Computicket (Pty) Ltd v Competition Commission of South Africa (170/CAC/Feb19) [2019] ZACAC 4 (23 October 2019)

About SAFLII
Databases
Search
Terms of Use
RSS Feeds
South Africa: Competition Appeal Court
SAFLII
>>
Databases
>>
South Africa: Competition Appeal Court
>>
2019
>>
[2019] ZACAC 4
|

|

Computicket (Pty) Ltd v Competition Commission of South Africa (170/CAC/Feb19) [2019] ZACAC 4 (23 October 2019)

IN
THE COMPETITION APPEAL COURT OF SOUTH AFRICA
Case
Number: 170/CAC/Feb19
In the matter
between:
COMPUTICKET (PTY)
LTD
Appellant
and
THE COMPETITION
COMMISSION
OF SOUTH
AFRICA
Respondent
Delivered: 23
October 2019
JUDGMENT
BOQWANA JA (DAVIS
JP and UNTERHALTER AJA concurring)
Introduction
[1]
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&rdquo
;), 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.
[2]
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.
Background
facts
[3]
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.
[4]
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.
[5]
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.
[6]
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.
[7]
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.
[8]
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:
“
2.3 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:
“
2.7 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
.
”
[9]
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.
[10]
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.
[11]
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 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
[12]
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 outcome of the case, owing
to his
employment with the Commission, is no sound legal basis to discard
his evidence or accord it any less weight than it would
otherwise
have.  No proper grounds were placed to challenge the
independence of Dr Mncube’s expert evidence nor to suggest
that
the evidence he gave fell within the realm of bias which would
trigger a decision regarding its admissibility
[4]
and thus the Tribunal was correct in dismissing this assertion.
The relevant
provisions of the Act
[13]
Section 8 (d) (i) dealing with Abuse of Dominance
provides that:
“
Abuse of dominance
prohibited.
–
(1)
It is prohibited for a dominant firm to –
…
(d) engage in any of the
following exclusionary acts, unless the firm concerned can show
technological, efficiency or other pro-competitive
gains which
outweigh the anti-competitive effect of its act
-
(i) requiring or inducing a
supplier or customer to not deal with a competitor;...”
[14]
An exclusionary act is defined in section 1 of the Act
as “
an act that impedes or prevents a firm from entering
into, participating in or expanding within a market
”.
Dominance and
Market Definition
[15]
The issues of dominance, as well as the definition of
the market, were conceded by Computicket.  Computicket
consistently held
an annual share of over 95% in the outsourced
ticketing services market, in relation to entertainment events,
between 2005 and
2009.  The experts, Dr Mncube and Prof Theron
for Computicket, agreed that the relevant market was the outsourced
ticketing
services in South Africa.
Exclusionary
act
[16]
As the Tribunal in
SAA (CT)
[5]
has made plain, when approaching the relevant section, the first
issue to determine is whether the conduct in question is exclusionary

in nature.  If prohibited conduct is alleged in terms of section
8 (c) of the Act, that conduct must assessed in line with
the
definition of exclusionary act.  However, if section 8 (d) is
relied upon, the impugned conduct would be that which meets
the
requirements of the conduct as categorised in sub-paragraphs (i) to
(vi) of section 8(d).  It is accordingly sufficient
for the
complainant, the Commission in this case, to prove that Computicket’s
conduct requires
or induces a customer not to deal with a
competitor
, without having to show further that such conduct
“
impedes or prevents a firm from entering into,
participating in or expanding within a market
”.
[17]
To the extent that Computicket contended otherwise, I
disagree.  It seems to me, purely from a plain reading, that
the
exclusivity provision of the second generation agreements
fits  squarely within with conduct described in section 8 (d)

(i) of the Act, as it
requires or induces a customer not to deal
with a competitor
.  The finding by the Tribunal that the
exclusive agreements constituted an exclusionary act because they
were “
facially exclusive”
, did not attach any “
per
se prohibition
” to the agreements based purely on the
existence of the contract, as argued by Computicket’s.
The act is exclusionary
if it falls within the conduct described in
section 8 (d) (i).  That is, however, not the end of the
enquiry.  The Commission
must still show that the conduct has an
anti-competitive effect.  If that has been established, the onus
shifts to the respondent,
Computicket in this case, to justify the
anti-competitive effect on efficiency grounds.
[6]
The Tribunal was therefore correct in its finding, that the
prohibition contained in the second generation exclusive agreements

that inventory providers may not utilise the services of a competitor
without Computicket’s written consent for the duration
of the
contract  fell within the definition set out in section 8 (d)
(i). That finding entails no
per se
prohibition because the
Commission must show the anti- competitive effects of the
exclusionary conduct.
Anti –
competitive effects
[18]
The enquiry as to whether exclusionary conduct is
anti-competitive yields a positive answer if “
there is (i)
evidence of actual harm to consumer welfare or (ii) if the
exclusionary act is substantial or significant in terms
of its effect
in foreclosing the market to rivals
.
This latter
conclusion is partly factual and partly based on reasonable
inferences drawn from proven facts.  If the answer
to that
question is yes, we conclude that the conduct will have an
anti-competitive effect. Whichever species of anti-competitive
effect
we have, consumer welfare or likely foreclosure, we have evidence of
a quantitative nature and hence we can return to the
scales with a
concept capable of being measured against the alleged efficiency
gain
.”
[7]
[19]
This approach was endorsed by the Tribunal in
Nationwide
[8]
and later by this Court in another
SAA (CAC)
[9]
decision, where this Court reaffirmed that section 8 (d) (i) “
did
not require showing of actual harm.  It was sufficient if there
was evidence that the exclusionary practice was substantial
or
significant or it had the potential to foreclose the market to
competition.  If it is substantial or significant, it may
be
inferred that it creates, enhances or preserves the market power of
the dominant firm. If it creates, enhances or preserves
the market
power of the dominant firm it will be assumed to have an
anti-competitive effect.
”
[20]
The Tribunal found that there was sufficient evidence
that the exclusive agreements employed by Computicket had resulted in
substantial
exclusion having anti-competitive effects, the strongest
evidence being the foreclosure of the market to effective competition
during the complaint period. It further held that “[
e
]
vidence
concerning…competitive pricing effects, a decrease in supply
by inventory providers, a reluctance by Computicket
to timeously make
use of available advances in technology and innovation and a lack of
choices for end customers, was consistent
with the Commission’s
theory of harm
.”  It found the cumulative effect of
these factors established on a balance of probabilities a case of
substantial exclusionary
conduct having anti-competitive effects.
[21]
It is contended on behalf of Computicket that the
Tribunal’s finding is faulty because the Commission ought to
have produced
evidence of actual foreclosure effects.  According
to Computicket the use of the term “
likely
”, as a
descriptor of effects in the case law, does not mean that effects can
be inferred where there is no evidence of any
rival firms suffering
any effects. Instead, it refers to the likely causal link between the
effects and the alleged exclusionary
act. This is because it may not
be possible to prove that an act led to the observed effects on the
market.  Even then, it
is argued, the alleged exclusionary act
must be isolated as far as possible, following which there must be a
causal link between
the impugned act and the effects caused thereby.
It is further contended that the only time the Tribunal found
that actual
evidence of foreclosure of rival firms may not be
strictly necessary, was when the market was expanding and all firms
experienced
growth.  Computicket submits that competition
authorities cannot ignore actual evidence about the market
circumstances and
preferences of the market as a whole, in favour of
limited anecdotal evidence from small segments of the market that
suits its
theory of harm; the Commission’s theory of harm must
take into account the unique and peculiar features of the relevant
market.
Computicket concludes that if there is a plausible
explanation other than the alleged exclusionary act, the Commission
would not
have discharged its onus;
foreclosure effects must be
significant or substantial
, therefore it is insufficient to
demonstrate that one small segment of a market may experience
foreclosure effects when there are
other viable segments of the
market open for entry.
[22]
Computicket places reliance on an article by Paul
Gorecki
[10]
who cautions against a form-based approach, which may lead to false
positives, and in turn have a chilling effect on efficiency
and
consumer welfare-enhancing contracts.
[11]
By implication Computicket suggests that the Tribunal followed a
form-based approach.
[23]
This argument seems to be similar to that which was
raised on behalf of SAA in the
SAA (CAC)
[12]
matter and rejected by this Court.  It had been contended by SAA
in that case, that the Tribunal made a finding of anti-competitive

