Netstar (Pty) Ltd and Others v Competition Commission South Africa and Another (99/CAC/MAY10, 98/CAC/MAY10, 97/CAC/MAY10) [2011] ZACAC 1; 2011 (3) SA 171 (CAC); [2011] 1 CPLR 45 (CAC) (15 February 2011)

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[2011] ZACAC 1
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Netstar (Pty) Ltd and Others v Competition Commission South Africa and Another (99/CAC/MAY10, 98/CAC/MAY10, 97/CAC/MAY10) [2011] ZACAC 1; 2011 (3) SA 171 (CAC); [2011] 1 CPLR 45 (CAC) (15 February 2011)

IN THE COMPETITION APPEAL COURT
CAPE TOWN
REPUBLIC OF SOUTH AFRICA
CAC CASE NO.99/CAC/MAY10
CAC CASE NO.98/CAC/MAY10
CAC CASE NO.97/CAC/MAY10
CT CASE NO.17/CR/MAR05
In the matter between
NETSTAR (PTY) LIMITED
..........................................................
First
Appellant
MATRIX VEHICLE TRACKING
(PTY) LIMITED
…......................................................................
Second
Appellant
TRACKER (PTY) LIMITED
…....................................................
Third
Appellant
and
COMPETITION COMMISSION
SOUTH AFRICA
…......................................................................
First
Respondent
TRACETEC (PTY) LIMITED
…....................................................
Second
Respondent
J U D G M E N T
Del. 15
th
February 2011
WALLIS AJA (DAVIS JP and DAMBUZA JA concurring)
INTRODUCTION
[1] Prudent motorists insure their motor vehicles,
principally against the risk of loss caused by accidents and theft.
Finance houses
that fund the purchase or lease of motor vehicles
usually require the purchaser or lessee to take out such insurance.
Short-term
insurers provide this type of cover and bear the losses
suffered in consequence of claims under the policies they issue to
motorists.
It is therefore in the interests of short-term insurers to
take steps to limit or minimise such claims.
[2] Once a vehicle has been stolen minimising the loss
depends upon how quickly it can be traced and recovered. The ability
to do
that has been considerably enhanced by the introduction into
South Africa about twenty years ago of stolen vehicle recovery
systems
that enable stolen vehicles to be traced rapidly and
recovered. Starting with high value luxury cars but increasingly
across a
broader range of vehicles insurers have taken steps to
ensure that motor vehicles are fitted with these systems. The one
route
they adopt is to require the installation of such a system and
to offer a reduced premium in return. The other is to offer insured

motorists a discount on their insurance premiums if they have such a
system fitted to their motor vehicles.
[3] The appellants, Netstar, Matrix and Tracker, were
amongst those who established the industry for the provision of
stolen vehicle
recovery systems. Netstar and Tracker are, and always
have been, by a significant margin the largest participants in the
industry.
Throughout the period relevant to this appeal Matrix was
the third largest. During that period they, together with another
entity,
Bandit, and, from 2002, Global Telematics, formed the stolen
vehicle recovery (SVR) committee of the Vehicle Security Association

of South Africa (VESA). In February 2005 their conduct as members of
that committee was the subject of a complaint by the second

respondent, Tracetec, to the Competition Commission. That led in turn
to a referral to the Competition Tribunal and, after a lengthy

hearing and the consideration of a mass of documents, the issue of a
declaratory order that they had contravened s 4(1)(a) of the

Competition Act 89 of 1998 (“the Act”). These appeals lie
against that order.
[4] A similar declaratory order was made against VESA at
the instance of Tracetec, which obtained leave to intervene in the
Commission’s
referral primarily for that purpose. VESA has not
appealed against the Tribunal’s order so that issue is not
before us. Tracetec
also obtained leave to pursue the appellants in
relation to a claim under s 8 of the Act that the Commission
decided not to
refer to the Tribunal and on a lesser issue of the
period of the alleged contravention of s 4(1)(a). It failed on
these issues
before the Tribunal and they form the subject of a
cross-appeal. However, during the argument on behalf of Matrix we
were informed
that Tracetec was not persisting in the cross-appeal in
relation to s 8. As regards the timing issue it can conveniently
be
dealt with in conjunction with the general consideration of the
merits of the appeals.
[5] The dispute between the parties arises from the
terms upon which providers of SVR systems could become members of the
SVR Committee
of VESA and have their systems accredited by VESA.
During the period from 1996 to February 1999 certain criteria for
membership
and accreditation were developed and thereafter
implemented by VESA. The effect of this, according to the Commission
and Tracetec,
was to impede newcomers to the industry from entering
the market for the provision of SVR systems. The reason is that these
criteria
or ‘standards’, as they were described, were
used by most of the members of the South African Insurance
Association
(SAIA) in deciding which SVR systems would, when
installed in the motor vehicles they insured, qualify the insured to
receive a
reduced or discounted premium. The complaint by the
Commission and Tracetec is that newcomers to the industry could not
satisfy
the performance component of the standards and hence could
not obtain membership of the Committee and VESA accreditation of
their
systems. It was contended that this blocked their entry into
the industry because of the fundamental importance that insurers
attached
to VESA accreditation. In brief therefore the establishment
and implementation of these standards was said to arise from an
agreement
prohibited under s 4(1)(a) of the Act.
THE FACTS
[6] There is no serious factual dispute on the record
and the facts underpinning the complaint can be set out quite
briefly. In
the mid-1990’s, when the SVR industry was in its
infancy in this country, a large number of businesses were offering
to provide
SVR systems. Short-term insurers were concerned about the
quality and reliability of their offerings. Their concern was
two-fold.
Firstly, if the system did not work or the supplier proved
unreliable or went out of business, the insured, who had been
compelled
or induced to fit the system, would complain to and
possibly seek compensation from the insurer. Secondly, if the system
did not
work or the supplier proved unreliable, the anticipated
benefits by way of a reduction in the amount that would have to be
paid
in respect of theft claims would not materialise.
[7] During 1996 and 1997 there was some discussion, in
meetings arranged by VESA involving various parties interested in the
SVR
sector, about the establishment of a standard for the supply of
SVR systems. This was a natural extension of the existing activities

of VESA, which had already established such standards in respect of
various vehicle anti-theft devices. Netstar attended an initial

meeting and Tracker was represented at the next meeting. In September
1997 VESA published some draft standards, principally of
a technical
nature. In the preamble the following was said:
‘
Stolen vehicle tracking systems are proving
to be useful means of stolen vehicle recovery and a number of these
systems are appearing
in the marketplace. Insurance companies would
like to endorse the systems when they are effective, and so it is
appropriate that
a means to measure the performance of recovery
systems be developed. Not only will this allow insurers to introduce
incentives
for fitting approved systems, it will also provide a
measure of protection to the general public who will have some
assurance that
the systems they select will provide adequate
long-term protection to their vehicles.
It is therefore the purpose of this document to
specify minimum performance standards for electronic tracking and
recovery systems
… The emphasis will be on the recovery
infrastructure and the ability of the recovery service to [service]
1
its customers. This emphasis is important because
vehicle recovery systems cannot be sold on a “fit and forget”
basis.
The customer who buys the system will rightly expect that it
will continue to protect his vehicle for the foreseeable future.’
That this accurately reflected the views of a majority
of short-term insurers is clear from the evidence of Ms Caroline de
Silva,
at the time the deputy to the executive director of SAIA, who
testified that:
‘
The tracking industry was relatively new at
the time … but it was proving to be very, very successful in
assisting us with
vehicle crime. And we had, I suppose, any number of
people saying that they could track vehicles, they could recover
vehicles and
they could do whatever it is that they do. And insurance
companies were starting to give discounts to policyholders upon a
fitment
of a tracking system, because they had proven so capable in
recovering vehicles. And like any other after-market fitment of
security,
the industry wanted some sort of standard or comfort that
vehicle tracking was being managed and that we were giving the
discounts
on the right basis, that we would actually recover that
risk, and ask the tracking companies to form under a standard body
and
of course, the preference for the insurance industry was VESA.’
[8]
SAIA’s
desire to establish a uniform standard for SVR systems that it could
recommend to motorists and that its members could
use as a basis for
offering reduced or discounted premiums, was given considerable
impetus when, near the end of 1997, Datatrak,
a leading supplier of
SVR systems, withdrew from the market because its holding company, a
public listed company, saw no reasonable
prospect of rendering its
operations sufficiently profitable in the near-term. Not only was
this a source of embarrassment to the
members of SAIA who had
recommended Datatrak as an SVR supplier but it also led them to
realise that technical specifications alone
would not suffice to
provide a standard for the supply of SVR systems. As Ms da Silva
said:
‘
There had to be a performance standard and
a capability standard and a sustainability standard that we wanted
the tracking companies
to adhere to’
[9] This led SAIA to convene a meeting of the five
leading SVR companies including the three appellants. The purpose was
to persuade
them to become members of VESA and participate in the
formulation of standards for the supply of SVR systems that would
satisfy
the requirements of the insurers. The SVR companies were
reluctant to do this and suggested that the South African Bureau of
Standards
be approached instead to formulate standards. However, an
approach to the SABS revealed that standards could only be prepared
over
a three or four year period at very substantial expense and this
would not meet the immediate needs of the insurance industry. What

