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[2022] ZACAC 5
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Tourvest Holdings (Pty) Ltd v Competition Comission and Another (195/CAC/Oct21) [2022] ZACAC 5; [2022] 2 CPLR 27 (CAC) (30 June 2022)

REPUBLIC OF SOUTH
AFRICA
IN THE COMPETITION
APPEAL COURT OF SOUTH AFRICA,
HELD IN JOHANNESBURG
Case No:
195/CAC/Oct21
In the matter between:
TOURVEST
HOLDINGS (Pty) LTD
Appellant
and,
COMPETITION
COMISSION
First
Respondent
SIYAZISIZA
TRUST
Second
Respondent
JUDGMENT
Summary:
Accepted competition theory in the
characterisation inquiry to be undertaken under section 4(1)(b) of
the Competition Act 89 of
1998 (‘‘the Act’’)
/ Section 4(1)(b) properly construed, requires
the parties to be in an actual or potential horizontal relationship
at the time that they commit the offence in issue/ Misdirection
to conduct inquiry on the basis that the horizontal relationship
can
be located in the impugned conduct itself.
FISHER AJA:
Introduction
[1]
This
matter involves a referral by the Commission of a complaint by
Airports Company of South Africa (SOC) Ltd (“ACSA’’)
alleging collusion between a supplier of curio
crafts, the second respondent (‘‘the Trust’’)
and the appellant,
(‘‘Tourvest’’) a
specialist retailor in the sale of such craft products, in a
tendering for a
retail opportunity at Oliver Tambo
International Airport (‘‘ORTIA’’).
[2]
The appeal relates to the proper
application of economic theory and competition law in the
characterisation exercise to be undertaken
under section 4(1)(b) of
the Competition Act 89 of 1998 (‘the Act’’). It
relates, specifically, to the situation
where parties who were not
previously in a horizontal relationship bid for the same tender.
Factual background
[3]
Tourvest’s
destination retail business (which is also known as
Tiger’s
Eye
) focusses on the sale of destination-themed souvenir products
to foreign visitors.  Its stores are located in areas which have

a large exposure to foreign tourists and mainly at the international
departures airside areas in international airports.
[4]
Mr Eric de Jager,
the Chief Operations Officer of Tourvest explained in his
evidence
before the Tribunal that the ability to tender competitively for such
retail concessions requires considerable resources
as well as
specialist skills and experience. Access is difficult and logistics
are challenging. In order to ensure consistent stock
replenishment,
it is necessary to have strong logistical infrastructures, good
computer systems and the operational capability
to trade 365 days per
year and up to 17 hours per day.
[5]
The Trust was
founded in 1987 with the purpose of providing assistance to women
in
rural areas through upliftment and training projects. Ms Jane
Zimmermann, its Executive Director, stated that its principal

objective is to facilitate the economic viability of rural
communities by promoting sustainable enterprise development support

to rural crafters. This has placed the Trust in the position of
‘’middleman’’ in the supply of crafts
generated by these communities to retailers.
[6]
On 17 February 2013
ACSA published a request for bids (‘‘RFB’’)

for the leasing of retail space described as Opportunities 1, 2 and
3. Opportunity 3 (which is the relevant tender in this case)

concerned three stores, in which Tourvest was then the incumbent,
conducted African arts, crafts and curio retail businesses under
the
names
Out of Africa Impulse
,
Indaba Origins
and
Out
of Africa Kiosk
.
[7]
The RFB provided
that bidders had to bid for each of these opportunities separately

and that no single bidder could be awarded more than two of the three
opportunities. This was a change in policy from previous
tenders and
was apparently driven by the need for enterprise development of
smaller craft retailers.
[8]
However, ACSA, at
the same time, stipulated onerous minimum financial requirements
for
all the opportunities including Opportunity 3. For example, ACSA
required a minimum guaranteed rental of R450 000 per month
and a bank
guarantee of three months’ rental. Furthermore, in order to
ensure that bidders had the minimum level of experience
and
qualifications required to operate the various opportunities, no bid
would be considered unless it met certain specified mandatory

administrative requirements.
[9]
One such requirement
was that the bidder have “sufficient experience
and/or
qualifications to effectively exploit the Retail Opportunity to the
mutual advantage of the Bidder and ACSA in a manner
consistent with
the standards set by ACSA”. ‘Sufficient experience’
was defined as ‘the successful management
of at least one
retail store with minimum monthly sales of R500 000.00 or R6 million
per annum in any two of the last three years.’’
[10]
In addition, bids would be
disqualified from consideration if they failed to meet two antecedent

requirements, viz. that the bidder (i) purchased the relevant bid
document from ACSA and (ii) attended a bid presentation by ACSA.
[11]
The Trust neither bought the bid
documents nor attended the bid presentation. Tourvest did both.
[12]
At the bid presentation, Tourvest
asked ACSA whether it would be permissible for a bidder to
be part of
more than one consortium. In ACSA’s minute of the presentation
the answer to this question was recorded as follows:
‘
Yes, you are
allowed as long as you will declare this
involvement to
ACSA as required in the RFB form (VI)(12).’
[13]
David Brenner, the CEO of
Tiger’s
Eye
at the time and Mr de Jager thus gave consideration to a
structure in terms of which the Trust could participate as a bidder
for
Opportunity 3 based on the support and experience of Tourvest. It
was reasoned that this would give Tourvest a stake in the enterprise

