Glaxo Wellcome (Pty) Ltd Others v D. Terblanche Others (04/CAC/Oct00) [2000] ZACAC 2 (4 December 2000)

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[2000] ZACAC 2
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Glaxo Wellcome (Pty) Ltd Others v D. Terblanche Others (04/CAC/Oct00) [2000] ZACAC 2 (4 December 2000)

IN THE
COMPETITION APPEAL COURT
CASE NO.
04/CAC/OCT00
IN THE MATTER
BETWEEN:
In the matter between:
GLAXO
WELLCOME (PROPRIETARY) LIMITED
First Appellant
PFIZER
LABORATORIES (PROPRIETARY)
LIMITED
Second
Appellant
PHARMACARE
LIMITED
Third Appellant
SMITHKLINE BEECHAM
PHARMACEUTICALS
(PROPRIETARY)
LIMITED
Fourth Appellant
WARNER LAMBERT SA
(PROPRIETARY LIMITED
Fifth Appellant
SYNERGISTIC
ALLIANCE INVESTMENTS
(PROPRIETARY)
LIMITED
Sixth Appellant
DRUGGIST
DISTRIBUTORS ([PROPRIETARY
LIMITED
Seventh
Appellant
and
TERBLANCHE, DIANE,
N.O.
First Respondent
FOURIE, FREDERICK,
N.0.
Second Respondent
HOLDEN, MERLE,
N.O.
Third Respondent
THE COMPETITION
TRIBUNAL
Fourth Respondent
NATIONAL
ASSOCIATION OF PHARMACEUTICAL
WHOLESALERS
Fifth
Respondent
NATIONAL
WHOLESALE CHEMISTS
(PROPRIETARY)
LIMITED
Sixth Respondent
MIDLANDS
WHOLESALE CHEMISTS
(PROPRIETARY) LIMITED,
t/a PHARM
PIETERMARITZBURG
Seventh
Respondent
EAST
CAPE PHARMACEUTICALS LIMITED
t/a
ALPHA PHARM EASTERN CAPE
Eighth Respondent
FREE
STATE BUYING ASSOCIATION
LIMITED, t/a ALPHA
PHARM BLOEMFONTEIN
(KEMCO)
Ninth
Respondent
PHARMED
PHARMACEUTICALS LIMITED
Tenth Respondent
L'ETANGS
WHOLESALE CHEMIST CC,
t/a
L'ETANGS
Eleventh Respondent
RESEPKOR
(PROPRIETARY) LIMITED
t/a
RESKOR
Twelfth Respondent
PHARMACEUTICAL
WHOLESALERS
MAINSTREET 2
(PROPRIETARY) LIMITED,
t/a NEW UNITED
PHARMACEUTICAL
DISTRIBUTORS
Thirteenth
Respondent
JUDGEMENT: Delivered on 4 December 2000.
Davis JP:
Introduction
On 28
th
August 2000 the Competition Tribunal (‘the
Tribunal’) made an interim order in terms of Section 59 of the
Competition Act 89
of 1998 (‘the Act’) in terms of which
the claimant’s application for interim relief in terms of
Section
59
of the
Competition Act 89 of 1998
was granted in respect of the
respondent’s alleged contravention of Section 4(1)(a) of the Act
respondents supply their products directly to the claimants and
other wholesalers on terms and conditions similar to those that
apply to transactions between them and the claimants and other
wholesalers immediately before the conversion of Druggist
Distributors
(Pty) Ltd to a joint exclusive distribution agency for
their products.
the order remains in force until the earlier of :
the conclusion of the hearing
into the prohibited practices alleged by the claimants to have
been committed by the respondents;
or
the date that is six months of the date of the issue of this
order.
On 5 September 2000 applicants (being the respondents in the
application before the Tribunal) lodged an application to suspend the
operation and execution of the order pending the final determination
of an application for a review and the setting aside of the
Tribunal’s decision and order including the order for costs.
On 13 October 2000 this
court dismissed the application on the ground that no appeal lay to
this Court in respect of an interim order
of the Tribunal granted
under section 59 of the Act. It further held that while the court
had jurisdiction to grant a suspension
of an order granted under
section 59 of the Act pending review thereof, it could not do so when
an application for review had not
been filed prior to the
commencement of the proceedings.
