Glaxo Wellcome (Pty) Ltd Others v D. Terblanche Others (03/CAC/Oct00) [2001] ZACAC 2 (5 September 2001)

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Glaxo Wellcome (Pty) Ltd Others v D. Terblanche Others (03/CAC/Oct00) [2001] ZACAC 2 (5 September 2001)

IN THE COMPETITION
APPEAL COURT
CASE NO: 03/CAC/OCT00
In the matter between:
GLAXO WELLCOME (PROPRIETARY) LIMITED
First
Applicant
PFIZER LABORATORIES (PROPRIETARY)
LIMITED
Second Applicant
PHARMACARE LIMITED
Third
Applicant
SMITHKLINE
BEECHAM PHARMACEUTICALS
(PROPRIETARY) LIMITED
Fourth
Applicant
WARNER LAMBERT SA (PROPRIETARY) LIMITED
Fifth
Applicant
SYNERGISTIC
ALLIANCE INVESTMENTS
(PROPRIETARY) LIMITED
Sixth
Applicant
DRUGGIST
DISTRIBUTORS (PROPRIETARY)
LIMITED
Seventh
Applicant
and
TERBLANCHE, DIANE, N.O.
First
Respondent
FOURIE, FREDERICK, N.O.
Second
Respondent
HOLDEN, MERLE, N.O.
Third
Respondent
THE COMPETITION TRIBUNAL
Fourth Respondent
NATIONAL
ASSOCIATION OF PHARMACEUTICAL
WHOLESALERS
Fifth
Respondent
NATAL
WHOLESALE CHEMISTS (PROPRIETARY)
LIMITED
Sixth
Respondent
MIDLANDS
WHOLESALE CHEMISTS (PROPRIETARY)
LIMITED, t/a ALPHA 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
JUDGMENT DELIVERED ON 5
th
SEPTEMBER 2001
SELIKOWITZ AJA:
SELIKOWITZ
AJA:
INTRODUCTION
This
is an application to have the decision and the order of the
Competition Tribunal (“the Tribunal”) under case number
68/IR/JUN00
dated 28 August 2000 reviewed and set aside. For the
sake of convenience the Applicants will be referred to as Appellants.
In the
interests of consistency, and where appropriate, references
to “Applicants” in quotations from the pleadings, the record and
the heads of argument have been altered to read “Appellants”.
First
to Fifth Appellants are importers and manufacturers of pharmaceutical
products. They have entered into a joint distribution
agreement.
Sixth Appellant is the company formed by them as the entity through
which they would establish their distribution agency.
Seventh
Appellant is the agency distributor. It commenced operation on 29
May 2000.
First, Second and Third Respondents are cited
nomine officio
as the members of the panel assigned to this matter pursuant to the
terms of sec. 31 of the Competition Act, No. 89 of 1998 (hereinafter
the “Act”) and whose decision and order are the subject of this
review application. Fourth Respondent is the Tribunal. Sec.
31(6)
of the Act provides that the decision of a majority of the members of
a panel is the decision of the Tribunal.
Sixth
to Thirteenth Respondents are wholesalers of pharmaceutical and other
products. These eight Respondents are members of Fifth
Respondent, a
voluntary association which promotes the interests of pharmaceutical
wholesalers.
The decision and order in issue here were given in
respect of an application by Fifth to Thirteenth Respondents (the
“Complainants”)
for interim relief against Appellants in terms
of sec.59 of the Act. In the interests of consistency, references
to Fifth to Thirteenth
Respondents in quotations from the pleadings,
record and heads of argument have been altered to read
“Complainants”
Over
many years importers and manufacturers of pharmaceutical products
distributed these products through wholesalers such as the
Complainants. This system was changed during 1993 when several
manufacturers - not involved in this matter - established a joint
distribution agency. Amongst the results were that wholesalers
could not buy directly from those manufacturers and that their
purchase discount was reduced. During 1997, First to Fifth
Appellants decided to establish their joint own exclusive
distribution
agency. As noted, they formed Sixth Appellant to
acquire Seventh Appellant, an existing national pharmaceutical
wholesaler, and
to convert it to their requirements.
On 8 June 2000 Complainants submitted a complaint to
the Competition Commission against the Appellants in terms of what
was then
sec.44 of the Act. The Commission accepted the complaint
in terms of its Rules.
Complainants
then launched an application for interim relief in terms of the sec.
59 of the Act as it then was.
Both
in their complaint and in their interim relief papers Complainants
alleged that Appellants were in contravention of four separate
sections of the Act. The four sections are, sec.4 - which prohibits
restrictive horizontal practices; sec.5 - which prohibits
restrictive vertical practices; sec.8 - which prohibits abuse of
dominance; and sec.9 - which prohibits price discrimination by
a
dominant firm.
The alleged contraventions were addressed in the
papers filed of record and in oral argument presented at a three-day
hearing before
the panel which took place on 25, 26 and 27 July
2000. The panel delivered its unanimous decision on 28 August 2000.
It granted
interim relief in terms of sec. 59 of the Act. In the
course of its decision, it made,
inter
alia
, the following finding:
"On the evidence before us, we find that there
is sufficient evidence that the agreement between the First to Fifth
Appellants
to distribute their products through a joint exclusive
distribution agency has the effect of substantially preventing or
lessening
competition in the market for the distribution of
pharmaceutical products in certain significant therapeutic
categories, in terms
of Section 4(1)(a). Having found for the
Complainants under Section 4(1)(a) we did not consider their case
under any of the other
sections."
The
Tribunal accordingly made the following order:
The Complainants’ application for interim relief
in terms of Section 59 of the Act, 89 of 1998 is granted in respect
of the
Appellants’ alleged contravention of Section 4(1)(a) of
the said Act.
That the First to Fifth Appellants supply their
products directly to the Complainants and other wholesalers on
terms and conditions
similar to those that applied to transactions
between them and the Complainants and other wholesalers immediately
before the
conversion of Seventh Appellant to a joint exclusive
distribution agency for their products.
That this order remains in force until the earlier
of -
i. the conclusion of the hearing into the prohibited
practices alleged by the Complainants to have been committed by the
Appellants;
or
ii. the date that is six months after the date of
the issue of this order;
The Appellants are ordered to pay the Complainants’
costs in the application on the scale as between party and party,
including
the costs of two counsel and one attorney.”
On
5 September 2000, Appellants applied to the Competition Appeal Court
as a matter of urgency for an order to suspend the operation
and
execution of the Tribunal's interim order pending the determination
of appeal or review proceedings which Appellants intended
to launch.
On
11 September 2000 the first stay application was heard by the
Competition Appeal Court. The presiding Judge, Davis JP dismissed
the application on the grounds that the interim order was not
appeallable and that the jurisdiction provided in sec. 38 of the
Act
to suspend such an order could only be exercised where there was a
review actually pending.
Four
days later, Appellants launched the current application to review
and to set aside the Tribunal's decision and order made in
the
section 59 application.
On
16 October 2000, Appellants brought a second stay application, which
was again considered by the Competition Appeal Court. On
this
occasion the application succeeded and a stay was ordered on 4
December 2000.
THE ISSUES BEFORE THIS COURT
The
grounds upon which Appellants seek to have the Tribunal’s decision
reviewed are conveniently summarised as the following:
the decision is void for vagueness;
the Appellants were not granted a fair hearing in
respect of the relief granted in the order;
the decision is
ultra
vire
s in that:
the order is overbroad;
the order frustrates the clear purposesec.of the Act;
the findings in the decision are not justifiable in
relation to the reasons given therefore; alternatively the Tribunal
took into
account irrelevant considerations and/or failed to take
into account relevant considerations;
the relief 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;
in disregarding the benefits of the joint distribution
structure that could have been gained other than by the use of
Seventh
Appellant.
Complainants
opposed the review application and filed answering affidavits in
which they resisted each and every ground of review.
In the principal answering affidavit Complainants
submit that there are “
no ground that
justify this Honourable Court intervening to review and set aside
the Tribunal’s decision and order
”.
Complainants
ask that the decision and order of the Tribunal be confirmed. In
the alternative, that this Court should amend the
decision and in
the further alternative that the matter be remitted to the Tribunal
for further hearing in terms of sec 37(2)(b)
of the Act.
Some twelve days before the date scheduled for the
hearing of this matter, Complainants’ Attorney wrote to the
Registrar of the
Court asking him to:
“
... notify the Judges that
The Complainants consent to the review on the basis
that the decision be referred back to the Tribunal on such terms as
the Competition
Appeal Court deems appropriate.
An endeavour to agree such terms with the Appellants
as far back as 7 December 2000 has unfortunately failed.
In our view the only pertinent issue will be one of
costs.”
The
heads of argument filed on behalf of Complainants state at the
outset that:
“
The Complainants consent to an order pursuant
whereto the order of the Competition Tribunal under Case No
68/IR/Jun00 ("the
matter") is reviewed and set aside and
the matter is remitted to the Competition Tribunal for a further
hearing in terms of
section 37(2)(b) of the Act 89 of 1998, as
amended ("the Act").”
