The Competition Commission v Interaction Market Services Holdings (Pty) Ltd

• Jurisdiction: http://justis.com/jurisdiction/166,South Africa
• Judge: T Siwendu AJA and M Victor JA and T Poyo Dlwati AJA
• Judgment Date: 25 March 2022
• Docket Number: 193/CAC/Jun21
• Hearing Date: 31 January 2022
• Court: Competition Appeal Court
• Citation: 2022 JDR 1913 (CAC)

Siwendu AJA:

Introduction:

[1]

The contentions in this appeal are whether in prosecuting a complaint under section 4(1)(b)(i) Competition Act No 89 of 1998 (the Act), it is incumbent on the Competition Commission (Commission) to plead a detailed market definition and define the geographical markets where the alleged contravention occurred. The Court is also asked to determine whether it is essential for the Commission to provide (1) details of the value chain where the contravention happened in the relationship between the respondents; and set out (2) the manner and extent to which the alleged contravention had an effect on competition in any relevant market.

[2]

A determination of the above contentions has a bearing on the Commission's ability to progress the prosecution of a complaint it brought against fifteen respondents including Interaction Market Services Holdings (Pty) Ltd (IMSA). IMSA is a voluntary association in which the respondents are members.

[3]

The Commission claims that the respondents were agents of South African farmers and acted as intermediaries between buyers and farmers to sell fresh fruit and vegetables at various markets throughout the country. It alleges that

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the respondents agreed and/or engaged in a concerted practice [1] to fix the base commission charged to farmers for selling the fresh produce.

[4]

The Commission alleges that IMSA enforced the prohibited practice directly through its structures. It alleges further that of approximately 97 agents, 60 are members of IMSA including the respondents. The appeal emanates from two successive exceptions raised by IMSA and other respondents against the Commission's referral complaint.

[5]

After hearing the first exception, the Competition Tribunal (Tribunal) upheld it and ordered the Commission to file a supplementary affidavit to cure certain defects it found in the referral complaint. IMSA raised a second exception notwithstanding the supplementary affidavit filed by the Commission on 30 November 2018 to cure the defects. Following a second hearing, the Tribunal [2] issued an order [3] directing a further supplementation. On 26 May 2021 the Tribunal furnished its reasons for upholding the second exception.

[6]

The Commission challenges the orders by the Tribunal on account that the Tribunal erred. It contends that the Tribunal's decision is dispositive of the question whether or not the Commission can prosecute its case without first defining the relevant market. A further compelling argument made before us is that, in imposing the erroneous requirements, the case would be decided on an incorrect formulation of the Commission's cause of action and the law. If left unchallenged, the broader consequence, is that in prosecuting cartels, the Commission will be bound to first conduct a market definition exercise and provide evidence of anti-competitive effects where such an exercise is not required in law.

[7]

Consequently, the Commission seeks an order declaring that it has substantially complied with Tribunal Rule 15(2).

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Background:

[8]

In October 2017, the Commission referred a complaint to the Tribunal, for an order declaring that the respondents breached section 4(1)(b)(i) of the Act and were liable to pay the administrative penalty prescribed in section 58(1)(a)(iii) read with section 59(2) of the Act.

[9]

Various respondents namely, Botha Roodt (Pretoria), IMSA, and DW Fresh Produce CC first excepted to the referral complaint, contending that the allegations against them were unsubstantiated and were pleaded in overbroad and imprecise terms inconsistent with Tribunal Rule 15(2). Part of their complaint was that the case against them was not cognisable under section 4(1)(b)(i) of the Act because the Commission had not alleged facts to show:

•

cooperation and or coordination which replaced their independent action amongst the respondents;

•

competitor contact leading to the concerted practice;

•

concerted interdependent action in a co-operative and co-ordinated way with other respondents amongst others.

[10]

The respondents complained further that when they sought particulars and facts of the collusive agreement alleged, the Commission first declined to provide the particulars.

[11]

It is not necessary to rehearse the grounds already dealt with in the first exception, save to point out that, after the first hearing, on 7 November 2018, as already alluded to above, the Tribunal upheld the exception and ordered the Commission to set out:

•

the manner in which section 4(1)(b)(i) of the Competition Act 89 of 1998 had been contravened;

•

The relevant market(s);

•

The geographical markets(s) in which this contravention took place;

•

Full detail of the agreement and how it was enforced;

•

The manner and extent that this alleged contravention has on competition in any relevant market

[12]

The Commission complied and filed a supplementary affidavit by Mr Ramoshaba on 30 November 2018.

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[13]

Dissatisfied with the supplementary affidavit, IMSA and the fifth respondent [4] raised a second exception, picking apart with granularity, the supplementary affidavit. I deal only with those aspects of the exception vital to this judgment.

[14]

IMSA contended that the referral complaint fell short of the specific guidance by the Tribunal in the first order, as well as Rule 15(2) and that it did not disclose a cause of action under section 4(1)(b) of the Act. It stated for a second time that; the Commission's reliance on an agreement and/ or concerted practice caused confusion as it was not clear whether the Commission relied on the agreement and/or concerted practice or whether it was relying on the same evidence to allege both contraventions. It asserted that rather than cure the defects, the supplementary affidavit exacerbated them.

[15]

IMSA held the view which found favour with the Tribunal; that it was obligatory for the Commission to disclose facts supporting allegations of either an agreement or a concerted practice, and, in the absence of facts supporting either of the two allegations, the Commission was obliged to state at the early stage of pleading whether its complaint was based on an inference.

[16]

Furthermore, IMSA held the notion that the Commission ought to have pleaded material facts establishing the relevant markets and/or the geographic markets as well as facts pertaining to the respondent's horizontal relationship in order to pass muster under section 4(1)(b) of the Act. It contended that a reference to "fresh produce market" throughout the country was inadequate, and that unless self-evident, the Commission was obliged to plead why it defined the markets alleged. IMSA applied the same reasoning to the allegations of the concerted practice.

[17]

Additionally, IMSA took issue with the allegations about the "fixed commission" charge as well as the allegations of its role in enforcing the agreement, complaining that there were no facts pleaded supporting allegations of its enforcement role rendering the allegations obscure, vague and ambiguous.

[18]

Despite acknowledging that there had been compliance with aspects of its first order, the Tribunal upheld the exception on the grounds that the Commission

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had not done so with "precision." [5] The Tribunal reasoned based on Netstar v Competition Commission [6] that the Commission must plead either an agreement or a concerted practice. Persuaded by IMSA's argument, it held that the Commission must provide details of the facts supporting each of the impugned practices, failing which it must state whether the facts are to be inferred.

[19]

Even though the Tribunal accepted that the Commission had properly defined the market, it nonetheless ordered the Commission to provide:

•

Specific facts regarding...