development aspect of the Tender and that  the Trust would
benefit from the acquisition of retail skills over time.
[14]
The Trust and Tourvest, to this end,
entered into an agreement in terms of which they would
collaborate on
the bid for Opportunity 3. In terms of this agreement, Tourvest would
provide the necessary experience, management
infrastructure,
technology and training required to enable the Trust to bid for the
opportunity.
[15]
Tourvest decided that it would
be prudent to submit an alternative bid to that of the
Trust in its
own name. Mr De Jager explained that Tourvest was concerned that ACSA
might decide that the Trust’s bid did
not meet the mandatory
criteria and if the Trust were disqualified, Tourvest wanted to still
be in the running in its own right.
[16]
Mr de Jager and Ms Zimmerman testified
that the object of providing bids by Tourvest and the
Trust was to
offer ACSA a choice. It could either award the bid to a rural craft
enterprise development initiative in the form
of the Trust (with
initial management, support, qualifications and experience to be
provided to the Trust by Tourvest) or to a
well-established retailer
with a proven track record at ORTIA, being Tourvest.
[17]
The Trust was assisted by Tourvest in
the compiling of its bid and specifically the calculation
of the
rental proposed.
[18]
A Memorandum of Understanding (“MoU”)
which detailed how the collaboration would
be orchestrated was
concluded. The MoU was submitted as part of the bid documents. In
terms of this agreement, all aspects of managing
the Opportunity 3
stores would, initially, be conducted by Tourvest. However, Tourvest
would provide skills transfer and capacity
to the Trust and, once the
Trust had developed the necessary expertise to operate the stores on
its own, the managerial responsibility
would be assumed by the Trust.
It was expected that this hand-over would take place in the third
year of the business. Tourvest
would receive a management fee
equivalent to 7.5% of the turnover of the Opportunity 3 business for
all aspects of managing the
business, including product range
planning, pricing strategy, retail operations and warehousing and
distribution.
[19]
Clause 16 of MOU reads as follows:
’
16.
The parties hereby note that they are aware of and agreed to the
following aspects of the proposed tender for opportunity 3:
16.1 Tourvest is
tendering for the same opportunity in its own right as the 100%
shareholder.
16.2 The rental proposal
for the tender proposed in this agreement shall be the same as that
offered by the Tourvest tender referred
to in 16.1 above.”
[20]
Thus, it was stated in the MOU in
clear terms that Tourvest would be submitting a separate bid
for
Opportunity 3 in its own name and that the rental proposed in the
Trust’s bid would be the same as that in Tourvest’s
bid.
[21]
Mr de Jager explained that the rental
offering was the same in both bids because  Opportunity
3 would,
in both instances, be managed by Tourvest for the first approximately
three years of the tender. Tourvest therefore assumed,
for purposes
of determining the rental, that the performance of the businesses
would be the same, irrespective of whether it or
the Trust won the
tender.
[22]
Furthermore, the Trust did not have
the capacity to calculate the rental figures for its bid.
Ms
Zimmermann stated:
“
We have never run
a shop, let alone a store the magnitude of any of Tiger’s Eye
shops at OR Tambo or any other destination.
We have no skills within
our staff to even contemplate what putting the finances together for
such a bid would comprise. We simply
did not have the wherewithal to
either question it or put it together.”
[23]
As it turned out, at the opening of
the bids and before any evaluation of the merits thereof,
the Trust’s
bid was eliminated by the Bid Evaluation Committee (BEC) on the
grounds the Trust had not, itself, purchased
the requisite bid
documents or attended the compulsory briefing session.
[24]
As a result, the BEC did not proceed
even to consider whether the Trust’s bid had complied
with any
of the mandatory administrative criteria for qualification let alone
evaluate the Trust’s bid for functionality
or price.
[25]
ACSA’s Bid Evaluation
Report reveals, however, that, notwithstanding the upfront

elimination of the Trust’s bid, the BEC proceeded to compare
the contents of the Trust and Tourvest’s bids and noted
that
there were similarities between the bids in most, if not all,
material respects.
[26]
After further inquiry, ACSA decided to
disqualify all of Tourvest’s bids on the grounds
that Tourvest
had allegedly colluded with the Trust in respect of Opportunity 3.
[27]
This was notwithstanding the clear
disclosure by the Trust and Tourvest in their tender documents
that
they were collaborating on the Trust’s Bid and the details of
their collaboration.
[28]
Significantly, it was later
acknowledged in the internal motivation of the BEC to the ACSA Board

