Sasol Gas (Pty) Ltd v Competition Commission of South Africa and Others [2024] ZACAC 2 (5 March 2024)

This case involves Sasol Gas (Pty) Ltd ("Sasol"), which sought to review and set aside decisions made by the Competition Commission of South Africa ("the Commission"). The decisions in question were the Commission's initiation of an investigation into Sasol for allegedly abusing its dominance by charging excessive prices for gas, detrimental to its customers or consumers, and the subsequent issuance of a summons to Sasol after it failed to respond to the Commission's request for detailed information relevant to its investigation.

The Industrial Gas Users Association of Southern Africa ("IGUASA") and Egoli Gas (Pty) Ltd, as the second and third respondents, had filed complaints against Sasol under the Competition Act, alleging that Sasol was abusing its dominance by charging excessive prices. The National Energy Regulator of South Africa ("NERSA"), joined as the fourth respondent, is the designated regulator under the Gas Act for the piped-gas, electricity, and petroleum pipeline industries in South Africa. NERSA's involvement was significant because the Commission's investigation effectively questioned whether the maximum price NERSA had allowed Sasol to charge was subject to scrutiny under the abuse of dominance provisions of the Competition Act.

Egoli Gas's complaint centered on Sasol's decision to implement a monopoly pricing structure from September 2021, which was excessive and threatened the business models of all traders except Sasol's trading arm. This price increase was linked to a new maximum pricing methodology determined by NERSA, which Egoli Gas contended was irrational and allowed Sasol to exploit its dominant position to the detriment of downstream competitors. The complaint highlighted that the new pricing methodology was directly linked to global spot pricing, resulting in soaring local piped natural gas prices. It was argued that Sasol, as the sole supplier, could abolish previously granted bulk discounts, rendering the trading market effectively moribund except for its own trading arm.

IGUASA's complaint extended the allegations of excessive pricing under the new methodology back to 2014 under the previous pricing methodology. It contended that Sasol had charged prices far in excess of its production costs and relied on a Constitutional Court decision that found NERSA's post-2014 gas pricing methodology irrational because it did not account for Sasol's costs in determining the maximum gas price.

The Commission decided to investigate Egoli Gas's complaint and later included IGUASA's complaint in its investigation. IGUASA had also brought an application before the Gauteng High Court against NERSA to review and set aside its new pricing methodology, seeking a new decision from the regulator.

Sasol's failure to respond to the Commission's request for information led to the issuance of a summons, prompting Sasol's review application before the Competition Tribunal. The Tribunal dismissed Part A of Sasol's review application and granted IGUASA an interdict to prevent Sasol from increasing its gas price until the conclusion of the Commission's investigation. Sasol sought to pursue Part B of its review application, arguing that the Tribunal lacked jurisdiction to review a decision of the Commission, leading to the transfer of the review to the Competition Appeal Court.

Sasol contended that the Commission's decisions fell outside its jurisdiction and were unlawful for violating the legality principle as being irrational. Sasol argued that the Commission had no jurisdiction to investigate whether Sasol charges an excessive price for gas because NERSA had made a price determination for the industry, which, according to Sasol, immunized it from the excessive pricing provisions of the Competition Act.

The core legal principle underlying the decision in this case is the affirmation of the concurrent jurisdiction of the Competition Commission of South Africa ("the Commission") and the National Energy Regulator of South Africa ("NERSA") over the investigation of gas pricing, even when NERSA has made a price determination under its statutory mandate. The Competition Appeal Court clarified that the Competition Act applies to all economic activity within, or having an effect within, the Republic of South Africa, including activities subject to the jurisdiction of another regulatory authority like NERSA. This is explicitly recognized by Section 3(1A) of the Competition Act, which establishes concurrent jurisdiction in respect of conduct regulated under Chapters 2 and 3 of the Act, even when such conduct is also within the purview of another regulatory authority.

The court emphasised that the existence of sector-specific legislation (like the Gas Act, which empowers NERSA to regulate gas prices) does not exclude the application of the Competition Act or the jurisdiction of the Commission to investigate allegations of anti-competitive practices, such as excessive pricing, within that sector. The Competition Act's provisions, particularly Section 3(1A), are designed to ensure that the Commission can exercise its jurisdiction to investigate and address anti-competitive behavior across all sectors, thereby promoting competitive markets.

Furthermore, the court highlighted the importance of the Memorandum of Agreement (MoA) between the Commission and NERSA, which outlines how the concurrent jurisdiction is to be exercised and stresses cooperation and coordination between the two regulatory bodies. This agreement acknowledges the Commission's jurisdiction to investigate alleged prohibited practices within the energy sector, including practices related to gas pricing, without diminishing NERSA's role in regulating prices where there is inadequate competition.

In summary, the ratio decidendi of this case is the affirmation of the concurrent jurisdiction of the Commission and NERSA over the investigation of gas pricing practices, based on the provisions of the Competition Act, even in instances where NERSA has made a price determination. This principle underscores the comprehensive reach of the Competition Act in addressing anti-competitive behavior across all sectors of the economy, ensuring that sector-specific regulatory determinations do not immunize entities from scrutiny under competition law.

In its reasoning process, the court relied on several key cases. Two particularly significant cases referenced were:

1. Competition Commission of South Africa v Telkom SA Ltd and others [2009] ZASCA 155: This case was pivotal in the court's analysis, especially regarding the issue of concurrent jurisdiction between the Competition Commission and another regulatory authority, in this instance, ICASA (the Independent Communications Authority of South Africa). The Supreme Court of Appeal in this case clarified that the Competition Act applies to all economic activity within or having an effect within South Africa and that the introduction of Section 3(1A) of the Competition Act was intended to establish the general jurisdiction of the competition authorities in all competition matters, thereby providing for concurrent jurisdiction even when another regulator has jurisdiction over the same conduct.

2. National Energy Regulator of South Africa and another v PG Group (Pty) Limited and others [2019] ZACC 28: This Constitutional Court judgment was referenced to understand NERSA's approach and obligations under the Gas Act, particularly in relation to setting maximum gas prices. The court's discussion in PG Group provided context for NERSA's regulatory framework and its mandate to promote the development of a competitive market for gas and gas services in South Africa, which was relevant to the court's consideration of the concurrent jurisdiction issue.

These cases were instrumental in the court's reasoning, helping to establish the legal framework within which the Competition Commission and NERSA operate, particularly in relation to their concurrent jurisdiction over matters of economic activity and competition within the energy sector.

An important and relevant quote from the judgment that encapsulates the core issue of concurrent jurisdiction between the Competition Commission and NERSA, and the application of the Competition Act to sector-specific regulation, is as follows:



In conclusion, the Competition Act's provisions, particularly Section 3(1A), establish a framework for concurrent jurisdiction over competition matters across all sectors, including those under the purview of sector-specific regulators like NERSA. It highlights the legislative intent to ensure that the Competition Commission has the authority to investigate and address anti-competitive practices within any industry or sector, reinforcing the comprehensive reach of the Competition Act in promoting competitive markets in South Africa.