The heads
of argument state further that:
“
For the Court's convenience a draft order is
annexed hereto marked "A". Although the draft order
records certain remittal
terms these are proposed merely in an
endeavour to assist the Court in the exercise of the discretion
vested in it, in terms of
section 37(2)(b) of the Act, and the
Complainants will abide any decision that the Court deems
appropriate in this regard.”
Counsel
for Complainants then seek to identify the issues before this Court
in the following terms:
“
Given that the
setting aside of the Tribunal's order is not in issue and that there
are no exceptional circumstances or reasons
for not remitting the
matter for a further hearing, the Complainants' submit that the only
pertinent issue is one of costs.”
Averring
that they had indicated that were prepared at an early stage to
consent to the setting aside of the Tribunals order on
condition
that the matter was remitted for further consideration by the
Tribunal on terms to be agreed between themselves and Appellants,
Complainants sought an order that Appellants pay the costs of the
appeal.
Counsel
for Appellants responded in Supplementary Heads of Argument:
“
In their heads of argument, the Complainants now
appear to concede the merits of the Appellants’ application for
the review and
setting aside of the Tribunal’s decision and order,
and consent to the remittal of the matter to the Tribunal for
rehearing on
terms set out in a draft order. They then argue, on
the basis that they have throughout consented to this relief, not
only that
they should not have to pay the Appellants’ costs in
these proceedings, but also that the Appellants should have to pay
their
costs.
These contentions are misleading and inconsistent
with the position previously taken by the Complainants in these
proceedings.
For the reasons set out below, there is no basis for
absolving the Complainants to pay the costs of this application on
an opposed
basis.
The Appellants challenged the Tribunal’s order and
decision on a number of review grounds and prayed in their notice of
motion
for the Tribunal’s order and decision to be reviewed and
set aside on all or any of these grounds.
This Honourable Court is empowered to provide this
relief at common law and in terms of s 37 of the Act (No 89 of 1998)
(the “Act”).
Section 37(2) provides that this Honourable Court
may give any judgment or make any order, including an order to:
“
(a) confirm, amend or set aside a decision or
order of the Competition Tribunal; or
(b) remit the matter to the Competition Tribunal for
a further rehearing on any appropriate terms”
It is clear from the Appellants’ notice of motion that they
seek a setting aside of the Tribunal’s order and decision in terms
of subsec (a) of s 37. They do not seek its remittal to the
Tribunal on specific terms as contemplated by subsec (b) of s 37.

This arises from the applicants’ contention, evident in the review
grounds that it has raised, that the Tribunal’s order and
decision
are bad in whole and not in part. The applicants challenge the
wording of the Tribunal’s order, the right of hearing
afforded to
the Appellants in respect of the relief ultimately granted by the
Tribunal, and allege that the decision and order
were
ultra
vires
on various grounds. We refer in particular in this
regard to the applicants’ allegations that various findings in the
Tribunal’s
decision are not justifiable for the reasons given
therefore; alternatively, the Tribunal took into account irrelevant
considerations
and/or failed to take into account relevant
considerations. These allegations are made in reference to the
definition of the relevant
market, the effect of the DD [i.e.
Seventh Appellant] distribution system on competition and the
frustration of the purposes of
the Act.
It is thus evident that the Appellants contend that
no part of the Tribunal’s decision and order should be allowed to
stand.
Consequently, it would be inappropriate to remit the matter
for rehearing on specified terms in terms of s 37(2)(b) as submitted
by the complainants. Rather, the decision and order should simply
be reviewed and set aside in terms of s 37(2)(a) and the matter
allowed to be considered afresh by the Tribunal. This is the normal
order in successful review applications, as reflected in the
cases
cited in the complainants’ heads of argument.”
First
to Fourth Respondents have not participated in the review nor
indicated any attitude thereto. They must be assumed to abide
the
decision of this Court.
At the hearing before this Court
Mr
Nelson SC
who appeared with
Mr
van Dorsten
for Complainants conceded
that the Tribunals order was reviewable on two of grounds advanced
by Appellants; the two grounds being
that the order was vague and
ambiguous and that it did not coincide with the prayers as sought by
Complainants.
It was common cause - and correctly so - that this
Court will not set aside the Tribunal’s decision and order on the
basis that
the Complainants have consented thereto; nor by reason of
any agreement between Complainants and Appellants. The Tribunal is
empowered
to make decisions and issue orders. In doing so it is
exercising a public function entrusted to it by the Legislature.
Unless
there are grounds in law to do so, the Court will not
interfere in the Tribunal’s exercise of its powers.
Mr Unterhalter
who
represented Appellants together with
Mr
Wilson
also pointed out that there
were a number of grounds of review which were not conceded by
Complainants and requested the Court
to adjucate all the grounds
advanced.
APPLICABLE LEGISLATION
Before proceeding to consider the merits of the
review it should be noted that the application for interim relief
in terms of
sec. 59 of the Act was heard by the Tribunal on 25 - 27
July 2000 and the decision was delivered on 29 August 2000.
Appellants
launched the current review proceedings on 15 September
2000. With effect from 1 February 2001, the Act was amended by the
Competition Second Amendment Act
(No 39 of 2000) (the “Second Amendment Act”). The Second
Amendment Act brought about significant changes to the Act and
materially
altered sec. 59 dealing with interim relief. (See: sec.
15 of the Amending Act).
Notwithstanding
the coming into effect of the Second Amendment Act, it is trite that
the substantive review of the Tribunal’s
decision and order must
be undertaken by reference to the Act as it existed at the time of
the hearing of the application. Accordingly,
references below to
the Act in relation to the application for interim relief in terms
of sec. 59 are references to the Act prior
to the coming into effect
of the Amendment Act.
The jurisdiction and powers of this Court to hear
and decide the current review proceedings under the Act have not
been affected
by the Second Amendment Act. The provisions of sec.
37 of the Act which apply are those which were substituted for the
original
sec. 37 by sec. 2 of the first
Competition
Amendment Act
, No. 15 of 2000 which
came into effect on 1 September 2000, a fortnight before the current
review application was launched.
REVIEW JURISDICTION
The Competition Appeal Court's review
jurisdiction is governed by the Act and is exercised in accordance
with the normal common
law principles of judicial review, which now
derive their force from the Constitution of the Republic of South
Africa (Act 108
of 1996) (the “Constitution”) and the
constitutional doctrine of legality. (See:
PHARMACEUTICAL
MANUFACTURERS’ ASSOCIATION OF SA and ANOTHER: in re Ex Parte
PRESIDENT OF THE REPUBLIC OF SOUTH AFRICA and OTHERS,
[2000] ZACC 1
;
2000
(2) SA 674
(CC)). In the course of his judgment, Chaskalson P said
that:
“
[20] The exercise of all public power must comply
with the Constitution, which is the supreme law, and the doctrine of
legality,
which is part of that law. . .
[33] ... The control of public power by the Courts
through judicial review is and always has been a constitutional
matter. Prior
to the adoption of the interim Constitution this
control was exercised by the courts through the application of
common law
constitutional principles. Since the adoption of the
interim Constitution such control has been regulated by the
Constitution which
contains express provisions dealing with these
matters. The common law principles that previously provided the
grounds for
judicial review of public power have been subsumed under
the Constitution and, insofar as they might continue to be relevant
to
judicial review, they gain their force from the Constitution. In
the judicial review of public power, the two are intertwined and
do
not constitute separate concepts. . .
[40]. . . We now have a detailed written
Constitution. It expressly rejects the doctrine of the supremacy of
Parliament, but incorporates
other common law constitutional
principles and gives them greater substance than they previously
had. The rule of law is specifically
declared to be one of the
foundational values of the constitutional order, fundamental rights
are identified and entrenched, and
provision is made for the control
of public power, including judicial review of all legislation and
conduct inconsistent with the
Constitution ...
[44]
I cannot accept this contention, which treats the common law as a
body of law separate and distinct from the Constitution.
There are
not two systems of law, each dealing with the same subject matter,
each having similar requirements, each operating
in its own field
with its own highest Court. There is only one system of law. It is
shaped by the Constitution which is the supreme
law, and all law,
including the common law, derives its force from the Constitution
and is subject to constitutional control.”
All discretionary powers must be exercised in
accordance with the Constitution. (
Metcash
Trading Ltd v Commissioner for South African Revenue Service and
Another
2001 (1) SA 1109
(CC) at paras 40-42
)
Sec.
37 of the Act expressly empowers this Court to review decisions of
the Tribunal. This power is repeated and reinforced by
sec. 61
which came into effect on 1 February 2001.
The Tribunal's decisions, although judicial in
nature, are administrative decisions. I am in agreement with the
remarks of Froneman
DJP where in
CAREPHONE
(PTY) LTD v MARCUS NO AND OTHERS
1999
(3) SA 304
(LAC), he said:
"[18] The constitutional answer to this
submission is that, although the Commission or other organs of State
may perform functions
of a judicial nature, they are not courts of
law and thus have no judicial authority under the Constitution (ss
165, 166 and 239
of the Constitution). Their judicial functions do
not transform them into part of the judicial arm of the State, nor
does it make
them part of the judicial process (cf
Bernstein
and Others v Bester and Others NNO
[1996] ZACC 2
;
1996 (2) SA 751
(CC)
(1996 (4) BCLR 449)
at paras [95] - [97]).