that:
“
Tourvest
Holdings nevertheless declared their relationship with the other
bidder, Siyazisiza Trust as required in the bid conditions.”
[29]
In light of the fact that the Trust’s
bid was technically not allowed in, Mr Maritz SC
argued on behalf of
Tourvest that this Court should find that there was no tendering to
speak of and that section 4(1)(b) was thus
not even engaged. We have
decided that ,in light of the findings of the Tribunal, it is best
that the matter be dealt with on competition
principles and on the
arguments made on behalf of Tourvest by Mr Wilson SC and by Maenetje
SC for the Trust and Mr Ngcukaitobi
SC for the Commission.
The Disputes
[30]
First,
there is a dispute as to the existence of a
horizontal relationship. The Commission argued and the Tribunal found
that Tourvest
and the Trust became actual or potential competitors
when they tendered for Opportunity 3 and that they were, thus, in a
horizontal
relationship for the purposes of the section 4(1)(b).
Tourvest and the Trust argue that accepted competition law and
economic principles
dictate that the inquiry into horizontality be
characterized absent the impugned agreement and that the Tribunal
erred in failing
to apply these principles to this part of the
characterization inquiry.
[31]
Second
,
there is a dispute as to whether the conduct was correctly
characterized as collusive tendering. Tourvest and the Trust argue

that the bids were neither intended to be nor portrayed as competing
bids but rather as alternative forms of the same bid. The
Commission
argues that the conduct of submitting materially the same bid
constitutes collusive tendering in terms of section 4(1)(b)
and that
the intention of the parties and object and effect of the
collaboration is irrelevant given the per se status of the
prohibition.
[32]
The Commission expressly abandoned its
initial case that the respondents were competitors in
a retail market
prior to the submission of their bids. Thus, the appeal centres on
the characterization inquiry in relation to
the bid process only.
[33]
The Tribunal found the appellant and
the Trust guilty of collusive tendering. It imposed an
administrative
penalty on Tourvest in an amount of in excess of R9 million but did
not impose an administrative penalty on the
Trust given its
non-profit status. The Commission does not appeal against the
Tribunal decision in this respect. Tourvest appeals
the whole of the
Tribunal’s decision. Whilst the Trust does not appeal it did
participate as a respondent in support of the
appeal. The finding
that it contravened section 4(1)(b)(iii) of the Act obviously impacts
adversely upon the Trust’s reputation
and this is material to
its ability to attract donations to fund its activities. It relied on
pro bono representation in the appeal.
The competition law
and economic framework
[34]
Section 4(1)(b) of
the Act concerns the per se prohibition of specific collusive
practices between competitors. The per se nature
of the prohibition
means that no defence is available if the conduct is found to fall
within the pracitices described in this section
of the Act.
[35]
Section 4(1) provides as follows in
relevant part –
“
An agreement
between, or concerted practice by, firms, or a decision by an
association of firms, is prohibited
if it is between parties in a
horizontal relationship
and if - ...
(b) it
involves any of
the following restrictive horizontal practices
:
(i)
directly or indirectly fixing a purchase or selling price or
any
other trading condition;
(ii)
dividing markets by allocating customers, suppliers, territories, or
specific types goods or services; or
(iii)
collusive tendering”. (Emphasis added)
[36]
This case is not
the common situation where the conduct complained of is of the nature
of obviously harmful fixing of a price. It
was thus necessary for the
Tribunal to engage in an inquiry as to whether the true character of
the collaboration between the parties
was such that it falls within
the type of economically harmful behaviour covered by section
4(1)(b).
[37]
the concept
of characterisation was incorporated into our law as a result of the
judgment in
American
Natural Soda Ash Corporation and another v Competition Commission and
others
[1]
(“
ANSAC”
).
[38]
ANSAC
recognised that there are
instances where conduct may, on the face of it, seem to be collusion
as to pricing but when closer scrutiny
is brought to bear on the
conduct it emerges as benign.
[39]
In their judgment in
ANSAC
Cameron
and Nugent JJA formulated the inquiry to be undertaken when there was
doubt as to whether the conduct in question was of
the character of
the per se conduct contemplated in section 4(1)(b).
[40]
After comparing the US position
of judicial evaluation to the South African statutory
scheme embodied
in section 4(1), the learned Judges concluded :
‘
Whichever approach
is adopted, the essential enquiry remains the same. It is to
establish whether the character of the conduct complained
of
coincides with the character of the prohibited conduct: and this
process necessarily embodies two elements. One is the scope
of the
prohibition: a matter of statutory construction. The other is the
nature of the conduct complained of: this is a factual
enquiry. In
ordinary language this can be termed ‘characterising’ the
conduct – the term used in the United States,
which Ansac has
adopted.’
[2]
[41]
The process
of characterisation was described by this court in
Competition
Commission v South African Breweries Ltd & others
[3]
(“SAB”).
Davis JP and Rogers AJA (as they then were)
explained the characterisation principle thus:
‘”
The
animating idea of the characterisation principle is to ensure that s
4(1)(b) is so construed that only those economic activities
in regard
to which no defence should be tolerated are held to be within the
scope of the prohibition. Whether conduct is of such
a character that
no defence should be entertained is informed both by common sense and
competition economics”.
[42]
They went on to explain that the South
African legislature, in passing the Act, favoured a statutory
rule
rather than the judicially constructed one preferred in the US and
set out the process under the statutory inquiry thus:
“
the
“characterisation” that is required under our legislation
is to determine: (i) whether the parties are in a horizontal

