Association of Shipping Lines v Competition Commission (22/CAC/Sep02) [2003] ZACAC 8; [2003] 2 CPLR 228 (CAC) (14 November 2003)

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[2003] ZACAC 8
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Association of Shipping Lines v Competition Commission (22/CAC/Sep02) [2003] ZACAC 8; [2003] 2 CPLR 228 (CAC) (14 November 2003)

IN
THE COMPETITION APPEAL COURT
OF
SOUTH AFRICA
CASE NO:
22/CAC/SEP02
In
the matter between:
ASSOCIATION OF
SHIPPING LINES
Applicant
and
THE
COMPETITION COMMISSION OF SOUTH AFRICA
Respondent
J
U D G M E N T
A. INTRODUCTION
1. The
Applicant is the Association of Shipping Lines (“ASL”), which
represents the interests of shipping lines whose vessels
use one or
more ports on the South African/Mozambique seaboard in the Walvis
Bay/Nacala range. The Respondent is the Competition
Commission.
2. The
Applicant seeks a declarator that the Competition Commission (the
“Commission”) enjoys jurisdiction in terms of section
10 of the
Competition Act (No. 89 of 1998), hereinafter referred to as “the
Act”, to consider applications for exemption from
the application
of Chapter 2 of the Act for categories of agreements and practices
(defined by generic type).
3. The
Applicant seeks the further declaration that the Commission enjoys
jurisdiction to consider the Applicant’s application for
exemption
for a category of practices relating to shipping liner conferences
and similar practices as is more fully set out in paragraph
1.2 of
the Notice of Motion.
4. The
Applicant accordingly seeks to establish that the Commission enjoys
the jurisdiction in terms of section 10(1)(b) of the Act
to consider
and grant or refuse applications for category exemptions generally or
more frequently referred to as block exemptions.
B.
LEGISLATIVE FRAMEWORK
5. The
gravamen of this application relates to the interpretation that is to
be accorded to Section 10(1) of the Act. Section 10
of the Act
regulates the granting of exemption from the application of Chapter 2
of the Act. Chapter 2 sets out the practices which
are prohibited
under the Act, including restrictive horizontal and vertical
practice, and abuse of a dominant position.
6. The relevant and material part of section 10
provides as follows:
“
(1) A
firm
may apply to the Competition Commission to exempt from the
application of this Chapter –
an
agreement
or practice, if that
agreement
or practice meets the requirements of subsection (3); or
(b) or
category of
agreements
or practices, if that category of
agreements
or practices meets the requirements of subsection (3).
(2) Upon receiving an application in
terms of subsection (1), the Competition Commission must -
grant
a conditional or unconditional exemption for a specified term, if
the
agreement
or practice concerned, or category of
agreements
or practices concerned, meets the requirements of subsection (3);
or
refuse to grant an exemption, if –
the
agreement or practice concerned, or category of
agreements
or practices concerned, does not meet the requirements of
subsection (3); or
the
agreement
or practice, or category of agreements or practices does not
constitute a
prohibited
practice in terms of this Chapter.
(3) The Competition Commission may grant an exemption in
terms of subsection (2)(a) only if -
(a) any
restriction imposed on the
firms
concerned by the a
greement
or practice concerned, or category of either
agreements
or practices concerned, is
required to attain an objective mentioned in paragraph (b); and
(b) the
agreement
or
practice concerned, or category of agreements or practices concerned,
contributes to any of the following objectives:
maintenance or promotion of exports;
promotion
of the ability of
small
businesses
, or
firms
controlled or owned by historically disadvantaged persons, to
become competitive;
change in productive capacity
necessary to stop decline in an industry; or
the
economic stability of any industry designated by the
Minister
,
after consulting the Minister responsible for that industry.
…
(5) The Competition
Commission may revoke an exemption granted in terms of subsection
(2)(a) or subsection (4A) if -
the exemption was granted on the
basis of false or incorrect information;
a condition for the exemption is not
fulfilled; or
the reason for granting the
exemption no longer exists.”
C. APPLICATION OF THE LAW AND CONCLUSION
7. At
the outset and as is evident from the provisions of section 10(5),
the granting of exemptions, whether they relate to an individual
or a
category of agreements of practices, is not cast in stone and the
Commission has the jurisdiction to revoke such exemptions
either on
the basis of false or incorrect information or that a condition for
exemption is not fulfilled. The Commission can also
revoke an
exemption if the reasons for the granting of the exemption no longer
exist.
8. In
terms of section 10(1) a firm may apply to the Commission for the
exemption either of “an agreement or practice” or a “category
of agreements or practices”, if such “agreement or practice” or
“category of agreements or practices” as the case may be,
meets
the requirements of section 10(3).
9. Further
and in terms of section 10(2), the Commission is required, upon
receiving an application in terms of section 10(1) to grant
or refuse
an exemption depending on whether the “agreement or practice” or
“category of agreements or practices”, as the
case may be, does
not meet the requirements set out therein.
10. In
terms of section 10(3), the Commission may grant an exemption in
terms of section 10(2)(a) only if the “agreement or practice
concerned” or “category of either agreements or practices
concerned”, as the case may be, is required to attain an objective
mentioned in section 10(3)(b).
