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[2016] ZACAC 4
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Omnico (Pty) Limited and Another v Competition Commission and Others (142/CAC/JUNE 16; 143/CAC/JUNE 16; : CR049 JULY 2012) [2016] ZACAC 4; [2016] 2 CPLR 398 (CAC) (15 December 2016)
REPUBLIC
OF SOUTH AFRICA
IN
THE COMPETITION APPEAL COURT OF SOUTH AFRICA
APPEAL
CASE NO: 142/CAC/JUNE 16
143/CAC/JUNE
16 COURT A QUO NO: CR049 JULY 2012
In
the matter between:
OMNICO
(PTY) LIMITED
First
Applicant
COOL
HEAT AGENCIES (PTY) LIMITED
Second
Applicant
and
THE
COMPETITION COMMISSION
First
Respondent
FRITZ
PIENAAR CYCLES (PTY) LIMITED
Second
Respondent
MELODY
STREET 18 (PTY) LIMITED
Third
Respondent
MONEYMINE
88 CC
Fourth
Respondent
t/a
HOT SPOT CYCLES
PEDDLE
ON MARKETING (PTY) LIMITED
Fifth
Respondent
t/a
MAVERICK CYCLES
SALOOJEE'S
CYCLES CC
Sixth
Respondent
WESTRAND
CYCLES CC
Seventh
Respondent
BOWMAN
CYCLES (PTY) LIMITED
Eighth
Respondent
ALBATROS
FISHING AND CYCLING
Ninth
Respondent
CYTEK
CYCLE DISTRIBUTORS CC
Eleventh
Respondent
MAILLOT
JAUNE TRADING (PTY) LIMITED
Twelfth
Respondent
TRIDIRECT
SA (PTY) LIMITED
Thirteenth
Respondent
t/a
VICICLETTA
LE
PELETON (PTY) LIMITED
Fourteenth
Respondent
DBS
DISTRIBUTING
t/a
THULE CARRACK SYSTEMS CC
Fifteenth
Respondent
PEDALLING
DYNAMIC CC
Sixteenth
Respondent
t/a
DUNKELD CYCLES
SUMMIT
CYCLES
Seventeenth
Respondent
DYNAMIC
CHOICES TWO CC
Eighteenth
Respondent
t/a
BESTER CYCLES
JOHNSON
CYCLE WORKS CC
Nineteenth
Respondent
THE
NEW JUST FUND GROUP (PTY) LIMITED
Twentieth
Respondent
JUDGMENT
VICTOR,
AJA:
[1]
The issue for determination in this case is whether the silent
participation by firms at a meeting where cartel
activity was
discussed amounts to a contraventions 4(1)(b)(i) of the Competition
Act 89 of 1998 ("the Act). Section 4 of the
Act provides that an
agreement or concerted practice is prohibited if it is between
parties in a horizontal relationship and has
the effect of
substantially preventing, or lessening, competition in a market,
unless a party to the agreement, concerted practice,
or decision can
prove that any technological, efficiency or other procompetitive gain
resulting therefrom it outweighs the effect.
This can consist of
directly or indirectly fixing prices or other trading conditions.
[2]
The appellants, Omnico (Pty) Ltd, (Omnico) and Coolheat Cycle
Agencies (Pty) Ltd (Coolheat) are wholesalers
that supply bicycles
and bicycle accessories to the retail trade. Omnico and Coolheat
attended a series of meetings together with
various retailers and
wholesalers of bicycles and bicycle accessories to discuss ways in
which retailers could improve their retail
margins. This would be
achieved by the wholesalers increasing the recommended retail prices
(RRP) for the products they sold.
[3]
The meetings culminated in a critical meeting on 1O September 2008
(the September meeting) attended by some
60 wholesalers and
retailers. It is common cause that at the September meeting the issue
of wholesalers collectively raising the
RRP at the same time was
discussed. Such a step would have resulted in the retailers
maximising their profit margins, although
the appellants appear to
dispute any 'active' participation by the wholesalers in these
discussions.
[4]
This case highlights the reasons for why there is so much writing on
what constitutes cartel conduct. The
Nobel laureate winner in
economic sciences for 1982 George Stigler, in discussing cartels
defined cartel conduct as whether or
not joint
profit-maximizing-collusion yields a meaningful and durable departure
from competition. He postulated two principal hurdles
for assessing a
cartel: firstly, reaching a consensus on the terms of coordination,
and secondly establishing a system to detect
and punish cheaters.
What constitutes cartel conduct is often a significant challenge for
a competition authority.
[5]
Corlia van Heerden and Monray Botha (Challenges to the South African
corporate leniency policy and cartel
enforcement
2015 TSAR 306
at
309) correctly observe:
'The hallmark of cartels
is that they are collusive, deceptive and secretive, and are
conducted through a conspiracy among a group
of firms. The result of
this secretive collusion is that it is notoriously difficult to
detect or prove the existence of a cartel
without the assistance of a
member who is part of it. Scormagdalia remarks that irrespective of
their clandestf ne character, the
existence of cartels is difficult
to prove due to their varying and mutating characteristics. Cartels
can be evidentially complex
in the sense that the duration and
intensity of participation and the subsequent anti-competitive
conduct on the market of each
individual undertaking may vary and
take different forms. He points out that these specifics impose a
near-unbearable task on competition
authorities to prove in detail
the cartel infringement and to impose an appropriate sanction
reflecting the cartelists' real participation.'
[6]
Because of the complex and clandestine nature of cartel conduct,
assessing whether the conduct is prohibited
becomes more difficult
and it is necessary to scrutinise the conduct and any other
evidential material in its entirety and not
piecemeal by what
occurred only at any particular meeting, as in this case the primary
September meeting. Investigating the conduct
in this matter requires
the -assessment of circumstantial evidence holistically giving its
cumulative effect rather than an item-by-
item basis, an approach
referred to in the OECD Secretariat.
[1]
In this case, as I shall describe, there is also a substantial amount
of direct evidence, in the form of correspondence between
members of
Omnico and Coolheat and other wholesalers, , agendas for meetings and
minutes of meetings.
[7]
In this case, Omnico and Coolheat participated in three meetings,
exchanged and received correspondence copies
of agendas and minutes
of meetings which were unchallenged by them. The legal significance
of these meetings lie at the heart of
this case.
Background
[8]
It was common cause in this case that most bicycles and cycling
accessories are imported and only minimal
manufacturing takes place
locally in the form of re-assembling component parts. The products
are imported under license from foreign
brand manufacturers. In South
Africa the cycles attract a 15% import duty. This import tariff
troubled the industry as it reduces
profits. A customer could also
buy components of a bicycle, such as the frame, tyres, rims, brakes
and gears which would then be
assembled to the customers
specifications.
