Computicket (Pty) Ltd v The Competition Commission of South Africa
| Jurisdiction | South Africa |
| Judge | NP Boqwana JA (DM Davis JP and D Unterhalter AJA concurring) |
| Judgment Date | 23 October 2019 |
| Docket Number | 170/CAC/Feb19 |
| Court | Competition Appeal Court |
| Hearing Date | 23 October 2019 |
| Citation | 2019 JDR 2056 (CAC) |
Boqwana JA (Davis JP and Unterhalter AJA concurring):
Introduction:
The appellant ("Computicket") appeals against the decision of the Competition Tribunal ("the Tribunal") which found it to have breached the provisions of section 8 (d) (i) of the Competition Act 89 of 1998 ("the Competition Act"), by abusing its dominance in the market for the provision of outsourced ticket distribution services to inventory providers for entertainment events, from mid-2005 to 2010. The Tribunal consequently ordered Computicket to pay an administrative penalty of R20 000 000 (Twenty million Rand) within 60 days of that order.
This followed from complaints submitted to the respondent ("the Commission") between 2008 and 2009 by various complainants, namely: Strictly Tickets CC ("Strictly Tickets"); Soundalite Artslink ("Soundalite"); KZN Entertainment News and others.
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Boqwana JA (Davis JP and Unterhalter AJA concurring)
Background facts:
Computicket is a well-known brand in South Africa, having been established in 1971. It is engaged in the business of providing outsourced ticket distribution services, to inventory providers such as theatre owners, theatre producers, promoters, festival organisers in the entertainment industry and sports events. Computicket acts as a ticketing agent on behalf of the inventory providers: it holds the inventory for events, sells it to end-customers or patrons, and passes on the funds collected to the inventory providers after deduction of its fees for services provided. This is all regulated by contract. It has built a very strong and successful brand over the years.
In late 1998 TicketWeb, owned by African Media Entertainment ("AME"), entered the market as Computicket's competitor, supported by one of Computicket's biggest clients, Big Concerts. TicketWeb gained a significant share of the ticketing market, and by January 2001 it was one of South Africa's most popular internet shopping sites. In late 2000, or early 2001, the Johnnic Group and South African Investments Limited ("SAIL") each acquired a 42.5% stake in TicketWeb from AME, the latter apparently not being in a position to provide additional capital for TicketWeb. In 2002 Computicket merged with TicketWeb under the banner of Computicket. At that stage, Computicket had been a member of the Naspers group, which owned it through M-Web.
In 2004, the Shoprite group started Ticketshop, in competition with Computicket. It focused on sport stadia (rugby, soccer and cricket) and on smaller events, in respect of which its services could be offered. In 2005 Computicket was acquired by the Shoprite Group, operated as Shoprite Checkers (Pty) Ltd ("Shoprite"). The Ticketshop brand was removed. According to Computicket, the rationale for its acquisition was that the incorporation of Computicket into Shoprite would generate operational synergies, Computicket would be supported by Shoprite's financial muscle and offer tickets to a much broader consumer base. Using Shoprite's infrastructure, Computicket grew from 90 outlets in 2005, to 600 points of presence, situated in every Checkers and Shoprite supermarket and hyper store, selected U Save, House & Home Stores and several self-standing box-offices. Computicket supports Shoprite's retail business and brands by drawing customers to their stores. Computicket currently distributes tickets through call centres, via the internet and through physical retail outlets.
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Boqwana JA (Davis JP and Unterhalter AJA concurring)
Other entrants into the market were Strictly Tickets in 2004, which offered the first paperless ticketing solution. Webtickets, in 2007, which used Pick 'n Pay, Ticket Connection in 2008, sponsored by Mr Price, TicketSpace in 2009, and a few other small players. I return to the topic of entrants shortly.
In 1999 Computicket introduced exclusivity provisions in their contracts with inventory providers. These were for relatively short periods, four months or less, and only applied to single events put on by the inventory providers. These clauses read:
"Client agrees that Computicket's appointment to sell tickets on its behalf for the Event is exclusive and, Computicket alone shall sell tickets to the event or performance to the exclusion of any person other than Client (and in that regard only to the extent agreed to in writing by Computicket)." (Clause 15.1)
The Tribunal referred to these as "first generation agreements" to distinguish them from those that would later follow.