Before judgment was
delivered on the 13
th
of October 2000 but after the
application had been heard on 11 September 2000, applicants launched
an application to the court for
an order that decision of the
Tribunal be reviewed and set aside.
Accordingly it is not
disputed that this court now has jurisdiction to adjudicate upon the
application for the suspension of the operation
and execution of the
order of the Tribunal.
Factual Background
The distribution of
pharmaceutical products in South Africa has traditionally been the
business of pharmaceutical wholesalers. The
wholesalers, who buy
products from the manufacturers at a general discount of 17,5%, sell
these products to pharmacists and other
smaller buyers. This system
changed when a joint exclusive distribution agency, International
Healthcare Distributors (IHD) was
established by several
manufacturers and commenced business on 1 November 1993. Wholesalers
found that the previous system changed
after the establishment of IHD
as they could no longer purchase pharmaceutical products directly
from manufacturers who were members
of IHD. Of major significance was
that these wholesalers no longer obtained the 17,5% discount.
In July 1998, 5
th
to 13
th
respondent filed a complaint with the Competition
Board (which operated under the then Maintenance and Promotion of
Competition Act
96 of 1979, (the ‘old Act’)) alleging that IHD
and its members contravened the provisions of the this Act in forming
a joint
exclusive distribution agency. In 1997 the applicant
manufacturers came together under the so-called project NASA with the
intention
of establishing a similar joint exclusive distribution
agency for their products. They formed a company called the
Synergistic Alliance
Investment (SAI) to acquire seventh applicant
(“DD”), a national full line wholesaler, with the intention of
converting it into
a joint exclusive distribution agency. DD and
the 13
th
respondent were the only national full line
wholesalers. Presumably as a precautionary measure respondents
applied to the erstwhile
Competition Board to have the project
exempted from the provisions of the old Act prohibiting horizontal
collusion on conditions
of supply.
In February 1999 the
Board announced that it would conduct a formal investigation into
exclusive distribution agencies in the pharmaceutical
industry
pursuant to a complaint against IHD. It found that there was
prima
facie
evidence that restricted practices existed or could exist.
SAI announced that that it would not go ahead with its project until
the
Board had issued its final report. This was published in May
1999. The board found that the joint exclusive distribution agency
for pharmaceutical products would constitute a horizontal restricted
practice prohibited under the old Act. The Board found that
the
formation of a joint exclusive distribution agency in a
pharmaceutical market would have the effect of limiting distribution
facilities in the market, restricting entry into the wholesale
distribution market, maintaining or enhancing the prices or other
consideration for pharmaceutical products and preventing the
distribution of pharmaceutical products in the most efficient and
economic
manner.
By the time the
Competition Commission was established in terms of the Act, the
Minister of Trade & Industry decided not to implement
any
recommendations of the Board and thus declare exclusive distribution
agencies in the pharmaceutical industry to be unlawful.
He considered
that the mechanisms provided under the new Act could resolve the
matter more effectively and that complaints could
be pursued with the
Competition Commission.
In March 2000, SAI
announced that it had acquired DD and it would go ahead with its plan
to convert DD into a joint exclusive distribution
agency for its
members’ products. Manufacturers who were members of SAI would in
future sell all their products through DD. Ownership
of the products
sold through DD would remain with the manufacturer until the sale to
relevant customer. DD would take all orders
and collect payments on
behalf of the manufacturers. DD advised all the manufacturers’
customers of the change and attached a
guide on how DD would operate.
Soon thereafter DD issued a single credit application form on behalf
of all the manufacturers to be
completed by businesses wishing to
open accounts with DD to buy their products. At the same time DD
issued a single set of terms
and conditions for the supply of the
manufacturers’ products.
Pursuant to these
developments an application, in terms of section 59, was launched
with the Tribunal on 28 April 2000. On 28 August
2000 the Tribunal
made an order the terms of which have been set out above.