SAIA wanted therefore was for the leading tracking companies to
participate in VESA in order to enable VESA to produce the standards

that SAIA members wanted.
[10] Although the tracking companies were reluctant to
join VESA for this purpose, SAIA was in a strong bargaining position
in its
efforts to persuade them to do so. As Ms da Silva pointed out
the members of SAIA had already written into their policy documents

that ‘any aftermarket fitment of vehicle security would be VESA
approved’. This applied both to anti-theft devices
and to SVR
systems. It would, as she said, be ‘far more in the interest of
the insurance industry if the tracking companies
jointed VESA’.
The perspective of the tracking companies in regard to SAIA’s
persuasive efforts is reflected in the
witness statement of Mr de
Clerk, the managing director at the time of Tracker. He pointed out
that Tracker’s business model
was very dependent on obtaining
support from insurers. After Datatrak’s exit from the market
SAIA placed the tracking companies
under pressure to join VESA and,
according to Mr de Clerk:
‘
It was stated unequivocally that, if a SVR
service provider wanted endorsement by SAIA, they had to be VESA
approved. Tracker, having
envisaged a business strategy that depended
on its co-operation with the insurers, was left with little choice
and accordingly
joined VESA in or about 1997.’
2
[11] In consequence of Ms da Silva’s efforts the
appellants and three or four other tracking companies agreed to
participate
in a process under the auspices of VESA to try and
determine some standards for the SVR industry. An initial meeting was
convened
by VESA on 16 July 1998. The minutes record that ‘the
Insurance industry are pro-active and leading the direction in the
development of vehicle security products’ and that VESA was
acting on a mandate from SAIA. The chairman, a VESA representative,

indicated that its objectives were to:
‘
1. Identify the key elements that will
demonstrate sustainable loss reduction.
2. Find a simple but very effective method to monitor claim
performance.’
Thereafter a series of workshops was
held attended by representatives of a number of different SVR
suppliers. According to Mr Maskrey
of VESA, who attended all of the
meetings on behalf of VESA, it attempted to involve as many SVR
companies as possible. Representatives
of VESA and Ms da Silva, on
behalf of SAIA, were kept informed of progress. The workshops broadly
covered two areas. The one was
the question of standards where it
seems that the suggestions in a memorandum prepared by Netstar, the
largest operator in the
industry, and provided to Mr Chris
Bezuidenhout of SANTAM, the largest short-term insurer in the country
were used as a working
base.
3
The other related to the
establishment of a vehicle tracking committee within VESA and the
constitution and rules of such a committee.
It is apparent from
minutes of these workshops that representatives of VESA were present
at all the workshops and that the board
of VESA was kept abreast of
developments in the workshops.
[12] It is not clear from the documents when finality
was reached on the contents of the standards. It may well have been,
as the
Tribunal inferred, in about September 1998. Some things are
however clear. First they were the product of a process in which not

only the three appellants but also other SVR and tracking companies
were involved as well as representatives of VESA and SAIA.
Second the
standards were created before the establishment of a vehicle tracking
committee, much less an SVR committee, within
VESA and were
accordingly not the product of the deliberations of that committee.
Third the workshop process culminated in parties
being invited in
November 1998 to become members of VESA and the vehicle tracking
committee. Fourth the applications that were
submitted were submitted
to VESA, which dealt with the approvals. Accordingly the Board of
VESA must have had and approved the
standards because they could not
otherwise have taken the decisions that they did in regard to
membership and approval. That is
apparent from the provisional
approval of Bandit. Fifth the decision that there should be two
committees, namely, a fleet management
committee and an SVR committee
was a decision by the Board of VESA taken at some time shortly before
the launch of the committees.
[13] In February 1999 it was decided by VESA in
conjunction with SAIA to hold a launch function on 16 March 1999. On
that day the
chief executive of SAIA issued a press release in which
he said the following:
‘
Motor vehicle tracking and recovery and
fleet management companies were now being regulated by an independent
body, launched today
by the Vehicle Security Association of South
Africa and the SA Insurance Association.
If the owner of a motor vehicle or fleet uses the system of an
approved tracking and recovery company or has one installed, the

short-term insurance industry may offer a discount on premiums,
according to SAIA chief executive, Barry Scott. …
He said VESA already developed a certification system for
immobilisers and gearlocks used by SAIA members.
“
We approached them to plan and implement
regulations for the tracking industry. VESA then approached companies
active in the field
and the result was the formation of this
independent regulatory body,” Scott said.’
The press release then identified Tracker, Netstar,
Matrix, Capital Air (Pty) Limited and Bandit as the approved
companies for tracking
and recovery. Other companies were identified
as approved in the fleet management area.
[14] The issue of approval mentioned in the press
release was a tricky one because Bandit was merely granted
provisional approval.
The reason was that the performance standards
required for full approval that the SVR supplier should have a
minimum client base
of 3000; should have been in operation for at
least one year; should have made at least 100 recoveries and should
have achieved
a specific recovery rate based on industry performance.
A new company starting out in the industry would not be able to
satisfy
these requirements. To that end the standards included a
category of provisional approval based on the applicant’s
infrastructure
rather than its performance record. Bandit fell in
this latter category and had been granted approval on a provisional
basis.
[15] Provisional approval was problematic as far as the
members of SAIA were concerned. Ms da Silva expressed the difficulty
in
the following terms;
‘
There was always a real doubt that
provisional approval will be workable. The insurance industry was
giving upfront discounts that
were quite significant in order for SVR
fitment. Their feeling was that they would be very unwilling to give
discounts where somebody
only had provisional status, because they
didn’t have the same comfort that those companies could do the
recoveries they
wanted. So, they had, I suppose, all along indicated
to VESA that they had difficulties with the provisional and full
approval
approach.’
These concerns were conveyed both to the SVR committee
and to the board of directors of VESA. In August 1999 Mr Oosthuizen,
the
chief executive of VESA, wrote to the members of the SVR
committee concerning a provision of the terms of provisional approval
that would require demonstration of an established performance
capacity. At a meeting of the VESA board on 7 September 1999

Mr Oosthuizen reported that provisional approval had not been well
received by the insurance industry. On 13 September 1999

the SVR committee revised the provisional membership requirements
over the objections of Netstar and Tracker, which appealed to
the
VESA board. On 8 November 1999, at a joint meeting of the
VESA board and the SVR committee, Ms da Silva conveyed
SAIA’s
view that an SVR system should either be approved or rejected and
that the insurers did not agree with the principle
of
‘semi-approval’. At a further combined meeting on 22
November 1999 it was recorded that the SAIA Motor Advisory
Committee
requested that provisional approval status be discontinued.
Thereafter the matter was further considered by the VESA
board, which
took legal advice on the question. On 25 April 2000 Mr
Oosthuizen wrote to the SVR committee informing them
that;
‘
In the category of Stolen Vehicle Recovery
there will be only one approval status (provisional approval having
fallen away). All
new applicants will be required to comply with the
criteria for what was previously termed “full approval”.’
From that time onwards there was no longer any
provisional approval category.
[16] From April 2000 until August 2003 the basic
requirements for membership of the SVR committee and accreditation of
an SVR system
by VESA remained the same. They were that the system
had been fitted in 3000 vehicles; that the operator had been in
operation
for over a year; that the supplier had effected over 100
recoveries with that system and that the recovery rate fell within a
defined
industry average. Within the committee itself this caused
some difficulties when members sought to introduce systems based on
new
technology, where the fitment and recovery requirements were not
yet satisfied. Disputes over these issues highlighted the internal

stresses within the committee, the members of which were competitors.
In my view, however, it is unnecessary to explore these disputes.
The
reason is that under s 4(1)(a) of the Act the Court is concerned
with whether an agreement ‘has the effect of substantially

preventing or lessening competition in a market’ and the
complaint in this case is that the alleged agreement had an
exclusionary
effect on new entrants to the industry seeking
membership of the SVR committee and VESA accreditation. Internal
wrangling among
the existing SVR committee members has no bearing on
this. The point in issue is whether potential entrants to the
industry were
excluded or hampered in their efforts to enter the
market by the existence of these standards, not whether those who
were already
part of the SVR committee and enjoying VESA
accreditation were self-serving in their dealings with one another.
[17] The situation of aspirant new members remained
unchanged throughout the period from April 2000 to August 2003.
Unless they
achieved the prescribed number of fitments and recoveries
they were not admitted as members and did not obtain VESA
accreditation.
That situation only changed in July 2003 when the
requirements for admission were altered by permitting SVR suppliers
that were
unable to satisfy the performance criteria to provide a
guarantee of R2 million to VESA in lieu of satisfying those
performance
criteria. After this several more SVR suppliers became
members of the SVR committee and obtained VESA accreditation. This in
turn
caused considerable dissatisfaction to the appellants resulting
in their joint withdrawal from VESA and the SVR committee in May

2004.
[18] In summary therefore the factual position is that
the SVR committee was established and membership of the committee and
accreditation
of SVR systems by VESA depended upon the ability of a
SVR supplier to satisfy the performance criteria. From the outset
(although
there was a minor difficulty, soon resolved, involving
Matrix in April 2000 when the SVR committee was separated from the
Fleet
Management Committee of VESA) the appellants were members of
the SVR committee. Their systems were accredited by VESA. Once the