relationship, and if so (ii) whether the case involves direct or
indirect fixing of a purchase or selling price, the division of

markets or collusive tendering within the meaning of section
4(1)(b).
[4]
[43]
They went on to state:
‘…
, since
characterisation in this sense involves statutory interpretation, the
bodies entrusted with interpreting and applying the
Act (principally
the Tribunal and this Court) must inevitably shape the scope of the
prohibition, drawing on their legal and economic
expertise and on the
experience and wisdom of other legal systems which have grappled with
similar issues for longer than we have.
”
[5]
[44]
The economic thinking behind the per
se offences that are intended to be captured under section
4(1)(b) is
that there is, almost certainly, harm to competition from such
conduct and rarely, if ever, redeeming features that
might outweigh
such harm.
[45]
Mr James Hodge, employed by Tourvest, was the sole
expert on economics in the case. Mr Hodge was called
on to explain
the economic principles behind the two elements of the
characterisation exercise. He succinctly described relevant
economic
theory and emphasized that it has its roots in an underlying economic
determination of the potential for such agreements
to result in harm
to competition.
[46]
Mr Hodge made the point that it is important
rigorously to apply economic disciplines to the facts of each
case.
He pointed out that economic competition theory operates on the basis
that parties must be potential or actual competitors
at the time that
they enter into the impugned agreement. Their status, at this time,
defines the economic inquiry to be undertaken.
[47]
The accepted economic discipline employed in the
determination of this status is to examine the relationship
in the
absence of the impugned agreement.
[48][
The EU and US guidelines on potential competitors both
espouse this economic approach.
[6]
The
application of this discipline enables an examination of the
counterfactual position (where there is no agreement) to the existing

factual position (where the agreement is in place).
This
is
generally accepted as the appropriate means to determine whether the
agreement itself resulted in harm to competition or not
and,
therefore, whether the conduct should fall into the type of economic
offences for which no defence should be permitted.
[49]
The question posed in this counterfactual analysis is whether the
parties were potential competitors
in the absence of the impugned
agreement
. If the answer to the question is in the affirmative,
then competition may have been harmed as the agreement would then
have removed
a potential competitor from the market and therefore,
itself, resulted in potential harm to competition. For instance, this
would
be the case in a situation of blatant market division.
[50]
However, if the answer to this question is in the negative - i.e. the
two firms would not have been competitors
absent the agreement - then
the agreement itself did not remove a potential competitor from the
market and, therefore, the agreement
could not have harmed
competition.
[51]
Put simply, where the firm in question is not a potential competitor
in either the factual scenario or the
counterfactual scenario, it
follows that competition is the same in each scenario.
[52]
This counterfactual discipline was recognised and
employed in
SAB
by this
Court in the characterisation of an agreement which, as in this case,
had both vertical and horizontal elements.
[7]
The court held ‘if an undertaking would have not competed,
absent the impugned agreement, then the agreement itself cannot
be
said to have been entered into between horizontal competitors but
rather stands to be classified as an agreement between an
upstream
manufacturer who is engaged in a new distribution strategy with its
downstream suppliers.’
[8]
[53]
This approach has sound economic foundations. If
the counterfactual scenario is indeed that one party would
not be
active in a market at all, then competition cannot be any worse as a
result of an agreement between that party and an existing
market
participant in terms of which the former party becomes active in the
market on terms determined by the agreement. In neither
the factual
nor the counterfactual scenario does the one party bring any
independent competition to the market and therefore one
cannot say
that the agreement has worsened competition as there was none to
start with.
[54]
The purpose of section 4(1)(b) is to capture
conduct which is so egregious that no defence is permitted.
Thus, it
stands to reason that it does not seek to capture conduct which is
not of character that causes harm to competition.
[55]
I now move to a discussion of the horizontal case
in this matter with these principles in mind.
The Horizontal case
The Tribunal’s
decision
[56]
In its horizontal inquiry the Tribunal accepted,
on the authority of its own decisions  in
Eye
Way
[9]
and
Aranda
[10]
,
that the Trust and Tourvest became actual or potential competitors by
reason of the fact that they both tendered for the same