[9]
The supply chain was described as follows: the importer who is the
wholesaler would supply the retailer who
sells the product to the
customer. Retailers consist of large national chain stores such as
Makro, Sportsman's Warehouse and a
host of independents that are also
larger retailers and a number of smaller outlets typically
established by cycling enthusiasts.
Marketing is undertaken by the
wholesalers by placing advertisements in cycling magazines and other
relevant media. Internet sales
has also increased during the referral
period. A RRP would be recommended by the wholesalers in the
advertising.
The
Recommended Retail Price (RRP)
[10]
As noted a number of meetings were held involving retailers and
wholesalers who were in a vertical relationship and wholesalers
who
were in a horizontal relationship. A common theme in the discussions
at these meetings was the increase in the mark-up on wholesale
prices
of bicycles and accessories by increasing the RRP suggested by all
the wholesalers, to all their retail customers. The meetings
included
how to co-ordinate conduct so that it would take place
simultaneously.
[11]
By recommending a higher RRP the retailer would benefit by increasing
profits. Without close co-ordination between wholesalers
inter se and
between retailers and wholesalers there would be no increased margins
for the retailers It should be recorded that
the appellants contended
that the meetings did not give rise to any agreement however defined.
It is necessary to analyse whether
the facts and the inferential
reasoning based on proven facts prove cartel conduct.
The
relevant meetings
[12]
As early as September 2007 Mr Allan Hodson, the managing director of
Omnico and a doyen in the wholesale cycle and accessory
industry had
attempted to establish a cycling/supplier association. He based this
concept on an American cycling association model.
The purpose of the
association would be to tackle industry wide issues such as lobbing
government to do away with the 15% import
duty on bicycles. The
purpose of this association would also address the question of
increasing the RRP for bicycles to assist
retailers. Because of the
long-term problems with eliminating the 15% import duty there could
not be resolution of the problem
in the short-term and improved
margins for the retailers was the only immediately practical
instrument to adopt.
[13]
On 26 September 2007 Mr Hodson sent an email to Mr Stephen Meltzer of
Coolheat, also a wholesaler, attaching articles
of the American
Bicycle Suppliers Association. He proposed that they meet to discuss
the establishment of an association. On 2
April 2008 Mr Hodson
circulated the suppliers' meeting minutes that was held during the
preceding Argus Expo under the banner of
discussing matters of mutual
interest and the possibility of putting together a bicycle suppliers
association. He recorded in the
letter that many matters were
discussed and there were broad consensus on most of them. It
was proposed that they would be
discussed further at a meeting which
would be held in the first week of May 2008. This email was followed
up on 11 April 2008 by
another from Mr Hodson to Mr Meltzer
confirming arrangements for the meeting of 7 May 2008 at Kempton
Park. On 17 April 2008 Mr
White of Pro Bike stated that it would not
be taking part in the forum in May 2008 as they wished to communicate
with their suppliers
as they deemed fit.
[14]
The Commission based its case of cartel conduct primarily on the
meetings leading up to the September meeting convened
by retailers.
The purpose of the September meeting was to discuss ways of improving
their retail margins including by increasing
the recommenced retail
prices for the products they sold. Several wholesalers were invited
to attend including Omnico and Coolheat
and they attended.
[15]
From the minutes provided in the record, it appears that Mr Stevens
of Omnico was silent during the September meeting.
The essence of the
meeting was that the wholesalers would utilise the RRP as a mechanism
by which the downstream prices and margins
of bicycles and cycling
accessories could be increased from 1 October 2008 onwards. Both
Omnico and Coolheat in fact raised the
RRP on 1 October. The
Commission alleged further that those wholesalers who did not attend
the September meeting engaged in subsequent
electronic communication
evidencing and confirming their agreement with the consensus already
reached at the meeting.
[16]
The Tribunal found that Omnico' and Coolheat's silence at that
meeting amounted to an agreement in terms of s 4 of the
Act:
'The evidence before us
shows that both Omnico and Coolheat attended the September 2008
meeting, where an agreement was reached
amongst wholesalers that
mark-ups on wholesale prices for bicycles and cycling accessories
would be increased and such increases
where to be achieved by
increasing RRPs, to allow more margin for retailers off the higher
RRP. The implementation date was also
agreed at the meeting. Omnico
and Coolheat did nothing to distance themselves from these
discussions.'
[17]
Omnico and Coolheat contend that to find that silent participation
gave rise to liability is to apply the incorrect legal
test. Omnico
contends that in addition to the silent participation, it was
incumbent to show that the other competitors (wholesalers)
engaged in
collusive conduct with it and that the parties regarded the agreement
as binding on them.
[18]
Omnico contends that the facts in this case do not support such a
test. The discussions at the meeting were potential
measures to
increase retail margins but no consensus was agreed between retailers
or wholesalers in regard to the measures. Omnico
submitted that the
lack of direct evidence was overcome by the Tribunal relying on
inferences from circumstantial evidence and
that this circumstantial
evidence was misconstrued and could not give rise to the inferences
to be drawn. Coolheat submits that
there were no proven primary facts
from which to draw these inferences.
[19]
The further issue raised was that there was no basis for an
administrative penalty imposed on Omnico or Coolheat even
if it did
amount to a contravention because the penalty was disproportionately
large and based on an erroneous and inconsistent
application of the
evidence and the methodology. They contended that the affected
turnover was miscalculated and the duration of
the alleged
contravention was also incorrectly calculated. It is within this
context that the meetings must now be analysed.
The
facts surrounding the 10 September meeting
[20]
An analysis of the agenda of the September meeting demonstrates
unequivocally that there were financial problems for
the retailers in
the industry in 2008. Certain retailers were scrambling to try and
come up with plans to alleviate their adverse
financial situation as
a result of the 2008 financial downturn.
The
agenda for the September meeting was as follows:
Margins
in the bicycle retail industry-10 September 2008.
1. Welcome
and background to meeting
2. Current
situation I problems in retail industry
a. Industry
have changed a lot in recent years, but the retail margins have
stayed too low
b. Retail
shops in SA not on par with international shop:
(i) Much
smaller margins
(ii) Smaller
industry
3. Proposed
new mark-ups
a. Bicycles -
50%
b.
Accessories - 75%
4. Proposed
date to start increased margins (1 October 'OB)
a. Why now?
b. Everyone
needs to start simultaneously
5. Benefits
to everyone
a.
Wholesalers:
(i) Stronger
retailers = better payments =better cash-flow
(ii) Improved shops
= better presentation of product
(iii) Retailers
won't need to wholesale to make a profit
b. Retailers:
(i) More
profit means stable business
(ii) Less shops
closing down and less stock dumping
6. Issues to
address:
a. Discount
mentality in cycling industry
b. Price
fixing concerns
c. Importance
of everyone's buy-in
d. Retailer's
commitment to dealers
(underlining for
emphasis)
[21]
Mr Pienaar of Fritz Pienaar Cycles CC (in liquidation by the time of
the 49A enquiry) attended the September meeting
and testified that
increasing mark-ups on bicycles from 35% to 50% and accessories to
50% and 75% respectively (from the industry
norm of 35% and 50%
respectively) simultaneously on 1 October 2008 was discussed. In
stark contrast, Mr Stevens of Omnico testified
that it was a
coincidence that this increase of the RRP would happen on 1 October
2008, an aspect referred to more fully below.