category of provisional membership fell away in April 2000 only a few
entities made enquiries about or sought membership of the
SVR
committee. None of them could satisfy the performance criteria and
none of them was admitted or given VESA accreditation for
their SVR
systems. That situation only changed in August 2003 with the
introduction of the financial guarantee and shortly after
that the
appellants withdrew from both the committee and VESA. In effect that
rendered VESA accreditation of SVR systems a dead
letter because the
short-term insurers indicated to the appellants that they would
continue to recognise their systems as justifying
reduced or
discounted insurance premiums.
THE COMPLAINT AND THE TRIBUNAL’S DECISION
[19] It is convenient against that background to
consider the terms of the Commission’s complaint and the
determination by
the Tribunal. In doing so it must be borne in mind
that the Act only came into operation on 1 September 1999
so that
activities by the appellants in the SVR committee prior to
that date do not fall within the ambit of the Act.
[20] The Commission’s complaint is set out in the
affidavit of its inspector, Mr Hendrik Senekal. He recorded that
Tracetec
had lodged a complaint with the Commission that the
appellants (and two other parties who subsequently fell away) were
engaging
in prohibited practices in contravention of the provisions
of s 4(1)(a) of the Act by:
‘
Collectively agreeing on accreditation
criteria for VESA membership of the Stolen Vehicle Recovery Committee
(“SVR Committee”)
which had the effect of obstructing new
entrants from entering into and/or effectively participating in the
market for the tracking
and recovery of motor vehicles to the
detriment of consumers.’
Mr Senekal said that the Commission had found that the
appellants had engaged in a restrictive horizontal practice as
referred to
in s 4(1)(a) of the Act:
‘…
in that the agreement between or
concerted practice by the respondents impeded or prevented Tracetec
and other competitors such
as Karoocell (now Mobile Traker
Manufacturing (Pty) Limited “Mobile Traker” (
sic
)),
Cartrack (Pty) Limited (“Cartrack”) and Cellstop (Pty)
Limited (“Cellstop”) from entering or expanding
within
the relevant market.’
[21] The Commission found that the appellants were all
members of VESA’s SVR committee from the time of its
establishment
until their resignation. In order to obtain VESA
accreditation firms needed to become members of VESA within specified
categories
relating to the nature of the product concerned. Mr
Senekal went on:
’
10.5 In order to enter the market and
compete effectively in the relevant market, Tracetec and other
competitors and/or potential
competitors such as Mobile Traker,
Cartrack and Cellstop required the accreditation of most major
insurance companies. This was
so because tracking devices are mainly
installed as a result of insurers’ requirements and insurance
companies only offered
discounts on insurance premiums to insured
persons if they used approved and/or accredited products and
services. In practice,
firms that competed in the relevant market had
to obtain VESA membership in the SVR category in order to obtain
approval from the
insurance companies since the insurance companies
do not recognise and/or accredit the products of non-VESA members.
Without VESA
accreditation in the SVR category it was therefore
virtually impossible for firms to enter or expand within the relevant
market.’
Mr Senekal then referred to the performance criteria of
a minimum of 3000 subscribers and 100 stolen vehicle recoveries and
said
that before July 2003 this:
‘…
raised an almost insurmountable
barrier to entry to potential new entrants into the relevant market,
since without VESA accreditation
in the SVR category, firms seeking
accreditation were unable to build up a sufficiently large client
base to meet the …
3000 subscriber requirement or conduct the
required 100 recoveries. The respondents, during the duration of
their membership of
VESA’s SVR committee, up until at least
July 2003, therefore excluded new entrants from the relevant market
by setting and/or
attaining criteria, which prevented potential new
entrants from obtaining VESA accreditation in the SVR category.’
[22] The Commission’s case was therefore that the
performance criteria and particularly the requirement that an SVR
supplier
have 3000 customers and over 100 recoveries were
exclusionary. It relied upon both an agreement and a concerted
practice in terms
of s 4(1)(a) of the Act. In response to
requests for particulars by each of the appellants as to the terms of
the agreement
said to constitute a contravention of s 4(1)(a) of the
Act they said that:
‘
The terms of the agreement between the
respondents were that membership of VESA (and accordingly,
accreditation by VESA) in the
SVR category … should only be
granted to new entrants who could satisfy [the specified criteria].’
In regard to the terms of the alleged concerted practice
it was alleged that the members of the SVR committee co-operated in
establishing
the criteria for membership of the SVR committee and
accordingly for accreditation by VESA and thereafter co-operated ‘in

resisting and/or frustrating and/or ignoring attempts by the Board of
VESA to ameliorate the established criteria’.
[23] In substance the Tribunal upheld this complaint,
although the terms of its declaratory order in some respects differ
from it
and in others are confusing. It held that the complaint was
established for the entire period from 1 September 1999, when the Act

came into force, until August 2003 when the giving of a guarantee was
introduced as an alternative to compliance with the performance

criteria. It did not regard the period of provisional membership as
being relevant to ameliorate the anti-competitive effect of
the
performance criteria because ‘provisional membership was not
something meaningful and when Bandit tried to rely on it
for
marketing it was chastised’. The correctness of that decision
lies at the heart of these appeals.
THE ISSUES
[24] A contravention of s 4(1)(a) of the Act arises
in three circumstances. These are where there is an agreement, as
defined
in s 1(1)(ii) of the Act, that has the effect of
substantially preventing or lessening competition in a market; where
there
is a concerted practice, as defined in s 1(1)(vi) of the
Act, having the same effect and where a decision by an association
of
firms has that effect. Both Tracetec in its original complaint and
the Commission in its reference to the Tribunal alleged that
there
was either an agreement between or a concerted practice by the
appellants that constituted the alleged contravention of s 4(1)(a).

No reliance was placed on a decision of firms insofar as the three
appellants were concerned and the endeavour by Tracetec to rely
on it
in its heads of argument was not pursued in oral argument.
[25] The distinction between an
agreement and a concerted practice is important as appears from the
definition of the two expressions.
4
These read:
‘”
Agreement”,
when
used in relation to a prohibited practice, includes a contract,
arrangement or understanding, whether or not legally enforceable’
and
‘“
Concerted practice”
means
co-operative, or co-ordinated conduct between firms, achieved through
direct or indirect contact, that replaces their independent
action,
but which does not amount to an agreement.’
A concerted practice arises from the
conduct of the parties and does not amount to an agreement. A
possible example might be the
type of cartel arrangement where a
market leader signals a price increase by way of public announcement
and, in accordance with
long-standing practice in the industry, the
other participants follow its lead. However care must be taken not to
confuse independent
conduct with interdependent conduct.
5
It suffices for present purposes to
say that the emphasis is on the conduct of the parties. By contrast
an agreement arises from
the actions of and discussions among the
parties directed at arriving at an arrangement that will bind them
either contractually
or by virtue of moral suasion or commercial
interest. It may be a contract, which is legally binding, or an
arrangement or understanding
that is not, but which the parties
regard as binding upon them. Its essence is that the parties have
reached some kind of consensus.
6
No doubt in many cases the same
evidence may be relied upon as pointing towards either an agreement
or a concerted practice. However,
sight should not be lost of the
fact that they are different. The definition of an agreement extends
the concept beyond a contractual
arrangement. However, what it
requires is still a form of arrangement that the parties regard as
binding upon both themselves and
the other parties to the agreement.
Absent such an arrangement there is no agreement even in the more
extended sense embodied in
the definition. By contrast a concerted
practice examines the conduct of the parties to determine whether it
is co-ordinated conduct
or they are acting in concert. The absence of
any arrangement between them or any belief that they are obliged to
act in that fashion
is immaterial.
[26] Observing the distinction
between an agreement and a concerted practice is essential to a
proper analysis of allegedly anti-competitive
conduct. If the
argument or analysis runs the two together that leads to confusion
and error. In particular, and that is evident
in this case, it leads
to an incorrect approach to and evaluation of the evidence. The case
for a concerted practice is based on
evidence that assesses the
nature of the conduct of the firms said to be party to the practice.
By contrast the case for an agreement
examines whether an agreement
as defined was concluded and that focuses on the existence of
consensus between the parties. Even
where reliance is placed on the
same evidence in support of these distinct cases it requires separate
evaluation. There are also
jurisdictional and procedural reasons for
a careful observance of the distinction. The jurisdictional reason
lies in the path by
which a complaint reaches the Competition
Tribunal. The process starts with the Commissioner initiating a
complaint in terms of
s 49B(1) of the Act or some other person
submitting a complaint to the Commission under s 49B(2)(b) of
the Act. In either
case the complaint must be investigated and, if
the Commission concludes that a prohibited practice has been
established, must
be referred to the Tribunal under s 50 of the
Act. The Tribunal’s jurisdiction is confined to a consideration
of the
complaint so referred and the terms of that complaint are
likewise constrained by the terms of the complaint initiated by the
Commissioner
or made by some other person. Accordingly if the
original ground for the complaint is that there was a prohibited
agreement the
Tribunal cannot determine it on the basis that there
was a concerted practice or
vice
versa
.
[27] As regards the procedural aspect
this court held in
Sappi
7
that the Commission has no general
power to consider anti-competitive behaviour but can only deal with a
complaint that alleges
a contravention by the target of the complaint
of a specific applicable provision of the Act. In
Woodlands
Dairy
8
the initiation of a complaint was
likened to a summons in that it must contain sufficient particularity
and clarity to survive the
test of legality and intelligibility. This
is not to say that what is required of a complaint is the level of
precision that is
demanded in pleadings. Where the complainant is a
lay person that would be to demand more than can reasonably be
expected. What
is required is that the conduct said to contravene the
Act must be expressed with sufficient clarity for the party against
whom
that allegation is made to know what the charge is and be able
to prepare to meet and rebut it.
9
It is true that the competition
issues upon which the Tribunal is called to adjudicate may be
broader, more general and less clear-cut
than those that arise in a
conventional civil case in the High Court. That does not mean,
however, that broad and unspecific generalities
should take the place
of a properly articulated complaint before the Tribunal to which the
target of the complaint can respond.
It was previously argued in
regard to hearings before the Industrial Court under the Labour
Relations Act 28 of 1956 that a broader
and more tolerant approach
should be taken in those tribunals because of the lack of
sophistication and experience of employees
in advancing their claims.
That approach was roundly rejected by the then Appellant Division.
10
There is even less excuse for it to
be adopted in competition matters, where the parties are usually
sophisticated and have, as
here, the services of experienced
attorneys and counsel. There is no excuse for resorting to vague
generalities instead of formulating
complaints accurately and in
detail in accordance with the provisions of the Act. It is the
Tribunal’s responsibility to
ensure that complaints brought
before it are pursued on this basis and also to ensure that it
determines only the complaint laid
before it, not something else that
arises or occurs to it in the course of the proceedings.
[28] Proof of the existence of an agreement or concerted
practice, as defined, is the first issue to be determined in an
enquiry
into an alleged contravention of s 4(1)(a) of the Act.
The second is whether the proven agreement or concerted practice has

the effect of substantially preventing or lessening competition in a
market. There are three elements to this. The first requires
an
identification of the relevant market. The second requires proof that
there has been some prevention or lessening of competition
in that
market and the third that this is an effect of the agreement or
concerted practice. The last is a question of causation.
Whilst these
three elements are notionally distinct, in practice it may prove
difficult to separate them.
[29] In the present case the
identification of the market has not posed any particular
difficulties. The market is the market in
respect of the supply and
operation of stolen vehicle recovery systems. Its geographic extent
is the whole of the Republic. Whether
there has in some respect been
a substantial prevention or lessening of competition in that market
is a factual enquiry.
11
Unless that enquiry generates an
affirmative answer the existence of an agreement or concerted
practice is irrelevant, at least
insofar as s 4(1)(a) is
concerned. There may be some overlap between prevention and lessening
of competition. For example,
an agreement between existing
competitors may both lessen the level of existing competition and
prevent competition in the future.
It could be argued that this
should be taken as a composite term and not as two distinct concepts.
An attempt to resolve the issues
raised by this language would
require us to consider the jurisprudence in the European Union on the
nature of prevention of competition.
It is unnecessary for present
purposes for us to enter upon that enquiry and preferable to leave it
for consideration on another
more appropriate occasion. In this case
there were very specific allegations of the nature of the prevention
or lessening of competition
relied upon by the Commission and
Tracetec and I confine myself to a consideration of whether that case
was established by the
evidence.
[30] The references to preventing and lessening
competition are qualified by the adverb ‘substantially’.
Whether any
particular prevention or lessening of competition is
substantial will be a question of fact in every case. However, the
existence
of this qualification demonstrates that what is required is
something that is neither speculative nor trivial. It may be notional