opportunity.
[11]
This
acceptance is fundamental to its decision.
[57]
The Tribunal found also that the parties “held themselves out
to be competitors” and it appeared
to find that this could be a
basis for finding that they were in a horizontal relationship.
[58]
It concluded as follows in relation to its
horizontal inquiry:
‘”
Accordingly,
we find that
at the point the bid was submitted
, the Trust was
in fact
holding itself out as a competitor
of Tourvest and the
other bidders. We therefor conclude that Tourvest and the Trust were
in a horizontal relationship in relation
to Opportunity 3.”
(Emphasis added.)
[59]
This conclusion elides two findings: first, that
the parties became competitors merely by bidding and second,
that the
Trust was holding itself out to be in a competitive relationship. The
Tribunal  appears also  to have found
that the parties were
potential competitors on the basis that  the Trust would, as a
result of the assistance provided to
it in terms of the MoU, be able
to compete independently with Tourvest and other retail outlets at
some time in the future.
[12]
[60]
Thus the Tribunals findings on the horizontal case
are, simply stated, as follows: although the parties
were not in a
horizontal relationship before they bid in the tender, they became
actual competitors by bidding in the tender;
they furthermore
became potential competitors under the agreement; alternatively, they
became competitors because they held themselves
out in the tender to
be bidding against each other.
[61]
Messrs Wilson  and Mr Maenetje  argue
that these findings of horizontality are at odds with the
applicable
statutory and economic prescripts.
[62]
I move to deal with each of the findings with
reference to the legal and competition prescripts outlined
above.
Horizontality
by bidding
[63]
The
Eye Way
and
Aranda
decisions
relied on for this finding, in fact, demonstrate that, had the proper
economic discipline been consciously applied in
both cases, the lack
of horizontality in the relationships would have been clear.
[64]
Applying the discipline to
Eye way
– the parties were
potential competitors in the vertical space absent the agreement in
that the tender was for the supply
of fabric not manufacture and thus
it mattered not that Eye way had no manufacturing capacity. Thus, the
correct application of
the legal and economic prescripts leads to the
same conclusion that was ultimately reached by the Tribunal in
Eye
Way
- albeit via a different route - being that the parties were
competitors.
[65]
The application of the discipline to the facts in
Aranda
yields
a similar conclusion. Aranda was the
only manufacturer and
supplier of the type of blankets required by the tender. It bid in
the tender itself and also imposed significantly
more onerous supply
terms on other bidders in the tender, save for Mzansi which was its
preferred customer in the vertical space.
The horizontal relationship
in issue related to the supply of blankets under the tender.
The Tribunal found, incorrectly,
that the parties were in a
horizontal relationship.
[66]
This finding was reversed on appeal to this
Court.
[13]
On the proper
application  of competition law and economics it is clear that
the parties in
Aranda
were
not in a horizontal relationship in that, absent the impugned supply
agreement,  they could not be competitors.
[67]
This Court found that the Tribunal had incorrectly
applied the characterisation process because it had failed
to
appreciate that the conduct in issue was a function of the vertical
relationship between the parties as supplier and customer
in relation
to Mzansi’s bid, and not a function of the horizontal
relationship between them as bidders in the tender.
[14]
[68]
A case which has similar features  to this
case is
A'Africa
Pest Prevention CC and Another v Competition Commssion of South
Africa.
[15]
In
A’Africa
the bids were submitted by two associated entities and the bids, in
effect, amounted to a conflation of the running of their affairs,