The minutes of the
September meeting confirm the increase referred to at the meeting Mr
Pienaar clarified that the minutes recorded
an increase in 'margin'
when what he was talking about was 'mark-up'. In other words the
retailers needed a higher recommended
mark-up from wholesalers on the
wholesale price (which in turn would increase the RRP) so that they
could improve their margins
by starting off on a higher RRP. He
confirmed, as reflected in the minutes, that The only way we can do
this is by all agreeing
and uniting with the price increase and
getting the wholesalers to back this decision and help us by
providing new suggested retail
price (sic) to the retail shop who
they supply, and advertise that price to the public. (underlining for
emphasis)
[22]
He also confirmed that the minute correctly reflects what he said as
minuted: 'Many of you are concerned that this may
be some form of
price fixing, it isn't and this is not illegal. By any means it could
be seen as price fixing from suppliers that
we need to sell at only
35% margins.'
[23]
Mr Pienaar testified that the mark-up would take place on 1 October
2008. This was corroborated by the minutes. Consensus on
the
effective date was significant so as to avoid wholesalers
undercutting each other. Mr Stevens also confirmed that increasing
the RRP, as described on 1 October 2008 was discussed. Neither Mr
Pienaar nor Mr Stevens contested the accuracy of the minutes
on the
proposed percentage increases and date of implementation. These two
features were also confirmed by Mr Els of ProBike who
had sent
someone from his organisation else to the meeting.
[24]
Mr Els testified that a few weeks prior to the September meeting, Mr
Pienaar had visited Pro Bike's offices and 'the
gist of the meeting
[with Pienaar] was that the discounters are making life difficult for
the retailers and that something needed
to be done about it. And he
requested me to increase our pricing to Cajeys [sic] [one of the
discounters] and he requested me to
increase our advertised pricing.
I [sic] recommended retail pricing to that 50% and 75%'.
[25]
Mr Els testified that he refused to comply with Mr Pienaar's request
and warned him that he regarded that these discussions
raised
competition law concerns. When he refused to comply, Mr Pienaar
threatened a group boycott against Pro Bike or any wholesalers
who
did not co-operate. This threat although not emanating from Omnico or
Coolheat is consistent with Stigler's second proposition
of cartels
of punishing cheaters. In this case it is unnecessary to deal with
this issue.
[26]
According to Mr Els, it was this threat that made him decide to send
Mr Wyatt to the September meeting. Mr Pienaar did
not dispute Mr Els'
account of the meeting between them but denied making any threat to
Pro Bike.
[27]
Historically the cycle industry utilised the RRP to the retailers.
The RRP could be advertised by wholesalers to the
public and may have
provided a guideline to the retailers for their pricing. The
retailers were allowed to discount from the RRP
so the RRP was not
the final actual retail price. The RRP was historically determined by
adding 30% to 35% to the wholesale price
of cycles and 50% to that of
cycling accessories. The Tribunal found that the agreement was
reached on the increase of the baseline
from which the retailers
could discount in order to secure sales and thereby ensure greater
retail margins.
[28]
The Commission contends that the cycling industry in 2008 was facing
financial pressure due to the global financial downturn.
The exchange
rate deteriorated. There was little domestic manufacturing of cycling
products and they had to be imported. The uniformity
of mark-up
structured by the RRP provided the instrument to improve the margins
of the retailers.
[29]
An evaluation of the facts and historical context surrounding the
September meeting must take into account facts pertaining
to the
other meetings and relevant correspondence and testimony.
Relevant
background facts prior to 10 September 2008 meeting The 7 May 2008
meeting
[30]
Mr Hodson organised the first formal meeting. This took place on 07
May 2008 in Kempton Park, Gauteng. Mr Hodson confirmed
in Omnico's
answering affidavit that he prepared an agenda and took minutes at
the meeting. He further confirmed that the meeting
was attended by
eleven wholesalers, including Coolheat. He confirmed that the
wholesaler Pro Bike, declined the invitation. When
asked by Mr Hodson
why Pro Bike was not attending he replied: 'should we want to convey
anything or make comments to any suppliers
we will do so ourselves'.
[31]
The minutes reflect that a discussion took place regarding a possible
lobbying of government to remove the 15% duty on
imports. Mr Els of
Pro Bike was not in support of this as this was an advantage it
enjoyed over its competitors. The minutes also
recorded the following
regarding 'support for cycle dealers'. 'cycle dealers are struggling
with a mark-up that was lower than
the international mark-up and
discussion would take place in future to ask association members to
adjust their recommended retail
price which would allow the cycle
dealers a higher mark-up on goods. It was emphasised that this would
be recommended and there
would be no aspect of price fixing or
controlling the prices by the association - just recommending prices
to cycle dealers'.
[32]
Mr Stevens of Omnico testified that the issue of raising the RRP at
that meeting was never part of the agenda for the
meeting. According
to him, the issue was only raised towards the end of the meeting by
one wholesaler who raised this issue because
his customer had
enquired about it. The Commission emphasised that all the wholesalers
that were present at that meeting would
as early as 7 May 2008,
become 'aware of the fact that retailers desired the wholesalers to
act collaboratively, as opposed to
independently of each other, in
raising the RRP and that future discussions in this regard will be
taking place.' Both Omnico and
Coolheat were present at this meeting.
No agreement was reached on the RRP and the minutes record that 'a
discussion around the
RRP would take place in future'. It is common
cause that the association was never actually formed due to a lack of
support from
some of the major wholesale suppliers.
[33]
The meeting was held on 7 May 2008. Mr Hodson took minutes of the
meeting. The minutes record that 'Cycle dealers are
struggling with
the mark-up that was lower than the international mark-up and
discussion would take place in future as to association
members to
adjust their recommended retail selling price which would allow the
cycle dealers a higher mark-up on goods. It was
emphasised that this
would be recommended and there would be no aspect of price fixing or
controlling the prices by the association
- just recommending prices
to retail dealers.'
The
11 June 2008 meeting
[34]
The second meeting took place on 11 June 2008 at Coolheat's offices
in Johannesburg. Mr Stevens testified that the meeting
was attended
by four retailers; Pienaar, Mclean, Bruce Reynecke of Bruce Reynecke
Cycles, and Lee Durham of Lee Cycle Centre, and
three wholesalers;
himself from Omnico, Meltzer from Coolheat and Mr Michael Hirschfield
from Dragon Sports.