or hypothetical in the sense that there is no actual instance of a
person being prevented by the agreement or concerted practice
from
entering the industry concerned. Nonetheless, if the evidence is
strong enough to show that, but for that agreement or concerted

practice, persons would probably have entered the industry and
engaged in competition, the requirements of a substantial prevention

of competition will almost certainly be satisfied. However, that may
be a difficult case to prove. It will require consideration
of not
only the agreement or concerted practice, but also other obstacles
that would have confronted aspirant entrants to the market.
Issues
such as the availability of capital, the need to establish an
infrastructure, the availability of suitably qualified staff
and
access to appropriate technology may all be relevant to the question
whether it is realistic to say that new entrants would
have come
forward when as a matter of fact they did not do so.
[31] Once an agreement or concerted
practice has been established it must be linked to the prevention or
lessening of competition.
This raises the question of causation
embodied in the words ‘if it has the effect of’. The
agreement or concerted practice
must be linked to the prevention or
lessening of competition. Whilst in practice this is not dealt with
as a discrete issue it
is necessary from an analytical perspective to
recognise it as separate from the other two questions as it may raise
distinct issues.
This court has not previously considered the
question of causation in relation to this section of the Act. What is
required in
order to justify a finding that the prevention or
lessening of competition in a market is an effect of an agreement or
concerted
practice? Clearly the agreement or concerted practice must
be a necessary cause (
causa
sine qua non
) of
the lessening or prevention of competition, without which it would
not have occurred. This is the same enquiry as to factual
causation
that is conducted in other areas of the law, such as the law of
delict.
12
One asks whether ‘but for’
the agreement or concerted practice the prevention or lessening of
competition would have
occurred. If the answer is in the affirmative
then that prevention or lessening of competition was not an effect of
the agreement
or concerted practice. However, a negative answer does
not finally dispose of the question of causation.
[32] A market is a complex concept and many factors
operate to influence what happens in a market. Often it will be clear
that the
only reason that there has been some prevention or lessening
of competition in a market will be the particular agreement or
concerted
practice identified in the complaint. The link of cause and
effect will be clear. On other occasions, of which the present case

is an example, there may be other factors that are also a necessary
cause of the prevention or lessening of competition. That is
the
argument for the appellants. They contend that if there was any
prevention or lessening of competition in the market for SVR
systems
it was the decisions by SAIA and its members that had that effect,
not any agreement or concerted practice by the appellants.
How is
this resolved if both causes satisfy the ‘but for’ test?
[33] The section does not contemplate concurrent causes
but requires a determination of whether the agreement or concerted
practice
had the effect of preventing or lessening competition in the
market. The language used is not consistent with the agreement or
concerted practice being one of several concurrent causes of the
prevention or lessening of competition in the market. It requires
the
agreement or concerted practice to have the required detrimental
effect. In my view what is required by this provision is that
the
primary or substantial cause of the prevention or lessening of
competition must be identified. Where an agreement and some
other
separate action by a different party are identified as both having
been necessary conditions for the prevention or lessening
of
competition it is only where the agreement or concerted practice
plays the dominant role that it falls within the section. In
other
words it is necessary to consider whether the lessening or prevention
of competition is so closely connected to the agreement
or concerted
practice that it can properly be said that the former was the effect
of the latter and any other action was merely
ancillary. In this
investigation it is necessary to have regard to the intervention or
involvement of third parties and any other
factors that may have had
a causative effect in bringing about the lessening or prevention of
competition. This is similar to,
but not the same, as the question of
legal causation that arises in the delictual context. In the context
of competition law and
the requirements of the Act it is only where
the substantial prevention or lessening of competition is the direct
and predominant
consequence of the agreement or concerted practice
that s 4(1(a) is contravened.
[34] Against the background of that analysis the
following questions fall to be considered in the present case:
(a) Were the appellants party to an agreement or
concerted practice as alleged by the Commission?
(b) Was there a substantial prevention or lessening of
competition in the South African market for the supply and operation
of stolen
vehicle recovery systems?
(c) If so, was that substantial prevention or lessening
of competition an effect of the agreement or concerted practice,
within
the meaning of that expression in s 4(1)(a)?
Each of these will be considered in turn.
AGREEMENT OR CONCERTED PRACTICE
[35] Regrettably the Tribunal’s
decision fails to recognise the need to distinguish clearly between
an agreement and a concerted
practice. The order it granted declared
that the actions of the appellants ‘in concluding an agreement
and/or engaging in
a concerted practice’ amounted to a
contravention of s 4(1)(a). The use of ‘and/or’
betrays its lack of
clarity on this point.
13
The Tribunal also overlooked the fact
that the basis upon which the Commission alleged that there had been
an agreement and the
basis for its allegation of a concerted practice
were different. In its discussion of the issue under the heading ‘Was
there
an agreement or concerted practice?’ the topic of a
concerted practice is not discussed and the conclusion appears to
have
been that there was an agreement. The alleged grounds of a
concerted practice were not considered. If the Tribunal intended
simply
to find that there was an agreement there is the further
difficulty that it is not apparent from its determination when this
agreement
was concluded or what its terms were.
[36] The relevant passage in the Tribunal’s
determination reads as follows:
It is
common cause that the three SVR respondents are competitors in the
SVR market. The agreement alleged to be a restrictive
practice is
the performance standard for membership of the VESA SVR committee.
The SVR respondents do not concede that they are
a party to an
agreement in respect of these standards. It is hard to see how they
can credibly make this assertion. The SVR respondents
all joined
VESA with a view to it setting performance standards. The early
history of the Tracking and Recovery sub-committee
showed that when
the SVR respondents did not reach agreement no standard was
determined. It was only when all three returned
after being prodded
by SAIA that a standard was agreed upon and that required consensus
being reached by these three firms and
in particular Nestar and
Tracker. Although other firms had brief roles in the committee they
played as extras. The real roles
and hence the agreement on the
standards came about when the three SVR respondents reached an
agreement all three found acceptable.
The agreement was finally
determined sometime in September 1998 and then implemented in
February 1999, with the press release.
It was, as the chronology
shows, the sub-committee which set the standard and then proceeded
to make it public – prior
to its endorsement by the executive
of VESA – something it is unclear ever happened. At various
times this standard was
amended by the Committee to make it easier
for the three firms to get approval for their new products whilst at
the same time
denying this latitude to new entrants. The SVR
respondents then voted in favour of raising the admission threshold
by abolishing
provisional membership and then repeatedly resisting
the suggestion of a financial guarantee until conceding to this in
August
2003 at the eleventh hour.
As the
history has shown, when major decisions needed to be taken they
often consulted outside of the committee and only amongst
the three
of them. VESA permitted the SVR committee to set the standard and
the SVR respondents were the key protagonists in
that consensus –
hardly surprising as they represented at that time more than 90% of
the industry.
When the
consensus in the SVR committee broke down at a time when the SVR
respondents could be outvoted by the other members of
the committee,
they resigned, collectively endorsing the same reasons for their
resignations and adopting the same press statement.
As they had
operated in setting the performance standard so they operated to
prevent the standard that had been for once imposed
upon them by
outside pressure, from becoming a means of easing entry into the
market. As we have seen, once they left VESA it
ceased effectively
to become the approval body for the industry. There is therefore
little doubt that the standard set for approval
based on a
performance standard was reached as a result of inter alia the
agreement of the three SVR respondents. Since they
did so as a VESA
sub-committee, which VESA permitted to be held out to the world as
its standard, it must be regarded as a decision
of an association of
firms as well. We deal more fully with VESA below.
[37] There are a number of problems with this passage.
Certain factual statements are simply incorrect. There was no formal
Tracking
and Recovery sub-committee within VESA prior to the
workshops being convened and the appellants were not members of VESA
prior
to or while the workshops were conducted. The Fleet Management
and SVR committees were created at the end of this process not at
the
beginning and only then did the appellants apply to join VESA. The
standards were not publicly launched without the endorsement
of VESA.
In fact VESA, in conjunction with SAIA, organised the launch. VESA
clearly endorsed and enforced the standards. Equally
problematic is
the statement that the agreement is the performance standard. That
cannot be correct. The standard alone cannot
be an agreement nor is
it the agreement alleged by the Commission to exist. That agreement
was that the appellants had agreed that
membership of VESA in the SVR
category and accordingly accreditation by VESA should only be granted
to new entrants who could satisfy
the standard. The question before
the Tribunal was whether that agreement had been established.
[38] The key finding by the Tribunal appears to be
encapsulated in the following extract from the quoted passage:
‘
It was only when all three returned after
being prodded by SAIA that a standard was agreed upon and that
required consensus being
reached by these three firms and in
particular Netstar and Tracker. Although other firms had brief roles
in the committee they
played as extras. The real roles and hence the
agreement on the standards came about when the three SVR respondents
reached an
agreement all three found acceptable.’
With respect to the Tribunal this
involves a considerable confusion of thought and a misreading of the
evidence. The minutes show
that at least seven vehicle tracking
companies, including the appellants, participated in the workshops.
There is nothing to indicate
that the other four merely stood by and
‘played as extras’. The role of both SAIA and VESA in
these meetings is ignored.
It is a
non
sequitur
to say
that because the three appellants found the ultimate set of standards
agreeable that meant that the standards were constituted
by way of an
agreement among the three of them. It is also not factually correct.
All those who participated in developing the
standards agreed to
them. The minutes show relatively little disagreement even by
companies that could not satisfy the standards.
14
Nor is there any basis for the
finding that the agreement of the three appellants was essential to
the establishment of the requisite
standards. If Matrix, for example,
had refused to accept the standards there is no reason to think that
this would have derailed
the entire enterprise. It is mere
speculation to say what the impact would have been if one of the two
largest companies, Netstar
or Tracker, had declined to participate,
because that eventuality did not arise and there were obvious
commercial reasons why the
one would not withdraw without the other.
[39] The Tribunal also relied on events after the
standards had been produced and launched to the public and after the
SVR committee
had been established. It is not clear why it thought
these relevant to the existence of an agreement that it held had been
finalised
in September 1998 and implemented in February 1999. Either
the agreement existed at that time or it did not. Subsequent events
cannot affect that. The Tribunal’s factual findings in this
regard are not supported by the evidence and particularly not
the
documentary evidence. It is correct that there was debate in the
committee about the introduction of new systems by existing
members
of the committee. However, this was never an issue in relation to new
entrants. It is not correct to say that the appellants
voted in
favour of raising the admission threshold by abolishing provisional
membership. This was done by the VESA board at the
instigation of
SAIA and the SVR committee was simply informed of that decision. It
is not correct to say that the appellants resisted
the suggestion of
a financial guarantee. The minutes reflect that Mr Oosthuizen, the
chief executive of VESA, raised this issue
at a meeting of the SVR
committee on 22 November 2001. The members were asked to
provide comment and input regarding
financial guarantees in order to
address requests from new pending applicants. At the next meeting of
the committee on 14 February
2002 Mr Oosthuizen reported that
VESA had consulted with its lawyers and ‘it was concluded that
it was not viable to proceed
with the financial guarantee in lieu of
achieving the current specification’. The minutes do not reveal
that the issue of
a financial guarantee was again raised within the
committee until its meeting on 1 July 2003 when it agreed that a
financial
guarantee would be permitted from applicants who could not
satisfy the requirement of 3000 active clients and 100 recoveries.
Finally,
it is difficult to see how the collective resignation of
appellants from the committee provides any evidence of the existence
of
an agreement.
[40] It follows that the factual finding of the Tribunal
that the standard was set as a result of the agreement of the three
appellants
cannot stand. Nor do the facts support the allegation by
the Commission that there was an agreement between the appellants
that
membership of VESA (and accordingly accreditation by VESA) in
the SVR category should only be granted to new entrants who could

