Netcare Hospital Group (Proprietary) Limited and Another v Norman Manoim NO and Others

In 1999, the Macmed Group of hospitals was liquidated, precipitating liquidation of the Malasela Hospital Group (MHG), an empowerment consortium. Netcare, seeking a black empowerment partner, concluded an agreement with MHG to provide financial assistance in exchange for a 43.75% shareholding in a new company, Community Hospital Group (CHG), which shareholding was transferred in September 2002. CHG consisted of five hospitals. Netcare provided financial assistance, guarantees, loans, bridging finance and working capital to CHG and installed IT equipment. This resulted in Netcare acquiring de facto control over CHG incrementally, though it was difficult to determine precisely when the obligation to notify the Competition authorities arose. Netcare conceded it had acquired de facto control over CHG for purposes of section 12(2)(g) of the Competition Act but failed to notify or obtain approval from the Commission as required by sections 13A(1) and (3), constituting a contravention. After changes in how private hospitals negotiated tariffs with medical schemes (collective bargaining being deemed price fixing), Netcare negotiated tariffs on behalf of CHG as an associated hospital. In August 2006, Netcare notified the Commission of its assumption of de facto control. The Tribunal approved the merger on 2 August 2007 without conditions after an 11-day hearing. Netcare and CHG negotiated with the Commission and agreed to a consent order under section 49D, conceding contraventions of sections 13A(3) (prior implementation) and 4(1)(b)(i) (price fixing) and agreeing to pay an administrative penalty of R6 million. On 10 March 2008, the Tribunal refused to confirm the consent agreement, finding that Netcare and CHG had not provided satisfactory explanations for their failure to notify the merger, and that the penalty was inappropriate. The Tribunal was influenced by evidence given by Dempers (CHG's CEO) at an unrelated Afrox hearing, where he stated Netcare had no control over CHG, which the Tribunal viewed as contradictory to the current proceedings.

• Whether the Competition Tribunal erred in refusing to approve the consent agreement under section 49D of the Competition Act
• What deference should the Tribunal accord to the Commission's views when considering a consent agreement
• What are the circumstances in which the Tribunal can refuse to confirm a consent agreement
• Whether the Tribunal committed a reviewable irregularity by introducing extraneous evidence (Dempers's testimony in the Afrox hearing) without affording parties an opportunity to respond
• Whether principles of procedural fairness and natural justice required the Tribunal to apprise parties of difficulties with the consent agreement before refusing it
• Whether this Court should substitute its own decision for that of the Tribunal
• Whether the agreed penalty was appropriate in the circumstances

The order of the Tribunal issued on 10 March 2008 was reviewed and set aside. The Court substituted an order confirming the consent agreement concluded between Netcare, CHG and the Commission as a consent order in terms of section 49A(1) read with section 58(1)(b) of the Competition Act, No 89 of 1998.

Under section 49D of the Competition Act, the Competition Tribunal must accord due deference to the Commission's views when considering whether to approve a consent agreement. The Tribunal's inquiry is whether the agreement is rational, meets the objectives of the Competition Act and public interest, and is not so inappropriate as to bring the authorities into disrepute. The Tribunal cannot introduce extraneous evidence from unrelated proceedings into its deliberations without affording parties an opportunity to respond, as this violates principles of procedural fairness and natural justice. Where the Tribunal forms the view it should not approve an agreement for reasons not canvassed at the consent hearing, it must apprise the parties and afford them an opportunity to address those concerns. In assessing penalties for competition law contraventions, the appropriate measure is the turnover of the affected line of business rather than the entire turnover of a parent company where this would result in double punishment.

The Court drew an analogy between section 49D consent agreements and plea bargaining in criminal law, noting both serve to bring about expeditious conclusion of cases and conserve resources. The Court observed (without deciding the issue definitively) that Netcare and CHG's contention that they could not simultaneously have committed the offences of prior implementation and price fixing had substantial merit, noting this would have required a lengthy and complex hearing had the matter not been resolved by consent. The Court noted that a presiding officer in criminal proceedings under section 105A(7) of Act 51 of 1977 is entitled to call evidence before approving a plea bargain, contrasting this with section 49D which envisages the Tribunal will not hear evidence.

This case establishes important principles regarding the Competition Tribunal's discretion to approve or reject consent agreements under section 49D of the Competition Act. It clarifies that: (1) the Tribunal must accord due deference to the Commission's views, as the Commission conducts detailed investigations before entering consent agreements; (2) the Tribunal's role is not to conduct a de novo hearing but to assess whether the agreement is rational and serves the objectives of the Competition Act and public interest; (3) the Tribunal cannot introduce extraneous evidence (such as testimony from unrelated proceedings) without affording parties procedural fairness; (4) principles of natural justice require the Tribunal to alert parties to concerns not raised at the consent hearing and allow them to respond; (5) in calculating penalties, the 'affected line of business' approach (using the turnover of the entity that derived the benefit) is appropriate rather than using the entire turnover of a parent company. The case emphasizes the importance of procedural fairness in administrative proceedings and the balance between the Tribunal's supervisory role and deference to the Commission's expertise.