s total annual turnover. Whereas the Tribunal could have considered a possible maximum penalty of R11 million, it decided to set the maximum threshold at R6 million. The Tribunal, in its discretion, then imposed a penalty of R3 million. The upper limit prescribed in the Act of 10% of annual turnover is reserved for the most egregious contraventions and an absence of any mitigating factors. The Tribunal correctly found that the appellant did not fall into this category. This court does not enjoy an unfettered discretion to interfere with the Tribunal’s assessment and imposition of an administrative penalty. Even if we decided that a different penalty was appropriate we are not merely at large to substitute our 45 finding for that of the Tribunal. This approach is consistent with the general principle that in an appeal against the exercise of its discretion by a court or a statutory body, the court on appeal has limited power to interfere. It can only do so on certain well-recognised grounds, namely, where the court a quo exercised its discretion capriciously, or upon a wrong principle, or where it has not brought its unbiased judgment to bear on the question or where it has not acted for substantial reasons. See – Vassen v Law Society of the Cape of Good Hope 1998 (4) SA 532 (SCA) at 537D-F; Jasat v Natal Law Society 2000 (3) SA 44 (SCA) at 51E-G; Law Society of the Cape of Good Hope v Budricks 2003 (2) SA 11 (SCA) paragraph

[2]and Thuketana v Health Professions Council of South Africa 2003 (2) SA 628 (T) at 642F-G. We can make no finding that the Tribunal exercised its mind capriciously, or upon a wrong principle or that it failed to bring an unbiased judgment to bare on the question of an appropriate penalty. Nor can we find that the penalty in the amount of R3 million was excessive or startlingly inappropriate. Accordingly we find that the imposition of an administrative penalty in the amount of R3 million was, in all the circumstances, appropriate. For these reasons the appeal is dismissed with costs including the costs of two counsel employed by both First and Second respondents. ________________________ DAVIS J P and JALI J A I CONCUR ________________________ HUSSAIN J A