[19] The substantive answer to the argument is to be
found in the purpose of the administrative justice section of the
Bill of Rights.
That purpose is to extend the values of
accountability, responsiveness and openness to institutions of
public power which might
not previously have been subject to those
constraints. Courts of law were in any event always subject to the
kind of requirements
set out in the section. It would simply be
incongruous to free other public institutions exercising judicial
functions from those
constraints. It is not necessary to seek the
origins of those constraints in other provisions of the Bill of
Rights, such as the
access to justice provision (s 34).
Administrative action may take many forms, even if judicial in
nature, but the action remains
administrative."
I
turn now to a consideration of the individual grounds of review
advanced by Appellants.
IS THE ORDER VAGUE AND/OR AMBIGUOUS?
It is trite law that orders of tribunals and
other functionaries may be set aside if they are void for vagueness.
An order which
is prescriptive must on the face of it,
unambiguously specify what has to be complied with. A failure to
comply with an order
of the Tribunal may render a respondent liable,
under s 59(1)(c) of
Competition Act, to
administrative penalties of
up to 10% of its annual turnover, and, under
s 73(1)
, to criminal
prosecution. If, after application of the normal rules of
interpretation, the reviewing court is unable to ascertain
its
meaning, the order will be characterised as void for vagueness and
liable to be set aside. (See:
Visagie
v State President
,
1989 (3) SA 859
(A) at 870B-D;
S
v Dlamini
,
[1999] ZACC 8
;
1999 (4) SA 623
(CC) at
para 75).
Irresolvable ambiguity is a species of vagueness.
As found by Trollip JA in
Genticuro AG
v Firestone SA (Pty) Ltd,
1972 (1) SA
589
(A) at 610B,
“‘
Ambiguity
’

has the wide connotation of ‘uncertainty’ or ‘vagueness’,
i.e. as being not only of double but also of indefinite meaning
which cannot be resolved with the requisite degree of certainty by
proper construction”.
Mr Unterhalter
submitted that when the normal rules of interpretation are applied
to the Tribunal’s decision and order
in
casu
, they do not yield a clear answer
and that the decision is accordingly incurably vague in the sense
set out in
Genticuro’s
case (
supra
).
In
S v Mothobi
,
1972 (3) SA 841
(O), the court was
concerned with a custodial sentence which was suspended subject to a
condition that the accused not be found
guilty of a similar offence
(
’n soortgelyke oortreding
).
The learned Judge (Kumleben AJ and Smuts J, (as they then were)
concurring stressed the need for certainty in conditions of
that
kind,
inter alia
in the event of another court being required at a later stage to
determine whether or not there had been a breach of the conditions.
Those
sentiments are of equal application to an order such as that given
by the Tribunal, the breach of which gives rise to serious
consequences. Appellants are entitled to know with certainty what
they must or must not do.
As
was stated by Davis JP in his judgment in the second stay
application (See: p. 16 of the typed judgment - Record, vol. 11, p.
3049):
“
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.”
As
recorded above, the prescriptive paragraph of the Tribunal’s order
is in the following terms:
“
That
the Appellants supply their products
directly
to the Complainants and
other
wholesalers
on terms and conditions
similar
to those that applied to transactions between them and the
Complainants and other wholesalers immediately before the conversion
of Seventh Appellant to a joint exclusive distribution agency for
their products.”
I have italicised the two words and the phrase which
Appellants contend are the offending parts of the order.
“
Similar”
Appellants submit that the first vague and/or
ambiguous word in the order is “
similar
”,
as applied to the terms and conditions on which the Appellants are
required to supply the Complainants and other wholesalers.
It was
argued that the meaning of that word, in the context of the order
and decision, is incapable of determination, with the
result that
the Appellants are not able to determine what is and what is not
required of them in order to comply with the order.
In
R v Revelas
,
1959 (1) SA 75
(A) at 80B-C, Schreiner ACJ observed that:
“
It
has been said that [’
similar
’]
is 'almost always a difficult word to construe' (
Union
Government (Minister of Finance) v Gowar
,
1915 A.D. 426
, per De Villiers, A.J.A., at p. 443). Obviously there
are degrees of similarity or likeness, some approaching, and
exceptionally
perhaps even reaching, sameness, others amounting to
no 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 263 should be
given the 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 have been aimed at
substituting
the notion of resemblance.”
The
Tribunal’s decision presents an analogous set of circumstances.
At paragraph 67 of its decision, (See: Pleadings p.69) the
Tribunal
states that:
“
The
order we have issued compels the respondents to supply the
Complainants and other wholesalers on the
same
terms and conditions as before the advent of Seventh Appellant.”
(Italics added)
It is quite clear that, as had occurred in the
Revelas
case
,
the Tribunal abandoned “
same
”
when it referred, later, to “
similar
”
terms and conditions in its order.
It was held in
S
v Mothobi,
(
supra
)
that the meaning of the word “
similar
”
could not be determined with any measure of accuracy and accordingly
that it required the setting aside of the order in which
it was
contained. In this regard, the Court found that:
“
Die
woord ‘
soortgelyk
’
beteken letterlik ‘van dieselfde soort’. Weens die inherente
onpresiesheid van die woord, kan die betekenis daarvan gewoonlik
nie
met enige mate van akkuraatheid vasgestel word nie.”
(at 841F)
His Lordship then quoted the section from
Revelas
case referred to above, and continued (at 842E-F) as follows:
“
Die
woord of begrip '
soortgelyk
'
is egter een wat vir ekstensiewe of beperkende uitleg vatbaar is.
Gevolglik kan daar nie met sekerheid bepaal word welke van hulle
binne of buite die bestek van die voorwaarde val nie. Hoewel 'n
verwysing na 'n '
soortgelyke
misdaad
' in 'n voorwaarde van
opskorting soms in 'n bepaalde verband in orde mag wees, meen die
Hof vir die redes vermeld dat in die onderhawige
geval dit 'n
onwenslike mate van onsekerheid skep.”
(For a similar observation, see: also
S
v van Rooyen
,
1974 (3) SA 319
(NC) at
320F).
There are reported cases in which the word
“
similar
”
has not been found to be incurably vague. (See for example:
Union
Government (Minister of Finance) v Gowar
,
1915 AD 426
;
Potgieter en n Ander v
Van Zyl
,
1983 (3) SA 451
(O)
.
In those cases, however, the meaning
of “
similar
”
was found to be ascertainable from the surrounding wording in
accordance with the principles of statutory interpretation. In
addition, neither of these cases involved a
mandamus
requiring the respondent itself to determine the meaning of the word
“
similar
”
on pain of criminal or other sanctions in the event of it proving to
be wrong.
In the order under review, in addition to it
being unclear as to whether the terms and conditions are required to
be the same or
merely similar, it is also unclear which “
terms
and conditions
” are contemplated by
the order. It appears that most of the Appellants, when acting as
principals, sold their products to the
Complainants at a discount
(generally 17,5%) off list price. It is unclear in the order
whether it is merely the discount that
is required to be the same or
whether the underlying list price is also included. If it is merely
the discount that is required
to be the same (or, indeed, similar),
then it is legitimate to ask what the order requires of those
Appellants, such as First Appellant,
which, as I understand the
evidence, did not use a discount formula but simply set a selling
price for its products.
It
is also unclear whether the order applies merely in respect of terms
and conditions that are less advantageous to customers as
a result
of the advent of Seventh Appellants, or whether they also apply to
sales which are more advantageous. If the latter,
some Appellants
would, on the facts presented, be required to reduce the discount
rate, or increase the price, at which they sell
certain products to
their consumers.
I am, in all the circumstances, satisfied that
the meaning of the word “
similar
”
as it appears in the Tribunal’s order is incapable of sufficiently
certain determination, with the result that Appellants
are not able
to tell what is and what is not required of them in terms of the
offer.
Accepting, as I do, that the “
similar
‘
terms and conditions are not required to be the same, I find that
the order is vague in that it is unclear as to what extent,
and in
which respects, the terms and conditions are allowed to differ from
those that prevailed previously. The Appellants cannot
reasonably
determine, for example, the extent to which they are permitted in
terms of the order to raise or lower their prices,
discount rates or
any of their other trading terms and conditions.
“
Other Wholesalers”
The order is also vague and/or ambiguous insofar
as it requires the Applicants to supply their products to the
Complainants and
“other wholesalers
”.
There are on the facts as set out in the record different types of
“wholesalers” in the pharmaceutical market. It is
unclear, for
instance, whether the class of persons contemplated is limited to
companies registered with the South African Pharmacy
Council
as wholesalers, or whether it includes
all companies which buy the Principals’ products for on-sale. If
the former, it is unclear
whether the class includes only full-line
wholesalers (such as the Complainants) or also short-line
wholesalers. If the latter,
it is unclear whether the class is
limited to non-retailers (such as the Complainants) which purchase
the Principals’ products
for on-sale to retailers, or whether it
also includes retailers and retail buying groups which purchase
Appellants’ products
for on-sale to other retailers. It is
stated on the record that from a business perspective, there is no
meaningful distinction
between these categories of customers.