effects in the market against it with no evidence of price or output
effects justifying it. In this connection a submission was
advanced
that there had been no proof of economic effects and hence the
requisite degree of foreclosure.  In rejecting this
contention,
this Court held:
“
These
submissions need to be interrogated through the wording of the Act.
Section 8 of the Act makes it clear what is necessary
in order
to establish an anti-competitive effect.  It includes the
consideration that if the exclusionary act is substantially

significant in terms of its effect in foreclosing the market to
rivals, the section applies.  This approach can be established

either by way of evidence of actual competitive harm or by
evidence
that the exclusionary practice is substantially significant, that is,
the practice has the potential to foreclose the market
to
competition, in which case an anti-competitive effect can be
inferred
.”
[13]
(My emphasis )
[24]
At the Tribunal, Prof Theron, Computicket’s
expert, seemed to suggest that the test in
SAA (CT)
is not one
to be followed as there is subsequent case law which points to a
different approach, such as that which was employed
in
BATSA
[14]
.
Counsel for Computicket however, on appeal, agreed with the
SAA
(CT)
test, but continued to submit that actual evidence of
anti-competitive effects must be shown. He however, during oral
argument
referred to the findings of this Court in
Netstar
[15]
,
to advance a cause and effect
argument. In
Nestar
,
in the context of section 4 (1) (a) of the Act, Wallis AJA held that
the agreement or concerted practice must be the primary or

substantial cause of the prevention or lessening of competition. In
other words, the lessening or prevention of competition must
be
sufficiently closely connected to the agreement or concerted practise
that it can properly be said the former was the effect
of the
latter.
[16]
Apart from the fact that
Netstar
dealt with a differently framed section of the Act, that is, it was a
case dealing with the problem of a cartel, the Court was
confined to
the case pleaded in those circumstances.
[17]
In any event, the authority directly on point
SAA
(CAC)
[18]
came after
Netstar
which firmly confirmed the effects doctrine as part of our law
relating to abuse of dominance.
[25]
These submissions warrant some clarification as to what
is required to prove an abuse of dominance under section 8 (d). The
provision
specifies defined exclusionary acts. No prohibition arises
unless it is proven, in the first place, that a dominant firm has
engaged
in one or more of the defined exclusionary acts. Prohibition
however requires more. The introductory language of section 8(d)
requires
an evaluation of effects. The evaluation is predicated upon
a weighing of harm and benefits (styled as gains in the language of

the statute). Prohibition occurs when the harm outweighs the gains.
The harm is measured by reference to the anti-competitive effect
of
the exclusionary act. The gains are measured by reference to
technological, efficiency or other pro-competitive gains.
[26]
This statutory formulation clearly entails a causal
relationship. The exclusionary act must be shown to have effects of a
kind that
engage the evaluation required by section 8(d). If an
exclusionary act gives rise to no anti-competitive effects, then the
exclusionary
act is not prohibited. So too, if an exclusionary act,
though having anti-competitive effect, gives rise to no
pro-competitive
gains, then the exclusionary act is prohibited.
As the text of section 8(d) makes plain, the effects that are
relevant to
the evaluation are the effects of “
its act”.
In other words, the effects of the exclusionary act of the dominant
firm.  Every effect must have a cause. Section 8(d) stipulates

that the relevant cause is the exclusionary act of the dominant firm.
Accordingly, section 8(d) does require proof that there is
a causal
relationship between the exclusionary act of the dominant firm and
the effects of that act that are relevant to the evaluation

contemplated as to anti-competitive harm and pro-competitive gains.
[27]
The recognition of this causal relationship, however,
does not answer a separate question: what is the anti-competitive
effect that
must be shown to have been caused by the exclusionary
act? Computicket submits that the anti-competitive effect that must
be proven
by the Commission is actual foreclosure of a rival and
the
effect must meet a criterion of substantiality
, that is to say,
that the exclusionary conduct had a market wide effect. This
submission is contrary to the text of the prohibition.
It is also
runs counter to precedent and economic principle.
[28]
First, as to text, section 8(d) references the
anti-competitive effect of an exclusionary act, whereas sections 4
and 5 reference
the formulation: “
the effect of
substantially preventing or lessening competition in a market”.
The legislature clearly marked out the requirement of
substantiality judged against an appreciation of the effect in the
market
in formulating the prohibitions in sections 4 and 5, but
repeated none of this language in section 8(d). This does not mean
that
section 8(d) resorts to form based prohibition. On the contrary,
it requires the evaluation of effects. The question is rather:
what
effects?
[29]
Second, in the
SAA
cases, cited above, what is
required, absent evidence of actual harm to consumer welfare, is
proof that the exclusionary act is
substantial or significant in
foreclosing the market to rivals. Such foreclosure may be actual or
potential. The emphasis in these
formulations is upon
the
substantiality of the exclusionary conduct
. The more substantial
the exclusionary conduct the more likely it is that the impact upon
the market will also be substantial.
But such an effect is not a
requirement that must be met to establish an abuse of dominance.
[30]
Third, the economic assessment of the anti-competitive
effect of an exclusionary act will have regard to the market and the
position
of the dominant firm in that market. Ultimately, the
question is whether the dominant firm’s rivals are rendered
less effective
competitors by reason of the exclusionary conduct of
the dominant firm.  This is what we mean by foreclosure. This
enquiry
may engage an aggregative enquiry of the market: how dominant
is the firm in the market, to what extent are the sales in the market

affected by the exclusionary conduct, and what conditions exist in
the market as to entry and the possibility of expansion? However,

aggregative considerations need not be determining.
[31]
Rivalry may be diminished because a small firm plays an
important role in constraining the dominant firm in a part of the
market,
whether as to the product or territory. An effect of this
kind is not ousted from consideration. And this is so because under
the
discipline of section 8(d), the effects of the exclusionary
conduct (harms and gains) must be weighed to determine ultimately
whether
there has been an abuse. The aggregative judgment is made in
weighing the effects. It is not made by insisting that what can count

as a gain or a harm must itself meet some criterion of sufficiency or
can only be counted if it is an actual rather than a potential
harm
or must be a market-wide effect.
[32]
Plainly, a small adverse effect will readily be
outweighed by pro-competitive gains. So too, significant
anti-competitive effects
will be more difficult to justify by proving
counter-veiling pro-competitive gains. There may be hard cases, where
there are no
gains, and a modest harm. But even in that case, the
judgment required by section 8(d) will be responsive to the ultimate
consideration
as to whether the dominant firm has engaged in
exclusionary conduct that has in some non-trivial way diminished the
competitive
constraints to which it would otherwise have been
subject.
[33]
It is widely accepted that determining whether the
exclusionary act had anti-competitive effects is not an easy
exercise, but as
set out in the previous paragraphs, is the key
requirement in determining cases of this nature. The substantiality
of the exclusionary
practice, however, can be inferred (not conjured
or assumed).  Clearly such an inference can be drawn from
existing or proven
facts; so much is clear from the economic
principles which I have set out and which have been followed by this
Court.
[34]
In brief, t
he jurisprudence of
this Court has been to the effect that the so long as the
exclusionary conduct had the potential to foreclose
the market to
competition that would suffice for the purposes of section 8(d)
[19]
.
In this, the Court followed an approach adopted by EU
jurisprudence. In a relatively early decision of the European Court