[35]
Mr Stevens confirmed that the issue of the RRP was discussed.
According
to Mr Stevens, the meeting was driven by Mr Mclean who wanted
wholesalers to collectively push up their RRP to retailers.
Mr
Stevens testified further that no agreement was reached at this
meeting. His evidence was that the wholesalers 'kept pushing
back
saying Andrew [Mclean]. we have tried to form an association on much
easier topics than this ... We cannot agree on anything.'
He also
said although the meeting was 'getting nowhere' he had a feeling that
Mclean was not going to give up the quest to increase
the RRP.
[36]
As to whose initiative the meeting was, both Omnico and Coo/heat have
consistently argued that the initiative of raising
the RRP was not
that of the wholesalers' but of the retailers. Mr Els of Pro Bike
received the e-mail but declined the invitation
again. He testified
that he believed it was Omnico who set the retailers up to arrange
the meeting. Mr Els responded by e-mail,
saying: 'This is the 2nd
approach for us to meet to discuss and I will give you our honest
position after just having communicated
that telephonically to
Michael [Hirschfield of Dragons] and Andrew [Mclean of Cycle Lab].
Pro Bike will resolve problems and strategies
directly with our
customers - whether individually or as a group. Pro Bike finds it odd
that we have been approached by players
that have dedicated
considerable effort over the recent past to get retailers and
suppliers in the East reasons why they shouldn't
deal with Pro Bike.
Thanks for the invite, but Pro Bike will not attend.'
[37]
Mr Stevens described the meeting thus:
ADV WILSON: There is
another meeting that was referred to by the Commission through their
witnesses, which is a meeting that was
convened at the instance of Mr
Mclean in June 2008. Were you in attendance at that meeting?
MR STEVENS: Yes, I was.
ADV WILSON: And are you
able to give the Tribunal an indication as to how that meeting came
about?
MR STEVENS: Andrew Mclean
was one of the, if not in my eyes, certainly in his interaction with
me, the person most keen and driving
the move towards increasing
recommended retail selling prices. He discussed this with me earlier
in the year. Just saying listen,
you know, I need to make a higher
margin. I don't know how he got wind of the suppliers meeting, but
obviously the word gets out,
not that we were keeping it a secret,
but you know.
MR STEVENS: It was
definitely a recommended retail selling price meeting. It was driven
by Andrew Mclean. He was the one who did
most of the talking on
behalf of the retailers if I remember correctly and he was adamant
that he wanted all wholesalers collectively
to get together and push
up recommended retail selling prices. That was his stance. (my
emphasis) As wholesalers, we just kept
pushing back and saying
Andrew, we have tried to form an association on much easier topics
than this. It is not going to work.
We cannot come together as a body
on anything. We cannot agree on anything. This is not going to work
and that was the dynamic
of the meeting for, I cannot remember how
long it lasted. A frustrating meeting for everybody.'
[38]
Of importance is the following letter written by Mr Hodson of Omnico
dated 16 July 2008 regarding the 'stalling of the
attempt to form a
proposed supplier association. He recorded that:
'Three out of the top six
major suppliers to the trade have indicated their unwillingness to
join the association - for various
reasons. So be it. I think this is
a decision that is going to be rued in the future; we are about to go
through hard times and
the better regulated the industry is - the
better it would be for the trade and indeed for our businesses.'
[39]
It was the Commission's case that as early as 7 May 2008 the
wholesalers knew that the retailers desired the wholesalers
to act
collaboratively as opposed to independently of each other in raising
the RRP. Both Omnico and Cool Heat who were direct
competitors were
present at that meeting and it was obvious that they would have known
about 'joint maximizing efforts' which
required their
participation.
[40]
The prelude to the September meeting according to Mr Pienaar was that
Mr Maclean determined that one further attempt
was to be given to
address the dire financial position of the retailers. Mr Maclean
wanted the meeting for both wholesalers and
retailers. The sole and
primary focus of the meeting according to Mr Pienaar was that the
increase of the RRP would afford greater
margin to the retailers.
According to Mr Els the discounters were making life difficult for
the retailers and something needed
to be done about this. Mr Pienaar
denied making a threat to Mr Els about boycotting Pro Bike but he
admitted to putting pressure
on the wholesalers to attend the
September meeting.
[41]
Mr Els testified that Pienaar threatened Pro Bike's relationships
with the retailers if it did not cooperate by suggesting
that if he
did not increase the RRP the retailers would not buy from him in the
future. Mr Pienaar by way of email invited Mr Hodson
of Omnico and
Stephens of Coolheat The email states' ... I have numerous meetings
with retail shops and wholesalers over the last
couple of months and
everyone seems to agree that the retail shops are not making enough
profit and that something needs to be
done about it. The bicycle
wholesalers agree that a healthier retail industry will also allow
for a healthier wholesale industry.
... The aim of the
meeting is to increase the profit margins of retailers. Please invite
all your retailers to have a representative
there. I would also like
all the retailers to invite the wholesalers ... It is of utmost
importance that we get all the major wholesalers
and retailers in
Gauteng to this meeting as we need everyone's support to be able to
make a change and to be able to implement
these changes right away'.
Although Mr Stevens testified that Omnico attended the meeting as a
fact finding mission and as a PR
exercise, the Commission contends
that these explanation do not assist the appellants in avoiding
liability.
[42]
The email also stated:
'We will mainly discuss
the margins on bikes, but all importers are welcome.'
[43]
Mr Pienaar prepared the agenda which dealt inter alia with margins
being too low. He stated that retail shops in South
Africa are not on
par with international shops and South Africa had much smaller
margins. Mr Pienaar stated that '... it is this
RRP pricing mechanism
which was the subject of that meeting. Specifically the proposal was
made that the RRP for bicycles be increased
by a mark-up from 35% to
40% or 50% for bicycles and from 50% to 75% for bicycle accessories.
This increase would result in the
increase of the selling price of
these products by a similar percentage'.
Evaluation
of the evidence
[44]
On behalf of the Commission Ms Le Roux contended that The uniformity
of an agreed increase in the mark-up between the
wholesale price and
the effect of this on the RRP is the mechanism by which the
wholesaler respondents achieved the direct or indirect
fixing of the
selling price or any other trading condition of bicycles and cycling
accessories, respectively by agreement.
[45]
Significantly, the minutes of the September meeting were posted on
the HUB, a social media platform largely for cyclists.
[46]
Ms Le Roux submitted that the minutes, the agenda and the testimony
established the absence of any defence, disagreement
or distancing by
anyone at the meeting with the contents referred to. According to
her, Mr Pienaar stated he could not recall anyone
speaking against it
(that is the RRP). Everybody that was at the meeting knew there was a
concern and everyone felt that there
should be some change.