It
is also unclear whether the wholesalers contemplated by the order
include only those customers with whom Appellants had business
relationships before they commenced distrubuting through Seventh
Appellant, or whether they also include wholesalers with whom
Appellants did not previously conduct business.
The vagueness of the term ‘
wholesalers
’
as it appears in the Tribunal’s order is demonstrated when regard
is had to Complainants’ attempts in their answering affidavit
to
explain the meaning of the word. (See:
Fifth
to Thirteenth Respondents’ Affidavit;
para 28. Pleadings File p. 148-9). The explanation serves to
illustrate the inherent ambiguity of that word in the Tribunal’s
order. In the first sentence Complainants state that wholesalers
“
must be defined in the context of
the industry where it is used to refer to wholesalers who are
registered as such with the South
African Pharmacy Council
”.
No evidence was given of this alleged customary usage in the
proceedings before the Tribunal, and the Tribunal makes no reference
to such usage in its decision. However, in the very next sentence
Complainants add another element to the definition of “
wholesalers
”,
namely that they must have been wholesalers “
with
whom the manufacturers did business before
”.
The following sentence refers to yet a further element, namely that
the word refers both to full-line and short-line wholesalers.

Finally Complainants revert to an interpretation of “
wholesalers
”
as meaning merely “
registered
wholesalers
”.
Even if one were to seek the meaning of
‘
wholesalers
’
by reference to the decision of the Tribunal, there is scant support
in the decision for any of the various meanings attributed
to the
word by Complainants. Complainants identify certain paragraphs in
the decision where the word is referred to. An analysis
of the
paragraphs identified by the Complainants which contain the word
“
wholesalers
”
(which list is itself not exhaustive), reveals no clear nor
consistent meaning. For example, in paragraph 2 of its decision,
the Tribunal appears to limit the use of the word “
wholesalers
”
to full-line wholesalers. (See: Pleadings file, p. 55). In the
other paragraphs mentioned, the word could mean either full-line
or
short-line wholesalers. Again, in paragraph 2,
“wholesalers”
clearly refers to all wholesalers in South Africa. It cannot be
interpreted as referring only to wholesalers “
with
whom the manufacturers did business before
”.
In my view the phrase ‘
other
wholesalers
’ as it appears in the
Tribunal’s order is vague and ambiguous.
“
Directly”
The third basis for the attack on the grounds
that the order is vague and/or ambiguous in that it requires that
Appellants - all
of them - to supply their products
“directly
”
to the Complainants and other wholesalers. It was argued by
Appellant that is not apparent
ex facie
the order whether or not Appellants are allowed to use the
infrastructure of Seventh Appellants in order to deliver their
products
to the Complainants and other wholesalers. It would appear
that the Tribunal was aware of and considered the issue but failed

to clarify their view in the order.
In
its decision (para. 67; Pleadings file, p. 69) the Tribunal states:
“
If practical considerations require it, the
manufacturers can supply the wholesalers using [seventh Appellant’s]
infrastructure
and facilities, so long as they do so on commercial
terms and conditions similar to those that applied before [Seventh
Appellant]
was converted to a joint exclusive distribution agency.
At the same time [Seventh Appellant] may continue to provide
distribution
agency services to the manufacturers.”
It is clear that it was the Tribunal’s view as
set out in its decision that, if ‘
practical
considerations’
required it,
Appellants would be permitted to use the distribution services of
Seventh Appellant to ‘
supply the
wholesalers’
. There were thus two
possibilities contemplated. One was not using the services of
Seventh Appellant and the other was the use
of those services.
However, the order, as worded, requires that Appellants supply their
products ‘
directly
’
to the Complainants and other wholesalers and does not reflect the
possibility of any alternative indirect supply.
In my view the reference to
‘directly
’
in the order is not
per se
ambiguous. The word ‘
directly
’
means without the intervention of an intermediary. Seventh
Appellant acting as an agent is, undoubtedly, an intermediary.
Appellants are unequivocally required by the order to supply their
customers
‘directly
’
and not through any intermediary. The fact that the order does not
reflect the view of the Tribunal as stated in para. 67 may
constitute a separate ground of objection. The order as granted,
however, is neither vague nor ambiguous in respect of direct
supply.
In the circumstances, and for the reasons stated
I find that in respect of the references to ‘
similar
’
and ‘
other wholesalers
’
the order of the Tribunal is vague and/or ambiguous to an extent
that its meaning cannot be determined by application of the
normal
rules of interpretation. Consequently, Appellants are unable to
establish what is and what is not required of them in terms
of the
order and the order therefore falls to be set aside.
NO FAIR HEARING IN RESPECT OF THE RELIEF AS
ORDERED
Appellants had a right to a fair hearing before
the Tribunal in terms of secs. 33 and 34 of the Constitution which
incorporates
and extends the common law, (See:
Du
Preez & Another v Truth and Reconciliation Commission
[1997] ZASCA 2
; ,
1997 (3) SA 204
(A) at 231H-232) as also in terms of sec. 59(1)(c)
of the Act.
Appellants submit however, that they were not granted a
fair hearing in respect of the relief granted in the order because
that
relief, was not sought by the Complainants in their notice of
motion and was not raised by the Tribunal at the hearing of the sec.
59 application, nor indeed, at any time prior to the order being
issued.
In their notice of motion Complainants sought
wide ranging orders in terms of sec. 59 of the Act. Orders were,
inter alia
sought, interdicting Appellants from converting Seventh Appellant to
an agency distributor - an event which had already occurred;

requiring Appellants to forthwith terminate their exclusive agency
distribution agreement and ordering Seventh Appellant to remain
an
independent wholesaler which does not favour First to Fifth
Appellants. What was not sought, however, was an order requiring
Appellants to return to the supply system which prevailed before the
conversion of Seventh Appellant to a joint exclusive distribution
agency for Appellants’ products. In that regard Complainants
prayed for an order that:
“
8. The Appellants are ordered to continue
supplying their products to the Complainants on terms and conditions
identical to those
given by Appellants to Seventh Appellant.”
While it is clear that the Tribunal is not necessarily
limited to granting the exact relief set out in the notice of
motion, it
was only permitted to grant alternative relief where
a case was made out for that relief on the papers;
Appellants were apprised of the alternative relief
contemplated; and
Appellants are granted a full hearing in respect of
such alternative relief.
(See:
Port Nolloth
Municipality v Xhalisa and Others
,
1991 (3) SA 98
(C);
Queensland
Insurance Co. Ltd v Banque Commerciale Africaine
1946 AD 272)
In respect of the right to a hearing, the Court
in
Port Nolloth Municipality,
(
supra
)
,
stated (at 112D-F) that:
“
A
prayer for ‘further and/or alternative relief’] can be invoked
to justify or entitle a party to an order other than that set
out in
the notice of motion

where that order is clearly indicated in the founding (and other)
affidavits

and is established by satisfactory evidence on the papers (or is
given)... Relief under this prayer cannot be granted which is
substantially different to that specifically claimed, unless the
basis therefor has been fully canvassed, viz the party against
whom
such relief is to be granted has been fully apprised that relief in
this particular form is being sought and has had the fullest
opportunity of dealing with the claim for relief being pressed under
the head of 'further and/or alternative relief'.”
In the recent case of
Nortje
en ‘n Ander Others v Minister van Korrektiewe Dienste en Andere
,
2001 (3) SA 472
(SCA), Brand AJA observed that the requirements of a
reasonable opportunity to which a party is entitled in order to put
his case
ought not be too closely defined. However, the guidelines
laid down in the
dictum
of
Lord Mustill in
Doody v Secretary of
State for the Home Department and Other Appeals
[1993] 3 ALL ER 92
(HL) 106 d-h, and approved by Corbett CJ in the
Du Preez
case (
supra
at
p. 232 B-C) remain valid and useful in deciding whether a fair
hearing was held in cases where
audi
alteram partem
applies.
The paragraphs of Lord Mustill’s
dictum
which were quoted by Brand AJA and which are apposite here are:
“
[5] Fairness will very often require that a
person who may be adversely affected by the decision will have an
opportunity to make
representations on his own behalf either before
the decision is taken with a view to producing a favourable result,
or after it
is taken, with a view to procuring its modification, or
both.
[6] Since the person affected usually cannot make
worthwhile representations without knowing what factors may weigh
against his
interests fairness will very often require that he is
informed of the gist of the case which he has to answer.”
(at p. 480 D-F)
Appellants
uncontradicted evidence is that they were never given an opportunity
to make submissions in regard to the relief as ordered
by the
Tribunal. They were not informed that an order in terms different
from that prayed for was to be granted. They were consequently
deprived of an opportunity to make representations in respect of the
order.
The
Complainants do not take issue with Appellants in regard to the
pertinent raising of the relief ordered but allege in their
answering affidavit that the relief granted was encompassed by the
wide relief claimed in the notice of motion. (See: para. 61.1;
Pleadings file, p. 198). The Complainants were, however, unable to
identify any part of their notice of motion that encompasses
the
relief ultimately granted by the Tribunal. It is apparent from a
reading of the Complainants’ prayers for relief that none
of these
prayers, in fact, covers the relief granted by the Tribunal.