satisfy the criteria. They go no further than showing that the
appellants, together with other participants in the vehicle tracking

industry and with the approval of the VESA board of directors and
SAIA, agreed to the adoption of the standards for membership
of the
SVR committee and accreditation of SVR systems by VESA.
[41] That conclusion gives rise to a
difficult question regarding the application of s 4(1)(a). The
section refers to an agreement
between parties in a horizontal
relationship and s 1(1)(xiii) of the Act defines a horizontal
relationship as meaning a relationship
between competitors. The only
possible agreement that is supported by the facts in this case is an
agreement involving a number
of competitors in the SVR industry, VESA
and SAIA. VESA was seeking to establish itself as a private
regulatory body in respect
of the SVR industry and SAIA represented
the insurance companies, who were the principal drivers in securing
that motorists fitted
SVR systems to their vehicles. Clearly neither
VESA nor SAIA were in a horizontal relationship with the appellants
and the other
SVR companies. That raises the issue of whether such an
agreement can fall within s 4(1)(a) merely because some of the
parties
thereto are in a horizontal relationship. The point is one of
considerable difficulty on which we have not had the benefit of full

argument.
15
As these appeals can be resolved
without reaching a final conclusion on that issue it is preferable
not to do so. The judgment proceeds
on the assumption that the
agreement that has been identified is an agreement capable of falling
within s 4(1)(a) but that
assumption should not be taken as any
indication of a view by the court that this is correct.
SUBSTANTIALLY PREVENTING OR LESSENING COMPETITION.
[42] The Commission’s complaint was based upon the
proposition that in order to enter the market for SVR systems and
compete
effectively Tracetec and other competitors, or potential
competitors, such as Mobile Tracker, Cartrack and Cellstop, required
the
accreditation of major insurance companies and in order to obtain
this VESA membership in the SVR category was essential. It alleged

that without VESA accreditation in the SVR category it was virtually
impossible for firms to enter or expand within the relevant
market.
In particulars sought by Netstar it identified the relevant insurance
companies as being:
‘
Absa, Mutual & Federal, Auto &
General, Hollard, Regent, Budget, Outsurance, Dial Direct and BMW.’
It said that apart from BMW all insurance companies
required VESA accreditation. Insofar as prospective applicants for
accreditation
were concerned it identified these as including
Orbtech, Cellstop, Tracetec, Cartrack, Karoocell/Mobile Tracker,
Global Telematics,
Global Asset Protection, Star Track and LST.
[43] Although the Tribunal discussed the issue of the
prevention or lessening of competition extensively in paragraphs
[234] to
[261] and concluded that;
‘…
it was not possible for a firm to
expand in the SVR market at the time without having its product
approved by VESA in the SVR category.’
there is no mention in the discussion of any of the
insurance companies identified in the reply to the request for
particulars nor
of any of the aspirant entrants into the industry,
that had similarly been identified. The reason is apparent namely
that the evidence
did not support the case advanced by the
Commission.
[44] That is hardly surprising in
regard to the insurance companies. The major insurance companies that
the Commission said would
not accept anything other than VESA
accreditation turned out to be largely a list of insurance companies
that did not require VESA
accreditation. The major company that
required VESA accreditation was Santam, the largest short-term
insurer in the country.
16
The Commission called Mr Pienaar
from Santam, which required VESA accreditation. He testified that
Auto & General, Budget,
First For Women and Outsurance, did not
require such accreditation. It is not clear whether they were members
of SAIA. It seems
probable that the bulk of the members of SAIA
required VESA accreditation of SVR systems if they were to attract a
reduced or discounted
premium, but Mr Pienaar agreed with the
proposition that it overstated the position to say that ‘only
VESA approved devices
are commercially viable’. Tracetec
identified a number of insurers and brokers as parties from whom it
obtained support and
that included virtually all those in the list
provided by the Commission as requiring VESA accreditation. The
evidence that there
were a number of insurance companies, insurance
brokers and some vehicle suppliers who did not require VESA
accreditation was destructive
of the Commission’s contention
that no such insurance companies existed. There was no evidence
before the Tribunal as to
the proportion of the insured market held
by insurers who required VESA accreditation. It was accordingly
impossible to assess
whether an aspirant entrant into the market
could target these insurance companies and brokers as a way of
building up their client
base.
[45] The Tribunal dealt with this
difficulty in the following manner. It recorded that SAIA represented
the bulk of the short-term
insurance industry. It then said:
17
‘
It was thus not viable for a firm to enter
into this market backed only by insurers who were outside of SAIA. No
evidence was led
that any insurer broke ranks to do so except for the
efforts of De Meillon of Auto & General. Even Auto & General
had,
whilst interested at one stage in Tracetec, relied on Matrix as
a partner. Thus Tracetec was not looked at in isolation but through

the lens of an incumbent. No more than uninsured motorists would
non-SAIA insurers want to consider non-VESA firms unless they
were
considering a joint venture of the sort contemplated by Auto &
General, which in any event did not work out.’
There was no evidence whatsoever justifying the first
sentence in this passage. Mr Pienaar had said that Auto &
General, Budget,
First For Women and Outsurance did not require VESA
accreditation. Tracetec had identified a number of other insurers and
insurance
brokers who did not require VESA accreditation and were
allegedly willing to deal with it. In the absence of information
showing
that the share of the insurance market held by these firms
was so tiny that access to them would not enable a new entrant to
secure
a customer base of 3000 clients there is no justification for
the finding that it was not viable for a firm to enter into this
market via insurance companies who did not adhere to the SAIA
standard.
[46] The evidence of Mr De Meillon was that, from the
point of view of the insurance companies that he represented, VESA
accreditation
was never an issue or requirement. What he was
concerned with, before being willing to recommend a vehicle tracking
and recovery
product to its insurance customers, was that the
provider could provide an effective, viable and sustainable service.
The investigations
he made, in conjunction with Matrix into the
possibility of investing in Tracetec, were as a result of approaches
by Tracetec itself.
His conclusion was that:
‘
In 2002, Tracetec did not have operational
and functional technology capable of being marketed and sold nor did
it have the financial
resources required to implement a viable and
sustainable vehicle tracking and recovery service.’
In other words Mr De Meillon’s evidence was that
the insurers that he represented, which included Auto & General,
Budget,
First for Women and Outsurance, were perfectly happy to use
an SVR provider that was not accredited by VESA provided their system

and support structure was adequate. This provided no support for the
conclusion by the Tribunal that it was not viable for a firm
to enter
into this market without VESA accreditation.
[47] A consideration of Mr De Meillon’s evidence
takes one conveniently to the other aspect of the Commission’s
case,
namely that there were a number of aspirant entrants to the SVR
market whose path was blocked by the existence of the standards.
Of
course, the primary case was that Tracetec was such an entity. Indeed
that was the entire basis for Tracetec’s original
complaint to
the Commission. However, that case collapsed not so much with a bang
as with a whimper when at the outset of the proceedings
before the
Tribunal leading counsel for Tracetec said the following;
‘…
it’s not possible to say
what the position might have been in the absence of VESA’s
track record criteria in 2001 and
2002. So, we are not going to seek
to persuade you that Tracetec would have entered the market, would
have been successful during
those two years. As a fact we were not
able to roll out the physical infrastructure to any significant
degree prior to July 2003
when Legatt joined and provided the
financing.
So, any statement by Tracetec in its documents to the contrary, in
other words that Tracetec was in a position to go out and into

(enter?) the market and compete is incorrect and we don’t
intend to rely on any of those statements. Spending on infrastructure

started in July 2003 when Legatt joined, but it was limited by the
fact that there was nobody’s approval until October 2003
when
the BMW contract was landed and Tracetec was able then to spend more
money and start building up its physical infrastructure.
We are able to say that but for the SVR restrictions, which were in
place at that stage, we would have been able to market the
product
fully by November 2003, October/November 2003.’
[48] Notwithstanding that concession, the accuracy of
Tracetec’s claims in documents it issued to investors and in
its endeavours
to obtain membership of VESA, whether in the SVR
committee or otherwise, were extensively canvassed in the evidence
and particularly
in the cross-examination of Mr Pickering. It
was demonstrated beyond doubt that the claims Tracetec had
persistently made
in regard to its product and its ability to enter
the market at the relevant time were simply, and on some occasions
deliberately,
untruthful. The concession by leading counsel at the
outset of the case was not only fully warranted but was thereafter
borne out
by the demonstrated facts. Insofar as the case before the
Tribunal rested upon the standards for VESA accreditation obstructing