[47]
Other companies noted in emails that it would be hard to drive the
concept with bike suppliers but they had to keep at
it. To a
participant in the September meeting it was clear that agreement was
reached and the only outstanding issue was the actual
implementation.
Further emails demonstrate that Mr Maclean asked Mr Pienaar to ask Mr
Meltzer of Coolheat to send a mail out for
'us to all retailers to
explain new margins'. In my view consensus had been reached on the
increased RRP on 1 October 2008. Mr
Van der Walt on 17 September 2008
circulated an email stating that:
'We've had a great
response from the meeting of 10 September 2008! With all major
bicycle wholesalers and retailers in Gauteng,
we have all come to an
agreement that raising the margins is a resolution to the problem. It
is of utmost importance that we sign-up
and state that you support
this decision, we need everyone's support to be able to make this
change and to be able to implement
the changes right away.'
It
is significant that there was no attempt by Omnico or Coolheat to
correct the minutes regarding the increase in the RRP on 1
October
2008.
[48]
Mr Pienaar testified that only once the initiative surfaced on the
Hub there was a flurry of responses. The email from
Mr Els of 19
September 2008 is instructive. It was sent to Mr Meltzer of Coolheat.
'Pro Bike would like to
make it clear that we attended the meeting reluctantly. Our company
does not agree with the contents of
your email which implies dealers
must collude achieve an agreed margin or exclude suppliers. Our
company encourages competition
amongst wholesalers and retailers.
Please take this as our company's official response to the minutes of
the meeting which would
be circulated by yourself.'
[49]
Various other allegations were made by Mr Els. He wanted to expose
Omnico who changed approach by using the retailers
to collude.
Pursuant to the agreement reached at the September meeting, Omnico
changed its pricing on 1 October 2008 from 35% to
40%. Mr Hodson said
he decided to do so because of the September meeting in that the
bicycle dealers were not making enough money.
He also explained that
an increase to 50% RRP in one move was 'crazy' and hence he decided
upon the incremental increase to 40%.
[50]
Mr Stevens' evidence with regard to what lead to the increase on 1
October is particularly instructive:
MR STEVENS: That it was a
forum, a discussion, with retailers and wholesalers on, certainly
from them, of pushing up recommended
retail and increasing margin up,
a combination of the two or something like that.
ADV LE ROUX: Okay.
MR STEVENS: I would
rather say it was clear from my discussion with Fritz Pienaar he was
not making enough money. He wanted to make
more money.
ADV LE ROUX: And then
just for completeness, what did you understand after receiving the
invitation and talking to Mr Pienaar, the
purpose of the meeting was?
It is what you have just testified. That it was to make more money by
increasing recommended retail.
That is what they wanted.
MR STEVENS: The purpose
of the meeting was to be a forum to discuss it. That is what I
understood. This was a discussion.
ADV LE ROUX: Your witness
statement then goes on to say, "Given the nature and purpose of
the meeting, Mr Hodson did not see
the need to attend the meeting
himself, but suggested it will be prudent for you to attend in order
to stay abreast of the general
state of the 10 industry. "
MR STEVENS: Correct.
ADV LE ROUX: And this is
where you testified in chief that Mr Hodson essentially said to you
look, go and get the gossip. Find out
what is going on.
MR STEVENS: Ja sure and
be polite. You know, this is your customer asking you to do
something. So, you have got to show face and
then just hear what
people are saying, you know? You pick up titbits. Who knows?
ADV LE ROUX: And did you
say to Mr Hodson I will go to the meeting, but I am going to tell
them we are not doing this. That something
else has got to happen
instead.
MR STEVENS: Alan and I
would roll eyes. This thing was a total waste of time. There was no
doubt in our minds that nothing will
come of this going into the
meeting. We have tried before to have a wholesalers meeting. You
cannot get consensus. To now get everybody
here to discuss something,
to discuss a topic that we know would ultimately result in absolute
failure is a waste of time. We knew
this would be a discussion about
pushing up recommended retail prices, increasing their margins,
whatever. We knew it was a discussion
about it. We knew it was a
waste of a discussion, because ultimately when all is said and done,
it cannot work. It will never work.
So, why even have the discussion
in the first place?
ADV LE ROUX: And it
cannot work and it will not work, because the other wholesalers are
not going to support it.
MR STEVENS: Ja, people
never agree on anything in this industry. ADV LE ROUX: So, when you
saw Mr Dave Wyatt representing ProBike,
did you see him at the
meeting?
MR STEVENS: I did see Mr
Wyatt at the meeting.
ADV LE ROUX: Did anything
cross your mind that oh, maybe ProBike are interested?
MR STEVENS: No, it just
reinforced what I always thought. The reason why ProBike never
attended any of the other meetings is because
they don't like Alan
Hodson. When Alan Hodson is not at the meeting, well okay, I will be
there.
ADV LE ROUX: Okay. If I
can ask you in your witness statement to look at the final sentence
in paragraph 12, it says, "There
was no suggestion in the
invitation of any agreement or other action being sought from the
wholesalers like Omnico. " That
is not correct, is it? You
understood that action was being sought from the wholesalers.
MR STEVENS: No.
ADV LE ROUX: Leave aside
for the moment whether or not you say Omnico agreed to anything. You
understood you were being asked to
attend a meeting where the
retailers were going to say, wholesalers, get your recommended retail
price up.
MR STEVENS: I understood
we were attending a meeting where that was going to be discussed.
That is what I understood. Not for one
split second did I think
anybody was going to make any decision at a meeting like that ever.
You cannot. It is not practical.
ADV LE ROUX: And then
finally I just want to understand, your evidence as to why Omnico
increased its recommended retail price on
15 bikes to 40% from the
beginning of October 2008 essentially boils down to all the reasons
you've given, all the reasons Mr Hodson
gave his evidence, but the
bottom line for your purposes to the Tribunal is that it's a
coincidence that you increased your recommended
retail price on the
date and in the manner that was requested at the meeting and
discussed at the meeting. Is it your evidence
that it's a
coincidence? You had all sorts of other reasons why you did and it's
just a coincidence that Omnico increased its recommended
retail price
in the beginning of October 2008.
MR STEVENS: Yes. I stand
by my reasons why I increased it on the 1st of October. (underlining
for emphasis)
ADV LE ROUX: And it's
just a coincidence that it coincides with the discussions at the
meeting?
MR STEVENS: Ja, I think
at the meeting they did say they wanted it from October. I can't
remember correctly. It's just not a factor
for me. Like I explained,
there's a very good reason why it has to be the 1st of October.
[51]
Read as a whole, Mr Stevens' evidence was replete with attempts to
evade the clear consequences of Omnico's role. Thus
he tried to
distance himself from the conclusion that Omnico had reacted
positively to the decision of the meeting by emphasising
that Mr
Hodson made pricing decisions and he could not bind Omnico at the
meeting in September. Mr Hodson's concession, under oath,
that the
increase was as a result of the meeting led to the finding that the
increase of the RRP was as a result of a common approach
agreed at
the September meeting to future price.