of Justice in
Continental Can v
Commission
[20]
,
the Court said , albeit  within the context of whether  an
acquisition of a  firm by a dominant firm could be an
abuse of
dominance: “
a
buse
may therefore occur if an undertaking in a dominant position
strengthens such position in such a way that the degree of dominance

reached substantially fetters competition, i.e. that only
undertakings remain in the market whose behaviour depends on the
dominant
one ... it can ... be regarded as an abuse if an undertaking
holds a position so dominant that the objectives of the Treaty are

circumvented by an alteration to the supply structure which seriously
endangers the consumer’s freedom of action in the market
such a
case necessarily exists if practically all competition is
eliminated
.”
[35]
See also
Hoffman La Roche v Commission
[21]
where the Court held that: “
abuse is
behavior which is such as to influence the structure of a market
where, as a result of the very presence of the undertaking
in
question, the degree of competition is weakened and which, through
recourse to methods different from those which condition
normal
competition in products or services on the basis of the transactions
of commercial operators, has the effect of hindering
the maintenance
of the degree of competition still existing in the market or the
growth of that competition
.”
[36]
This
dictum
is helpful in that it shows that the
harm that must be shown to exist, whether in the form of actual or
potential harm, strengthens
the dominant firm’s position to the
extent that competitive rivalry is significantly impeded or is likely
to be so impeded
by the impugned conduct of the dominant firm.
[37]
The assessment of the effect of exclusionary conduct is
usually done “
by comparing the actual or likely future
situation in the relevant market (with the dominant undertaking’s
conduct in place)
with an appropriate counterfactual, such as the
simple absence of the conduct in question or with another realistic
alternative
scenario, having regard to the established business
practices
.”
[22]
[38]
The experts of both parties
agreed that applying a counter-factual is the correct approach which
is canvassed this later in the
judgment that is, absent Computicket’s
impugned conduct, competition would not have been significantly
impeded in the relevant
market or expressed differently whether
Computicket’s rivals were rendered less effective because of
its impugned conduct.
[39]
To return to the evidence, it is not disputed that
exclusive dealings can lead to foreclosure of competitors and harm to
consumers.
[23]
What is in dispute is whether the conduct of Computicket
significantly effected competition in the market. In this regard,
the
Commission would, as a first step, “
need to identify a
theory of harm whereby exclusive dealing arrangements have resulted
in substantial foreclosure which has harmed
or is likely to harm
competition.  A common way in which substantial foreclosure may
be anticompetitive is if it denies to
rivals sufficient share of
distribution to achieve minimum efficient scale, thus raising the
costs of those rivals. Alternatively
it may raise rivals’ costs
by preventing them from accessing particular inputs or distribution
channels.  However, these
are not the only ways in which
substantial foreclosure may result in anticompetitive effects. What
is important in general is for
the agency to develop a robust theory
of harm that connects the exclusive dealing conduct with
anticompetitive effects and seeks
appropriate evidence to support the
theory
.”
[24]
[40]
The ICN Workbook further explains that:
“
Harm can occur because
the exclusive dealing leads to the exit  of an existing
competitor (or prevents entry by a new rival)
or through increases in
prices or decreases in innovation.  Foreclosure may also harm
competition by relaxing the competitive
constraint imposed by rivals
without fully eliminating them from the market.  That is, it may
weaken the ability of competitors
to charge as low a price as they
might otherwise do. Moreover, potential entrants, not just incumbent
competitors, may be among
the affected rivals
.”
[25]
[41]
The ICN Workbook refers to a number of factors to be
taken into account when considering whether exclusive dealing has the
capacity
to foreclose competitors and, as a result, contribute to
anti-competitive effects.  Those include (a) market coverage,
where
exclusive dealings are more likely to result in anticompetitive
effects the larger the proportion of the relevant market that is
the
subject of the conduct;
[26]
(b) duration of the exclusive dealings, where the longer the
duration, the stronger its potential for foreclosure; whether
contracts
are all renewed simultaneously and whether they are
automatically renewed or subject to conditions of renewal;
[27]
(c) alternative sources of supply;
[28]
(d) whether the customer requested the exclusivity;
[29]
(e) ease of entry and market dynamics;
[30]
and (f) scale of economies – “
denying a competitor
access or partial access to the market may prevent or hinder it from
obtaining the economies of scale necessary
to allow it to grow into
an effective competitor
”; two “
slightly different
but related factors that may be taken into account are the network
effects and/or incumbency advantages.  These
factors “have
an effect similar to scale economies since a dominant firm can use
exclusive deals to exploit such market dynamics
in order to deprive a
competitor of the means of gaining the required critical mass of
sales or credibility of customers
.”
[31]
[42]
Prof Theron had no difficulty with the literature
referred to by the Commission; her issue was that in the outsourced
ticketing
services market, one needed to look at the exclusive
dealing literature in a two-sided market.  According to her,
Computicket
is the two-sided platform that brings two sides of the
market together, i.e. inventory providers and end consumers of
tickets.
In this market inventory providers may choose to
by-pass the outsourced ticketing agent by selling its own tickets
(self-supply).
She observed that the two-sided ticketing
platform creates a specific sort of dynamic in that: (a) Computicket
needs to satisfy
both, (b) these two groups rely on each other to
sell and buy tickets, (c) they cannot capture the value from mutual
attraction
on their own, due to, for instance, high transaction
costs, (d) they rely on Computicket’s platform to facilitate
value creation
interactions between them, and (e) this restricts the
potential market power of the platform (Computicket).  It
matters to
both sides that there is a critical mass on the other
side.  In Computicket’s case, the demand for Computicket’s

services by inventory providers will increase if there are more
customers using it for bookings on the other side of the platform.

The converse is also applicable.  She criticised the
Commission’s analysis, as it did not include this feature,
as
well as the authorities upon which it relied as being too limited, as
it leads to very strict assumptions. Consequently, Computicket

submitted that ordinary theories of foreclosure are inappropriate in
this case.
[43]
There is no support for this conclusion apart for the
argument that in the relevant period, at least, this market required
large
upfront infrastructure investments, including retail networks
and that it made sense for the inventory to be grouped together in

exclusive contacts, in order to make the investment worthwhile. This
is the only basis put forward, which appears to be a standard

defence. It reveals no foundation for a different theoretical
approach to be employed in exclusive contracts in the context of

two-sided markets.
Prof Theron did not
really deal with the question whether exclusivity was needed to
operate at scale and, if required, the proportionality
thereof.
[44]
Furthermore, there was agreement between the experts
that the market had two-sided features and that this had to be taken
into account.
Dr Mncube, however, explained that the two-sided
market does not limit market power of the platform.  On the
contrary, it
makes it more difficult for new entrants to break into
the industry, “
which is dominated by an incumbent which has
more than 90% market share, since they would need to attract enough
scale on each side
of the market
.”  This position is
strengthened by the approach set out in the ICN Workbook, namely that
network effects have “
an effect similar to scale economies
since a dominant firm can use exclusive deals to exploit such market
dynamics in order to deprive
a competitor of the means of gaining the
required critical mass of sales or credibility with customers
.”
[32]
[45]
Prof Theron acknowledged that the two-sided market may
create a barrier to entry, and that such markets are not impervious
to abuse,
although she argued that those cases may be few.  I
agree with the Tribunal that Prof Theron’s argument of the
special
features, in relation to a two-sided market, stood at no more
than a theoretical level and was not necessarily supported by any

evidence.  Nothing from what was presented by Computicket,
specially changes the assessment applicable when examining the
effect
of exclusive contracts, even when two-sided markets are involved.
[46]
As to market coverage, all Computicket post 2005
contracts with inventory providers covered the “entire”
inventory of
its inventory providers and not just a single or certain
event(s).  In addition, all the agreements contained exclusivity
clauses.  This means post-2005, the entire client base was
subject to the exclusivity provisions.  This represented over