In their effort to justify the Tribunal’s order
in their answering affidavit, Complainants point to a portion of
their Second
Replying Affidavit in the s 59 proceedings which they
claim foreshadows the relief granted by the Tribunal (See: para.
61.3; Pleadings
file, p 199). However, it is clear from a reading
of this passage that it does not avail Complainants. Firstly, the
relief there
claimed is not the same as the relief granted by the
Tribunal. Secondly, the reference therein is to an order that “
this
pricing structure is made to apply to Seventh Appellant
”.
This reflects the failure of the Complainants to appreciate that
Seventh Appellant is not a principal purchaser of the First
to Fifth
Appellants’ goods but a true distribution agent. Thirdly, it
would appear that even this relief was never pertinently
raised by
the Tribunal, nor was an opportunity granted to the Appellants to
address the Tribunal in respect thereof.
In all the circumstances, I am of the view that
Appellants’ constitutional and common law rights to a fair hearing
were breached
by the Tribunal. Furthermore, the requirement in s
59(1)(c) of the Act that the Principals be given “
a
reasonable opportunity to be heard”
was not adequately met. Accordingly, the Tribunal’s order should
be set aside on the ground that the Appellants did not receive
a
fair hearing in respect of the relief ultimately granted by the
Tribunal.
DECISION IS
ULTRA
VIRES
Appellants
further impugn the order of the Tribunal on the grounds that it is
ultra vires
.
This ground is, in turn, based upon a number of separate attacks.
The
Order is overbroad
In
Goldberg and
Others v Minister of Prisons and Others
,
1979 (1) SA 14
(A), Corbett JA (as he then was) said:
“
An exercise of a discretion is assailable in a
court of law where it
is shown that the party in whom it is vested
acted
mala fide
or from ulterior motive or failed to apply his mind to the matter
(
The Administrator, Transvaal
and The Firs Investments (Pty) Ltd v Johannesburg City Council
1971 (1) SA 56
(A) at 80B   H;
Schoch
NO and Others v Bhettay and Others
1974 (4) SA 860
(A) at 865A   H). In this context "
ulterior
motive
" does not
necessarily connote a sinister motivation: it can relate simply to
the case where, for instance, a person or body
vested by statute
with the discretionary power uses it for a purpose not expressly or
impliedly authorised by the statutory enactment
(see
Administrator,
Cape v Associated Buildings Ltd
1957 (2) SA 317
(A) at 325D, 329H   330A; Rose Innes
Judicial Review of
Administrative Tribunals
at 127
30; Wiechers
Administratiefreg
at 242   3). Moreover, in
Northwest
Townships (Pty) Ltd v The Administrator, Transvaal
1975 (4) SA 1
(T) Colman J (in whose judgment Cillie JP and Davidson
J concurred) pointed out that the failure by the person vested with
the
discretion to apply his mind to the matter (see 8G):
‘
... has been held, in other English and South
African cases, to include capriciousness, a failure, on the part of
the person enjoined
to make the decision, to appreciate the nature
and limits of the discretion to be exercised, a failure to direct
his thoughts to
the relevant data or the relevant principles,
reliance on irrelevant considerations, an arbitrary approach, and an
application
of wrong principles.’"
(at 48D-H):
It follows that a statutory discretion exercised
for a purpose contrary to the statute in question is
ultra
vires
and will be set aside by the
Court on that ground. The exercise of the discretionary power in a
manner which frustrates the clear
purpose of the statute, or renders
the provisions of the statute nugatory, is invalid and must likewise
be set aside. (Cf:
Corium (Pty) Ltd
and Others v Myburgh Park Langebaan (Pty) Ltd and Others
,
1995 (3) SA 51
(C) at 67F-68C)
In terms of s 60(1)(a)(ii) (now s 58(1)(a)(ii))
of the Act, the Tribunal is empowered to order a party to supply or
distribute goods
to another party. The power is, however, limited.
The order to supply or distribute must be on terms that are
“
reasonably required to end a
prohibited practice
”.
The words “
reasonably
required
” dictate that the terms
imposed by the Tribunal should be no more onerous than is reasonably
necessary to end the prohibited
practice found by the Tribunal. In
Automec Srl v Commission
[1992] 5 CMLR 431
, the European Court of Justice held that “
[t]he
burdens imposed on undertakings in order to bring an infringement of
competition law to an end must not exceed what is appropriate
and
necessary to obtain the objectives sought, namely compliance with
the rules infringed.
”
This approach accords with the principle of
proportionality contained in sec. 36 of the Constitution. And as
already noted, all
discretionary powers must be exercised in
accordance with the Constitution.
The prohibited practice identified by the
Tribunal was that First to Fifth Appellants’ joint exclusive
distribution arrangement
set up through Sixth Appellant and operated
through Seventh Appellant substantially reduced competition
“
primarily
”
in the market for the distribution of pharmaceutical products in
“
certain significant therapeutic
categories
” where the First to Fifth
Appellants “
play a significant role
”.
(See: Tribunal Decision, para. 14 read with para. 33; Pleadings
file, pp. 58,61).
It
was submitted by Appellants that the order granted by the Tribunal
is in its own terms overbroad and not reasonably required
to end the
prohibited practice identified. Two arguments were advanced.
Firstly, that the relief ordered does not apply
only to the distribution of those pharmaceutical products in
therapeutic categories
in which First to Fifth Appellants play a
“significant role”
,
but to the distribution of all their products.
Secondly,
that the relief granted is not limited to ensuring that direct
access to First to Fifth Appellants’ products is granted
to the
Complainants. It goes further by requiring these Appellants to sell
their products to all wholesalers upon terms and conditions
fixed at
a particular time. In so doing, the order prohibits Appellants from
amending the terms (including, for example, price
and payment terms)
upon which they sell their products to each of the Complainants and
other wholesalers on commercially justifiable
grounds. It also
prevents the Appellants from choosing their customers on a
commercially justifiable basis, for example from being
able to
decline to supply a wholesaler which has been guilty of misconduct.
It
was argued that, in the result, the order infringes Appellants’
freedom of commercial activity under secs. 18 and 22 of the
Constitution, and that it has a discriminatory impact on the
Appellants relative to other pharmaceutical manufacturers in breach
of sec. 9 of the Constitution.
In their answering affidavit (para. 30; Pleadings
File p. 151) Complainants pointing to the use of the word
“
primarily
”,
sought to argue that the Tribunal found in paragraph 33 of its
decision that the joint distribution arrangement substantially
reduced competition not only in the market for the distribution of
pharmaceutical products in therapeutic categories where the
First to
Fifth Appellants play a significant role, but also in a broader
distribution market. I am satisfied, however, that on
a proper
reading of the decision, the Tribunal’s finding set out in
paragraph 14 only refers to a reduction of competition “
in
the market for the distribution of pharmaceutical products in
certain significant therapeutic categories
”.
Sec.
59
of the
Competition Act empowers
the Tribunal to grant interim
relief. When it grants an interim order in terms of
sec. 59
, the
Tribunal is not limited to the powers in
sec. 60.
The powers
provided for in
sec. 60
of the
Competition Act are
:
“
In addition to its other powers in terms of this
Act ...”
Sec.
59 permits the Tribunal to grant an interim order that is
“reasonably necessary to:
(i) prevent serious, irreparable damage to [an
applicant]; or
(ii) to
prevent the purposes of this Act being frustrated.”
In
this matter the Tribunal found that Complainants had not established
that they would suffer serious irreparable damage if no
interim
order was granted. The Tribunal found, however, that an interim
order was necessary to prevent the purposes of the
Competition Act
being
frustrated, namely to put an end to “the prohibited practice
found in this case [which] is to lessen competition in the
distribution
of pharmaceutical products.”
Having identified the market in which First to
Fifth Appellants were engaged in a “
prohibited
practice
” in terms of
sec. 4(1)
(a)
of the
Competition Act as
being “
the
market for the distribution of pharmaceutical products in certain
significant therapeutic categories
”,
there is no apparent justification for extending the ambit of the
mandamus
granted to include all the Appellants’ products. The interim
order should have been limited to the relevant therapeutic
categories.
To the extent that it is not so limited it is overbroad
and cannot stand.
The
Competition Act is
intended to promote and
regulate an efficient and competitive economic environment
throughout South Africa. The
Competition Act applies
“to all
economic activity within, or having an effect within, the Republic”
(See:
Sec. 3
of the
Competition Act). The
“
prohibited
practices
” identified by the
Competition Act may
or may not, in any given matter, be solely of
concern between or affect the parties to the
lis
.
A “
prohibited practice
”
may, in a given case, be confined to the parties or it may affect a
wider group. For this reason, and having regard to the
provisions
of
sec. 59
of the
Competition Act, I
am satisfied that it would be
an entirely artificial situation were the Tribunal to be limited to
making an interim order which
applied only to the parties in
circumstances where the identified “
prohibited
practice
” was of wider application
than just between the parties before the Tribunal.
Firstly and from a practical point of view it
would be undesirable that every “victim” of the “
prohibited
practice
” should have to lodge a
complaint and seek interim relief. The resultant multiplicity of
cases would simply overburden and multiply
the work of the Tribunal
and would lead to unnecessary expenditure without any practical
purpose.
