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[2022] ZACAC 3
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Life Wise (Pty) Ltd t/a Eldan Auto Body v Competition Commission of South Africa (197/CAC/Nov21) [2022] ZACAC 3; [2022] 1 CPLR 3 (CAC) (8 April 2022)
REPUBLIC
OF SOUTH AFRICA
IN
THE COMPETITION APPEAL COURT OF SOUTH AFRICA
HELD
IN JOHANNESBURG
CAC
CASE NO: 197/CAC/Nov21
REPORTABLE
OF
INTEREST TO OTHER JUDGES:
REVISED.
NO
DATE:
05 April 2022
In
the matter between:
Life
Wise (Pty) Ltd t/a Eldan Auto
Body
Appellant
And
Competition
Commission of South Africa
Respondent
JUDGMENT
MANOIM
JA (Victor Acting JP and Savage AJA concurring)
[1]
The appellant before us in this matter appeals a decision made by the
Tribunal to refuse to amend a provision in a consent order the
appellant (Eldan) had entered into with the Competition Commission
(Commission).
[2]
Eldan is the trading name of a small business, owned by historically
disadvantaged
persons, that is engaged in the provision of auto body
repairs.
[3]
Although the Commission was a party to the order it does not oppose
the appeal.
[4]
Eldan had
entered into a consent agreement with the Commission in terms of
section 49D (1) of the Competition Act, 89 of 1998, (the
Act), in
which it admitted it had contravened three provisions of the Act,
relating to price fixing, dividing markets by customer
allocation and
collusive tendering.
[1]
[5]
When the
Tribunal approves a consent agreement between the Commission and a
respondent firm, it becomes an order of the Tribunal.
[2]
This means
that despite the agreement being one between the Commission and the
respondent firm, once the Tribunal has approved it,
even if both
parties seek to amend it, they cannot do so without the Tribunal
approving it. Nor are the Tribunal’s powers
to amend its own
orders unconstrained. An express power is given to the Tribunal to do
so but in limited circumstances, in terms
of section 66 of the Act.
This jurisdiction is limited to errors and ambiguities in orders.
[6]
Nevertheless,
the Tribunal has previously found that like a High Court it can amend
one of its own orders if a respondent firm is
suffering hardship due
to changed circumstances
(Foskor)
[3]
or where
there are exceptional circumstances
(Ferro
)
[4]
.
In
its
Ferro
decision
the
Tribunal
explained
that:
“
exceptional
circumstances means unusual or unexpected circumstances
”
[5]
.
In the present case the Tribunal has used the test of exceptional
circumstances.
[7]
The
exceptional circumstances test derives from a decision of the
Constitutional Court in the case of
Molaudzi
v S
.
There the Court held that where a significant or manifest injustice
would result if a court order would be allowed to stand, the
res
judicata
doctrine
could be relaxed in “
rare
and exceptional circumstances where there is no alternative effective
remedy”.
[6]
[8]
Of course as a creature of statute, the Tribunal, unlike a High
Court,
does not exercise an inherent power in terms of section 173 of
the Constitution, the section relied on by the Court in
Molaudzi
.
The Tribunal’s solution has been to read this power into the
discretion conferred upon it in terms of section 27(1)(d) of
the Act.
[9]
That section states:
27.
Functions of Competition Tribunal.
—
(1)
The Competition Tribunal may—
…
..
(d) make any ruling or
order necessary or incidental to the performance of its functions in
terms of this Act.
[10]
Thus preventing an injustice where exceptional circumstances are made
out, would, in the
Tribunal’s reasoning, as I understand it,
constitute a basis for an order, necessary or incidental to the
performance of
its functions.
[11]
This court
has not been previously asked to consider whether the Tribunal
can
rely
on
this
power
to
amend
one
of
its
orders
in
those
circumstances.
[7]
Since this
matter is before us on an unopposed basis, it would not be
appropriate for us to decide the point without the benefit
of full
argument by the Commission. But it is not necessary for us to do so
in the present case, because the Tribunal did not exercise
this power
to amend its order.
[12]
What remains for us to decide is whether, the Tribunal correctly
exercised its discretion
in refusing the amendment, assuming it had
this power.
[13]
The Tribunal also had to decide a further jurisdictional point;
whether it could grant
a consent order if the respondent firm had not
made an admission that it had contravened the Act? Here again the
Tribunal found,
based again on its past jurisprudence, that it could.
[14]
This means that the success of this appeal does not turn on any
jurisdictional error by
the Tribunal, since both jurisdictional
issues were decided in favour of Eldan. The question is whether the
Tribunal correctly
found that Eldan had not made out a case for an
amendment to the consent order based on exceptional circumstances.
Background
[15]
In 2014 the Commission initiated an investigation into collusion
between Eldan and a competitor,
Precision and Sons (Pty) Ltd. After
some unsuccessful preliminary skirmishes against the Commission on
procedural grounds, not
germane to the present application, Eldan and
the Commission entered into a consent agreement.