95% of the total market, (as that constituted Computicket’s
market share).
[47]
Prof Theron contended that market dominance cannot be
the same as a  share of the market which is foreclosed; only
1800 contracts
were analysed by the Commission and in a market where
there are no published figures reflecting the turnover of the whole
market,
it was very difficult to understand the relevant universe.
According to her, about a third of contracts should expire on
average every year.  These contracts would then be open to be
contestable by a new entrant.
[48]
I fail to follow this argument. Firstly, the amount of
contracts analysed would have represented a significant portion of
the market,
i.e. over 90%; the rest of the universe allegedly not
known would have been insignificant in the bigger scheme of things.
[49]
Secondly, the contention that some 25% of the contracts
would expire each year opening an opportunity for a new entrant to do
business
with those inventory providers, does not assist, either,
because of the constraints presented by the exclusivity contracts, as
well as other barriers that a new entrant would have to face.  This
is not easily ascertainable
as to
what
percentage of business remained “for the taking”, as some
inventory providers could have ceased doing business
altogether after
a particular event or show had come to an end. Certainly there was
insufficient evidence to show that the figure
of 25% could
significantly sustain a rivalry. In addition, the inventory providers
could also leave the outsourced ticketing services
market or opt for
self-supply.  The suggested alternative of self-supply is,
however, in this context, not an indication that
the market was not
foreclosed.  Self-supply did not form part of the defined market
of outsourced ticketing services.
[50]
Thirdly, there is no evidence to support a view that an
increase in contracts over the period 1999 to 2010 meant that many of
those
contracts were available to sign in previous years but not
acquired by Computicket.  The increase could be ascribed to a
number
of factors, including increase in business, or change in
enforcement of contracts.  Even if it signified new business,
what
prospects would a new entrant have in the face of the “
all
or nothing approach
” adopted by Computicket, viewed
together with the incumbency advantage Computicket had?
Moreover, it is not clear how
many of the expiring contracts were in
fact terminated or were automatically renewed in terms of the default
renewal provision.
Even had the contracts expired, the figure
of R364 million proposed by Computicket to represent business up for
renewal,
included gross ticket sales across all sectors, not just
entertainment. In summary,   it was uncertain whether the
value
of business that remained for contestation was sufficient to
sustain a competitive rivalry with so dominant a firm as Computicket.
[51]
As for the duration of the contracts, the exclusivity
obligation was imposed for a period of three years in virtually all
contracts
from 2005.  It is possible that inventory providers
would fail to actively take any step, after expiry of the contract,
which
would result in its automatic renewal.  Others may have no
motivation to switch due to lack of suitable replacements, or simply

for reputational reasons, or because a Computicket product is a “
must
stock
” product as explained in the ICN Workbook.
[33]
[52]
With regard to incumbency advantages and economies of
scale, it is without a doubt that Computicket has over many years
built a
strong brand. As Dr Mncube submitted, a new supplier of
outsourced ticketing services would need to overcome significant
entry
barriers on both supply and demand sides. An entrant would need
to incur a significant amount of fixed costs in order to be an
effective rival to Computicket. It would also need to overcome
reputational barrier and other costs-price
disadvantages.
[53]
It was revealed at the Tribunal
that in six out of eight instances, Computicket enforced the
exclusivity clause strictly and in
two instances it threatened to do
so. If inventory providers attempted to use the services of a
competing supplier they ran the
risk of facing legal action for
breach of the exclusivity clause and had to forgo use of
Computicket’s
services at the same time.  Mr
Kurt
Drennan, who testified for Computicket at the Tribunal, confirmed
that Computicket enforced the exclusivity clause strictly.
It also
rejected requests to enter into non- exclusive agreements, even after
the expiry of the exclusive agreement.  Failure
to accept
the exclusivity clause resulted in no agreement being signed and
therefore ticketing services not being provided by Computicket.
As
Mr Drennan put it “
if a party does not want to have
exclusivity there is no agreement available for them
.”
[54]
This was the case in respect of
the Theatre on the Square in mid-2008.  Computicket’s
insistence on exclusivity was also
communicated to Theatres such as
the Dockyard Theatre, Heritage and National Children’s Theatre
in early 2008 and 2009 respectively.
[55]
Dr Mncube concluded that Computicket’s ‘all
or nothing’ policy also harmed consumers who may have preferred
multiple
ticket agents in order to maximise their sales.  It
also hurt them over time, by making it harder for entrants to build
scale
gradually, and acquire the reputation for reliable service in
the marketplace.  The harm to consumers could occur even if the

policy was for a short duration. It also had the effect of making
small-scale entry harder when the contracts came up for expiry,
thus
reinforcing the overall exclusionary effects of its exclusive deals.
[56]
From the period 1999 to 2010, of the 1639 contracts for
which information on exclusivity was made available, 1630 were
exclusive,
while only nine were non-exclusive.  According to Dr
Mncube, the appearance of the exclusivity clause in a standard
service
agreement indicated that it was a condition insisted upon by
Computicket and not included at the behest of the inventory provider.

This cannot be disputed.
[57]
The change in duration of contract from 4 months or
less coincided with Shoprite’s acquisition of Computicket.
Prior
to 2005, less than 30% of contracts were on a
multi-period basis, with fewer than 10% between 1999 and 2001.  From
June 2005,
however, 95% of all contracts were signed for three years.
Contracts did not all run out at the same time, they were
staggered.
[58]
Another significant issue concerns two significant
increases in booking fees, in mid-2002 and mid-2003 respectively,
after the merger
with TicketWeb. I deal with this in more detail
elsewhere in the judgment.  According to Dr Mncube, variations
in commissions
and booking fees across different contracts confirmed
the existence of price discrimination in relationships between
Computicket
and inventory providers.  As Mr Drennan testified,
larger customers were able to negotiate substantially better rates.

There was less discrimination in terms of exclusivity and the
contract scheme after mid-2005.
[59]
The staggered nature of these contracts inhibited new
entrants from discerning the expiry of the contracts and accessing
the necessary
stock of available business so as to enter and expand
effectively in the market.
[60]
Lack of buyer concentration is one of the features
noted which could potentially have subjected them to coordination
failures when
contracting with Computicket. The largest five clients
accounted for about 50% of the total entertainment sector.  The
TicketMaster Ireland
[34]
case upon which Computicket relies in this connection is
distinguishable. In that case TicketMaster was constrained from
exploiting
its monopoly position, because of the countervailing buyer
power of two promoters, MCD Promotions and Alken Promotions. There
the
promoter, in conjunction with the artist, set the price or face
value of the ticket sold by TicketMaster.  Promoters in Ireland

competed with promoters in other countries to convince high profile
artists to perform in Ireland.  Artists had strong bargaining

power, could command substantial appearances fees, which was in turn
reflected in the ticket price.  If
TicketMaster
did not
agree with the promoter’s booking fee “
they can
credibly threaten to either switch to another ticketing service
provider or set up their own ticketing facilities
.”
[35]
This was not the case in the South African outsourced ticketing
services market dominated by Computicket.
[61]
In contrast to
TicketMaster
, in
SISTIC
[36]
the Competition Commission of Singapore found explicit restrictions
requiring all events held at certain venues to use SISTIC as
a sole
ticketing service provider to be abuse of dominance in contravention
with section 47 of Singapore’s Competition Act.
It was found
that “
when event promoters are required to sell tickets for
all their events through SISTIC ticket buyers who wish to attend
those events
have no choice but to buy tickets through SISTIC as
well
.”
[37]
In these circumstances there was no strong countervailing power
from customers, unlike in
TicketMaster Ireland
.
Evidence
supporting likely anti-competitive effects
[62]
Computicket contends that there is no evidence to
support any anti-competitive effects.  Mr Drennan conceded under
cross examination
at the Tribunal that there was fierce competition
between Computicket and TicketWeb at the time of their merger.
Computicket’s
shareholders expressed the view in the Project
Symphony deal document, dealing with the proposed transaction between
Computicket
and TicketWeb that the ticketing market in South Africa
was too small and under too much pressure “
to sustain two
competitors in the short to medium term
.”  I take note
of the fact that the merger was approved, and may have been intended
to reduce costs by increasing joint
scale of the business as
contended by Computicket; its effect though, had an outcome of
removing a formidable competitor from the
market, at that time.
[63]
Mr Bernard Jay, who was the Chief Executive Officer of
Johannesburg Civic Theatre (Pty) Ltd (“Joburg Theatre”),
in his
witness statement stated that when TicketWeb entered the
market, it was in direct competition with Computicket, it had a lower
fee structure, and as a result became successful in attracting
inventory providers.  According to him, Computicket lost
inventory
to TicketWeb and it was around this time that it started to
seek exclusive contracts with inventory providers.  In certain