11. It
is thus clearly apparent from the wording of Section 10 that a
distinction is drawn throughout between an agreement or practice
and
a “category of agreements or practices”.
12. Accordingly,
if reason for the law is the life of a law, then it follows that a
particular meaning must be ascribed to the words
“category of
agreements or practices” which distinguishes it from the words
“agreement or practice”. Otherwise there would
be no basis for
the distinction drawn between these two concepts in section 10.
13. The
language used by the Legislature in section 10(1)(b) is pellucid in
its statement. The ordinary grammatical meaning of the
word
“category” is defined in the New Shorter Oxford English
Dictionary as:
“A class, - division … an entity consisting of a class of
abstract objects sharing the particular property together with a
class of mappings which preserve that property”.
Similarly,
in Webster’s Third New International Dictionary (1993) category is
defined as:
“Any major
fundamental conception or general class of concepts …
Any
class, group or classification of any kind”
14. Accepting
that language cannot be mathematically precise and applying the
ordinary literal meanings to the words “category of
agreements or
practices” it must be accepted as submitted by Mr. Wallis, who
appeared with Mr. Wilson for the Applicant, that these
words can mean
nothing other than a “category” determined by generic type.
15. I
might in passing mention, as was further submitted by Mr. Wallis,
that the literal meaning of the words is consistent with the
specific
meaning attributed to the phrase “category” in other Competition
Legislation internationally.
16. At
the hearing of the matter, Mr. Maleka who appeared with Mr. Ngutshane
for the Respondent, was constrained to agree with Mr.
Wallis’
interpretation of section 10(1)(b) and therefore it would be jejune
to consider the purposive interpretation of the words
“category of
agreements or practices” and the use of block exemptions
internationally in order to harmonise the literal interpretation
which the Court accords to the provisions of section 10(1)(b). I
might, however, mention that block exemption regulations in Europe
were introduced with the principle aim of increasing legal certainty
and reducing the Commission’s workload. Similar considerations
must have enjoined the Legislature when it drafted the provisions of
section 10 of the Act. It is accordingly unnecessary to consider
the
jurisprudence evolved in Europe and the USA to consider the meaning
to be accorded to the provisions of section 10(1)(b) since,
the
literal interpretation can lead to no other conclusion than the one
constrained for by the Applicant.
17. In
the opposing affidavits, the Respondent contended that to allow such
an exemption to the Applicant would accord to the maritime
industry a
special status, which status is not provided for by the Act. The Act
is, however, a broad one, designed to cater to the
needs of all
sectors of commerce, and not industry specific. It is a springboard
that could possibly give rise to future, more industry
specific
legislation. Also, the Act is relatively new, as it only commenced
on 30
th
November 1998. Therefore various issues will
arise, which the court will have to interpret and decide.
D.
COSTS
18. Mr.
Maleka attempted to argue that it was never the Commission’s
intention to indicate that it did not enjoy jurisdiction to
consider
block exemptions but rather that the questions of the
locus
standi
of the Applicant did not appear to be clear. The
Commission also required further information before it could take a
decision on
the block exemptions envisaged by Paragraph 1.2 of the
Notice of Motion. If that was indeed the position of the Respondent,
then
it should have clearly consented to its jurisdiction to consider
block exemptions. This is further not borne out by the Respondent’s
attitude in opposing this application and by Annexure I.6 which
appears at page 160 of the papers wherein the Commission pinned its
colours to the mast by stating categorically that so-called block
exemptions cannot be considered by it. Accordingly, the Commission
can-not resist an order for costs in this matter.
E.
ORDER
19. I accordingly make the following order :
19.1 It
is declared that it is within the jurisdiction of the Competition
Commission in terms of section 10 of the Competition Act
(No. 89 of
1998);
19.1.1 to
exempt from the application of Chapter 2 of the Act a category of
practices (existing and/or future) defined in terms of
a generic
type, if such category meets the requirements of section 10(3) of the
Act;
19.1.2 to
exempt from the application of Chapter 2 of the Act the following
category of practices, if such category meets the requirements
of
section 10(3) of the Act:
“The gathering of
members of the applicant, their subsidiary and associated companies,
and other parties in a number of different
groupings so as to agree:
(a) common
freight rates and common terms and conditions;
(b) frequency
and allocation of sailings and capacity management;
(c) common
approach to membership of such associations;
(d) arrangements regarding different sections of
the trade;
(e) tying or loyalty arrangements with customers;
(f) a
common approach to surcharges implemented for unforeseen
circumstances;
(g) pooling
of cargo;
(h) pooling of revenue;
(i) pooling
of resources.”
19.2 The
Respondent is directed to consider the Applicant’s application for
exemption of the aforesaid category of practices from
the application
of Chapter 2 of the Act, and to grant a conditional or unconditional
exemption, or refuse to grant an exemption,
in respect of such
category in terms of section 10(2) of the Act.
19.3 The
Respondent is ordered to pay the costs of this application, such
costs to include those consequent upon the employment of
two counsel.
_________________________
PATEL, AJA
HUSSAIN, J. and MAILULA AJA concurred.