staff complement, equipment, management strategy and businesses. As
in this case, the same person decided on the prices contained
in both
tender forms and other identical information submitted therein.
[69]
The Tribunal, adopting similar reasoning to the
one adopted in this case, found that this amounted to price
fixing.
This finding was based on the submission of two quotations which, in
its view, exhibited dishonest behaviour directed at
gaining a
BEE advantage over others. In its view, “ the appellants
could not be allowed to benefit from their
dishonest actions and
the
illusions of competing for the work
.”
[16]
(Emphasis added.)
[70]
On appeal, this Court (per Boqwana JA as she was
then) reversed this finding. Although the case was decided
on the
basis of the application of section 4(5), It was held that the
submission of the two separate bids in the same terms could
not, on
its own, bring the impugned conduct within the ambit of section
4(1)(b).
[17]
[71]
Again, the application of counterfactual economic
theory to the facts of
A’Africa
yields the conclusion
that the two entities were never in an actual or potential horizontal
relationship.
Horizontality
by illusion
[72]
Reference to the above quotation from the decision
in
A’Africa,
shows that the Tribunal adopted a similar
approach to the one adopted in this case being that horizontality can
be found in the
creating of an ‘illusion’ of
competition’.
[73]
The Tribunal reasons that because the parties
sought to ‘hold the Trust out as a competitor’
they can
and should be found to be in a horizontal relationship.
[18]
[74]
This approach to horizontality defies logic. It
holds within it the assumption that the parties are not
actually in a
horizontal relationship. Thus it constitutes, in and of itself, a
finding which is contrary to the express provisions
of section
4(1)(b) which requires the parties to be in an actual (or potential)
horizontal relationship.
[75]
The section cannot be construed so as to import
strict liability to a party for pretending to be a competitor
when it
is not one.
[76]
This approach of the Tribunal is founded on an
incorrect reading
of
United States v Reicher.
[19]
The Tribunal cited the following passage as purported authority for
the proposition that, if a party holds itself out as a competitor
for
the purposes of bid rigging, it can be held to be in a horizontal
relationship:
“
Here
the decisive circumstances in defining “competitors” is
the simple fact that Giolas Sales submitted a bid for the
OCA
contract. Despite its ultimate inability to perform the contract,
Giolas held itself out as a competitor for purposes of rigging
what
was supposed to be a competitive bidding process. This is exactly the
sort of “threat to the central nervous system
of the economy”
... that the antitrust laws are meant to address ...”
[20]
[77]
Reicher
involved a charge of conspiracy to
rig bids in violation of the Sherman Act. The tender in question was
for a project involving
the building of a specialised structure for
laser testing at a national laboratory. The laboratory compiled a
list of prospective
bidders and Reicher was on the list. The
procurement procedure entailed that there be at least two bids for
the tender to proceed.
As the deadline for bid submission approached,
it became clear that Reicher’s company was likely to be the
only bidder. To
ensure that the bid process went ahead and that his
company would be the successful bidder Reicher arranged with James
Giolas,
the
proprietor of another potential bidder appearing on
the list of prospective bidders
to sign a blank bid form which
Reicher then completed and submitted in the name of Giolas. Giolas
had neither the ability nor the
inclination to perform the project.
In essence, Giolas’. bid was a ‘dummy’.
[78]
Reicher’s company was awarded the bid as the
low bidder. Thus, notwithstanding Giolas' undisputed
incapacity,
through their agreement Reicher and Giolas were able to manipulate
the bidding and lull the laboratory into the belief
that it had the
benefits of true competition. Having bid on the job, and having
created the appearance of legitimate competition
in a bidding
process, the court held that they could not escape the inevitable
conclusion of dirty dealing by denying that they
were
competitors.
[21]
[79]
The Tribunal approached
Reicher
on the
basis that it, like the Tribunal’s decisions in
Eye Way
and
Aranda,
is authority for the proposition that
horizontality can be achieved merely by bidding. As set out above
this is contrary to the
plain meaning of section 4(1)(b) and accepted
competition economic theory.
[80]
In fact,
Reicher
was decided on the basis
that a determination of a
per se
antitrust violation depends
on whether t
here was an agreement to subvert the competition
,
as opposed to whether each party to the scam could perform.
[81]
The argument of the Trust and Tourvest that the
Trust could not carry out the tender without Tourvest because
it was
in a vertical relationship without the agreement ,was met with
reliance by the Commission on the proposition in
Reicher
to
the effect that ability to perform was not a relevant consideration
in the evaluation. But this is to misunderstand that, in
Reicher, the
parties were actual or potential competitors absent the bid rigging
arrangement. They both appeared on the list of
potential bidders and
were both invited to bid. On the application of the economic
principles, the only purpose of the arrangement
was thus to subvert
competition.
[82]
In
United
States v Sargent Elec. Co
[22]
which was relied on in
Reicher
the
Court defined ‘competitors’ for bid rigging purposes
according to who was eligible to bid.
[23]
The Court held:
‘
There
is no potential competition between a party not on an approved list
of vendors and a party on such a list.’
[24]
[83]
Put simply, if the parties are found to be
‘ineligible’ as competitors in a tender for reasons
which
attach to the environment in which they trade, they are not potential
competitors.
[84]
This ineligibility factor is not merely about
exclusion from a tender but the character of the relationship.
In
this case, the Trust was not eligible to participate in the tender
because it did not meet the criteria -  and thus it
was excluded
- but it also, was not a business which had the means, experience,
acumen, structure and character which would allow
it to be a
competitor in the first place.
[85]
In contrast, the parties in
Reicher
were
potential competitors for the horizontality analysis absent the
agreement. They were both on the list of prospective bidders
and thus
fell into the realm of eligibility.  Reicher is not authority
for the proposition that the act of bidding determines
horizontality.
Were this the case, the characterisation exercise would be redundant.
Parties in cases such as this one would axiomatically
become
competitors.
[86]
The lead opinion in
Sargent
confirmed that the initial inquiry is whether each party to a
conspiracy was “an actual or potential competitor in that
market” and that “[a]n agreement among persons who are
not actual or potential competitors in a relevant market is for

Sherman Act purposes
brutum
fulmen
[an empty threat].
[25]
[87]
Applying economic theory in the pre-tender
environment (which is the correct environment to assess the existence

or otherwise of actual or potential competition) the Trust could
never have been assessed to be a competitor. And, hypothetically,

even  if it were  pretending  to be a competitor, this
would not make it a competitor
[88]
This brings me to a discussion regarding the
Tribunal’s understanding that the Trust could be characterised