instances it offered to undercut TicketWeb’s fee structure if
inventory providers agreed to sign these exclusive contracts
with it.
He did, however, testify that TicketWeb’s financial
viability declined, because the public still enjoyed going
to retail
outlets to buy tickets and TicketWeb could not compete with the
facilities that Computicket had built.  Before TicketWeb’s

entry, Computicket did not require inventory providers to sign
exclusive contracts.
[64]
The relevant issue here is that, at least between 1999
and 2001, successful entry by a competitor had been achieved, albeit
both
companies were making losses by the time of their merger.  The
Tribunal was therefore correct in accepting that period as the
best
available counter-factual for the purposes of assessing the
anti-competitive effects of the exclusive contracts, since it
was the
least affected by the exclusivity policy.
[65]
According to Computicket, Shoprite, through Ticketshop,
successfully entered the market in 2004 and garnered significant
business,
reaching approximately R18 million of gross client turnover
during the period July 2005 to June 2006.  It entered the market

offering low cost rates to some event promoters, or event organisers,
in order to try and gain market share.  It entered into

exclusive arrangements with clients.  Computicket therefore
contends that from 1999 to 2005, there were two large entrants
which
were viable competitors to Computicket, and which survived because
they were sponsored by large companies and had a retail
footprint.
[66]
The discord, in Computicket’s view, is that
during this period 99% of the contracts were said to be exclusive,
but yet there
was fierce competition, by large entrants; no small
entrants were noted during this period.  According to
Computicket, if
a counter-factual of prior to 2005 is preferred it
ought to be the full period from 1999 to 2004.  Prof Theron
proposed an
alternative counter-factual, from 2010 to 2016, on the
basis that whilst the exclusive contracts were still in place, there
were
several firms that entered the market.
[67]
Ticketshop only operated for a
year before it merged with Computicket and had only achieved 3% of
Computicket’s revenue. In
Computicktet’s view, the
contended success of Ticketshop could well demonstrate how entry
could be achieved prior to the 2005 exclusivity provisions.
[68]
Computicket also contends that from 2005 to 2010, there
were two successful entries, by Webtickets and Ticket Connection in
2007
and 2008 respectively.  It contends, however, that between
these periods, the limited presence of firms was not due to the

exclusive contracts, but was determined by the nature of the market
and the fact that these firms were not as efficient as Computicket.
[69]
In an email dated 28 August 2009, a Ms Lise Kuhle
informed the Commission that Ticket Connection earned R3.5 million in
fees and
“
this was mostly due to the Celine Dion concert
because the ticket prices were high and we also did a lot of work for
this promoter
so we charged our standard rates (not discounted)
”.
Ticket Connection was only in the market for a year.  It
appears that Ms Kuhle told the Commission in an interview
that the
primary reason for exiting the market was that they could not
reimburse patrons who bought tickets for cancelled Josh
Groban
concerts.  Ticket Connection subsequently went into liquidation.
The other reason put forth by Ms Kuhle for Ticket
Connection’s
demise was that it could not expand and get new inventory providers;
most of the potential inventory providers
were tied down to the
exclusive contracts.  Those that switched were very small and
probably insignificant to Computicket.
Ms Kuhle further advised
that when they approached larger inventory providers, Computicket
immediately sent those inventory
providers’ legal threatening
letters which made the inventory providers stop any intended dealings
with Ticket Connection.
Hence it is clear that, whilst the Josh
Groban concert was the cause for Ticket Connection’s primary
exit, the exclusivity
contracts played a role in its struggle to
survive.
[70]
Computicket’s counsel pointed out that Ms Kuhle
should have been called to testify and that the utterances on
correspondences
remain untested and should not have been accorded
much weight. The Tribunal has a discretion to decide whether or not
to admit
hearsay evidence. To the extent that it attached too much
weight to the statements attributed to Ms Kuhle, such would have no
material
impact to the overall assessment of the case. Until 2010,
Webtickets was a small player which had entered the market but had
not
sufficiently grown to pose any significant competitive threat to
Computicket.
[71]
As regards Strictly Tickets, Computicket submits that
the Tribunal’s findings were not supported by evidence.  It
argues
that Strictly Tickets did not pose any competitive threat to
Computicket during the relevant period.  It was a small-scale

up-start, not comparable to Computicket; it employed technology not
generally desirable at the time and chose to focus its efforts
on the
theatre segment, which not only showed no growth but constituted only
2.7% of Computicket’s total contracts. Furthermore,
the
exclusive contracts did not cause Strictly Tickets’ exit from
the market.  It failed because it did not have the
required
attributes (scale, sponsorship and retail footprint) to successfully
enter the market and expand.
[72]
The evidence presented on behalf of the Commission
stands in sharp contrast. Strictly Tickets introduced paperless
ticketing as
a first in the world, which provided convenience to
customers to purchase tickets in the comfort of their homes and at
any time
of the day.  It offered ticket distribution services to
theatre owners/producers, festival organisers and promoters, who are

inventory providers.  The technology made it possible for a
customer to purchase a ticket online and have it delivered to
his or
her cell phone through a 2D barcode.  In contrast to
Computicket’s system, consumers did not have to travel to
an
outlet to collect their tickets.  According to Mr Charne who
testified about Strictly Tickets, the paperless system, in

conjunction with the barcode system, also prevented any opportunity
for fraudulent activities.
[73]
Mr Charne stated that for about six months,
approximately six theatres had given to and allocated Strictly
Tickets inventory which
they were selling for those who did not want
to go to a physical outlet.  This was a good supply for tourists
who could not
go to a physical outlet, for instance.  The
examples of those inventory providers were Victory Theatre, which
hosted the Umoja
show.  Strictly Tickets was becoming very
successful - in one month it sold over R120 000 worth of
tickets.  Other
examples are the Heritage Theatre, the Dockyard
Theatre where Strictly Tickets improved dramatically, as well as the
Liberty Theatre.
Within six months it had built up to R400 000
in ticket sales.
[74]
Shortly thereafter, Strictly Tickets received
notifications virtually from all the theatres it did business with,
advising it of
a letter they received from Computicket notifying them
of the exclusive agreement they had with Computicket, and that they
needed
to stop selling tickets through Strictly Tickets, and
threatening them with legal action.  An email from Computicket
to Heritage
Theatre dated 19 February 2008, is a clear example of
Computicket’s conduct.  It states, inter alia, as follows:
“
I respectfully request that you correct the position within
the next five days, of removing your event (s) from Strictly Tickets