Tracetec in its endeavours to enter the market that case was
abandoned by Tracetec and destroyed by the evidence. It is
unfathomable
in those circumstances on what basis the Tribunal could
conclude in paragraph [250] that Tracetec was disputing the
allegation
that it was in no position to enter the market. It was
also wrong for it to say:
‘
It is not necessary for us to determine
whether Tracetec could have successfully entered the market at the
relevant time, but for
the VESA approval criteria. Rather the
question is posed in more general terms; could a reasonably efficient
firm or a firm at
least as efficient as one of the SVR respondents
have entered the market without VESA approval or, if not, could it
have obtained
VESA approval within a reasonable time period?’
The complaint by the Commission and Tracetec had not
been brought before the Tribunal on that footing and it was not open
to the
Tribunal, once Tracetec’s grounds of complaint proved
unfounded, to create a different case on a purely hypothetical basis

that was not the case that the appellants were required to meet. In
addition, the manner in which the Tribunal formulated this
question
was founded on a premise about which there was no evidence whatsoever
and which squarely confronted it with the question
of causation. The
underlying premise is the presumed existence of a reasonably
efficient firm, or one at least as efficient as
one of the
appellants, wishing to enter the industry. In the absence of any
evidence that such a firm existed a discussion of the
question
whether the absence of VESA accreditation constituted an obstacle to
its entering the market was entirely academic.
[49] Reverting to the case that the Commission actually
sought to advance, although it listed an impressive number of firms
in its
further particulars, it produced witness statements from only
two, Karoocell and Cartrack, and was not in a position to call the

witness from Karoocell. It followed that once Tracetec made its
concession the only tangible evidence placed before the Commission
in
support of the proposition that the standards substantially prevented
competition in the market was that of Mr de Wet from Cartrack.
An
examination of his evidence is therefore necessary, although the
Tribunal did not rely upon it in this part of the enquiry.
[50] Mr de Wet testified that Cartrack was established
in July 2001. It was a start-up enterprise with a product it had
itself developed.
It made no formal application for admission to the
SVR committee and VESA before 2003. According to him, he spoke to Mr
Oosthuizen,
the chief executive of VESA, in the latter stages of 2001
about obtaining VESA accreditation for Cartrack’s product and
was
told that Cartrack did not comply with the standards. No written
application was ever made. He says that approaches made to insurers

by Cartrack were always rebuffed on the basis that their product was
not VESA accredited. However, he gives no indication of how
extensive
these approaches were. Instead Cartrack moved into other neighbouring
countries during 2002 and 2003 and applied for
membership of the SVR
committee when the requirements were relaxed to permit the furnishing
of a guarantee. Even then it took ten
months after its application
was approved to launch its product in South Africa.
[51] It is difficult to assess what weight to attach to
the evidence of Mr de Wet. The problem is that it suffers from a
complete
lack of verifiable detail. In his statement he mentions a
number of insurers that were approached in January 2004 after
Cartrack
had obtained VESA accreditation. However, he gives no detail
in either his statement or his evidence of which insurers he
approached
between 2001 and 2003. What he said in his witness
statement was that it was common knowledge at the time that the South
African
insurance industry would only accredit products that were
VESA approved. Mr Pienaar, who was far better qualified than he to
speak
to this issue, regarded this as an overstatement. Mr de Wet
said that the SVR market was driven by the insurance industry and
that
once one started a marketing drive it was the insurance
companies that had to be approached for approval. He went on:
‘…
if you didn’t have VESA
approval at the time, you basically wouldn’t even be able to
talk to them about it.
That was always the first question that they asked you, anybody would
ask you, are you VESA approved. If you weren’t VESA
approved,
that would basically be the end of the conversation. It wasn’t
just the insurance industry, but that was by far
the major issue.’
However, this was only one of the hurdles facing
Cartrack. A second was in persuading manufacturers that its product
could be fitted
in their vehicles and a third was the need to obtain
information from the cellular networks to operate the system. That in
turn
required Cartrack to persuade the cellular networks that it had
a viable business.
[52] The route adopted by Cartrack was to launch its
operations in countries other than South Africa. Mr de Wet gave no
evidence
regarding the basis upon which this was done or whether it
required the co-operation of insurance companies operating in those
countries. One significant aspect of his evidence is that Cartrack
only launched its operations in South Africa two months after
the
appellants withdrew from VESA and the SVR committee so that VESA
accreditation ceased to be a significant factor in developing
a
business in the SVR market. That flows from the fact that the members
of SAIA were happy to support the appellants even though
they were no
longer members of VESA. They were aware of the circumstances in which
the appellants had withdrawn from VESA and their
concerns that access
to the SVR committee by way of a financial guarantee was no guarantor
of an SVR firm’s performance,
stability or reliability. It is
difficult then to attribute any part of the breakthrough achieved by
Cartrack to its acquisition
of VESA accreditation. Mr de Wet says
that by January 2005 Cartrack had over 4500 South African members and
was installing 800
units per month. In 2007 when he signed his
statement the number of members had risen to 45 000 and they
were installing 3000
units per month. When he gave evidence in
November 2008 Cartrack had just under 110 000 subscribers and
was installing just
over 5000 new systems every month. Its major
growth and development has therefore been entirely during the period
when, according
to the Tribunal’s findings, VESA had ceased
effectively to be the approval body for the industry. It is difficult
to see
on what basis therefore Cartrack’s development in South
Africa after its launch in July 2004 can be attributed to its having

secured VESA membership and accreditation.
[53] That difficulty is compounded by an examination of
the available information regarding the growth of the market for SVR
systems
over this period. The figures contained in the report by Mr
Hodge, an economist who gave evidence on behalf of Netstar and
Tracker,
was that the market for SVR systems was expanding rapidly.
That expansion continued, if anything even more dramatically, after
July 2003, when membership of the SVR committee was made easier in
consequence of the introduction of the alternative of a guarantee.
It
continued after the three appellants withdrew from VESA and the
latter’s regulatory role was effectively ended. The picture
is
therefore of a rapidly expanding market in which new entrants, such
as Cartrack, were able to expand their customer base rapidly
even
though VESA membership had become largely irrelevant. Those facts
weigh against a conclusion that during the period when the
standards
were being applied by VESA from March 2000 to July 2003 the
conditions operated to prevent competition.
[54] On this issue it is also appropriate to consider
the firms identified by the Commission as having complained about the
3000
subscribers requirement. Global Telematics obtained VESA
approval in the fleet management category in February 2001. In May
2001
it requested membership of the SVR category but at that stage
did not satisfy the requirement of 3000 clients. By May 2002,
however,
it had achieved the requisite number of clients and was
admitted to the SVR category. Its experience does not suggest that it
was
impossible for new entrants to achieve the standards as it did so
during their heyday. Karoocell (which later changed its name to

Mobile Tracker) only approached VESA for membership of the SVR
committee at some stage near the middle of 2003 and it was an early

beneficiary of the introduction of the financial guarantee. In the
witness statement of its Mr Tafur, other than broad
generalities,
there is no indication that it took any steps prior to
2003 to enter this particular market. Mr Tafur was not available to
be called
as a witness and the Tribunal ruled that his statement
should be disregarded.
[55] The other firms identified by the Commission can be
dealt with reasonably quickly. Cellstop applied for VESA approval in
February
2003 and their application was referred to the VESA board by
the SVR committee. They were offered membership in the fleet
management
category but rejected this. They offered a financial
guarantee and when the standards were changed to permit this they
became a
member of the SVR committee in June 2004. Orbtech was a
member of the fleet management committee but resigned in February
2002.
It only applied for membership of the SVR committee in
September 2003. Mobile Data was a joint venture that was only
launched in
May 2004. LST only applied for membership in January 2004
and was only able to tender a guarantee payable over 6 months. The
minutes
reflect that there were concerns about its product from a
technical perspective. Global Asset Protection expressed interest in
about July 2003 but do not appear to have pursued it. No information
was placed before the Tribunal in regard to Star Track.
[56] Again it is not surprising that the Tribunal did
not place any reliance on the experience of these firms. There was
not the
slightest indication that they were in a position to enter
the SVR market during the period from 2000 to July 2003. To the
extent
that any of them were trying to break into that market there
was no evidence of their capacity to do so, what steps they took to

achieve entry and, to the extent that this was the position, the
reason for their failure to achieve entry. Insofar as there was
any
evidence it lay in the experience of Global Telematics, which was
that, notwithstanding the fact that it was not a member of
VESA in
the SVR category, it was able to achieve the admission criteria
during the period between May 2001 and May 2002. It seems
likely that
it did this by developing its existing fleet management business.
That this was a possible way of obtaining entry into
the insured SVR
market was in accordance with the evidence of Mr Hodge on behalf of
Netstar and Tracker. However, the Tribunal
attached no weight to this
evidence.
[57] In those circumstances the evidence before the
Tribunal did not sustain the factual basis for the Commission’s
complaint.
The evidence in regard to the actual situation in the
market for SVR systems during the period from March 2000 to July 2003
did
not disclose that the existence of the standards substantially
prevented or lessened competition in that market. The major contender

for such a situation was Tracetec and its concession at the
commencement of proceedings fatally damaged the Commission’s

case in that regard. Beyond that there was only the limited evidence
from Cartrack and some evidence about Global Telematics, both
of
which developed their business notwithstanding the existence of the
standards.
[58] Some reliance was placed on the fact that, once the
standards were altered by permitting a guarantee, several firms
applied
for and obtained VESA membership. However that is no
indication that the standards had prevented them from competing in
the market.
It only indicates that they perceived a possible
advantage in VESA membership. On its own it gives no indication that
in the absence
of the standards there would have been a greater level
of competition in the market. Had there been no standards the
appellants
could quite freely have marketed their products as being
the only ones with an established track record in terms of the number
of vehicles to which their systems were fitted and their rates of
recovery. That would have confronted the new entrants with precisely