as a potential competitor by virtue of the impugned agreement.
Potential competitor
via the agreement
[89]
The Tribunal’s finding that the parties
horizontal relationship could be found in the potential for
the Trust
to compete in the future in light of the enterprise development
purpose of the tender is also illogical and contrary
to the
provisions of section 4(1)(b).
[90]
The MoU itself reflects the extent of the deficit
in experience and infrastructure the Trust had at the
time. It was
disclosed that It was only with this agreement that the Trust could
overcome this deficit.
[91]
The accepted evidence of Ms Zimmerman was that
absent the agreement
the Trust would not have been able to
develop the skills and resources which would allow it to occupy a
specialised retail space.
[92]
Section 4(1)(b) provides that the prohibited
agreement must be between parties in a horizontal relationship.
It is
illogical to suggest that this potential can be found within the
impugned agreement. Section 4(1)(b) properly construed requires
the
parties to be in a horizontal relationship when they commit the
offence in issue.
[93]
Thus in sum on the horizontal case, accepted
economic theory and the proper application of the terms of
section
4(1)(b) does not accommodate the approach taken by the Tribunal,
being that the horizontal relationship contemplated in
the Act may be
located within the impugned conduct itself. Such an approach is
anathema the statutory scheme created by section
4(1) and accepted
competition economic theory.
[94]
Having made its erroneous determination on the
horizontal case, the Tribunal proceeded to consider the second

component of the characterisation exercise, namely whether the
respondents’ conduct constituted collusive tendering in
contravention
of section 4(1)(b)(iii). It concluded that it did.
[95]
The case for thus characterising the conduct is
simply that  the parties literally fixed the price.
[96]
Once it is accepted that the parties were not in a
horizontal relationship, an enquiry as to the characterisation
of the
conduct as collusive tendering cannot follow as a matter of law. I
will, however, deal briefly with the Tribunal’s
theory of
collusive tendering.
Collusive
tendering
[97]
On the case accepted by the Tribunal, the
‘collusion’ lay in the fact that the parties tendered
on
the same terms and at the same price. It went on to theorise that
Tourvest had forced the Trust to bid at the same rental and
thereby
prevented it from putting in a competitive bid.
[26]
This was purely on the basis that Mr de Jager conceded that Tourvest
would not provide its services under the MoI at a lower rate.
[98]
Thus, the Tribunal worked backwards in its
reasoning. Having decided that the price was “fixed”
in
terms of the MoU, it reasoned that this must, somehow, mean that
there was collusion of the sort contemplated in section 4(1)(b)(iii).

It then sought to develop a theory of collusive tendering. This led
to it having to construct, by inference, a corrupt design.
It’s
collusion theory failed to take into account that the collaboration
was  disclosed and that there was no anti-competitive
object
which could be found in the MoU. The Tribunal, somewhat cryptically,
theorised that this disclosure was designed to create
the illusion
that the two bids were competitive.
[27]
But this does not explain any anti-competitive purpose.
[99]
There is nothing objectionable about working
backward for the purposes of the assessment. However, in embarking
on
an assessment in this direction, one must be cautious not to make the
determination and then contrive a case which seeks to
support this
determination.
[100]
The tribunal appears to have been fortified in its
approach by the inability of Mr Hodge to point it to
any authority
where a ‘bid rigging’ case was decided as lawful because
of characterisation. This begs the question.
The point is it was not
bid rigging in the first place.
[101]
In
ANSAC
the SCA noted:
‘
There is in
principle no reason why the enquiry should not be conducted in
reverse. The enquirer might choose first to identify
the true
character of the conduct that is the subject of the complaint, and
only then turn to whether the conduct (so characterised)
constitutes
price-fixing as contemplated by s 4(1)(b). (This is how the enquiry
is conducted in the United States, though there
the two elements tend
to be elided, because the scope of the prohibition is itself a matter
of judicial rather than legislative
determination.)
[28]
[102]
The Court was ,however, at pains to explain that,
whilst ‘price fixing’ always involves consensual
price
determination by competitors, it does not follow that price fixing
has necessarily occurred whenever there is an arrangement
between
competitors that results in their goods reaching the market at a
uniform price. In the language that the Act uses, the
‘collusive
tendering’ by competitors refers to conduct designed to avoid
competition, as opposed to conduct that merely
has that incidental
effect.
[29]
[103]
This Court in
SAB
referred to the US
Supreme Court’s decision in
BMI
which cautioned against
an overly literal approach to price fixing. It quoted the following
passage in relation to the characterisation
of the conduct:
‘
But this is not a
question simply of determining whether two or more potential
competitors have literally ‘fixed’ a
‘price’.
As generally used in the antitrust field, ‘price fixing’
is a shorthand way of describing certain
categories of business
behavior to which the per se rule has been held applicable. The Court
of Appeals’ literal approach
does not alone establish that this
particular practice is one of those types or that it is ‘plainly
anticompetitive’
and very likely without ‘redeeming
virtue’. Literalness is overly simplistic and often overbroad .
. . ’
[30]
[104]
Thus although the Tribunal repeatedly posed the
question why Tourvest bid in its own name and made much
of Ms
Zimmerman’s concession that the Trust’s bid could, in
theory, be seen to be in competition with that of Tourvest,
it was
unable to put up a cogent collusion theory. On the other hand, Mr de
Jager’s explanation that the Tourvest bid was
put in because
there was a rational fear that the Trust would be disqualified from
the bid leaving Tourvest
between two stools
is an obvious
explanation.
Conclusion
[105]
In conclusion, the central misdirection of the
Tribunal in this case was the failure to appreciate that
the accepted
legal and economic prescripts did not allow it to embark on a
characterisation enquiry which failed to take account
of the
character of the parties’ relationship absent the impugned
agreement – which relationship was, on all the facts,
plainly
vertical.
[106]
The approach by the Tribunal on characterisation
does not accord with the approach outlined in
ANSAC
and
this Court’s jurisprudence in
SAB
and more recently in
Dawn.
[31]
Order
[107]
The following order is thus made:
1.
The appeal is upheld.
2.
The Tribunal’s order of 29 September 2021 is set aside and
replaced by
the following order:
“
The
Competition Commission’s Complaint Referral against Tourvest
Holdings (Pty) Ltd and Siyazisiza Trust (under CR 022May15)
is
dismissed.”
3.
The Commission is ordered to pay the
appellant’s costs including the cost of two counsel where
employed.
D FISHER AJA
ACTING JUDGE OF THE
COMPETITION APPEAL COURT
I concur,
PP
M VICTOR AJP
ACTING JUDGE PRESIDENT
OF THE COMPETITION APPEAL COURT
I concur,
PP
L NUKU
ACTING JUDGE OF THE
COMPETITION APPEAL COURT
Date of
hearing:
29 April 2022.
Judgment
delivered:
30 June 2022.
APPEARANCES:
For the
Appellant:
Adv N.G.D Maritz SC.
Adv J Wilson SC.
Instructed
by
:                                  MacRobert