Secondly,
to limit the order to the parties would be entirely artificial. For
the Tribunal to approach its task on the basis that
it should limit
its order to the parties would be to ignore the very purposes which
the interim order is required to protect.
The Tribunal is the
statutory body which has been entrusted by the Legislature with the
duty,
inter alia
,
of identifying, adjudicating and remedying practices by Chapter 2 of
the
Competition Act. The
decisions which it takes must reach the
outlawed behaviour wherever it is identified. Where the evidence
shows that the “
prohibited practice
”
is applied to and affects a wider group than just the complaining
parties then the Tribunal would, if it were to limit the application
of its order, be exercising its discretion without taking all the
circumstances into account.
In deciding whether to make an interim order and,
indeed, the terms of such order the Tribunal ‘s discretion is, in
terms of
sec. 59
, sufficiently wide to enable it to have regard to
the extent of the “
prohibited
practice
”. In
Rood v Wallach
1904 TS 257
Innes CJ
who delivered the judgment of the Full Bench of the Transvaal
Supreme Court, said:
"... In considering in each particular matter
what real and substantial justice requires, the Court may take into
account all
the circumstances surrounding the case."
(At p. 259)
The
remarks apply equally to the Tribunal exercising its discretion in
regard to an interim order.
Similarly, in
South
Cape Corporation (Pty) Ltd v Engineering Management Services (Pty)
Ltd
,
1977 (3) SA 534
(AD) Corbett JA
(as he then was) stated:
"In exercising this discretion the Court
should, in my view, determine what is just and equitable in all the
circumstances."
(at p. 545)
For these reasons I am of the view that an
interim order made by the Tribunal pursuant to the terms of
sec. 59
can be extended to apply to persons who are not parties to the
lis.
In this case the order requires Appellants to supply their products
to “the Complainants and other wholesalers on terms and
conditions
...”. I find that the extension of the order to customers other
than the Complainants is not only unobjectionable
but indeed,
appropriate.
Insofar
as the Appellants point out that the terms of the order limit their
ability to act upon sound commercial grounds that criticism
is
sound. The order does not include any escape valve whereby
Appellants could decline to supply a Complainants or other
wholesaler
who might be in breach of an obligation towards the
Appellants or any of them. To that extent the order is overbroad
and should
not be allowed to stand. This aspect is an example of
the practical benefit of giving the parties an opportunity to be
heard in
respect of relief which was not debated before the
Tribunal. Where parties are apprised of the relief claimed they
have an opportunity
to address any shortcomings in the terms of the
proposed order. Where, however, an order is made without the
opportunity for submissions
the Tribunal may overlook an effect of
such order which may not even have been intended.
Order frustrates the clear purpose of the
Competition Act
.
The next ground upon which Appellants contend
that the order of the Tribunal is
ultra
vires
is the submission that the Order
frustrates the clear purpose of the
Competition Act.
Section
2 of the
Competition Act provides
:
Purpose of Act. —The purpose of this Act is to
promote and maintain competition in the Republic in order—
(a) to promote the efficiency, adaptability and
development of the economy;
(b) to
provide consumers with competitive prices and product choices;
(c) to
promote employment and advance the social and economic welfare of
South Africans;
(d) to
expand opportunities for South African participation in world
markets and recognise the role of foreign competition in the
Republic;
(e) to
ensure that small and medium sized enterprises have an
equitable opportunity to participate in the economy; and
(f) to
promote a greater spread of ownership, in particular to increase the
ownership stakes of historically disadvantaged persons.
Appellants
contend that the Tribunal’s order frustrates the clear purpose of
the
Competition Act as
set out in
sec. 2
thereof in two ways.
Firstly, prior to the advent of Seventh Appellant, most of the
Appellants supplied their products to the
Complainants at a standard
17.5% discount off list price. It is common cause that this
discount rate has been an industry norm
for over 25 years,
irrespective of the fluctuating forces of supply and demand for the
various pharmaceutical manufacturers’
products. This price
structure was thus, potentially, at least, an historical anomaly
which is no longer commercially justifiable.
(See: Founding
affidavit, para 9.2.2.1 and the references there cited; Pleadings
file, p. 27)
It
was argued that the concerted practice of the Complainants in
requiring this standard discount rate from manufacturers constitutes
an agreement to fix prices in violation of
s 4(1)(b)(i)
of the
Competition Act. Accordingly
, if the Principals were required to
sell all their products to the Complainants at this same rate, there
would be a reversion to
this unlawful conduct on the part of the
wholesalers.
The Complainants responded in their answering
affidavit that the 17.5% discount was merely a base rate, off which
additional promotional
and early settlement discounts were granted
(See: para. 31.2; Pleadings file, p. 152). This reply does not
satisfactorily answer
the criticism as the mere use of a base price
list in this manner may well constitute horizontal price fixing.
(Cf:
Plymouth Dealers Association v US
[1960] USCA9 158
;
279 F.2d 128
(9
th
Cir 1960)).
Secondly, the Tribunal’s order may require the
Appellants to sell products to the Complainants and other
wholesalers on terms
and conditions preferential to those offered to
their other customers. There is no meaningful distinction between
these two classes
of customers. Even as between wholesalers
themselves, the order may, depending on the definition of
“
wholesalers
”,
be construed as requiring that preferential pricing only be extended
to certain wholesalers and not to others. Furthermore,
the order
only applies to wholesalers which were customers at a particular
date. Other customers wishing to enter the wholesale
distribution
market may thus be at a disadvantage and, in such event, the order
would have the effect of restricting entry into
the market.
Therefore,
it was submitted, the discrimination in price between wholesalers
and non-wholesalers required by the Tribunal’s order
is hostile to
the objects and contents of the
Competition Act, and
particularly
the principle, in
sec. 9
of the
Competition Act, that
there should
not be differential treatment of purchasers.
Thus, it was argued that enforcement of the order
would frustrate the clear purposes of the
Competition Act, and
that
it should accordingly be set aside as
ultra
vires
.
In
my view it is unnecessary to consider the merits of the individual
arguments concerning the alleged frustrations of the purposes
of the
Competition Act. What
must be borne in mind is that the subject
matter of this review is an interim order. Such an order is by
definition a temporary
measure aimed at minimising damage prior to
the final determination of the issues. On the one hand the Tribunal
is required to
impose measures which are reasonably necessary to
control damage either to the Complainants or to prevent the purposes
of the Act
being frustrated. On the other hand the Tribunal must
avoid making a final decision in respect of the issues. What is
required
is that a temporary regime be enforced which will as far as
possible ensure fairness and minimise anti-competitive behaviour.

In balancing those aims the Tribunal may in certain circumstances
have to endorse or indeed, enforce practices which are
irreconcilable
with the purposes as set out in sec. 2 of the Act.
Such a situation is inherent in the grant of interim relief in this
context.
The
purposes of the Act as set out in sec. 2 are manifold and may not
always be reconcilable in the short term. Thus to take a
single
example, sec. 2(b) emphasises competitive prices and product choices
while sec. 2(c) seeks to promote employment. The tension
between
those two purposes may require the Tribunal to sacrifice one in
favour of the other in an interim order.
Furthermore one of the purposes of the Act is to
create a fair and accountable system by which to regulate
competition in our society.
In order to protect that system and not
to pre-judge, nor indeed to even be perceived to pre-judge any issue
the Tribunal may
have to introduce or to endorse on a temporary
basis a scheme which displays anti-competitive elements simply
because that scheme
is in the opinion of the Tribunal
reasonably
necessary
to achieve the
administrative fairness required by the Constitution and in the
light of which the Act must be applied.
In every case in which an interim order is to be
made, the very many factors which make up modern commercial trade
practices have
to be weighed against the purposes of the Act. In so
doing the Tribunal is bound to find tensions and it is the
Tribunal’s task
to consider them and to exercise a discretion in
favour of what is fair in the circumstances. Because the order is
only a temporary
order, and is made before a final determination of
the issues, care ought to be taken to avoid excessive and
irreparable harm to
all concerned. For this reason the preservation
of a
status quo
or the reversion to the
status ante
quo
, albeit that such situations are
uncompetitive is often the device which is found to be the fairest,
least harmful and most practical
solution on an interim basis. The
perpetuation of an apparently outlawed practice on an interim basis
is not only unobjectionable
but will, in many cases be inevitable
or, simply the least of all evils. When the matter is finally
decided the Tribunal will
be less constrained in ordering
fundamental changes to uphold the central purposes of the Act. I
say “less constrained” because
the potential for conflicts
between the various purposes in sec. 2 of the Act is quite apparent
and a measure of balancing and
choice will often be unavoidable even
at the stage of final decision.
In my view, the issue of an interim order which
on close scrutiny contains elements which introduce, endorse or
perpetuate a “
prohibited practice
”
does not
per se
mean that the Tribunal has acted
ultra
vires
its powers.
ARE
THE FINDINGS JUSTIFIABLE IN RELATION TO THE REASONS GIVEN?
The
next ground upon which the decision and order of the Tribunal were
attacked was that the findings are not justifiable in relation
to
reasons given.