3. Grounds of Review
The grounds from which
applicants seek to have the Tribunal decision and order reviewed and
set aside include the following:-
The decision is void for vagueness
The decision was
ultra vires
in that the order was over
broad, the order frustrates the purpose of the Act, the decision is
not justifiable in relation to reasons
given for it, the relief
granted in the order extends to persons who were not parties to the
proceedings.
The Tribunal made a material mistake of law regarding the incidence
of the onus of proof in the Act and in disregarding benefits
of the
DD distribution structure that could have been gained otherwise than
by the implementation of DD.
The Tribunal failed to take into account various relevant
considerations and took account of irrelevant considerations.
Applicants were not given a fair hearing in respect of the relief
granted in the order.
Applicants further allege that they will suffer severe and
irrecoverable loss if the order operates until the application for
review
is determined and the review application then proves to be
successful. They also contend that the complaints would not suffer
substantial
prejudice if the order was suspended pending final
determination of the review application.
4. Test for granting suspension pending review
Mr Loxton, who appeared together with Mr Wilson on behalf of the
applicants submitted that the applicants should succeed in obtaining
a suspension of the Tribunal’s decisions if they could show that:
they
had
prima facie
prospects of success on the application for
review of the Tribunal’s decision and order; and
the balance of convenience favoured the suspension of the Tribunal’s
order.
In short Mr Loxton’s approach to the test that should be applied
before the court invoked its powers in terms of section 38 (2A)(d)
of
the Act, namely the power to suspend the operation and execution of
an order that is the subject of a review or appeal, was to
follow the
approach to stay applications developed in the common law. See, for
example,
Safcor Forwarding (Pty) Ltd v
National
Transport Commission
1982(3)SA654(A) at 674-675;
Southern
Metropolitan Substructure v Thompson
1997(2)SA799(W) at 805.
Mr Nelson, who
appeared together with Mr van Dorsten on behalf of respondents,
submitted that, in the exercise of its discretion to
grant a stay,
the court must give careful consideration to the purposes of the Act.
In short the purposes of the Act would be frustrated
if the interim
order granted by the Tribunal, after careful consideration of the
available facts, were to be suspended in circumstances,
where the
review application is without substance, was launched merely to
confer jurisdiction on the court to hear the stay application
and
represented a dilatory tactic that amounted to an abuse of the court
process.
In considering
such a decision, the court must balance the rights of an applicant to
a stay with those of the party in whose favour
the section 59 order
has been granted by the Tribunal. Further the decision must take
place within the context of legislation designed
to promote
competition. In this connection Mr Nelson cited Lewis P in
South
African Raisins (Pty) Ltd v SAD Holdings Ltd (Case No
.
16/IR/Dec99),
“our conclusion that an interim order in
terms of section 59 is not appealable serves to avoid an outcome that
would frustrate
the whole purpose of providing an interim relief
remedy in competition matters. If the granting of the interim order
in terms of
section 59 were appealable and the interim order stayed,
as is argued by the respondents, this would destroy the main object
of section
59 – to provide interim relief pending final
determination of the complaint following a full investigation by the
Commission”.
For these reasons
Mr Nelson cautioned against the adoption of the same approach to stay
applications as developed in accordance with
the common law in that
the fundamental question must always be whether or not the granting
of the stay would have the effect of advancing
the purposes of the
Act. Accordingly he submitted that in the exercise of its discretion
the court should consider whether or not:
Real
and substantial injustice required a stay to be granted;
Injustice
would result if the stay is refused;
The
balance of convenience favoured the granting or the refusal of the
stay; and
The
applicants have substantial prospects of success in the review
application.
In my view, a
careful examination of the submissions made by both counsel reveals
that there was less of a difference between the
approaches
respectively contended for by Mr Loxton and Mr Nelson than would
superficially appear to be the case. In considering
whether to grant
a stay, a conclusion that an applicant can show
prima facie
that his or her rights have been infringed and that there is a
balance of convenience favouring the granting of such an order will
weigh heavily with a court in the exercise of its discretion.
