Trials and the Tribunal newsletter

  04 February 2019

February 2019 Issue

An online resource where you will find the latest news relating to the Competition Tribunal.


Tribunal orders Computicket (Pty) Ltd to pay administrative penalty for abuse of dominance.


Tribunal prohibits mergers in January: one involving one of the largest hospital groups in SA and the other involving a local and international drum manufacturer. 


Tribunal approves Sibanye-Stillwater and Lonmin merger. AMCU appeal set for April.


Constitutional Court to hear Standard Bank application to access Commission investigation record. 


Snippets of cases before the Tribunal. 


Bee removal tender collusion case heads from Free State Magistrates' Court to ConCourt. 


Oct-Dec 2018 mergers by sector (orders)
Oct-Dec 2018 penalties by sector (orders)

The Competition Tribunal recently ordered Computicket (Pty) Ltd to pay an administrative penalty of R20 000 000.00 (twenty million rand) for abuse of dominance between 2005-2010.
The Tribunal’s decision, issued on 21 January 2019, followed an investigation by the Commission into the local ticketing giant’s use of long-term exclusive agreements to exclude new entrants from the outsourced ticket distribution market.
The Commission led evidence that Computicket induced its customers not to deal with competitors. The company’s exclusivity contracts increased dramatically following its take-over by Shoprite in 2005. In addition, from at least December 2006 - September 2009, Computicket’s personnel aggressively enforced the exclusive agreements among its clients, particularly among new entrants in the market.
Computicket denied that its contracts had an exclusionary effect, arguing that customers preferred to use its services and that exclusive contracts were also a means to mitigate against reputational risk. Computicket further argued that there were several players which competed with it during the relevant period. 
Tribunal Decision
In its 61-page order, the Tribunal noted that Computicket “enjoyed a near monopoly position at the time it introduced the three-year version of the exclusive contracts in 2005”.
The Tribunal found that “there was limited market entry during the period 2005 and 2010, a period which at the beginning and thereafter coincided with the period of the introduction of the longer-term exclusivity contracts and Computicket’s aggressive enforcement of its rights under these contracts. No other theory for why entry was so limited and ineffectual has been offered to rebut this conclusion …”.
The Tribunal also found “on the basis of evidence, that exclusionary effects are evident with sufficient robustness for the period 2005 to 2010”. The Tribunal noted a trend that Computicket’s pricing and profits increased steadily during this period. The full judgment is available on the Tribunal’s website at .
Meanwhile, Computicket has indicated that it will appeal the Tribunal’s decision.
In February 2008, several of Computicket’s competitors started approaching the Commission to complain about the ticket seller’s dominance. The Commission consolidated the complaints and referred the matter to the Tribunal for prosecution in April 2010. The hearing started more than seven years later, in October 2017. The long delay is attributed to a lengthy and litigious history between the parties over discovery of documents and an unsuccessful administrative law challenge to the Commission’s decision to prosecute the matter.