website and refrain from making use of their ticketing services until
such time that our current agreement lapses od that we meet
with you
to discuss the path going forward. Should you not do so within the
next five days as requested, we will suspend selling
tickets for your
event(s)
.”
[75]
The inventory providers were scared; they were
frightened by the prospect of getting into a dispute with a
well-respected brand,
legal action and not being able to do business
with Computicket.  Whilst they would have wanted to continue
using Strictly
Tickets, they asked for their inventory to be removed.
Various email exchanges and letters reflecting these notifications
from
Computicket are on record.  One such exchange, from one of
the theatres dated 17 June 2008, states: “
Joe asks that you
please contact Strictly Tickets and tell them to stop whatever it is
that they are doing in selling our tickets
as we have a contract with
Alfie/Computicket.  We cannot afford for Computicket to pull the
shows from their website and stop
selling them.  Please do this
in writing and please confirm with Alfie that we have instructed
Strictly Tickets to stop whatever
they are doing.
”
[76]
According to Mr Charne, the strict enforcement of the
exclusivity contract by Computicket had a dramatic impact on Strictly
Ticket’s
commercial viability.  As the ticketing business
is volume driven, theatres represent continuity in the
business
as they are open almost daily.  They are a consistent source of
business, unlike just doing once-off type of events.
[77]
Mr Charne further testified that due to the enforcement
of the exclusive contracts by Computicket, Strictly Tickets intended
to
downscale in 2011.  It did not close down, however, due to
some inventory providers who advised that they had left Computicket

to support it.  The business was left open for another five
years and finally closed down towards the end of 2016.  According

to Mr Charne, the closure came when he gave up hope, ultimately
realising that the “
ticketing industry was a blocked off
industry and there wasn’t very likely much chance of anything
changing in the near future
.”
[78]
It is abundantly clear that Strictly Tickets was a
small-scale entrant, which was able to grow its business, without the
extensive
retail network.  It had technology that no one else
had in the market at the time, and offered customers a convenient
paperless
ticket option.  Because of Computicket’s
enforcement of its exclusivity provisions and its incumbency
advantages as
a dominant firm, Strictly Tickets was prevented from
growing in the market and was ultimately forced out.
[79]
In cross examination, when it was put to Mr Charne that
the business grew despite the presence of exclusivity agreements, as
the
hard financial facts showed, he suggested that it would have
become even more viable and a greater business without the presence

of the exclusivity agreements.
[80]
Counsel for Computicket criticised the Commission’s
reliance on Mr Charne’s evidence, mainly for the reason that
Strictly
Tickets was small and not an efficient competitor. Size and
efficiency of a competitor are not determinant factors in
establishing
likely competitive effects. It should not be forgotten
that the exclusivity clauses, on the available evidence had a clear
likelihood
of impeding the rise of as efficient competitors to
Computicket.  Insistence on proof of actual effects could lead
to firms
escaping prohibition in terms of the Act in situations where
conduct foreclosed the emergence of competition.
[81]
I am in agreement with the Commission that the ultimate
foreclosure of Strictly Tickets did not only affect it, but had an
effect
on inventory providers who would have wished to utilise more
than one ticketing agent to increase their sales, and a loss to
customers
who enjoyed the convenience of a paperless technology which
no one else offered at the time.
[82]
Computicket argues that despite the remaining presence
of exclusivity agreements after the relevant period of 2005 to 2010,
many
competitors entered the market, including Omni-Tickets,
www.tunegum.co.za
, Tixsa,
SmartFan, Ticket Break, Micket, Entry Tickets, Viagogo and Groupon.
It concludes that the limited presence of other
entrants in the
relevant period of 2005 to 2010 was not as a result of the
exclusivity contracts, but was determined by the nature
of the market
as well as the fact that these firms were not as efficient as
Computicket.  Prof Theron had proposed the post
2010 period as
an alternative counter-factual.
[83]
In my view ,the Commission’s contention that the
entrants post 2010 were enabled by significant changes in the market,
such
as the development of the internet and possible changes in
demand, is the more probable explanation. Firstly, the practicability

of internet usage was fortified by the evidence of  Mr Daryl
Baruffol, the ticketing manager of Cricket South Africa (Pty)
Ltd
(“CSA”) at the time, who, referring to a system
implemented after termination of the Computicket contract as at
the
end of 2009/2010 season, said in his witness statement, “[
t
]
he
new system that has been developed for CSA would not have been
feasible in the past, and it is only the increased availability
of
open-source software and increased internet usage in South Africa in
the recent past that had made it viable now.  Previously,
CSA
was dependant on Computicket as a result of its ability to reach a
wide range of customers via its retail network and call
centre
.”
[84]
As Dr Mncube put it, the question is what would have
happened had the exclusive contracts not been in place, in the
relevant period,
and not what happened after 2012 in the context of
Computicket continuing with exclusivity contracts.  The time
period for
the analysis is accordingly flawed.
[85]
What Dr Mncube explained made sense, because the period
after 2012 was not under investigation.  Even if that were to be
the
case, the correct counter-factual question in those
circumstances, would be what would have happened between 2012 and the
date
the relevant period ends.  A different investigation is
apparently being undertaken by the Commission in respect of the said

period.  Entry in the post-period may have been made possible by
a number of factors, which I have already mentioned.  It
equally
cannot be argued that such post relevant period entry meant that
exclusivity clauses did not constrain entry in the market
during the
relevant period.
[86]
Besides not much interrogation had been done for the
post 2012 period.  The Tribunal was, therefore, correct in
concluding
that the proposed post relevant period counter-factual was
procedurally irregular and insufficiently robust to constitute a
reliable
counter-factual.
[38]
[87]
There is no doubt that there were inventory providers
who would have wished to split the inventory for various reasons
including
different technology, customer bases, customer
relationships, quality of service and pricing of different ticketing
providers,
and they were denied that by the enforcement of the
exclusivity clause.  It was alleged by Mr Charne that Dockyard
Theatre
and Heritage Theatre closed down – ascribing this to
not being allowed to benefit from split inventory.  This may not

be conclusive but that is not the requirement, such effect may be
inferred from the substantive exclusionary conduct.  It
would be
also recalled that the conduct need not completely drive the
competitors out of business, or completely foreclose them
from
entering the market.  It is enough to show that they were
prevented or impeded from entering it.
[39]
[88]
Prof Theron conceded that reduction of supply of
inventory may be an anti-competitive effect.  She would not
comment on whether
there would have been a reduction of inventory
supply during the period of exclusivity. The exclusivity clause had a
negative effect
on innovation, choice and higher quality of service.
There is sufficient evidence to provide an answer to this question.
Pricing effects
[89]
As to the pricing effects, the Commission’s
theory of harm is that the exclusive contracts caused fees to be
higher than they
would otherwise have been.  Following the
merger with TicketWeb, Computicket implemented two separate increases
in its standard
booking fee, one in April 2002 and another in
mid-2003.  Dr Mncube found that a standard booking fee schedule
was used frequently
for the period 1999 to 2010.  He testified
that approximately 75% of contracts fell in this category.
Arrangements with
a special booking fee represented a limited
exception.  As with the booking fees, his assessment showed an
increase in commissions
paid by the inventory providers from late
2002.  The standard commission between 1999 to 2001 was 5%, this
was increased to
5.7% from about late 2002, up to and including 2010.
Between October and December 2002, of 32 contracts about 17 had
a commission
of 5.7%.  During 2003, about 93% of the contracts
had the higher commission of 5.7%.
[90]
Computicket on the other hand contends that prices
charged for its services, between 2005 and 2010 and beyond, remained
relatively
steady or stable.  It argues that there is no
evidence to support a conclusion that fees associated with the
tickets were
higher than they would otherwise be, as a result of the
exclusive contracts.  It contends that such remained stable, or
decreased,
as shown by Prof Theron in her expert testimony.
[91]
The experts differed on the periods as well as the
assumptions used.  Dr Mncube chose the period of 1999 to 2001,
because during
that period TicketWeb was an effective competitor.
According to Dr Mncube, after the merger with TicketWeb, the
reduction
in competition appeared to have affected prices paid by
customers; Computicket, who have moved into a
de facto
monopolist position in the market in 2001, was able to profitably
increase both its booking fees and its commissions.  He
compared
this period to that after the merger in 2002, which allowed
Computicket to capture back all the clients it had lost to
TicketWeb.
[92]
The increases, according to Dr Mncube, brought about a
nominal cumulative increase of between 33% and 100%, depending on the
ticket
price, between the first half of 2002 and the second half of
2003.  Having been criticised by Prof Theron for relying on
nominal
pricing, Dr Mncube calculated booking fees in real terms, and
concluded that the real booking fees had in reality increased: the