However in taking
this decision the court has a discretion to grant or refuse an
application to suspend an order. As Traverso J said
in
Santam
Limited
v
Norman and another
1996 (3)SA502(C) at 505 F “It
is a discretion which should be exercised judicially but generally
speaking a court will grant a
stay of execution where real and
substantial justice requires such a stay or where injustice would
otherwise be done” see also
Strime v Strime
1983(4)SA850(C)
at 852.
The position can be
summarised thus: In exercising its discretion a court must, of
necessity, enquire as to whether there is a
prima facie
case
that an applicants rights have been infringed. Further the court
must locate where the balance of convenience lies. But that
is not
all that has to be considered in the exercise of the discretion to
grant such an order. Within the context of the Act there
is the
additional consideration that the suspension of an interim order in
terms of section 59 can, if granted too easily, subvert
the very
purpose of an important provision of the Act which created this kind
of order. Hence the court must exercise its discretion
by means of a
careful consideration of the policy considerations of the act in the
context of the facts of the case.
If the test for the
successful application for a stay of the execution of a section 59
order nods too generously in favour of the
applicant, Mr Nelson’s
contention that the granting of a stay would subvert the very purpose
of an order designed to ensure the
promotion of pro-competitive
behaviour would be justified. For this reason a court must enquire as
to whether the applicant can show
prima facie
that its order
has infringed a right which applicant enjoys, further that the
balance of convenience favours the granting of such
interim relief
within the context of the factual matrix of the case and that the
injustice caused by the perpetuation of the order
would be greater
than the possibility of jeopardizing the purposes of the Act promoted
by the continuation of the section 59 order
itself.
5. Grounds
of Review
As set out above, applicants
submitted that there were a number of grounds on which the Tribunal’s
order could be justifiably reviewed.
However in his argument to the
court, Mr Loxton concentrated attention on the vague and ambiguous
nature of the order. He referred
for definitional support to the
decision in
Genticuro AG the
Firestone (SA) (Pty) Ltd
1972(1)SA589(A) at 610 D where Trollip JA said, vagueness
connotes ‘being not only of double but also of indefinite meaning
which cannot be resolved with the requisite degree of certainty by
proper construction”.
Applying this definition, Mr Loxton submitted that the key paragraph
in the order of the Tribunal was incapable of being interpreted
with
the requisite degree of certainty by means of a proper construction.
That paragraph provided that the respondents supply their
products
directly to the claimants and other wholesalers on terms and
conditions
similar to those that applied to transactions between
them and the claimants and other wholesalers
immediately before
the conversion of DD to a joint exclusive distribution agency for
their products (our emphasis) .
Mr Loxton submitted
that the word ‘similar’ was a particularly difficult word to
interpret. As Schreiner ACJ noted in
R v Revelas
1959(1)
SA75(A) at 80B-C “obviously there are degrees of similarity or
likeness, some approaching, and exceptionally perhaps even
reaching
sameness, others amounting to know more than a slight resemblance.
The similarity may be basic or superficial, general or
specific. I do
not think that the words “a similar” in GN 363 should be given a
meaning “the same”. That is at most a rare
sense. And moreover
the history of the Government Notices indicates that the word “same”
was abandoned in favour of “similar”.
The change could hardly
have been designed to make it clear that sameness was intended:
rather it must been aimed at substituting
the notion of resemblance”.
In
S v Mothobi
1972(3) SA841(O) at 842 E-F Kumleben AJ(as he then was)said “Die
woord of begrip ‘ soortgelyk is egte een wat vir extensiewe
of
beperkende uitleg vatbaar is. Gevolglik kan daar nie met sekerheid
bepaal word welke van hulle binne of buite die besteek van
die
voorwaarde val nie. Hoewel ‘n verwysing na ‘n ‘soortgelyke
misdaad’ in ‘n voorwaardevan opskorting soms in ‘n bepaalde
verband in orde mag wees , meen die Hof vir die redes vermeld dat
die onderhawige geval dit ‘n onwesenlike mate van onsekerheid
skep”.
Mr
Loxton submitted that the approach adopted by Kumleben AJ was equally
applicable to the order of the Tribunal. The manner in which
the
order had been framed left great uncertainty as to how terms of a
contract must be understood. For example did the qualifying
word
‘similar’ relate only to an enquiry as to comparative price or to
other terms of the contract? To what extent could terms
be adjusted
to take account of external exigencies such as inflation? Similarly
there was no clarity as to the meaning of a wholesaler
as employed
within the context of the order.