The Tribunal, in January, prohibited two mergers – one involving one of the largest hospital groups in South Africa and the other involving a local and international drum manufacturer.
Proposed Hospital Merger
The Tribunal prohibited a large merger between Mediclinic Southern Africa (Pty) Ltd (Mediclinic) and Matlosana Medical Health Services (Pty) Ltd (MMHS) in the North West. In terms of the transaction, Mediclinic would have acquired a majority interest in MMHS.
MMHS owns and operates, among others, two multi-disciplinary private hospitals, Wilmed Park and Sunningdale Hospitals, in Klerksdorp. Mediclinic, one of the largest hospital groups in South Africa, owns and operates, inter alia, Mediclinic Potchefstroom which is located about 50km from the target hospitals. Mediclinic Potchefstroom, Wilmed Park and Sunningdale all provide inpatient private hospital services in the Klerksdorp and Potchefstroom area.
In June 2017, the Commission recommended to the Tribunal that the proposed merger should be prohibited on grounds that: the joining together of Mediclinic Potchefstroom, Wilmed Park and Sunningdale hospitals would likely result in a significant increase in healthcare prices in the region; the incentive to improve on non-price factors, such as patient experience and quality healthcare, would likely diminish after the merger; and that the acquisition would confer relatively greater bargaining power to Mediclinic vis-à-vis medical schemes.
The merging parties denied that the proposed merger would have any negative effects on competition and argued that it would lead to several pro-competitive efficiencies including improved costs of procurement and increased clinical quality and patient experience.
The Tribunal engaged extensively with the merging parties and their proposed remedies were canvassed with several medical aids. However, no appropriate remedy was tendered that would cure the substantial lessening of competition as a result of the proposed transaction.
Proposed Merger Involving Steel Drum Makers
The Tribunal also prohibited a merger between Greif International Holding B.V. (Greif) and Rheem South Africa (Pty) Ltd (Rheem), both suppliers of industrial packaging products which include large steel drums and steel pails and knock-down drums for export.
The Commission prohibited the proposed merger in June 2017, on grounds that it would constitute a near monopoly in the market for the manufacture and supply of large steel drums. The proposed merger was also previously notified to the Commission and prohibited in 2004. 
Greif and Rheem approached the Tribunal in 2017, requesting a reconsideration of the matter. They argued that the merger would not lead to substantial lessening of competition and that there were alternative suppliers in the market. They also argued that any potential competition concerns would be addressed by proposed remedies.
The Tribunal heard evidence from several witnesses and engaged extensively with Greif and Rheem on whether a potential remedy could be found to address the competition concerns. Their proposed remedies were canvassed with various stakeholders in the market. However, despite the different remedies proposed, no appropriate remedy was tendered which would cure the substantial lessening of competition that would arise as a result of the proposed transaction.

On 21 November 2018 the Tribunal approved, with conditions, a large merger between Sibanye Gold Ltd (trading as Sibanye-Stillwater) and Lonmin PLC.
Sibanye-Stillwater is one of the largest producers of platinum and palladium and features among the world’s top gold producing companies. It owns and operates a portfolio of operations and projects in the Southern African and United States regions.
Lonmin Plc is a primary producer of Platinum Group Metals. It’s a British producer of platinum group metals and operates in South Africa. The company is registered in London and its operational headquarters are in Johannesburg.
The Tribunal, in approving the merger with conditions, found that the transaction was unlikely to substantially lessen competition in the market for the mining of platinum minerals or any related markets. 
Extensive public interest concerns had been raised by third parties including the Association of Mineworkers and Construction Union (AMCU), the Mining Forum of South Africa, the Greater Lonmin Community and the Centre for Applied Legal Studies, acting on behalf of Sikhala Sonke.
Their submissions related to largescale retrenchments at Lonmin, non-compliance by merging parties with their respective Social Labour Plans and the effect of the merger on local suppliers and historically disadvantaged persons. The possible number of operational job losses had been estimated at between 10 156 and 13 444.
However, the issue of which retrenchments related to Lonmin’s operational requirements and which were merger-specific, became an intensely disputed issue. The exact number of merger specific retrenchments could not be established.
The merging parties were found to be transparent and cooperative with the Commission and the Tribunal in sharing their assessment of the situation. To resolve these issues, the parties made certain undertakings which formed the basis of the conditions imposed by the Tribunal.
Sibanye undertook to the following: to conduct a feasibility study for the implementation of an Agri-industrial Program; to conduct an economic assessment of further investments in identified shafts and thereby potentially reduce planned operational retrenchments; and to establish a consultative forum in respect of the implementation of social labour plans.
The Tribunal imposed a six-month moratorium on all retrenchments, from the date of the merger’s implementation. This was done to protect employees from merger specific job losses; to afford Sibanye an opportunity to conduct an in-depth assessment of the operational requirements at Lonmin; and to consult with all relevant stakeholders, including unions.
However, the operation and execution of the Tribunal’s order was suspended by the Competition Appeal Court on 22 January 2019, pending the final determination of an appeal by AMCU. The union is asking the CAC to set aside the Tribunal’s decision and order on grounds that, among others, the merger should have been prohibited. The appeal is expected to be heard on 2 April 2019.