analysis showed that during the period of 2003 to 2010, the average
annual increases in booking fees ranged from 11% to 52%, being,
16%
for a R60 ticket, 13% for R100 ticket, 25% for a R200 ticket and 52%
for a R300 ticket.  Given that the standard booking
fee was not
increased after mid-2003, the annual real increase in booking fees
generally declined through time, due to the impact
of inflation.
However, due to large increases implemented mid-2002 and
mid-2003, even at the end of the period in 2010, booking
fees were
higher than the 2002 level in real terms.  For example, at a
ticket price of R300 in 2002 prices, the booking fee
in 2010 remained
higher than in 2002 in real terms.  The price increases were
profitable, significantly so after the merger
and consistently
thereafter as in both 2004 and 2005 financial years.  There was
also an upward trend in the total fees and
profitability of the
entertainment business.
[93]
Computicket’s submission on the other hand is
that its data showed that, whilst tickets had risen consistently from
2001 to
2016, its margins did not.  From 2001 to 2006, they rose
only by 1.5% and thereafter consistently declined until 2016.  This

was as a result of various technological improvements, resulting in a
lower cost base and passing these efficiencies on to clients.

Computicket disputes that it enjoyed “
supra-competitive
”
prices as alleged by the Commission.  In fact, it submits that
there were no price increases.  The flaw, in Computicket’s

view, is that Dr Mncube insisted on price comparisons between 2001
and 2010, as opposed to year on year price comparisons and
recognition of what the comparative market price ought to have been
in 2005, before the significant sign-up of exclusive contracts.

Additionally, if there was any kind of increase, which is
denied, as explained by the ICN Workbook, a price increase
accompanied
by a quantity increase is consistent with a
pro-competitive effect, while a decrease suggests an anti-competitive
effect.
[40]
In this case, it contends that the evidence showed there was an
increase in quantity of supply over the relevant period.
[94]
In her analysis Prof Theron included a period of
analysis (after 2012), which constituted an error, as this is not a
period under
investigation.  Another flaw identified by Dr
Mncube is that the pricing method followed by Prof Theron is affected
by composition
of demand, so if for some reason demand for the lower
price tickets increases, then the average price decreases.  Even
if
the prices for each and every price category of tickets increased,
the demand effect may bias their price index making it appear
that
the ‘
per transaction price
’ has decreased.
[95]
Prof Theron acknowledged the distortion caused by
composition of demand, but stated that it was the best possible
analysis as there
was no way an index could be constructed that could
show price increases over time, as this was not a “
homogenous
”
product.  Computicket’s analysis also excluded its top
five inventory
providers, which had an effect
on biasing its average booking fee downwards.  The answer for
this exclusion was less than satisfactory.
[96]
In the final analysis I am
satisfied that the Tribunal was correct in its finding that the
Commission’s theory of harm supports
a conclusion that
Computicket’s exclusivity contracts were likely to have given
rise to anti-competitive effects during mid-2005
to 2010 in that
conduct by a dominant firm, being Computicket significantly impeded
the establishment of a viable competitive rivalry
and thereby
consolidated Computickets’ continued dominance through its
impugned conduct.
The efficiency
defence
[97]
The next question is whether there was any
technological, efficiency or other pro-competitive gain from
Computicket’s anti-competitive
conduct.  It is for
Computicket to establish this defence. In analysing efficiencies, it
must be considered “
whether they are relationship specific,
whether the parties can achieve them through less restrictive means
and whether the efficiencies
outweigh any anti-competitive effects on
consumers.
”
[41]
[98]
At the outset it is important to state that according
to Mr Drennan the purpose of the exclusivity contracts was to respond
to TicketWeb’s
entry into the market.  In June 2005,
Computicket received an instruction from Naspers, the parent company
of the company
that owned Computicket at the time, to secure stock
for a longer period of time. The purpose was clearly to protect
Computicket’s
inventory from competition.
[99]
When asked by the Chairperson of the Tribunal whether
she had investigated efficiencies, Prof Theron testified that, in her
report,
they [Econex team] had found no anti-competitive effects, so
they did not see a need for an in-depth analysis of the efficiencies,

but “
included efficiencies from the literature and some that
we got
from the evidence to show that there could be specific
efficiencies here yes
.”
[100]
Computicket contended that exclusivity was necessary to
protect general investments, as it did not charge its clients upfront
for
all of its investments.  It also protected it from free
riding by other ticketing agents, piggybacking on its advertising
efforts.  It has made considerable investments in advertising,
which it would not have made had there been no exclusive agreements

in place, despite being able to contract some of the investment with
the individual clients.
[101]
It submitted that it relied on clients remaining with
it for the duration of the exclusive agreement in order to recoup its
costs.
It also contends that it was willing to make loans and
investments in some way to protect inventory providers because it
could reduce its risk through guaranteeing ticket sales for the
duration of the exclusive agreement.
[102]
Dr Mncube explained that guidance from economic theory
indicated that exclusive dealing is more likely to promote efficient
investment
by a supplier if the following three cumulative conditions
held: firstly, the investment must be non-contractible, which implies

that it cannot be specified in a contract and paid for by the buyer;
secondly, the investment is customer specific, meaning that
once it
has been incurred by the seller, it cannot be used by another
customer; and thirdly, the investment has external effects
on
competitors to the seller, increasing the value of trading between
such competitors.
[103]
The Tribunal found that these requirements were not met
as Computicket applied exclusivity provisions in each contract,
regardless
of what type or needs were. “
The standard terms
were applied for the standard length to all providers. Nor was
Computicket able to provide any documentary evidence
to support that
these contracts were motivated by any of the efficiency concerns set
out above
.”
[42]
[104]
Computicket argued that there were general investments
in every relationship that were not fully contracted and evidence
showing
that there were high operational costs associated with
crafting new contracts for every specific client’s needs which
needed
use of standard form contracts. Further, consumer convenience
is enhanced through cross subsidisation of smaller events; this in

turn builds consumer loyalty and brand reputation.
[105]
According to Dr Mncube, if the investment was part of
the contract, the seller and the buyer could simply agree on the
efficient
level of investment and make an upfront payment which would
take into account the optimum level of the investment that would be

required. This would ensure that efficient trading takes place with
no need to rely on an exclusive contract as an instrument to

indirectly achieve the outcome. This is a sensible method.
[106]
There is no risk of free-riding that has been shown,
requiring exclusivity, either.  The exclusivity provisions
spoken of were
only introduced in 2005, if their purpose was to
protect investment they would have been introduced long before that.
When introduced
in 2005, their reason was to meet certain contractual
financial performance warranties. None of the contracts were
suggested to
have been tied into or calculated in relation to any
specific investments.
[107]
Support has not been shown for the justifications given
by Computicket, as being in concert with general economic and
competition
principles in exclusive dealings in relation to general
volume-based considerations. The generic submissions made do not
illustrate
why the Computicket situation had to be treated as unique.
In addition, such submissions are not supported by evidence.
[108]
The problems that may allegedly occur as a result of
inventory splitting cannot in my view justify exclusive provisions
for all
events. Clearly this is an issue that can be overcome by
contract, including making upfront arrangements per event(s),
depending
on the needs or as Baruffol stated, a possible blocking off
of tickets that each agent has, to avoid any double booking, or
confusion
that may arise. Sharing of platforms is something that
Computicket had at some occasions accommodated before, in
circumstances
where inventory was split with parties who were
self-supplying. With all the concerns raised with inventory splitting
including
any reputational risks that may occur due to systems
errors, I do not see a necessity of an exclusive contract of the
nature employed,
to avoid such from occurring. These are matters that
can be resolved without a need for exclusivity. Again, another issue
is that
these difficulties would surely have arisen long before 2005.
It has not been satisfactorily explained why inventory splitting
would become a particular concern in 2005.
[109]
Finally, on the efficiency point, it was argued on behalf of
Computicket that exclusivity increases consumer choice and
convenience
by enabling Computicket to offer the best available seats
and equal opportunity to tickets; this reduces search costs to
consumers
because they know where to buy tickets for a given event.
With a large network of retail outlets, a website with large capacity

