The department of trade, industry & competition has reinstated non-binding advisory opinions by the Competition Commission, offering businesses a way to seek clarity on compliance with the Competition Act, 89 of 1998. However, legal experts caution that these opinions are no substitute for independent legal advice.
According to law firm Adams & Adams, advisory opinions provide an interpretation of the Competition Act as it applies to specific agreements, transactions or practices. While they can guide businesses in understanding compliance requirements, the firm said such opinions are nonbinding. That means they don’t protect companies from enforcement action if the conduct in question is later found to contravene the act.
The commission suspended its advisory opinion service in January 2018, pending a case involving Hosken Consolidated Investments. The 2018 amendment to the Competition Act, promulgated in July 2019, formally empowered the commission to issue non-binding advisory opinions. Section 79A empowers the minister of trade, industry & competition to regulate such opinions, including fees. After public consultations, the final regulation reintroducing advisory opinions was published in December.
Advisory opinions have traditionally been sought for clarity on matters such as whether an agreement constitutes a notifiable merger or if a business practice may breach the Competition Act. However, Adams & Adams warns that these opinions offer limited comfort, particularly for complex legal questions.
The firm argues that advisory opinions differ from the commission’s corporate leniency policy, which offers protections to whistle-blowers. In contrast, advisory opinions provide no shield from enforcement action if the conduct or agreement is later deemed noncompliant.
“While advisory opinions can be of assistance to parties, the fact that they are non-binding means they provide only limited comfort, especially in relation to complicated questions of law,” the firm said.
“The risk of noncompliance with the prescripts of the Competition Act (which attracts administrative penalties and potential criminal liability) will remain with the parties, notwithstanding a positive advisory opinion. Parties are therefore encouraged to seek legal advice to proactively ensure compliance with the Competition Act,” it added.
Though the reinstatement of advisory opinions may be welcomed by businesses seeking clarity on competition law, Adams & Adams said these opinions should not be relied upon as a comprehensive compliance tool. Instead, it urged companies to consult legal professionals to mitigate risks and navigate the complexities of the act.
“An advisory opinion is forward-looking. It typically seeks the commission’s guidance before engaging in certain conduct, or before implementing a transaction. The Corporate Leniency Policy, however, seeks to obtain immunity from an administrative penalty for conduct that has already taken place.”
The firm advised businesses to proactively address competition law compliance by conducting a “competition health check”, which involves consulting a competition specialist, implementing tailored compliance training, and developing policies to mitigate risks. Such an approach, will allow employees to identify and prevent violations, it said.
If a violation of the Competition Act has already occurred, businesses can seek immunity from penalties by reporting the issue first to the commission under the Corporate Leniency Policy, with the assistance of a specialist, the firm said.
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