Mr Loxton also
contended that the manner in which “wholesaler” was employed in
the offending paragraph led to uncertainty in
that it was unclear
whether the class of person contemplated was limited to companies
registered with the South African Pharmaceutical
Council as
wholesalers or whether it included all companies who purchase
applicants products. If it was only to include the former,
then the
order was unclear as to whether the class included only full line
wholesalers such as respondents who offer a short line
wholesalers.
If it was the latter it was unclear whether the class was limited to
non retailers who purchase the principles products
for on sale to
retailers or whether it also included retailers and retail buying
groups who purchase applicants products for sale
to other retailers.
Mr Loxton also
attacked the logic of the reasoning of the Tribunal in justifying the
grant of the order. In paragraph 67 of the Tribunal’s
decision, Ms
Diane Terblanche writing on behalf of the Tribunal said: “the order
we have issued compels the respondent to supply
the claimants and
other wholesalers on the same terms and conditions as before the
advent of DD”. By contrast the order which was
granted referred to
terms and conditions “similar to those that applied to transactions
between them ….”
Although applicants
have launched an application in terms of Section 66 of the Act to
have ambiguities in the order clarified, Mr
Loxton submitted that
section 66 only empowers the Tribunal to clarify its decision and
vary its order if, on a proper construction,
the meaning thereof is
ambiguous. However the Tribunal was not empowered to alter the
substance of the decision or order. The ambiguity
and/or vagueness
in the order was such that it could not be clarified without altering
the very intention of the Tribunal and for
this reason any such
ambiguity or vagueness could not be cured in terms of section 66.
Applicants’
further submission that it was not granted a fair hearing in respect
of the relief granted in the order is relevant
to this question.
In terms of
paragraph 8 of the Notice of Motion for interim relief in terms of
section 59 of the Act, respondents approached the Tribunal
for an
order in terms of which respondents would be ordered the continue
supplying their products to applicants on terms and conditions
identical to those given by respondents to DD. This was the nature
of their case. The deliberations before the Tribunal were predicated
upon this form of relief and there was no opportunity given to
applicants to provide their views on any alternative approach or
alternate
relief of the kind which was granted by the Tribunal in
terms of its order. Were the Tribunal to have granted the relief
sought in
paragraph 8 of the Notice of Motion, the relief which
should have been granted by the Tribunal was to order that applicants
were
to continue to supply products to respondents on terms identical
to those given by applicants to DD.
In his response, Mr
Nelson submitted that applicants were attempting to place imaginary
jurisprudential obstacles in respondents way
by presenting certain
words as ambiguous rather than conceding that they admitted of some
surmountable interpretive difficulty. As
Young J said in
R v
deKock
1965(2)SA380(SR) at 384 C “the fact that the true
interpretation of an Order is a matter of difficulty and even great
difficulty
does not necessarily imply that the Order is ambiguous for
the purposes of the ambiguity rule. If I am driven to a particular
conclusion
then for me there is no ambiguity”.
For this reason Mr
Nelson submitted that the word ‘wholesalers’ could only
constitute a reference to wholesalers with whom the
manufacturers
have engaged previously in business. Accordingly it would include
both full and short line wholesalers. There was
evidence before the
Tribunal that the respondents were the only remaining full line
wholesalers. There was therefore no need to
make reference to other
wholesalers if the order was intended to refer only to full line
wholesalers. On the assumption that the
order incorrectly referred
to other wholesalers this should not be a basis for setting aside of
the order and in particular depriving
the wholesalers, to whom it
correctly referred, from obtaining interim relief.
In terms of the
Concise Oxford Dictionary the word similar is defined as “of the
same kind, nature, or amount; having a resemblance
(your house is
similar to mine; we have similar tastes)”. Mr Nelson thus
submitted that in the context of the order, the word
could be given
its dictionary meaning. In short the Tribunal had made it clear that
what was meant was that applicants must sell
on the same terms and
conditions as applied before the 29
th
of May 2000.