[16]
In line with the manner in which the Commission structures its
consent agreements the first
paragraph contains definitions, followed
by a second in which, inter alia, the conduct alleged to have been
engaged in by the respondent
firm is set out. In the third paragraph,
headed “
Admissio
n”, Eldan made an admission that
it had engaged in conduct that contravened section 4(1)(b)(ii) of the
Act.
[17]
The remainder of the order contains undertakings by the firm as to
its future behaviour
and then provision for it to pay an
administrative penalty of R 750 000.
[18]
When the agreement first served before the Tribunal, the panel
queried why the admission
by Eldan was confined to subsection
4(1)(b)(ii), when the factual background contained in the second part
of the agreement, suggested
that it had also contravened subsections
4(1)(b)(i) and (iii).
[19]
The Commission and Eldan then concluded an addendum to the consent
agreement, which now
included an admission in paragraph 3, that Eldan
had contravened subsections 4(1)(b)(i), (ii) and (iii).
[20]
It was this amended version of the consent agreement that the
Tribunal then confirmed on
12 August 2020.
[21]
In September 2020, Eldan applied to the Tribunal to vary its order by
the excision of paragraph
3, i.e. the paragraph containing the
admission of the contraventions. It did not seek the excision of any
other paragraph in the
order.
[22]
The primary reason for the application was that shortly after the
confirmation of
the order, Mercedes Benz, a firm that represented a
sizeable portion of Eldan’s panel beating business, announced
that its
accreditation as one of its repairers, had been terminated
based on the contravention of section 4(1)(b) of the Act Eldan
brought
an urgent interdict in the High Court to prevent this
cancellation but was unsuccessful. The parties then reached a
settlement
which was made an order of court in which Eldan
acknowledged that Mercedes Benz was entitled to cancel the agreement
between the
firms, by 31 November 2020.
[23]
Cancellation of other customers’ business followed thereafter.
Included amongst them
were insurance companies from whom Eldan
obtained business.
Eldan’s contentions
[24]
Eldan argued before the Tribunal that this cancellation by its major
customers had caused
unforeseen harm that was highly prejudicial to
its business and occasioned great hardship.
[25]
Eldan also
relied on a public interest argument. It contended that it is a small
business, owned by historically disadvantaged individuals
(HDI’s)
and the cancellation of this business will likely lead to its
exclusion from the market. Since the inclusion of businesses
of this
class in a market is a goal of competition policy, Eldan argued that
this consequence constituted a separate ground justifying
the
excision of the admission. The Competition Commission filed an
affidavit in support of the application for rescission echoing
its
contentions about the effect on public interest grounds. This was a
surprising
volte
face
given
the history of the matter. According to Eldan it was the Commission
that had originally insisted on the inclusion of the admission.
[8]
[26]
Finally, Eldan contended that at the time it entered into the consent
agreement it was
unrepresented. It was thus not advised that an
admission was not a requirement for consent agreement to be valid.
Approach of the Tribunal
[27]
The Tribunal rejected all three grounds. It had little sympathy with
Eldan’s argument
that it had not been legally represented at
the time that it had entered into the agreement. It noted that Eldan
had already disclosed
that it had incurred one million rand in legal
costs in the proceedings before the Tribunal in certain interlocutory
applications,
and then in an aborted appeal to the CAC. Then
following the conclusion of the consent order, Eldan, as I noted
earlier, engaged
legal representation to represent it in the High
Court in litigation against Mercedes Benz. The Tribunal was correctly
unconvinced
that Eldan could be regarded as an indigent litigant.
Moreover, it is worth noting that the decision to sign a consent
order with
an admission has certain advantages to a firm. It may
result in a lower administrative penalty and more favourable terms to
the
firm than if it refused to make the admission. It is thus by no
means conclusive that lack of legal representation at the moment
of
signing led to a sub-optimal legal decision.
[28]
The
Tribunal also rejected the argument that the cancellation of customer
contracts amounted to exceptional circumstances. Quoting
from the
Molaudzi
case
the Tribunal held that to justify a departure from the res judicata
principle the circumstances have to be “…
truly
exceptional” .
[9]
the
Tribunal reasoned that there was nothing exceptional about a customer
cancelling a contract even if the extent might not have
been
foreseen.
[29]
The Tribunal also rejected any inconsistency with its prior decisions
to amend its orders
which Eldan had relied upon. The Tribunal made
the point that these cases involved behavioural remedies that had
been imposed on
the firms on the assumption that the market
conditions which justified the conditions at the time the orders were
made, would prevail
in the future. But with time market conditions
had changed. There was no longer a rationale for the conditions to
prevail. Constraining
the firms’ market behaviour to comply
with the conditions was pointless and might even be inimical to
competition. In such
cases the change in market conditions
constituted exceptional circumstances unforeseen at the time of their
imposition.
[30]
Quite rightly the Tribunal held that this is not the case with the
present consent order.
That customers would decide to terminate the
services of a firm involved in collusion is wholly predictable.