[52]
Mr Meltzer and Mr Stevens claim that they did not know prior to the
September meeting that the objective was inconsistent
with the
meetings held prior to September and the express language of the
invitation to the September meeting.
[53]
The following passage of evidence is equally indicative of his
perchant for evasion:
ADV WILSON: Well can I
ask you to go to that, because you will see after the first four
paragraphs on page 154, which track the
agenda there is then at the
top of page 155 at fifth heading, which is not reflected in the
agenda, which is support for cycle
dealers. And it says the following
"cycle dealers are struggling with the mark-up that was lower
than the international mark-up
and discussions would take place in
future to ask association members to adjust their recommended retail
selling price, which would
allow the cycle dealers a higher mark-up
on goods. It was emphasised that this would be recommended and there
will be no aspects
of price fixing or controlling the prices by the
association, just recommending prices to cycle dealers. " Now
you said this
wasn't on the agenda, how did it come into the
discussion?
MR STEVENS: There was a
time for general discussion towards the end of the meeting, once Alan
was satisfied that all his points
had been addressed. It would have
been rude for us not to allow other views. And it then came up, and I
can't remember who brought
up ...
ADV WILSON: Was it
Omnico?
MR STEVENS: Sorry?
ADV WILSON: Was it
Omnico?
MR STEVENS: No. Omnico,
like I say, what Omnico wanted to say we said and that was in the
agenda, anything else was brought up from
the floor. It wasn't a very
long discussion, number 1 because Alan now wanted to wrap the meeting
up and was making quite clear
right guys, this is it now. And number
2, because there was no agreement here. Some people are saying, okay,
ja, I've heard that,
other people are saying, no, well I haven't
heard about that. You know, depending on who was at the meeting.
[54]
Coolheat did not express agreement at the meeting but significantly
it did not distance itself from the proposals at
the meeting or
thereafter. It was argued that the suggestion by Mr Treger that legal
advice be obtained according to Mr Meltzer
meant that there was no
agreement. However this must be weighed against the fact that
Coolheat actually increased its prices on
94 of its 4000 stock items
in accordance with the discussion at the meeting and, in particular,
on 1 October.
Legal
Framework
[55]
Once there is sufficient evidence put up by the Commission that there
is cartel conduct it is incumbent on the firm to
put forward rebuttal
evidence to establish that its participation was without any
anti-competitive intention. This it did not do.
As stated in Mac Neil
Agencies Pty Ltd vs Commission GAG No 121/CAC Jul12 it is not
necessary to apply rigid concepts found in
our common law of contract
to prove offer and acceptance. It is clear from the record that
Coolheat did not demonstrate to its
competitors that it was
participating for a purpose inconsistent with anti-competitive
behaviour. It is not important that the
parties are legally bound but
that they regard themselves as bound. The United States definition of
an agreement as:
'Conscious commitment to
a common scheme. (See Monsanto Co v Spray Rite Services Corp
[1984] USSC 55
;
465
US 752
1984 768), is helpful in this regard.
[56]
This definition finds support in South Africa. See Competition
Commission v Pioneer Foods (Pty) Ltd para [35]. The Tribunal
has
determined that a positive meeting of minds is not the same as
understood in the law of contract. See Competition Commission
v DPR
Plastics (Ply) Limited paras [94) to [97). It is sufficient to be a
passive participant, in that 'Where participation in
such meetings
has been established, it is for that undertaking to put forward
evidence to establish that its participation in those
meetings was
without any anti-competitive intention by demonstrating that it had
indicated to its competitors that it was participating
in those
meetings in a spirit that was different from theirs.'
[57]
The evidence, as I have evaluated it, reveals that neither Omnico nor
Coolheat distanced themselves at the meeting after
consensus had been
reached. They gave no indication thereafter that they disagreed and
they placed no evidence before the Tribunal
that the increased RRP
following the September meeting was as a result of an independent
decision without anti competitive
effect.
[58]
In my view, the Commission provided sufficient evidence that there
was an agreement in place regarding the RRP. It was
then incumbent on
Omnico and Coolheat to provide sufficient evidence to the contrary.
Upon scrutinising the Commission's evidence
it demonstrated that the
conduct in question would have the effect of undermining
competition.
[2]
In assessing the
necessary level of proof Philip Lowe indicates that the evidence must
be, as Tetra Laval
[3]
(for
example) suggests, sufficiently precise, consistent and convincing
(which does not necessarily imply the 'clear and convincing'
standard
known in common law countries}. The claimed non-participation at the
meeting does not end the evidential enquiry. The
undisputed evidence
of their failure to overtly disagree or distance themselves from the
contents of the final September meeting
meets the necessary standard
of proof as being consistent, clear and convincing in determining
participation in a cartel.
[59]
In Mac Neil supra, the question was left open whether the South
African approach to passive attendance and public distancing
should
be the same as the European or US law. Obviously each case will turn
on its own facts. Our competition jurisprudence however
has evolved
and the time has come to analyse more carefully the context of the
alleged cartel behaviour, the evidence read with
all the surrounding
circumstances of the undertaking's participation or passive
participation in meetings. Silence within a specialized
context can
never equal non participation. There does not have to be a single
pressing piece of conduct demonstrating cartel behaviour.
The
cumulative effect of conduct whether active or passive when assessed
within a particular context is equally compelling.
[60]
The assertion by Mr Stevens that the collective raising of the RRP on
1 October 2008 by all concerned was simply a coincidence
not only
stands to be rejected but it illustrates most vividly that the
evidence must be evaluated as whole and the adjudicator
must not be
confined to a strict application of a pre-defined burden of proof.
[61]
The principle of passive attendance at meeting to listen to 'gossip'
among companies cannot excuse an undertaking. Consistent
with
European competition jurisprudence, as it has now developed, there is
a duty to speak or to report to authorities or publicly
distance
oneself from any uncompetitive behaviour. In Trefi/europe v
Commission Case T-141/89
[1995] ECR 2-791
at para [85] the fact that
an undertaking does not abide by the outcome of meetings which have a
manifestly anti-competitive purpose
does not relieve it a full
responsibility for its participation in the cartel if it has not
publicly distanced itself from what
was agreed in the meeting.
Several cases followed suit. The reason for this rule is that, having
participated in the meeting without
publicly distancing itself from
what was discussed, the undertaking has given the other participants
clear cause to believe that
it subscribed to what was decided and
that it would comply therewith.
