Glaxo Smith Kline South Africa (Pty) Ltd v David Lewis N.O and Others

Glaxo Smith Kline South Africa (GSK), a pharmaceutical manufacturer, was the subject of two complaints alleging excessive pricing of antiretroviral drugs in contravention of section 8(a) of the Competition Act 89 of 1998. The Treatment Action Campaign (TAC) initiated a complaint in September 2002, followed by the AIDS Healthcare Foundation (AHF) complainants in January 2003. The Competition Commission investigated both complaints together. On 3 December 2003, just before the one-year statutory deadline for referral or non-referral expired, the Commission entered into a settlement agreement with GSK whereby GSK agreed to grant licenses to generic manufacturers in return for the Commission not referring the complaint to the Competition Tribunal. The Commission did not refer the complaint nor issue a notice of non-referral. The AHF complainants, who were not party to or consulted about the settlement, referred their complaint directly to the Tribunal in terms of section 51(1) after the deemed non-referral. On 22 November 2004, well after the one-year period had expired, GSK applied to have the December 2003 settlement agreement confirmed as a consent order in terms of section 49D of the Competition Act. The AHF complainants initially opposed but later withdrew their opposition and complaint in March 2006. The Tribunal raised mero motu whether it had jurisdiction to confirm the settlement agreement as a consent order given that the application was brought after the statutory period for referral had expired.

• Whether the Competition Tribunal had jurisdiction to confirm a settlement agreement as a consent order in terms of section 49D of the Competition Act where the application for confirmation was brought after the expiry of the one-year period within which the Commission was required to either refer the complaint to the Tribunal or issue a notice of non-referral
• Whether the Commission retained the power to settle a complaint by way of consent order after losing its title to prosecute through the expiry of the referral period
• The proper interpretation of the temporal limitation in section 49D(1) regarding when settlement agreements can be concluded ('during, on or after completion of the investigation')
• Whether the Commission's undertaking not to refer a complaint was ultra vires its statutory powers
• Who has standing to bring an application for a consent order under section 49D

The review and appeal were both dismissed. No order as to costs was made as none of the Respondents opposed the proceedings.

The Competition Commission's power to conclude settlement agreements under section 49D(1) of the Competition Act and have them confirmed as consent orders is temporally limited by the Commission's statutory duty to refer complaints to the Tribunal or issue notices of non-referral within the prescribed one-year period (or extended period). The phrase 'during, on or after completion of the investigation' in section 49D(1) relates only to the timing relative to the investigation itself, not to the Commission's broader statutory obligations. The Commission must conclude any settlement agreement and obtain confirmation from the Tribunal before the expiry of the referral period, or else refer the complaint if it has determined a prohibited practice has been established. The power to settle and the power to prosecute are coextensive - once the Commission loses its title to prosecute through expiry of the referral period, it also loses the power to settle by way of consent order under section 49D. An agreement to settle that does not specify terms of an 'appropriate order' does not satisfy the requirements of section 49D(1). The Commission cannot by agreement abdicate its statutory duty to refer complaints establishing prohibited practices to the Tribunal.

The Court made several non-binding observations: (1) The interpretation of section 50(4) regarding extensions was clarified - the 'or' linking subsections (a) and (b) should be read as 'and', meaning the Tribunal can only extend a period already agreed between the Commission and complainant, not grant an initial extension without such agreement. The Court suggested this anomaly should be reported to the Minister for legislative amendment. (2) Competition Tribunal Rule 24(2), insofar as it purports to allow consent order applications 'at any time before the Tribunal makes a final order,' may be ultra vires to the extent it conflicts with the temporal limitations in the Act. (3) The proper procedure for consent order applications should involve both the Commission and respondent jointly applying, or at minimum the Commission filing supporting affidavits and being represented at hearings to assist the Tribunal. (4) After a complaint has been referred to the Tribunal, parties remain free to present agreed draft orders to the Tribunal for confirmation outside the section 49D procedure, provided the Tribunal acts lawfully, reasonably and in a procedurally fair manner. (5) The Court noted that Competition Commission Rule 18 contemplates settlement agreements being made before referral or non-referral, supporting the Court's interpretation of the statutory scheme.

This judgment provides important guidance on the temporal limitations governing consent orders under the Competition Act and the statutory duties of the Competition Commission. It establishes that the Commission cannot use settlement agreements to circumvent its statutory obligation to refer complaints establishing prohibited practices to the Tribunal within the prescribed timeframes. The judgment clarifies the relationship between the Commission's investigative powers, its power to settle, and the one-year referral deadline, emphasizing that these powers are coextensive and the Commission cannot retain settlement powers after losing its title to prosecute. The case reinforces that the Commission exercises public functions that cannot be abdicated through private settlement agreements, particularly where such agreements would undermine the statutory scheme for policing prohibited practices. It also highlights potential gaps in the Competition Act regarding extensions of time where settlement negotiations are ongoing, suggesting legislative amendment may be necessary. The judgment provides guidance on proper procedure for consent order applications and flags that certain Competition Tribunal Rules may be ultra vires to the extent they conflict with the statutory scheme.