In terms of sec. 33(2) of the Constitution,
“everyone whose rights have been
adversely affected by administrative action has the right to be
given written reasons”
.
In terms of sec. 33 of the Constitution, read
with item 23(2)(b)(d) of Schedule 6 thereto, Appellants have a right
to
“administrative action which is
justifiable in relation to the reasons given for it where any of
their rights is affected or threatened”
.
The
provisions of this item override the common law doctrine of
symptomatic unreasonableness and introduce into South African
administrative
law a requirement
of
rationality in the merit or outcome of the administrative act.
Much
of the argument focussed not upon the relationship between the order
and the reasons but upon the justification for and rationality
of
the Tribunal’s findings.
Appellants
submitted that the Tribunal was not justified, either on the basis
of the evidence before it, or alternatively on the
basis that it
failed to take into account relevant considerations and/or took into
account irrelevant considerations, in making
certain of
the findings which it made. These finding
include the important determinations of the relevant market and the
effect that the joint
distribution through Seventh Appellant has on
competition. Also under this head, Appellants attacked the order as
not being justifiable
in that the Tribunal’s decision that the
order was reasonably necessary was founded on an indecisive finding
that the purposes
of the Act “
may
”
be frustrated. The Tribunal found “
...
that a final order may not be able to adequately address the effects
of [Seventh Appellant’s] conversion on the nature of
the
competition in the distribution market
.”
(See: para. 64; Pleadings p. 68). Under this head, Appellants
repeated that the inclusion of “
other
wholesalers
” in the order was not
justified.
The
arguments in respect of these issues involved an in-depth analysis
of the pleadings and evidence in order to seek to show that
the
Tribunal’s decision and order could not be justified. In the
light of the findings I have already made and for the further
reasons I will mention, I do not consider it necessary nor
appropriate to embark upon an analysis of the evidence in this
judgment.
This is so especially in view of the fact that the
Tribunal may - I emphasise “may” - have to reconsider the matter
and to
re-examine its factual findings in the light of further
evidence and the important developments that have come about since
the
order was made.
This Court has been informed that after the Tribunal
granted the interim order, First to Fifth Appellants disposed of
Sixth Appellant,
the holding company of Seventh Appellant, to a
third party. Appellants state that this was done to avoid further
litigation by
a restructuring in line with a format which had been
approved by the Tribunal in another instance. Whether or not
Appellants have
succeeded in their intention is not in issue here.
However, the restructuring may be relevant to a reconsideration of
the interim
relief if the further developments are to be included in
the evidence for reconsideration.
In addition, the Tribunal may have to re-apply
its mind to the evidence and decide whether or not Complainants have
established
a “
prohibited practice
”
in terms of secs. 5, 8 or 9 - matters which have been raised and
debated but which in the light of its
finding
of a “
prohibited practice
”
under sec.4 have not as yet been regarded as requiring a
determination by the Tribunal.
REVIEWABLE
MISTAKES OF LAW
In
our law only certain mistakes of law are reviewable.
As
stated in Baxter,
Administrative
Law
(1984) at 469:
“
Reviewable errors of law have sometimes been
referred to as ‘jurisdictional facts’, but in the case of
discretionary powers
it is more usual for such errors to be
characterized as errors which distort the nature, or prevent the
exercise, of that discretion
which has been conferred.”
Similarly,
in
Hira and Another v Booysen and
Another
,
1992
(4) SA 69
(A), the Court distinguished between an error of law “
on
the merits
”, which could not be
reviewed and an error -
“
... which causes the decision-maker to fail to
appreciate the nature of the discretion or power conferred upon him
and as a result
not to exercise the discretion or power or refuse to
do so.”
(at p. 90D-E)
From the record it is clear that the Tribunal
made a reviewable mistake of law regarding the incidence of the
onus
of proof in Chapter 6 (i.e. Secs 59 to 68) of the Act as a result of
which it failed to apply the provisions of sec.59 correctly.
Sec.68
provides that:
“
In any proceedings in terms of Chapter 3 or this
Chapter, the standard of proof is on a balance of probabilities.”
There is nothing Chapter 6 which deals with
“
Remedies and Enforcement
’
to indicate that the normal rule that he who asserts must prove -
because he who wants something from the tribunal must prove
that he
is entitled to it - is not applicable. Indeed, the reference to a
“
standard of proof
”
in sec. 68 presupposes that one party will have the burden of
establishing the facts.
In
terms of sec. 59, read with sec. 68, the Tribunal is only empowered
to grant interim relief in circumstances where it had found
that the
Complainants had established each of the elements of sec. 59 on a
balance of probabilities. This required of the Tribunal
that it
determine and record which of the relevant facts were found to have
been proved and which had no been satisfactorily proved.
The
decision does not evidence that the Tribunal embarked on such a
process. Without coming to a conclusion as to which facts had
been
proved, the Tribunal was not in a position to weigh up, for example,
the prejudice to the Complainants of not granting interim
relief
against the prejudice to the Applicants of granting it.
The
error is a material one and by itself justifies the setting aside of
the decision and order.
Appellants
also argued that the Tribunal made the further material mistake of
law in disregarding benefits of the Appellants joint
distribution
structure that could have been gained other than by the
implementation of Seventh Appellant. I have considered the
decision
of the Tribunal with particular reference to the paragraphs relied
upon by Appellants and cannot find justification for
the criticism.
The Tribunal considered the evidence and made findings in regard to
the issue of the “technological, efficiency
or other
pro-competitive gains” referred to in sec. 4(1)(a). I cannot find
that the Tribunal made any reviewable mistakes of
law in that
regard.
REVIEW
AND SET ASIDE - CONCLUSION
For
the reasons stated there are a number of independent grounds upon
which the decision and order of the Competition Tribunal under
case
number 68/IR/JUN00 dated 28 August 2000 cannot stand and should be
reviewed and set aside.
REMITTAL
- WITH OR WITHOUT DIRECTIONS?
Whilst the Complainants and the Appellants are
now
ad idem
that the decision and order be set aside albeit not fully agreed
upon the bases therefore, they disagree as to what further orders,
if any, should be made.
Complainants submit that the matter should be
remitted in accordance with the provisions of sec. 37(2)(b) of the
Act to the same
panel which heard and decided the matter with
directions that the panel continue the hearing on the same papers
duly amplified
so as to raise further issues which arise out of this
review judgment and which may have arisen by reason of any changed
circumstances.
They ask for the order to be reviewed and set aside
in terms of sec. 37(2)(a) of the Act and that the matter then be
remitted
to the Tribunal for further hearing in terms of sec.
37(2)(b) of the Act. They have provided the Court with a suggested
“
Draft Order
”
which includes directions to the Tribunal detailing what should be
reconsidered.
Appellants contend that the decision and order
“should simply be reviewed and set aside in terms of sec. 37(2)(a)
and the matter
allowed to be considered afresh by the Tribunal.”
During argument
Mr Unterhalter
stated that while both sides agree that there should be a remittal,
Appellants submit that such remittal should be unconditional
and
that it should be a remittal to the Tribunal “as an institution”
and not to the original panel.
The first matter to be considered here is the Court’s
powers as prescribed in sec. 37 of the Act. As already noted,
Sub-sec 37(2)
provides that:
“
(2) The Competition Appeal Court may give any
judgment or make any order, including an order to -
(a) confirm, amend or set aside a decision or order
of the Competition Tribunal; or
(b) remit
a matter to the Competition Tribunal for a further hearing on any
appropriate terms."
The powers set out in sub-paragraphs (a) and (b)
are provided as alternative powers. When this was raised by the
Court during argument,
Appellants’ Counsel seemed to favour a
reading of the “or” as “and”, pointing out that the Court
could not remit an order
without first setting it aside.
Mr
Nelson
throughout sought a setting
aside coupled with a remittal order in terms of sub-section
37(2)(b).
In
my view the powers provided in sub-paragraphs 2(a) and 2(b) are true
alternatives. Subsection 2(a) empowers the Court to confirm,
amend
or set aside a decision or order while subsection 2(b) provides the
Court with the power to remit the matter to the Tribunal
without
taking any of the steps provided in subsection 2(a). They are
different remedies and, as provided in the sec. 39, are
mutually
exclusive.
The
statutory power to remit without setting aside the order is a very
useful power where the decision or order of the Tribunal
is
incomplete and requires to be supplemented before the matter is ripe
for appeal or review or indeed, where a remittal with directions
can
remove the need for a review and setting aside. There may be cases
where the Tribunal has failed to consider a relevant issue
or where
its decision or order is deficient and where this Court finds that
the problem can best be solved by a remittal to the
Tribunal for
further consideration or clarification without this Court having to
act in terms of sub-section 2(a).
The power provided in sub-section 2(a) equates to the
Court’s common law power on review. The common law power includes
- as
a matter of law - the power to remit with or without directions
after the decision or order has been set aside wholly or in part.

This power which is well-established in our law is different from
the power provided in sub-section 2(b).
Although
repeatedly advanced in terms of sec. 37(2)(b), Complainants’
request for the matter to be remitted after it is set aside
is in
substance a claim based upon the Courts’ inherent common law
powers included by law in the powers contained in sec. 37(2)(a).