The Tribunal is currently writing reasons for the exception applications (preliminary objections) brought by the respondent firms (the banks). The exception applications were heard in August last year. The banks brought the exception applications against the Commission’s referral of the case to the Tribunal, arguing about why the Tribunal should dismiss the matter. The order and reasons will be issued in due course.
The matters set down to be heard before the Constitutional Court on 5 March 2019 are not related to the exception applications, but rather to an application brought by Standard Bank to access the Commission’s record of its investigation.
Before the Tribunal heard the exception applications, it heard an application brought by Standard Bank South Africa (SBSA) in which SBSA sought the record of the Commission’s investigation into the banks, in terms of Commission Rule 15. The application was heard on 18 September 2017 and the Tribunal ordered the Commission to hand over its record only at the discovery stage.
SBSA then appealed the judgement to the Competition Appeal Court (CAC), which overturned the Tribunal’s Ruling and ordered that the Commission should provide the record within ten days of its order. The Commission appealed that judgement to the Constitutional Court.
While the above was ongoing, SBSA brought a separate application for review of the Commission’s decision to refer a complaint against it directly to the CAC.
In terms of Rule 53 of the High Court rules, once a party brings a review of a decision maker’s actions, the decision maker has to provide the record of its decision-making process. Within the context of its review process, SBSA requested that the Commission make its record available to them, to enable the review.
One judge of the CAC ordered that the Commission needs to hand over its record within this context. The Commission therefore sought to join this case to its earlier appeal, to the Constitutional Court.
The Constitutional Court will therefore hear both appeals on 5 March 2019.

The Tribunal ordered, in February 2019, that Unilever South Africa’s application for leniency would not be included as evidence against it, in the market division case against the company. This, after the Commission brought an application to have the leniency application included as evidence in the trial.
In terms of the Commission’s Corporate Leniency Policy, companies can approach the competition body to seek immunity from prosecution. Unilever SA applied for leniency in May 2014. The Commission subsequently denied the application and is proceeding with the market division case against it.
The Commission alleges that Unilever SA and Sime Darby Hudson Knight (Sime Darby) entered into an agreement from 2004 – 2013 to divide markets by allocating specific types of goods and customers, in contravention of the Competition Act. Both companies manufacture and supply bakery and cooking products, including edible oils and margarine.
Sime Darby entered into a settlement agreement with the Commission in 2016, admitting that it had concluded an agreement to divide markets. It agreed to pay an administrative penalty of R35-million.
In January 2019, the Tribunal dismissed a case of price fixing against power cable manufacturer, Tulisa (Pty) Ltd, after finding there was insufficient evidence to show that the company had been part of a cartel whose activities would have harmed Eskom, the mining industry and municipalities. The Commission claimed that the cartel had sought to fix the price of power cables from 2001 to around 2010.
At the time of the hearing of the matter, three other companies accused in the case had all entered into settlement agreements with the Commission. These were Alvern Cables (Pty) Ltd, South Ocean Electric Wire Company (Pty) Ltd and Aberdare cables (Pty) Ltd.
In its referral, the Commission alleged that: (i) Tulisa’s representatives had attended meetings with the other accused in the matter in order to fix the price of power cables; and (ii) that Tulisa was party to a concerted practise because it would base its prices on a competitor’s price list.
The Tribunal found insufficient evidence to place a Tulisa representative at a meeting of competitors within the prescription period. The Tribunal held that Tulisa, basing its prices on a price list of a competitor obtained from a customer, was more akin to conscious parallelism -- a feature of oligopolistic markets -- which may be indicative of cartelisation but is not conclusive proof of the existence of such.  
The Competition Tribunal confirmed, as an order, a settlement agreement between power cable supplier, Alcon Marepha (Alcon) and the Commission in February 2019. Alcon will, among others, pay an administrative penalty of R1 378 107.69 as part of the settlement agreement. The company also agreed to assist the Commission in ongoing investigations.
Alcon admitted to collusive tendering through the submission of cover prices for tenders issued by Eskom. Alcon, in agreement with competitors, allocated specific product lines and agreed on the prices to be charged per product line during the period 1994 – 2008.
Alcon also admitted to fixing prices of power cables through the Association of Electric Cable Manufacturers South Africa (AECSMA). Under the auspices of the AECMSA, Alcon discussed and agreed to quotation indices with competitors. These indices were used to escalate prices when bidding for short- and long-term tenders to supply electric cabling products between 2001 - 2012.
The Tribunal conditionally approved a merger between Off the Shelf Investments 56 (RF) (OTS) and Chevron South Africa in October 2018. This transaction is similar to a merger which the Tribunal approved conditionally in March 2018, in which SOIHL Hong Kong Holdings (Sinopec) intended to acquire 75% of the issued share capital of Chevron South Africa.
OTS, as one of the shareholders in Chevron South Africa, holds a pre-emptive right to acquire 75% of the issued share capital held by Chevron Global Energy Inc. The Sinopec transaction triggered the pre-emptive right and OTS exercised it in favor of acquiring 75% of the issued share capital of Chevron. This latter transaction was subsequently notified and approved with conditions.
Although the transaction will not substantially lessen competition the parties negotiated and agreed a set of conditions with certain government departments ranging from employment, refinery capacity, local procurement and broad-based black economic empowerment which the Tribunal granted but with certain enhancements.
It is worth noting that the Tribunal does not need to decide which of these two transactions should ultimately be implemented, as this is the decision of Chevron Global Energy. The Tribunal only needs to consider the effect of the potential transaction on competition in the relevant market and the effect on public interest.
In October 2018, the Tribunal dismissed a case of collusive tendering and price fixing against two brand activation companies, Geometry Global (Pty) Ltd and Vaxiprox (Pty) Ltd.
The Commission earlier referred a case of anti-competitive conduct to the Tribunal, alleging that Geometry and Vaxiprox colluded on a 2014 tender issued by South African Tourism (SAT) for brand activation services. The Commission’s claim was based on email communication between the companies and SAT relating to quotations for the tender.
Both companies denied the allegations. They argued that, given the volume of work to be undertaken, SAT instructed them to form a joint venture in response to the tender. However, they had no formal recorded agreement to this effect. They argued that, as joint venture partners, they could not be considered to be competitors as defined in the Competition Act.
The Tribunal dismissed the case, finding that the companies’ actions could not be seen as conduct seeking to subvert the competitive process of the tender. However, the Tribunal warned those claiming to operate as a joint venture that “whispered agreements at side meetings are poor substitutes for formalised memorandums of understanding or joint venture agreements”.   