Relying upon a
purposive interpretation to the order, Mr Nelson submitted that the
Tribunal intended to restore the status quo to
the fair competitive
environment that existed prior to the 29
th
of May 2000.
This meant that manufacturers competed in setting blue book prices at
certain levels and wholesalers competed by passing
on a portion of
the wholesaler margin. To ensure that competition was restored
manufacturers were directed to restore the wholesalers’
ability to
compete with one another on an equal footing. The decision of the
Tribunal thus recognized that the complaint that the
manufacturers
had bandied together and tampered with existing price structures in a
manner that was uncompetitive. This conclusion
was justified on the
evidence presented to the Tribunal and accordingly the order granted
was designed to restore the
status quo ante.
Given these
competing arguments the test to be applied in granting such an order
becomes critical. While Mr Nelson correctly contended
that it would
be improper to grant a stay in circumstances whether the review
application was without substance or formed part of
dilatory tactics
which amounted to an abuse of the court process, most cases have more
distinct shades of gray. The essential question,
within this factual
context, has less to do with these considerations and more with the
determination of how substantial the prospects
of success in the
review application must be before a court will make an interim
decision of this nature. Clearly the more substantial
the prospects
of success may be in the review application, the greater the degree
of substantial injustice which would follow were
the stay not to be
granted.
In my view,
applicants must show that they have a justifiable case, that is a
case which, on their papers, justifies a conclusion
that a successful
review may be prosecuted. Expressed differently, the question that
arises is whether the court on the papers can
reasonably come to the
conclusion that the application for review before another court may
be successful. In my view such a conclusion
is justified in the
present case.
The order was made
by the Tribunal and not a court. Thus the reliance by Mr Nelson on
dicta
of Trollip JA in the
Genticuro
case cannot simply
be applied to the order of a tribunal. Although Mr Nelson also cited
Frankel Max Pollak
Vinderine Inc v Menell Jack Hyman
Rosenberg and Co Inc
1996(3)SA 355(A) at 362-363 as support
for his argument , this case(as with the others cited) dealt with the
award of an arbitrator
which was to be made an order of court. In
the present case, the problem is not only about ambiguity in that the
order granted not
by a court employs a different formulation to the
relief sought in the notice of motion. In addition the order employs
different
language from the very explanation given by the Tribunal as
to reasons for the order which it granted.
The case law cited
above reveals that it is a legitimate argument to contend that the
word ‘similar’ is ambiguous. Such a conclusion
does not require a
process of creative lawyering to renders the word uncertain. The
phrase “other wholesalers” may be interpreted
in the manner
contended for by respondents but there is a legitimate argument
regarding the ambiguity of the phrase which renders
this part of the
order itself vague and ambiguous.
When the Tribunal
grants an order which is different from that contained in a notice of
motion great care should be given to its meaning
and purport and
further there should be no inherent linguistic difficulty for the
parties being able to comply therewith. The consequence
of
non-compliance with such an order can be serious in that non
compliance can be visited with severe penalties.
For these reasons I
find that on the ground of review for vagueness and ambiguity, these
is a clear basis for applicants to approach
this Court for a stay.
6. Balance
of Convenience
In
Olympic
Passenger Service (Pty) Ltd Ramlagan
1957(2)SA382(D) at 383F,
Holmes J (as he then was) said “by balance of convenience is meant
the prejudice to the applicant if the
interdict be refused, weighed
against prejudice the respondents that it be granted. In clarifying
the scope of this dictum Magid
J said in
Verstappen v Port Edward
Town Board & Others
1994(3)SA569(D and CLD) at 576 H “I do
not believe that the learned judge intended to suggest that the
manner in which the grant
or refusal of an interdict would affect the
immediate parties to the litigation was the only matter relevant to a
determination of
the balance of convenience. Where, as in this case,
the wider general public is affected, the convenience of the public
must be
taken into account in any assessment of the balance of
convenience” see also
Corium (Pty) Ltd & Others in Myburgh
Park
Langebaan (Pty) Ltd & Others
1993(1)SA853(C) at
858F.