The ordinary course is to refer the matter back
to the administrative tribunal or functionary because the Court is
slow to assume
a discretion which has by statute been entrusted to
another tribunal or functionary. (See:
Vries
v Du Plessi s N.O.
,
1967 (4) SA 469
(SWA) at p. 482;
Johannesburg City
Council v Administrator, Transvaal & Another
,
1969 (2) SA 72
(T) at p. 76).
An analysis of the reported cases illustrates
that the reviewing court will itself correct the decision of the
tribunal or functionary
and substitute its own decision where the
result is a foregone conclusion; (See for example:
Traub
v Administrator, Transvaal
,
1989 (2)
SA 396
(T) at p. 418-420); where further delay may cause undue
prejudice (See for example:
Reynolds
Brothers Ltd v Chairman, Local Road Transportation Board,
Johannesburg
,
1985 (2) SA 790
(A) at
p. 805 F-H); where the tribunal or functionary has exhibited bias or
incompetence which would render it unfair to re-expose
a party to
the same jurisdiction; (See for example:
Mahlaela
v De Beer
,
1986 (4) SA 782
(T) at p.
794-5); where the Court finds itself to be in as good a position as
the tribunal or functionary. Here the Courts, will
despite the fact
that they are usurping the function of another, nonetheless act if
fairness so dictates; (See for example:
Theron
v Ring van Wellington van die NG Sendingkerk van Suid-Afrika
,
1976 (2) SA 1
(A) at p. 31 B-E)
This approach was recently reaffirmed by the
Supreme Court of Appeal in
Erf One Six
Seven Orchards CC v Greater Johannesburg Metropolitan Council
,
[1998] ZASCA 91
;
1999 (1) SA 104
(SCA) where it was said that:
“
In approving the plan in question, the first
respondent was discharging its administrative functions. When
setting aside such a
decision, a Court of law will be governed by
certain principles in deciding whether to refer the matter back or
substitute its
own decision for that of the administrative organ.
The principles governing such a decision have been set out as
follows:
'From a survey of the . . . decisions it seems to me
possible to state the basic principle as follows, namely that the
Court has
a discretion, to be exercised judicially upon a
consideration of the facts of each case, and that, although the
matter will be
sent back if there is no reason for not doing so, in
essence it is a question of fairness to both sides.'
(
Livestock
and Meat Industries Control Board v Garda
1961 (1) SA 342
(A) at 349G. See also,
inter
alia, Local Road Transportation Board and Another v Durban City
Council and Another
1965 (1) SA
586
(A) at 598D  F; and
Airoadexpress
(Pty) Ltd v Chairman, Local Road Transportation Board, Durban, and
Others
[1986] ZASCA 6
;
1986 (2) SA 663
(A) at
680E  F.)
The
general principle is therefore that the matter will be sent back
unless there are special circumstances giving reason for not
doing
so. Thus, for example, a matter would not be referred back where the
tribunal or functionary has exhibited bias or gross
incompetence or
when the outcome appears to be forgone. (
Airoadexpress
(Pty) Ltd v Chairman, Local Road Transportation Board, Durban, and
Others
(
supra
at 680F  G).)”
(at p. 109)
Where the tribunal which is empowered to decide a
matter has, in effect, a number of chambers - as is the case here
where a panel
consisting of three members of the Tribunal hears the
matter - then our Courts have where fairness so requires remitted
the matter
with directions that another functionary should deal
further with the matter. (See:
S v
Somciza
,
1990 (1) SA 361
(A) at p.
366)
Although no allegations of bias nor of serious
incompetence are made, Appellants initially submitted that because
of the interim
nature of the proceedings and because of the number
of grounds upon which the decision and order are liable to be set
aside, it
is inappropriate to remit the matter to the Tribunal. At
the hearing, however, it was common cause that the matter should be
remitted
but Appellants argued that it should be sent back to the
Tribunal as an institution as opposed to the panel which first heard
and
decided the matter. Appellants contended that any rehearing had
to be a hearing
de novo
.
Complainants
submitted that the matter should be remitted to the panel who first
heard it as the members were apprised of the facts
which are set out
in a very lengthy record. They also pointed to the fact that the
members of the panel were now familiar with
the issues as also the
practices in the wholesale pharmaceutical trade. To have to start
again before a new panel will considerably
and unjustifiably
increase the costs of what is, after all, an interim application,
I have considered the arguments raised and cannot
find any basis upon which to refuse to remit the matter. Logically
the resumption
must be before the existing panel. If any panel
members are not available, then the Chairperson of the Tribunal will
have to act
in terms of sec. 31 of the Act. In setting aside the
decision and order in this matter the proceedings as a whole are not
invalidated.
On the facts
in casu
,
the hearing is put back to the stage which had been reached before
the decision was made. When the matter proceeds the Tribunal
will
have to decide upon the further procedural steps which it takes.
Without limiting or extensively defining the concerns which
may
arise, it appears that the panel may be faced with an application to
re-open the matter in order to place further or updated
information
before it; it may itself require further argument in the light of
this decision; it may be required to consider the
complaints made in
terms of secs. 5, 8 and 9 of the Act - matters which have not yet
been decided and which fall essentially within
the domain of the
Tribunal. The Tribunal has been empowered by the Legislature to
determine the issues which arise in the sec.
59 application and,
save in respect of the matters dealt with in this judgment, there is
no basis for this Court to impose its
own views, at this stage, as
to what may be relevant or how the Tribunal should go about the
further hearing of this matter. Those
decisions are, and at this
stage, remain, the prerogative of the Tribunal.
In
all the circumstances it seems fair to all concerned that the matter
be remitted to the Tribunal for the hearing to be resumed
before the
panel to which it was assigned in terms of sec. 31(1) of the Act.
COSTS
Both
parties asked the court to favour them with an award of costs.
Appellants submitted that they had to pursue the review in
order to
protect and enforce their rights. Complainants argued that they had
conceded the review and offered to agree terms upon
which this Court
could be asked to remit the matter but that their overtures were
rebuffed by unco-operative Appellants.
Section
61(2) of the Act provides that:
"The Competition Appeal Court may make an order
for the payment of costs against any party in the hearing, or
against any person
who represented a party in the hearing, according
to the requirements of the law and fairness."
The
review hearing could not be avoided by agreement. Only an
abandonment by the Complainants of their order could they have
avoided
a full hearing before this Court. In any event even the
concessions made by the Complainants were limited to the two grounds
upon
which Davis JP had suspended the operation of the interim order
pending this judgment. Consequently Appellants were fully entitled
to proceed to try and establish their remaining grounds of review.
In cases where a matter is remitted for further hearing, it
does not
assist a party nor, indeed, the tribunal or functionary to have only
some of the grounds of review determined. Such a
situation may
create a false sense as to the remaining issues and would inevitably
lead to a subsequent review when the same errors
are perpetuated or
repeated.
Further,
Complainants’ offer to concede the review was conditional upon
Appellants reaching agreement with them as to the terms
upon which
the matter would be remitted to the Tribunal. When Appellants
declined to enter into negotiations, Complainants promptly
filed
lengthy answering affidavits in which they vehemently opposed each
and every ground of review. It was then only some twelve
days
before the hearing that Complainants advised the Court that they
would “
consent to the review
on the basis that the decision be referred back to the Tribunal on
such terms as the Competition
Appeal
Court deems appropriate.
”
Up until the matter was argued, Appellants
opposed an order remitting the matter. It was argued that the
decision and order should
simply be set aside. That, it was
submitted, would have the effect of reinvesting the Tribunal with
jurisdiction. It was, however,
clear that
Mr
Unterhalter
opposed the grant of an
order sending the matter back to the original panel. He supported a
hearing
de novo
and consequently resisted an order which contained any directions
for the further hearing of the matter.
In
the result, Appellants have achieved substantial success. A majority
of their grounds of review have been upheld. On the other
hand,
Complainants have succeeded in only one aspect, namely in their
submission that the matter should be remitted to the panel
which was
seized with it originally. No other directions will be made.
When
regard is had to the pleadings and argument for the review I find
that very little time and effort was expended in respect
of the
remittal issue. It was introduced by Complainants on a conditional
basis before the answering affidavits were filed. Thereafter
those
affidavits, strenuously resisted and opposed the review. The
question of a concession was again conditionally linked to
a
remittal when Complainants heads of argument were filed a week
before the hearing. In the circumstances, I am satisfied that
fairness demands that the costs follow the result. Appellants have
succeeded save in respect of the referral to the original panel.

That issue occupied the Court for a relatively short time and is of
insufficient import or weight to justify depriving Appellants
of any
part of their costs.
The Court notes that the parties agreed to bear their
own costs in respect of the hearing on 22 May 2001.
In
the result it is ordered:
0
. That the decision and order of the
Competition Tribunal under case number 68/IR/JUN00 dated 28 August
2000 are reviewed and set
aside. The matter is remitted to the
Tribunal for further hearing by the panel which is seized therewith;
That the Complainants are ordered to pay the costs of
this review application, such costs to include the costs of two
counsel.
___________________
SELIKOWITZ AJA
MAILULA
AJA
and
JALI AJA
.