the same difficulty in dealing with the insurance companies, namely
that their products were unknown and untested, with no track
record
to back them up. They were entirely dependent on persuading insurers,
brokers, fleet managers and the market generally that
they should to
adopt a colloquialism ‘be given a chance’. Both Ms de
Silva and Mr Pienaar said that, in the absence
of the formulation of
standards through VESA, insurers would have formulated their own
standards before recommending the installation
of a tracking system
and giving a reduced or discounted premium for doing so. In view of
the expense involved in doing that the
probability is that they would
have preferred the safe offerings of the large companies, namely the
appellants, to those of new
start-ups who could give them no comfort
in regard to their long-term viability and effectiveness. In other
words in the absence
of some evidence that tended to show that
insurers would, but for the standards, have been willing to use new
entrants, the case
is taken no further by these companies joining
VESA by way of the mechanism of providing a guarantee.
[59] In my view where the Tribunal went wrong is that it
approached this question on a theoretical basis concerning the
potential
effect of standards in a market instead of examining the
factual basis of the complaint that had been referred to it. It
commenced
its discussion of the issue by saying that:
‘
The theory of harm advanced in this case is
that the standards operated to exclude rival firms from effectively
entering in the
market to compete with incumbents who had been
approved in terms of the standard.’
From there it engaged in a largely academic discussion
of the effect of standards on competition and sought to draw a
distinction
between benign and malign standard setting. In doing so
it appears to have been significantly influenced by the approach in
other
jurisdictions and in particular the various tests adopted by
courts in the United States of America in implementing its rule of

reason approach to standard setting.
[60] The flaw in this approach is twofold. Firstly, it
drew the Tribunal away from a consideration of the facts of the
complaint
that had been referred to it with the result that it did
not consider whether the Commission’s evidence supported the
complaint.
Secondly, it substituted a theoretical investigation of
the effects of standard setting for a factual enquiry into the
question
whether there had in fact been any substantial prevention or
lessening of competition in the market for the supply of SVR systems

as a result of the application of the VESA standards. This is not to
say that reference to foreign authorities and the approach
taken in
other courts may not be helpful in standard setting cases. However,
where the basis of the complaint is that particular
firms identified
in the complaint were constrained in their efforts to enter an
identifiable market the enquiry for the Tribunal
must revolve around
those factual allegations not hypothetical tests for determining the
general impact of standards in a market.
Those tests may be helpful
in other cases but they found little purchase in this case where the
Commission’s complaint was
that specific entities had been
prevented from entering the market.
[61] In the light of these problems
it is necessary once again to emphasise that the Tribunal is not at
large to decide whether
conduct is anti-competitive and then to
formulate reasons for that finding. It is, as this Court said in
Mittal Steel
,
18
bound to apply the Act and engage
with the issues as they arise from a proper construction of the Act’s
provisions. It does
so in the light of a specific complaint that has
been referred to it for determination and its only function is to
determine whether,
in the light of the Act’s provisions and the
evidence placed before it or obtained by it pursuant to the exercise
of its
inquisitorial powers, that complaint is made out. Not only did
it not do that in this case, its approach to the evidence was flawed.

A reading of its decision in the light of the record conveys that it
highlighted every piece of evidence that could be construed
as
casting the conduct of the appellants in an unfavourable light and
disregarded or discounted all the evidence to the contrary.
There is
considerable force in the criticism by the appellants that in places
it substituted speculation for legitimate inference.
In conjunction
with its theoretical approach to the task before it that leaves the
unfortunate impression that it was concerned
to mould the evidence to
fit its theory of harm and the principles it was seeking to apply
rather than adjudicating on the case
before it. That is something
that should be strictly guarded against in any adjudicative body.
[62] In Tracetec’s argument it was submitted that
the standards were irrational and anti-competitive. Reliance was also
placed
on the repeatedly stated concerns of the appellants, as well
as members of the VESA board, that the standards might be seen as
anti-competitive. However this does not assist. The fact that the
appellants were concerned not to be seen as engaging in
anti-competitive
conduct and were anxious about the consequences if
they did so cannot create an agreement or concerted practice, nor can
it demonstrate,
absent clear independent evidence, that competition
was in fact prevented or lessened. And unless there was an agreement
or concerted
practice and competition was prevented or lessened
thereby the irrationality of the standards was immaterial. It is
entirely proper
for firms engaged in a market to have an ongoing
concern not to fall foul of the provisions of the Act and the fact
that they have
such concerns and adopt a conservative approach to
that possibility does not of itself demonstrate that the concerns are
well-founded.
Whilst a business that sets out to behave in an
anti-competitive way is unlikely to receive sympathy from the
Tribunal when it
contends that it failed in its endeavours a firm
that is anxious not to do so cannot be condemned by reason of that
anxiety.
CAUSATION
[63] In my view there was no sufficient basis in the
evidence for the Tribunal to conclude that there was a substantial
prevention
or lessening of competition in the market for the supply
of SVR systems during the period from April 2000 to July 2003. The
evidence
does not show that there existed in that market during that
period any actual or potential entrant that was hampered in its
efforts
to enter the market by the existence of the standards. As
discussed in the previous section of the judgment the complaint was
made
and referred to the Tribunal principally on the footing that
Tracetec was prevented from entering the market by the existence of

the standards and its consequent inability to obtain membership of
the SVR committee and VESA accreditation in that category. That

complaint collapsed and the other evidence tendered by Tracetec and
the Commission was insufficient to show that any of the parties

identified by the Commission had been hampered in securing entry to
or competing in the market for SVR systems as a result of their
lack
of VESA accreditation. It was accordingly insufficient to resuscitate
the complaint. The resort to a hypothetical ‘reasonably

efficient firm or a firm at least as efficient as the SVR
respondents’ was not only not open on the terms of the
reference
but the evidence failed to disclose that such a firm
existed or could have been brought into being had the standards not
been in
force.
[64] On that ground alone the necessary causal link
between the agreement that I have assumed for purposes of this
judgment existed
among the appellants and any prevention or lessening
of competition in the market does not exist because no such
interference with
competition was established. However even if it
could be said that there was some interference with competition in my
view it is
plain that the necessary causal connection between that
and any conduct on the part of the appellants has not been
established.
[65] I reach that conclusion because of the key role
that SAIA and the insurers that required VESA accreditation for SVR
systems
played in the process. Whilst the insurance companies were
not themselves the customers for those systems they drove the
decisions
by their clients both to install such systems and as to the
suppliers with whom they would contract. That is because the reduced

or discounted premiums would only be made available to persons
seeking insurance if the system they installed was one that their

insurer approved. Accordingly if an insurer required a VESA
accredited system that is what would be installed.
[66] It necessarily follows that the effect of the
standards does not arise from their mere existence but from the
stance that insurance
companies took to them. It was the insurance
companies in the first instance and not the tracking companies that
required standards.
On the face of it the appellants were perfectly
happy to continue to develop and market their businesses without such
standards.
No doubt in the course of doing so they would have boasted
of their track records and stressed to the insurers the advantages of

recommending their systems ahead of those of competitors. There are
documents in the record that demonstrate that this was the
marketing
strategy of both Netstar and Tracker. When confronted with newcomers
to the industry they would no doubt have emphasised
the latter’s
lack of a proven track record and the limitation of their coverage
and any other weaknesses they perceived in
their offerings. A warning
against making use of potential ‘fly by nights’ would
have been sounded. That is what competitive
marketing involves. Had
the insurance companies through SAIA not made it clear that they
wanted standards it seems unlikely that
the appellants would have
become involved in developing standards at all. If standards had been
developed in that situation it
would have been by the insurance
companies themselves or by a separate agency.
[67] Not only did SAIA drive the process that lead to
the creation of the standards but it was involved in determining
their content.
When it regarded the proposals as unduly stringent for
its purposes it required them to be watered down and Netstar accepted
this.
Once the standards had been developed and the SVR committee
established it was left to the individual insurance companies to
decide
whether or not they would require VESA accreditation for SVR
systems. Mr Pienaar made it clear that Santam’s decision to do

so was Santam’s own decision not that of the appellants. Some
insurance companies were clearly prepared to make use of SVR
systems
that were not accredited, as were some insurance brokerages. The
latter were important because they directed clients to
the insurance
companies. Of central importance is that the mere existence of the
standards had no effect at all. What was crucially
important was that
the insurance companies accepted the standards as providing the
measure of comfort that they were seeking so
that they would require
their clients to install VESA approved SVR systems.
[68] Mr Loxton SC, on behalf of Tracetec, focussed in
his submissions on this issue of causation. His approach, like that
of this
judgment, was first to apply the ‘but for’ test
and then to examine the impact of other factors. He accepted that the

insurers’ decision to accept the standards and require that
VESA accredited SVR systems be installed in their clients’

vehicles was itself a
causa sine qua non
of the effects of the
standards in the market. As he put it in response to a question from
the bench: ‘If SAIA was not on
board there would be no effect
in the market.’ It is the acceptance by SAIA of the standards
and the decision of their members
to make use of VESA accreditation
that caused the effect in the market.
[69] It is probably incorrect to describe the role of
SAIA and its members as an intervening cause of any market effect as
they
participated throughout and their involvement cannot be
separated from those of VESA and the persons who participated in
preparing
the standards. However s 4(1)(a) does not appear to
contemplate concurrent necessary causes one of which contravenes the
section
and the other of which does not. In any event that is an
artificial approach to the section. As dealt with earlier the proper
construction
of the section requires that the dominant or real and
substantial cause of any prevention or lessening of competition in
the market
be identified. In the present case that involves asking
whether it was an agreement among the appellants that did this or the
conduct
of SAIA and its members.
[70] In my view it is clear that the conduct that had
the closest connection with any prevention or lessening of
competition was
that of SAIA and its members. Whilst the preparation
of the standards was a necessary element, that flowed from SAIA’s
needs
not those of the appellants. SAIA participated in the
preparation of the standards, assisted in their launch and its
members, or
the bulk of them, decided to use VESA accreditation in
giving reduced or discounted premiums. The moment SAIA changed that
stance
the standards could no longer play a role in determining
competitive conditions in the market, as occurred when it agreed to
continue
to endorse the appellants’ systems after they withdrew
from VESA. As counsel put it, without SAIA there was no effect in the