This matter originated in 2015, when a swarm of bees invaded the Magistrates’ Court in         Hertzogville, in the Free State. Few would ever have guessed that the matter would eventually end up in the Competition Appeal Court in Cape Town… 

The court invasion had officials from the Department of Public Works abuzz -- and a tender for fumigation services was summarily issued to counter the onslaught.
Two companies, A’Africa Pest Prevention CC (A’Africa) and Mosebetsi Immoho Professional Services CC (Mosebetsi), were among those who submitted bids for the tender valued at just under three thousand rand.
Without prior notice, and notwithstanding the bee invasion, the Department suddenly halted the entire tender process after noticing suspicious similarities in the documentation of the purportedly competing bids.
A’Africa and Mosebetsi’s pricing schedules were almost identical and both bids had been signed by the same person. The Department reported the pest control companies to the Commission who launched an investigation into the suspected contraventions of the Competition Act.  
In late 2018, with the actual swarm of bees (but not the tender) likely long forgotten, the two companies appeared before the Tribunal for price fixing and collusive tendering.
The Commission -- in a stinging indictment -- accused the companies of being competitors in the fumigation market, which had entered into an unlawful agreement to fix prices and rig the bee invasion tender.
A’Africa and Mosebetsi argued, in their defence, that they were part of a single economic entity as they shared common members (executives). They could, therefore, not be competitors and could not have contravened the Act.
Later, in its reasons for finding the companies guilty of price fixing and collusive tendering, the Tribunal said, among others: “We conclude that A’Africa and Mosebetsi were not constituents of a single economic entity as envisaged in section 4(5)(b) but instead two competitors, albeit with common membership, submitting separate bids for the Hertzogville tender. This is because structurally the respondents are not in a wholly owned subsidiary-parent relationship as contemplated in section 4(5)(a).
A’Africa and Mosebetsi are appealing the Tribunal’s decision and reasons at the Competition Appeal Court on 3 April 2019. 
Meanwhile, the fate of the bees remains unknown to this day.


The table below reflects the distribution of large mergers decided by sector for the period October 2018 - December 2018. 


The table below reflects the distribution of consent orders and settlement agreements confirmed and penalties levied by sector in prohibited practices cases for the period October 2018 - December 2018.


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