[62]
In the case of Westfalen Gassen Nederland BV v Commission of the
European Communities Case T-303I02 (2006) the European
Court of First
Instance held at para 1: ..... 'For the purposes of applying Article
81(1) EC, it is sufficient that the object
of an agreement should be
to restrict, prevent or distort competition irrespective of the
actual effects of that agreement. Consequently,
in the case of
agreements reached at meetings of competing undertakings, that
provision is infringed where those meetings have
such an object and
are thus intended to organise artificially the operation of the
market.'
[63]
The Court in Westfalen Gassen Nederland, supra also held that it was
sufficient for the 'Commission to show that the
undertaking concerned
participated in meetings at which anticompetitive agreements were
concluded, without manifestly opposing
them, to prove to the
requisite standard that the undertaking participated in the cartel
Where participation in such meetings has
been established, it is for
that undertaking to put forward evidence to establish that its
participation in those meetings was
without any antirmpetitive
intention by demonstrating that it had indicated to its competitors
that it was participating in those
meetings in a spirit that was
different from theirs.' Para 2.
[64]
The principle emanating from Westfalen Gassen Nederland is based on
the underlying principle of law that, 'having participated
in the
meeting without publicly distancing itself from what was discussed,
the undertaking gave the other participants to believe
that it
subscribed to what was decided there and would comply with it. The
notion of public distancing as a means of excluding
liability must,
in itself, be interpreted narrowly. In that regard, silence by an
operator in a meeting during which the parties
colluded unlawfully on
a precise question of pricing policy is not tantamount to an
expression of firm and unambiguous disapproval.
On the other hand, a
party which tacitly approves of an unlawful initiative, without
publicly distancing itself from its content
or reporting it to the
administrative authorities, effectively encourages the continuation
of the infringement and compromises
its discovery. That complicity
constitutes a passive mode of participation in the infringement which
is therefore capable of rendering
the undertaking liable. 'para 2.
[65]
The Court went on to hold that 'The upshot is that the undertaking
gave the other participants to believe that it subscribed
to what was
decided there and would comply with it. The narrow interpretation is
that silence by an operator in a meeting during
which other parties
colluded unlawfully on a precise question of pricing policy is not
tantamount to an expression of firm and
unambiguous disapproval. On
the other hand a party which tacitly approves of unlawful initiative
without publicly distancing itself
from its content or reporting it
to the authorities effectively encourages the continuation of the
infringement and compromises
its discovery. This complicity
constitutes a passive mode of participation in the infringement which
is therefore capable of rendering
an undertaking liable. The
prohibition on participating in anti-competitive agreements is
well-known and it is normal for activities
to take place in a
clandestine fashion. The evidence is normally fragmentary and so that
it is often necessary to reconstitute
certain details by deduction.'
[66]
In Kaiska and Denka Chemicals GmbH v European Commission Case
T-83/08; a judgment of the General Court of 2/2/2012 at
para 177 the
following was said:
'In most cases, the
existence of an anti-competitive practice or agreement must be
inferred from a number of coincidences and indicia
which, taken
together, may, in the absence of another plausible explanation,
constitute evidence of an infringement of the competition
rules.'
[67]
Returning to the present dispute, the evidence adduced by the
Commission is sufficient to show that agreement was reached
amongst
wholesalers that there would be an increase in mark-up in agreed
percentages. This can also be inferred from Mr Steven
'coincidence'
regarding the commencement date of 1 October 2008. This is an
indiciae which taken together with all the other facts
constitute
clear evidence of an infringement of the competition. The evidence is
also conclusive that 1 October would be the implementation
date. The
relevant background evidence, context, meetings of 7 May and 11 June
2008 and the emails provides sufficient and consistent
proof of
agreement among the cartel participants, namely
1. Both
appellants failed to distance themselves from the consensus reached
at the meeting to increase the RRP from
October 2008 so as to afford
greater margins to the retailers;
2. Both
appellants gave no indication - either at the September meeting or
thereafter in any forum - that they disagreed
with the increase and
that they would not proceed on that basis; and
3. Both
appellants have placed no evidence before the Tribunal that their
pricing, and increased RRP in particular,
following the September
meeting was the result of their independent decision making, rather
than as a result of the unlawful agreement
reached at the September
meeting.
The
Tribunal correctly found that Omnico and Coolheat engaged in conduct
directly and indirectly in contravention of s 4 (1)(b)(i)
of the Act,
since.
PENALTIES
[68]
The Commission used the formula as set out in Competition Commission
v Aveng (Africa) Ltd and Others Case No: 84/CR/DEC09
where six steps
constitute the basis further calculation of penalties:
Step 1:
Determination of the affected turnover in the relevant year.
Step 2:
Calculation of the base amount being the proportion of the relevant
turnover relied upon.
Step 3: Where
the contravention exceeds 1 year multiply the amount contained in
Step 2 by the duration of the contravention.
Step 4:
Rounding off the figure obtained in Step 3 if it exceeds the cap
provided for by s 50 (2).
Step 5:
Consider the factors that might mitigate or aggravate the amount
reached in Step 4 by way of a discount or premium
expressed as a
percentage of that amount that is either subtracted from or added to
it.
Step 6:
Rounding off the amount in Step 5 if it exceeds the cap provided for
in section 59(2).
[69]
The Commission proposed a penalty based on affected turnover and used
the entire turnover of Omnico for the year ended
June 2009 which
amounted to R92 548 238. The Commission ignored that the mark-up was
only on cycles below R20 000; in other words
cycles with an RRP above
R20 000,00 remained at 35% throughout the relevant period. The
Tribunal accepted this submission. The
relevant mark-up was therefore
from 35% to 40% on cycles under R20 000. That turnover was R38 507
331. The Commission submitted
that in terms of Step 2 of Aveng the
base amount of the penalty should be 15% of R92 548 238,00 which
equals R13 882 235,00 and
in terms of Step 3 the duration by a factor
of one of the grounds that the Commission had evidence that the
cartel ran from October
2008 to October 2009. The Commission also
submitted that Step 5 there were no mitigating factors and there
should be no discount
on the amount of R13 882 235.
[70]
Omnico submitted that there was an "elision" of two
inconsistent cases brought by the Commission. For the reasons
set out
above there was no elision of the Commission's case. It was not based
on two negative and abstract propositions as the
concept of elision
would suggest. The meeting of 10 September, the two prior meetings of
7 May and 11 June and the correspondence
generated before and after
the September meeting all lead to the permissible inferences as drawn
out in this judgment.
[71]
Once there is cartel activity that is sufficient to attract a
penalty. In a work edited by Dorota Leczykiewicz and Stephen
Weatherill Bloomsbury Publishing Company it was stated correctly that
there is a growing international acceptance that such cartel
activity
poses a serious threat to economies and consumers and constitute the
supreme evil of antitrust. In particular'... Parties
to cartels
deliberately set out to interfere with free competition'. Accordingly
the submission by both Omnico and Coolheat that
there should be no
penalty must fail.