Collusion leads to
firms paying higher prices and getting degraded
service. That a customer finds such conduct intolerable and a
betrayal of fair
dealing should come as no surprise.
[31]
Nor is it an exceptional hardship on the contravening firm that they
do so. That conduct
contravening the Act, leads to private
consequences in addition to public enforcement remedies is not novel.
Persons who face criminal
convictions will frequently be faced with
private opprobrium in the sense that people may no longer wish to
employ them or use
their services. The fact that this happens does
not merit revisiting the criminal sanction as something leading to
exceptional
circumstances. The same applies to admissions concerning
collusion. Collusive activity is the most reviled conduct in terms of
the Act. Firms which engage in such activity need to appreciate that
if they do so the consequences will be severe.
[32]
In any event it is difficult to understand why the excision of the
admission would make
a difference to customer attitudes. The conduct
that Eldan is accused of remains extant in paragraph 2 of the consent
agreement.
Customers concerned will be able to read what is stated
and draw their own conclusions. Whether the admission is excised or
not
is unlikely to change their attitude. Eldan appears to concede
this, but argues that without the admission of guilt, it will be
easier for it to be able to persuade customers to resume using its
services. That is highly speculative. Eldan is more likely to
be
successful in regaining the confidence of its customers if it can
show that the firm has changed its ways and now offers competitive
pricing, better service or both. It is change in behaviour of
substance not a cosmetic alteration of an order that will matter.
[33]
Finally, the Tribunal rejected Eldan’s public interest
argument. The Tribunal correctly
pointed out that even if Eldan exits
the market this does not mean it will not be replaced by another SMME
or HDI firm.
[34]
But it is important not to confuse two issues. The public policy in
the Act to promote
small and HDI businesses is aimed at preventing
such firms from being excluded by anticompetitive behaviour. It is
entirely a different
matter to argue that this policy of
inclusiveness justifies ameliorating the consequences of
anticompetitive behaviour of firms
that fall into this class. The
Tribunal correctly rejected this argument as well.
Conclusion
[35]
The Tribunal’s decision to refuse the application for variation
of its order to excise
the admission contained in paragraph 3 has
been properly reasoned. There is no basis made out for this court to
come to any different
conclusion. The appeal is dismissed. Since the
matter was unopposed it is not necessary to decide on costs.
Order
1.
The appeal is dismissed.
2.
There is no order as to costs.
N
MANOIM JA
I
concur
M
VICTOR JA
pp
.
I
concur
K
SAVAGE AJA
pp.
Counsel
for the appellant: Advocate S. Cohen
Instructed
by: Thompson Wilks
Heard
on: 04 March
2022
Delivered
on: 08 April 2022
[1]
The collusive tendering involved cover quoting, a practice where the
competitors collude over the outcome of a tender. The firm
that they
agree will lose the tender, submits a higher quote than the other,
giving the false impression that the lower price
is a competitive
price.
[2]
Section 49D (1) read with section 58(1)(b).
[3]
Foskor
(Pty) Ltd and Competition Commission, Omnia Group (Pty) Ltd And
Others,
case
number: CO037Aug10/VAR240Feb16 paragraph 69-71. Foskor was an
excessive pricing case.
[4]
Ferro
South Africa and Others v At/and Chemicals CC and Othe
rs.
LM 179Jan14NAR 152 Nov 16.
[5]
See Ferro, ibid, at paragraph 37.
Ferro
was a
merger case where the conditions required the merged firm to grant a
third party a toll manufacturing agreement. The merging
party sought
later to vary this condition due to a dispute with the third party
over its alleged misappropriation of confidential
information.
Unlike in
Foskor
the
Tribunal here held the dispute was a private one and refused to vary
the order.
[6]
2015 (8) BCLR 904
(CC) at paragraph 45, where the Court stated
:
“Where significant or manifest injustice would result should
the order be allowed to stand, the doctrine ought to be relaxed
in
terms of sections 173 and 39(2) of the Constitution in a manner that
permits this Court to go beyond the strictures of rule
29 to revisit
its past decisions. This requires rare and exceptional
circumstances, where there is no alternative effective remedy.”
[7]
There are other decisions both in this court and the Constitutional
Court in respect of section 27(1)(d) which suggest the Tribunal
enjoys a wide remit under this section to grant declaratory relief.
See
Competition
Commission v Hosken Consolidated Investments and another
(CCT296/17)
2019(3) SA 1 (CC) and
Hosken
Consolidated Investments Limited and Tsogo Sun Holdings v CC
Case
number 154/CAC Sep17.
[8]
Eldan’s deponent states in his founding affidavit that
“
Notwithstanding
that Eldan had never admitted to the commission of the prohibited
conduct which it stood accused of, the Commission
required Eldan to
sign the consent agreement containing this term. Eldan understood
that there would be no settlement unless
I signed the consent
agreement presented by Commission.”
[9]
Tribunal reasons, paragraph 39. Record page 124.