market. It follows that any prevention or lessening of competition in
the market as a result of these standards being implemented
was
brought about by SAIA and its members and was not an effect of any
agreement among the appellants.
[71] That conclusion is consistent with the evidence in
regard to the competitive effect of standards that was placed before
the
Tribunal by Mr Hodge. He made the point, referring to United
States sources, that standards cannot generally be viewed as
anti-competitive
when the party or parties that drive their
implementation in practice are the customers or users of those
standards. In this case
it is SAIA and its members that played that
role, acting on behalf of their clients and in their own interests.
Mr Hodge also pointed
out that there was never an obligation on
potential entrants to comply with these standards. They could always
seek to advance
their business through other channels, as Global
Telematics and Cartrack did, and it was always open to them to seek
to persuade
the insurance companies that their systems, albeit new
and relatively untried, had advantages that made them worthy of
endorsement.
DECISION
[72] For those reasons no contravention of s 4(1)(a)
was established during the period from April 2000 to August 2003.
That
conclusion means that there was no contravention during the
earlier period from September 1999 to April 2000, when provisional
approval was possible and no contravention after August 2003
when the financial guarantee was introduced, as it is accepted
that
if anything any barriers to entry were less during those periods. The
appeals must therefore succeed and the determination
by the Tribunal
be set aside. The cross-appeal must fail. As Tracetec has been
unsuccessful in its attempts to sustain the Tribunal’s

determination it must pay the costs of the successful appellants.
Those costs will include in the case of Netstar and Tracker the
costs
of two counsel.
[73] Before completing this judgment it is necessary to
make some comment for the future guidance of practitioners in this
Court
in regard to the production of records and heads of argument.
In regard to the record we were confronted with 52 volumes running
to
5873 pages. In case that was thought insufficient three further
volumes totalling 465 pages were added when the heads of argument

were delivered. No significant reference was made to these volumes in
either the heads or the oral argument. Rule 20(1)(h)
of the
rules of this Court provides that only documents referred to in the
Tribunal proceedings should be included in the record.
This was
ignored and we were presented with vast swathes of transcripts of
meetings when at most a page or two had been referred
to in evidence.
Rules 20(2)(b)(vii) and (viii) say that neither opening addresses nor
closing argument should be included in the
record. Both were, adding
418 pages to the record. Rule 20(4) says that the documents referred
to in the Tribunal must be arranged
in chronological order. They were
not. That meant that they could not be perused quickly in order to
get an overall impression
from the documents of the course of events.
[74]Rule 20(5) provides that:
‘
The record of the evidence of any witness
must contain references to the bundle of documents in the Tribunal
and to documents contained
in the Appeal Record.’
This was done imperfectly by way of the index (although
the members of the Court were not told this and accordingly had to
discover
it for themselves). However the index provided no means of
cross-referencing a document to the passage or passages in the record

where a witness referred to it. By way of example Mr Pickering
referred to a VESA board meeting on 20 August 2003. The
transcript
of the meeting runs to 130 pages over two volumes. Apart
from the occasional first name the speakers are not identified and
one
has to try and identify them from the cross-examination. Finding
the passages on which he was being examined was almost impossible.

The reason references are required to be in the record of the
evidence is to make finding documents while reading relatively easy.

Instead it was rendered extremely difficult as one had to go back to
the index in order to find the document being referred to
and then
search the document for the relevant passage. The difficulty was
compounded by the fact that the documents were not in
the same form
as the bundles presented to the Tribunal, nor did they contain the
original references that they had borne in those
proceedings. In the
witness statement prepared by Price Metrics portions constituting
confidential material were omitted. All of
this made it exceptionally
difficult to read the record and resulted in a far greater
expenditure of time than would have been
necessary had the rules been
followed. And this in a case where all counsel agreed that there was
little or no dispute of fact
on the papers. Notwithstanding that fact
there was no helpful response to the Judge-President’s
directive that we should
be told what needed to be read and what was
irrelevant and could be disregarded.
[75] Turning to the heads of argument they were in some
respects excessive and missed the point of heads.
19
In total they ran to over 700 pages with the shortest
being 69 pages and the longest a touch under 200 pages. This mountain
of paper
arrived in the three weeks immediately prior to the hearing
together, in the one case, with a further three volumes of the
record.
It is simply impossible for judges of this Court, who have no
separate time for reading and preparation from their duties in the

provincial divisions, to prepare adequately on the basis of these
volumes of paper. If this case were to go further to the SCA
the
parties would be confined to 40 pages for their heads of argument and
in our own revised practice directive 70 pages is set
as a maximum,
thereby recognising that a greater engagement with the evidence may
be necessary in competition cases
.
In
addition our practice note requires the provision of a chronology and
will now be further revised to mandate the provision of
a core bundle
of documents and oblige counsel to advise the court of the portions
of the record that do not need to be read for
the purposes of the
appeal. In future, practitioners in this Court will be required to
ensure that their heads of argument comply
fully with the
requirements for such heads laid down in the revised practice note.
[76] I contemplated whether the successful parties
should be deprived of some of their costs arising out of the
situation described
in paragraphs [73] to [75]. Not without some
hesitation, as counsel who appeared in these appeals are senior and
experienced counsel,
their attorneys are from major firms and the
Commission itself and all concerned should have known better, I have
decided not to
do so on this occasion as the parties had not been
warned that the Court might take this approach. In future, however,
if there
is non-compliance with the rules in regard to the
preparation of the record or non-compliance with the requirements now
laid down
for the preparation of heads of argument practitioners must
be aware that adverse costs orders may follow.
[77] The following order is made.
The appeals are upheld.
The Tribunal’s orders in paragraphs [316.1] and
[316.3] of its determination are set aside and replaced by the
following
order:
‘
(i) The Commission’s
complaint referral against Netstar, Matrix and Tracker is dismissed.
(ii) Tracetec’s complaints against Netstar. Matrix
and Tracker are dismissed, with costs, such costs to include those
consequent
upon the employment of two counsel where two counsel were
employed. Mr Hodge is declared a necessary witness.’
The cross-appeal by the second respondent is dismissed.
The second respondent is to pay the appellants’
costs of the appeal and the cross appeal, such costs to include in
the case
of Netstar and Tracker those consequent upon the employment
of two counsel.
M J D WALLIS
ACTING JUDGE OF APPEAL
DATES OF HEARING 29 and 30 NOVEMBER 2010
DATE OF JUDGMENT 15 FEBRUARY 2011
FIRST APPELLANT’S COUNSEL John Campbell SC (with
him Anthony Gotz)
FIRST APPELLANT’S ATTORNEYS Bowman Gilfillan Inc
SECOND APPELLANT’S COUNSEL Jerome Wilson
SECOND APPELLANT’S ATTORNEYS Werksmans
THIRD APPELLANT’S COUNSEL Mike van der Nest SC
(with him Alfred Cockrell SC)
THIRD APPELLANT’S ATTORNEYS Cliffe Dekker Hofmeyer
FIRST RESPONDENT’S COUNSEL D I Berger SC (With him
P L Mokoena)
FIRST RESPONDENT’S ATTORNEYS Competition
Commission
SECOND RESPONDENT’S COUNSEL C D Loxton SC (with
him R M Pearse)
SECOND RESPONDENT’S ATTORNEYS Knowles Husain
Lindsay Inc
1
My
insertion.
2
Whilst
Mr de Clerk did not ultimately give evidence his statement was
available to the Tribunal and it was entitled to have regard
to it
in terms of s 54(f) of the Act.
3
The
Tribunal found (para [45]) that this letter, which was copied to
Tracker and Matrix, was probably ‘the product of joint

discussion between the three firms and was being sent to
Bezuidenhout for his buy-in’. There is no evidence in support

of this and it is nothing more than speculation.
4
It
is not correct to say, as do Philip Sutherland and Katherine Kemp,
Competition Law of South A frica
, (loose-leaf, issue 10) 5-17
that ‘there is no need to draw a clear line between
arrangements and concerted practices’
as such a line is drawn
by the language of the definitions. Nor are concerted practices
merely diluted agreements (5-25).
5
Sutherland
and Kemp,
supra,
5-9 to 5-11.
6
Sutherland
and Kemp, supra, 5-14 to 5-15 where they deal with the approach of
the European Commission and the European Court of
First Instance to
the topic of agreement.
7
Sappi
Fine Paper (Pty) Limited v Competition Commissioner and Another
[2003] 2 CPLR 272
(CAC) paras [35] and
[39].
8
Woodlands
Dairy (Pty) Limited & Another v Competition Commission
2010
(6) SA 108
(SCA), para [35].
9
The
essential question is whether the issue was raised with sufficient
clarity not whether it was described by a term understood
in the
area of competition law. See
Senwes
Ltd v Competition Commission of South Africa
[2009] ZACAC 4
, paras [27] to [43]
.
10
Buthelezi
and Others v Eclipse Foundries Limited
(1997)
18 ILJ 633 (A) 642C-H;
[1995] ZASCA 142.
11
This
may be, but is not necessarily, the same as anti-competitive
consequences to which it is equated by the authors of Sutherland
and
Kemp,
supra
, 5-60 to 5-61. It is safer in the circumstances
to focus on the expression actually used in the section rather than
replace it
with one that may not be identical in meaning. For the
same reason there are dangers in the uncritical adoption of the
American
terminology of a ‘rule of reason’ approach to
describe the scope of s 4(1)(a). Unlike the Sherman Act, which
these authors say (2-11) is ‘widely formulated and it leaves
much to the imagination of the courts’ the South African

statute is fairly precise in describing what constitutes a
horizontal or vertical restrictive practice. If each case is
examined
in the light of the statutory requirements there is less
prospect of falling into error.
12
International
Shipping Co (Pty) Limited v Bentley
1990
(1) SA 680
(A) at 700 D-H.
13
See
the various comments on this ‘bastard conjunction’
collected in
Berman v Teiman
1975 (1) SA 756
(W) 757D-G.
14
The
principal disagreement was between Netstar and SAIA over the
suggestion that 5000 fitments were necessary. SAIA did not agree
and
this was watered down to 3000.
15
Sutherland
and Kemp are emphatic that only horizontal relationships are covered
by the section (5-6 to 5-8) but do not deal with
this type of
situation.
16
According
to Mr Pienaar Santam, Mutual and Federal and Zurich together had
slightly less than 50% of the market for motor vehicle
insurance at
the time. There was no evidence of the stance taken by Mutual and
Federal and Zurich to VESA accreditation.
17
In
para [260] of its Determination.
18
Mittal
Steel South Africa Limited and Others v Harmony Gold Mining Company
Limited and Another
[2009] ZACAC 1
para
[29]
.
19
As
to the nature of heads of argument see
Caterham Car Sales &
Coachworks Ltd v Birkin Cars (Pty) Ltd
[1998] ZASCA 44
;
1998 (3) SA 938
9SCA)
para [37].