Attorneys
For the Commission
:
Adv
T Ngcukaitobi
SC.
Adv K Monareng.
Instructed
by:
Ndzabandzaba
Attorneys inc.
For the second
respondent:
Adv N
Maenetje SC.
Instructed
by:
Werksmans
Attorneys.
[1]
American
Natural Soda Ash Corporation and another v Competition Commission
and others
2005
(6) SA 158
(SCA)
(‘
ANSAC’
)
at paras 43 – 47.
[2]
Id
at para 47.
[3]
Competition
Commission v South African Breweries Ltd &
others
[3]
(SAB))
[2014]
2 CPLR 339
(CAC)
paras 25-47.
[4]
Id at
para 37.
[5]
Id
at para- 37.
[6]
European
Commission (2011). "Guidelines on the applicability of Article
101 of the Treaty on the Functioning of the European
Union to
horizontal co-operation agreements." para. 10 reads as follows
in relevant part:
"A
company is treated as
a
potential
competitor of another company if,
in
the absence  of the agreement,..
United
States Federal Trade Commission and Department of Justice (2000),
"Antitrust Guidelines   for collaborations
among
competitors define a potential competitor in much the same way:
"A
firm is treated as
a
potential
competitor if there is evidence that entry by that firm is
reasonably probable
in the
absence of the relevant agreement,
,.’ (emphasis added).
[7]
Reference
was made to the European Commission in its Guidelines to Technology
Transfers Agreements (2004) which states:
‘
In
order to determine the competitive relationship between the parties
it is necessary to examine whether the parties would have
been
actual or potential competitors in the absence of the agreement.
If without the agreement the parties would not have
been actual or
potential competitors in any relevant market affected by the
agreement they are deemed to be non-competitors.’
[8]
SAB
at par 41.
[9]
Competition Commission v Eye Way Trading and Another CR073Aug16/
CR074Aug16.
[10]
Competition
Commission v Aranda Textile Mills (Pty)Ltd; Mzansi Blanket supplies
Case
no CR016APR 18.
[11]
Tribunal
decision para 128. The decision in this case was reversed in
[12]
Tribunal decision, paras 120-128, Vol 24, p 2450:25 – p
2454:17.
[13]
Aranda
Textiles (Pty) Ltd and Another v The Competition Commission of South
Africa
(190/CAC/Dec20)
[2021] ZACAC 1.
[14]
Id at para 87.
[15]
(168/CAC/Oct18)
[2019] ZACAC 2
(2 July 2019)
[16]
A’Africa
at para 64.
[17]
Id at
para 67.
[18]
Tribunal
Decision para [128]
[19]
United
States v Reicher
[1992] USCA10 1383
;
983 F.2d 168
(10th Cir. 1992).
[20]
Ibid para 170.
[21]
Reicher
,
983 F.2d 168, 172.
[22]
United
States v. Sargent Elec. Co,
785
F.2d 1123
(3d
Cir.) (1986)
[23]
Id at
1129.
[24]
Id. at
1130.
[25]
Id at
1127.
[26]
Tribunal
Decision, paras 129-142.
[27]
Tribunal
Decision at para 146.
[28]
ANSAC
at para 46.
[29]
Id
at
para 47.
[30]
Broadcast
Music, Inc v Columbia Broadcasting System, Inc
441 US 1
at 7-9 and
19-23 (1978), quoted with approval in SAB, at paras 33 and 35.
[31]
Dawn
Consolidated Holdings (Pty) Ltd & Others v The Competition.
Commission
(155/CAC/Oct2017)
[2018]
ZACAC 2
(4 May 2018).