By mid-2005 the scope, duration and coverage of the exclusivity provisions increased. These new exclusivity contracts, also referred to as "second generation agreements", were for a minimum period of three years, with a default indefinite annual renewal clause under "Duration of Agreement". [1] The scope of these new contracts extended to all events put on by the inventory providers during the relevant period, and also to all events put on by a third party in a venue owned or leased by the inventory provider. These expanded exclusivity provisions were included effectively in all Computicket's contracts with the inventory providers. The relevant clause of the contract, clause 2.3, determined:
For the duration of this Agreement, Client appoints Company, which accepts the appointment, to be Client's exclusive ticketing agent for all Events, and Client agrees, for the duration of this Agreement, not to instruct or allow any other party to accept booking or sell or distribute tickets to any Event without the written consent of the Company."
Whilst clause 2.7 provided:
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Boqwana JA (Davis JP and Unterhalter AJA concurring)
Client specifically agrees and acknowledges that in setting up the requisite organisational structure, and affording access by Client to hardware and software necessary for the provision of the Services, and in making available its facilities in respect of its personnel, intellectual property, expertise and ancillary thereto, Company is incurring expense and undertaking the commitment of resources; and accordingly, the exclusivity set forth in Clause 2.3 above is justified and reasonable."
The exclusivity clauses were contained in Computicket's standard services agreement. It appears that, particularly after the take-over by Shoprite, Computicket strictly enforced these exclusivity provisions and especially in relation to inventory providers that attempted to utilise the services of competing firms. Failure by the inventory providers to remedy the alleged breach of the exclusivity clause would have consequences such as cancellation of the contract, removal of Computicket's equipment and/or damages claims. It appears that Computicket rejected any requests for non-exclusive contracts. These issues are expounded upon later in the judgment.
As it was accepted by Computicket that it was a dominant firm for the purposes of section 7 of the Act, having had a market share in excess of 90% in the outsourced distribution market during the complaint period, the Tribunal went on to find that the agreements in question were at least "facially exclusive", as they prohibited the inventory providers who were Computicket's customers from utilising the services of a competitor without Computicket's written consent, for the duration of the contract. This, according to the Tribunal, met the definition set out in section 8 (d) (i) of the Act. Following the test it set out in SAA (CT) [2] , it agreed with Dr Mncube's (the Commission's expert) chosen counterfactual which was based upon the period 1999-2001. In this regard, it found that a case of anti-competitive effect had been established on a balance of probabilities and that Computicket had not been able to discharge its onus of showing any efficiency justifications.
The nub of the appeal by Computicket is that the Tribunal erred in its factual conclusions on exclusion and anti-competitive effects, primarily because excessive emphasis was placed on the experience of a "single would-be competitor" of Computicket [Strictly Tickets], that was (a) not an "efficient competitor"; (b) had focused its efforts on the sale of theatre tickets (which represented no more than 3% of the opportunities in the outsourced
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Boqwana JA (Davis JP and Unterhalter AJA concurring)
ticketing market in the relevant period); and (c) in fact had not been excluded from participation in the relevant market. The approach of the Tribunal as to how it accepted the Commission's evidence, was said to be untested and speculative. The expert analysis presented by the Commission, as opposed to that presented by Computicket, is challenged. Dr Mncube's independence is also placed in issue.
Dr Mncube's independence
It is convenient to first deal with the issue of Dr Mncube's independence. To the extent that it is suggested that, by virtue of having been an economist in the employ of the Commission, Dr Mncube was disqualified from giving evidence as an expert for the Commission, that contention must be rejected. His evidence cannot be discredited on a plausible legal basis. The employment of Dr Mncube by the Commission has no greater entailments than the appointment of an expert by a litigant. What signifies is whether an expert discharges the duties that bind an expert. Those duties have been specified by this Court. [3] It remains the role of the Tribunal or the Court, on appeal, to assess the objectivity of any evidence he presented, on the basis of whether it is in line with the law as it relates to the giving of expert evidence. The manner in which such was obtained and assessed may also be evaluated, to the extent necessary. Any criticism regarding Dr Mncube's conduct as an expert should be based on particular facts and dealt with accordingly. The fact that he had an interest in the...
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