This latter
dictum
supports the principle contained in the submission of Mr Nelson,
namely that in competition law the weighing up of the balance of
convenience does not depend only upon a consideration of the
interests of the immediate parties. In considering the balance of
convenience,
attention must also be given to the broader objective
sought to be achieved by the Act and whether there is clear evidence
that the
conduct with which an applicant for such a stay wishes to
persist will be contrary to the purposes of the Act. This
consideration
must weigh heavily against such applicant
irrespective of the adverse financial consequences that the initial
order of the Tribunal
may entail. Consequently Mr Nelson referred to
the reasons given by the Tribunal for the interim order, namely “if
we did not grant
the interim order and the claimants subsequently get
a final order the competitive process and structure for the
distribution of
the respondents manufacturers products would have
been so skewed in favour of DD and the respondents, that a final
order may not
be able to adequately address the effects of DD’s
conversion on the nature of competition in the distribution market”.
Were
the prohibited practice allowed to continue the pattern of
competitive prices for the distribution of respondents’ products
could be so skewed that the final order may not be able to correct
the position.
For this reason Mr
Nelson submitted that it was clear that the Tribunal was mindful of
the fact that the anti-competitive arrangement
that the applicants
set up resulted in a significant financial benefit to the applicants
that was derived directly from a reduced
competition for the
distribution of their products and which rents, but for their
concerted action would in the ordinary course of
business have
accrued to wholesalers.
Mr Loxton submitted
that the applicants would suffer a severe and irrecoverable loss if
the order was not suspended pending review
and applicants were in due
course successful in the application. The order was, in his view, so
vague that despite its best efforts
applicants were unable to comply
therewith. Accordingly they ran a risk of being found subject to
contempt of court proceedings
and fined in terms of section 61 of the
Act. Mr Loxton contended that applicants expended approximately R39m
in converting DD into
a distribution agent and upgrading its
infrastructure in distribution services with an additional project
cost of R51m being budgeted.
When the matter
came before the Court, Mr Nelson applied, at the proverbial eleventh
hour and somewhat tentatively, for leave to cross-examine
certain
representatives of the applicants on the contents of certain
confidential affidavits setting out potential loss. The confidential
affidavit, setting out respective financial positions of the parties,
provided competing versions of the financial loss which may
be
suffered by the parties respectively were the Tribunal order to
continue in force on the one hand or be suspended on the other.
These competing
versions notwithstanding, it is clear that, were the Tribunal’s
order to continue to operate, applicants would suffer
significant
financial loss (although Mr Nelson did attempt, without clear
evidence to suggest that being part of multi-national giants
applicants loss was insignificant in relative terms). The Tribunal
found that ‘the manufacturers joint control of the distribution
agency ensures that rents derived from the reduced competition for
the distribution of their products accrue to them and not to some
independent third party. It thus effectively ensures a transfer of
these rents from the wholesalers to the manufacturers’.
Viewed in these
terms, this dispute turns on competing claims to the rents derived
from the distribution of pharmaceutical products.
No compelling case
was made out before the Tribunal (if its decision is any guide) or in
the papers before this Court as to the
broader societal interest
particularly those of consumers whose interests may be affected by
the outcome of this dispute. The Tribunal
was also not able to arrive
at a conclusion as to whether respondents would suffer serious,
irreparable damage were the order not
to be granted.
It is likely that
there will be prejudice to both parties depending on the outcome of
this decision. In the light of the clear case
which applicants have
made out to justify an application for review to set aside the order
of the Tribunal and the further evidence
which is available as to the
financial loss which could be suffered in the event that the order
continues, I am satisfied that the
balance of convenience in the
specific context of this case sufficiently favours a granting of the
order as sought
7. Order
For the reasons set
out:
(a) The operation and execution of the order of the Competition
Tribunal under case number 68/IR/Jun00 dated 28 August 2000 is
suspended, pending the final determination of an application for the
review and the setting aside of the Competition Tribunal’s
decision
and order including the order for costs.
(b) The costs of this application, such costs to include the costs
of two counsel, shall be paid jointly and severally by the
respondents
the one paying the others to be absolved.
Davis JP
15