and a call centre, it is very easy for most consumers to access
tickets for a particular event as opposed to a non-exclusivity

scenario where customers will have to move between retail outlets and
websites. In addition, issues of fraud, management of ticket

inventory, refunds to customers for cancelled concerts, and
organising, negotiating and tendering for each event are efficiently

managed.
[110]
I agree with the Commission’s argument that this
presupposes that consumers would prefer to have one supplier than
having
to search for a best deal. In any event the network offered by
Computicket would still be available as one of the choices available

to the consumer
;
it would not be lost. To achieve all these
efficiencies in order to offer value to customers does not
necessitate closing off of
potential rivals by way of an exclusive
contract.
Conclusion
[111]
In summary, I am persuaded that
not only was the exclusionary act substantial in terms of foreclosing
the market to rivals, there
is evidence pointing to actual harm on
consumers (although the latter is not necessary to show). No
pro-competitive efficiencies
were established.
Accordingly,
the Tribunal did not err in its finding that Computicket had
infringed the provisions of section 8 (d) (i) of the Act.
Penalty
[112]
With regards to the penalty, Computicket submits that
the Tribunal ought not to have imposed an administrative penalty
which is
almost equal to 10% of the firm’s turnover. The reason
put forward is that, regard being had to considerations of
proportionality
and rationality, the only evidence advanced by the
Commission in respect of foreclosure, was only in relation of a tiny
(3%) of
the total market, being the theatre market on which Mr Charne
and Mr Jay focused their evidence.
[113]
This submission cannot be sustained. The evidence
presented in this case was across all inventory providers and not
just the theatre
section. Mr Drennan’s contention was never
that the enforcement of the exclusivity was intended to merely focus
on theatres.
[114]
The Tribunal thoroughly explained the methodology
applicable and basis of its decision to impose the penalty of R20
million. There
is no reason to repeat it. Having considered the
submissions made on appeal, in relation to penalty, I find no basis
to interfere
with the Tribunal’s discretion.
[115]
In light of the above findings, the following order is
made:
1. The appeal is dismissed with costs including costs of two counsel.
________________________________
N P BOQWANA
Judge of Appeal
DM
DAVIS and D UNTERHALTER
Judge
President and Acting Judge of Appeal
(Concurred)
APPEARANCES
For the
appellant: Advocate L Kuschke SC with Advoctes  M Engelbrecht
and A
Armstrong
Instructed
by: Werksmans Attorneys, Cape Town
For the
respondent: Advocate J Wilson SC
Instructed
by: State Attorney
[1]
“
This Agreement shall commence
on the date of Client’s signature hereof and shall continue for
an initial period of three years,
and unless terminated at the end of
the initial period by either party giving the other three months’
written notice of termination,
the Agreement shall continue for
successive periods of one year each, subject to the right of either
party to terminate the Agreement
at the end of each successive year
by giving three months’ written notice of termination prior
thereto.
”
[2]
Competition Commission v South African Airways (Pty) Limited
(18/CR/Mar01)
2005] ZACT 50
(28 July 2005)
[3]
Sasol Chemical Industries Limited v The Competition Commission
2015(5)SA 471(CAC) at paras 178-184
[4]
See
Ways to curb expert bias,
De Rebus September 1 2017
[5]
Id fn 2 at paras 103 to 105
[6]
Id fn 2 at para 132
[7]
Id fn 6
[8]
Nationwide Airlines (Pty) Ltd and Another v South
African Airways (Pty) Ltd
(80/CR/Sept 06)
[2010] ZACT 13
(17 February 2010) at paras 143 and 183
[9]
South African Airways (Pty) Ltd v Comair Ltd and
Another
2012 (1) SA 20
(CAC) at paras
105-106
[10]
Paul K Gorecki “
Form – versus effects based approach
to the abuse of a dominant position: The case of Ticketmaster
Ireland”
2 J Comp L & Econ 533 (2006)
[11]
Id fn 10 at page 547
[12]
Id fn  9 at para 109 and 110
[13]
Id fn 9 at para 112
[14]
Competition Commission and Another v British American Tobacco
South Africa (Pty) Ltd
(05/CR/Feb05)
[2009] ZACT 46
(25 June
2009
).
It is perhaps is iro’nic, given the attack on Dr
Mncube’s evidence  that Computicket’s economist,
Prof
Theron, spent so much time divining on legal doctrine
which is patently beyond the scope of an expert economist.
[15]
Netstar
(Pty) Ltd and Others v
Competition Commission South Africa and Another
2011
(3) SA 171
(CAC). See also  the EU approach in
Intell
Corporation v European Commission
CaseC-413/14P
[16]
Id fn 15 at para   33
[17]
Id fn 15 at paras 29, 38 and 42
[18]
Id fn 9
[19]
See in particular
SAA (CAC)
fn 9 at
para
112
[20]
1973[ECR] 215 at para 12
[21]
Hoffman
La Roche v Commission 1979
[22]
EC Guidelines on the Commission’s enforcement of priorities in
applying Article 102 at para 21
[23]
See
ICN Unilateral Conduct Workbook
, Chapter 5: Exclusive
Dealing, April 2013
“
The term
‘exclusive dealing’ is generally used to describe an
arrangement through which an upstream seller’s
goods are sold
to distributor or retailer under the condition that the distributor
or retailer does not sell similar competing
products.  The term
. . . may also describe an arrangement by which a downstream
purchaser requires an upstream seller not
to sell its products to
any competing downstream purchasers.”
(At para 1).
[24]
Id fn 23 at para 18
[25]
Id fn 23 at para 13
[26]
Id fn 23 at para 48
[27]
Id fn 23 at paras 51 and 53
[28]
Id fn 23 at para 56
[29]
Id fn 23 at para 60
[30]
Id fn 23 at para 61
[31]
Id fn 23 at paras 64 and 65
[32]
Id fn 23 at para 65
[33]
Id fn 23 at para 55
[34]
TicketMaster Ireland
, Case COM/107/02, Competition Authority
of Ireland, 26 September 2005. There it was found that: “
A
single provider of ticketing services…reduces transaction
costs of the promoter leaving the promoter in a better position
to
compete for artists
.”  (at para 2.88)
[35]
Id fn 34 at page 2
[36]
Abuse of a Dominant Position by SISTIC.com Pte Ltd
, Case CCS
600/008/07, Singaporean Competition Commission 4 June 2010
[37]
Id fn 36 at para 1.2
[38]
See also
Nationwide
fn 8 at para 213
[39]
See
Competition Commission v Telkom SA Ltd
(11/CR/Feb04), at
para 99, where the Tribunal held: “
In order to show harm
for purposes of section 8 (d) (i) it is not necessary to show that
competitors must first exit a market
or even that they lost market
share before harm.  All that is required to be shown is that
Telkom’s conduct was likely
to result in preventing or
lessening competition which would include the impeding of
competition
.”
[40]
Id fn 23 at para 73
[41]
Id fn 23 at paras 30 to 32
[42]
Tribunal’s decision at page 238