[72]
In this case it is clear that the bottom line of the September
meeting was agreement that the RRP would be increased
in the industry
standard from 35% to 40% on bicycles and 50% on accessories to 75%.
[73]
It is no defence that Omnico had a consistent history of
non-adherence to the industry norm. In further mitigation Omnico
submitted that it did not change its RRP mark-up accessories which
remained at 60% throughout the relevant period. This is a factor
that
must be taken into account. The only RRP mark-up was in respect of
bicycles below R20 000 and there was only a 5% increase
from 35% to
40%. This fact cannot be overlooked and should be taken into account
when determining the correct penalty.
[74]
Based on Omnico's turnover on domestic sales and accessories for that
financial year the relevant turnover to be taken
into account is not
R98 007 193 but R38 507 331. Other factors which would be appropriate
to take into account is that the amount
utilised in Step 2 of the
Aveng methodology should remain at 15% proposed by the Commission.
[75]
Other mitigating factors are that the proposal emanated from the
retailers rather than from Omnico during the economic
downturn in
2008.
[76]
In my view, this in itself is not a mitigating factor as the
culpability of Omnico arises the moment it went along with
the
agreement. The submission by Omnico that the wholesalers did not
stand to profit from implementing the proposal does not mitigate
the
culpability, in particular having regard to the egregious
consequences of cartel conduct. Jt is not clear from the submissions
regarding the appropriate penalty that anti-competitive behaviour
would result in a reduction of the volume of bicycles and accessories
sold. The contention is that once the minutes were posted on the Hub
on 19 September 2008, the agreement, at best, only lasted
for
approximately one week and that this factor should be applied in Step
3 of the methodology. Accordingly, Omnico submits that
it should be
one month and not twelve months as proposed by the Commission.
Insufficient evidence was proffered by Omnico in this
regard. As
regards Step 5 the mitigating factors include that Omnico had never
previously been found to have contravened the
Competition Act. It
cooperated with the Commission's investigation and in the complaint
referral proceedings. Omnico also submits it should not be
punished
for not accepting the Commission's settlement proposals because it
was of the strong view that the conduct did not amount
to a
prohibited practice. Omnico submits further that the fact that other
respondents elected to settle the proceedings against
them should
have a negative effect on Omnico's case. Omnico points out that all
the respondents disputed the merits of the complaint.
Omnico also
submits that Mr Stevens was a passive and silent participant at the
meeting and did not contribute a single word on
behalf of Omnico.
Having regard to what is stated above this is not a factor which
assist Omnico. Silent participation can be as
culpable as active
participation depending on the context.
[77]
In summary, I accept that in regard to Step 1 the affected turnover
should be limited to domestic sales of bicycles under
R20 000,00 and
this amount was R38 507 331,00. As regards Step 2 the Commission
should take into that the mark-ups emanated from
the retailers. This
submission cannot be justified in the light of the fact that the
wholesalers had to engage in the cartel conduct
for the RRPs to
happen. Omnico also submits that the Commission did not adduce any
evidence of any other wholesalers who were induced
RRP mark-ups on
bicycles. As regards Step 3 Omnico's RRP mark-up in respect of
bicycles was restricted to cycles under R20 000,00.
This remained in
place throughout that financial year and not just for the week prior
to the reaction to the HUB posting. As regards
Step 5 it was
submitted that the Commission's proposed penalty ignored the various
mitigating factors and therefore there should
no penalty imposed or
at most only a nominal penalty. Omnico claimed that it did not stand
to gain from the cartel. There was insufficient
evidence on this. In
any event this does not matter as once there is an agreement the
potential for gain was there. The Tribunal
correctly found that it
did not make a difference whether it was a retailer initiative the
contravention was no less egregious.
The Tribunal correctly took into
account that the agreement pertained to luxury goods and not basic
commodities. The base amount
therefore of 15% on the affected
turnover should take into account the limited application. The base
amount of 10% in Omnico's
affected turnover is R3 850 733. Giving the
mitigating factors referred to a 50% discount should be applied. The
penalty payable
by Omnico is thus R1 925 366.
[78]
Mr Meltzer of Coolheat did not testify what the turnover was on the
limited amount of the increase on the 94 product
out of 4000. The
Tribunal used the turnover provided by Coolheat for the 2009 period
which was R32 506 122, 00 as the affected
turnover Step 1. The
Tribunal also used the 10% as the base amount as for Omnico. The base
amount calculated at 10% of Coolheat's
affected turnover is R4 250
612 being Step 2. The multiplier of one year is also taken into
account for the same reasons as Omnico.
Coolheat's total turnover for
the financial year ended June 2014 was R71 983 454 being the audited
statements.
[79]
The Tribunal used the base figure of 10% which is R7 198 345 and the
figure arrived at in Step 3 is R4 250 612,00 which
does not exceed
10% of Omnico's turnover.
[80]
The Tribunal found no basis to give Coolheat a discount because Mr
Meltzer was of no assistance to the Tribunal. A further
punitive
aspect raised by the Tribunal was that Mr Meltzer did not distance
Coolheat from the agreement on the Hub. The Tribunal
therefore found
the penalty in Step 3 as remaining at R4 250 612 and that this did
not exceed the statutory cap of 10% of Coolheat's
total turnover in
2014 (Step 6). The penalty imposed is thus R4 250 612.
[81]
In conclusion save for the reduction in Omnico's penalty to the
amount of R 1 925 366 the appeal must be dismissed.
Costs
[82]
Even though the first appellant met with some success it was
unsuccessful in its substantive appeal and accordingly it
must also
pay the costs of the appeal. Mr Wilson submitted that in cases
involving the commission no costs should be awarded. I
have found no
authority to support this view.
Order
1. Save for
paragraph 2, the appeal is dismissed, with costs to be paid by first
and second appellants jointly and severally.
2. The order
of the Competition Tribunal is altered only to the extent that the
penalty imposed upon first appellant
is to be in the amount of R 1
925 366.
M VICTOR AJA
DAVIS
JP & NP BOQWANA AJA
Concurring
Adv.
Michelle le Roux instructed by the
State
Attorney
:Adv.
Jerome Wilson SC instructed by
Lowndes
Dlamini Inc.
For
Coolheat: Adv. David Stephens instructed by Shaie Zindel Attorneys
[1]
OECD Journal of Competition Law and Policy Vol No3, 2007
[2]
Philip Lowe, Taking Sound Decisions on the Basis of Available
Evidence. EUROPEAN COMPETITION LAW ANNUAL 2009:
The
Evaluation of Evidence and its Judicial Review in Competition Cases
[3]
These judgments quickly raised the profile of questions such as what
standard of proof applies in competition cases and with
what rigor
the enforcer's decisions will be controlled. More generally, the
value of exploring these issues relates to the ancient
insight that
principles of procedure cannot or should not be regarded as neatly
dissociable from substance, as one often bears
decisively on the
other.