COMPETITION TRIBUNAL
REPUBLIC OF SOUTH AFRICA
Case Number: 15/IR/Feb01
In the matter between
YORK TIMBERS LIMITED Applicant
and
SOUTH AFRICAN FORESTRY COMPANY LIMITED Respondent
REASONS
THE PARTIES
1. The applicant is York Timber Timbers Limited, a public company incorporated in South
Africa. The business of the applicant is sawmilling. It converts softwood into a range of
sawn products, including wood chips for the pulp and paper industry. It also markets sawn
wood to timber merchants, especially in the construction and furniture industries on the
domestic and export markets.
2. The respondent is the South African Forestry Company Limited (“SAFCOL), a public
company incorporated in terms of section 2 of the Management of State Forests Act 128 of
1992. SAFCOL is entrusted with the management and development of certain State forests.
It sells softwood saw logs from these forests in South Africa and abroad. SAFCOL is
vertically integrated and owns sawmills that it supplies saw logs to from the plantations
under its management. The five sawmills under SAFCOL’s control are Wemmershoek,
George, Weza, Blyde and Timbadola. Through these sawmills SAFCOL sells sawn products
in competition with some of its customers in the sawmilling industry.
BACKGROUND1
1
3. From around 1952 the State, through the Department of Water Affairs and Forestry
(“DWAF”), entered into contracts for the sale of softwood saw logs from its plantations to
private sawmills. The purpose of these contracts, which were for an initial period of ten (10)
years extendable for another five (5) years, was to encourage investment into the sawmilling
industry. Log prices for each year were determined through an agreed formula and
negotiated between DWAF and the sawmills collectively, and as a result, prices were
generally uniform. On the expiry of the first contracts DWAF decided to revise the terms of
these contracts, and between 1968 and 1971 entered into 52 new agreements with existing
and new sawmills.
4. The revised agreements were for an unspecified period of time but ran for an initial period of
five years. They would then continue to run for further successive five year periods provided
the parties agree on the terms of the contract for each five-year period. The contract
provided that if the parties failed to agree on applicable terms then the matter must be
referred to the Minister of Water Affairs and Forestry who would determine the terms of the
contract. If the terms determined by the Minister were not acceptable to the sawmill the
contract would run on existing terms for a further period of five years and then expire. An
important feature of these agreements was that each sawmill was guaranteed a certain
volume of logs per annum from a specified plantation. In other words, each log supply
contract stipulated the source and the volume of the log supply based on the sawmill’s
requirements and the sustainable yield of the specified plantation.
5. As mentioned above DWAF conducted price negotiations with the long-term customers
collectively and they would all agree on the same price for all, with small regional
variations. Later a clause was added to the contracts to provide a mechanism for the
variations. Later a clause was added to the contracts to provide a mechanism for the
resolution of price disputes between the parties – if the parties were unable to reach
agreement on price revisions they would refer this matter to the Minister of Water Affairs
and Forestry (“the Minister”). If the Minister expressed the opinion that the parties were
unable to reach agreement on the prices the matter would then go to arbitration. The effect of
the wording of this clause was that if there is a price dispute the sawmill would continue to
pay the prices last agreed between itself and DWAF until the dispute is resolved.
6. In 1993 SAFCOL succeeded DWAF as the seller of some of the State’s saw logs in South
Africa, thus taking over a number of the long-term contracts between DWAF and various
sawmills. It inherited 27 contracts allocated to 27 sawmills. SAFCOL had been incorporated
in 1992 in terms of Management of State Forests Act 128 of 1992 and entrusted with the
management of a large proportion of the State’s commercial forests. One of SAFCOL’s
mandates in terms of the Act is to manage State forests under its control on a commercial
basis.
7. The applicant was party to two long-term contracts that SAFCOL took over from DWAF.
The contracts entitled the applicant’s sawmill, Nicholson and Mullin situated in
Mpumalanga, to a supply of saw logs from the Witklip and Swartfontein plantations to the
volume of 2, 000 000 (two million) cubic feet over five years.
8. SAFCOL decided to revise the inherited agreements in 1995. SAFCOL claimed that the
changes were sought in order to enable it to meet its statutory requirement to manage the
forests under its control on a commercially viable basis. Essentially the revisions limited the
tenure period of the contracts to a period of 3 years with subsequent periods of three years
provided the parties reached agreement on the terms to apply during each successive 3-year
period. The revised agreements also did away with the requirement that the Minister’s
opinion be sought on whether the parties are unable to reach agreement before price disputes
can be referred to arbitration.
9. With the exception of the applicant, CJ Rance (Pty) Limited (“Rance”) and Lentz Properties
(Pty) Limited (“Lentz”), SAFCOL succeeded in convincing all the sawmills to accept the
new contracts. Under pressure from SAFCOL to agree to the revisions the applicant
instituted a High Court action arguing that it was not obliged to negotiate about the tenure of
its contract. This matter was settled. SAFCOL agreed with the applicant’s assertion
regarding the unlimited tenure of the applicants’ 1968 contract. Rance and Lentz eventually
entered into revised contracts with SAFCOL but it is common cause that their contracts are
effectively the same as before and are not affected by the changes introduced by SAFCOL in
1995.
10.In 1998 SAFCOL again proposed revision to the log supply contracts. This time it persuaded
the sawmills to accept contracts with even more limited tenure: the new contracts would run
for an initial period of 3 years with an option to renew for a further 3 years subject to a right
of cancellation by SAFCOL with 3 years notice at any time. Furthermore the price revision
procedure of the 1995 contracts was amended to provide for an expert arbitration instead of
the legal arbitration in the contracts then.
11.The applicant, Rance and Lentz again rejected these new contracts; all subsequent
negotiations regarding the proposed new contracts failed. The relationship between the
applicant and SAFCOL continued to be governed by the 1968 contract as the applicant had
applicant and SAFCOL continued to be governed by the 1968 contract as the applicant had
not accepted either of the revisions proposed by SAFCOL in 1995 or 1998. As a result, the
price revision procedure requiring the intervention of the Minister in the case of the parties
failing to reach agreement on price and the long-term tenure of the contracts remained part
of the applicant’s contract with SAFCOL.
12.When SAFCOL took over the contracts in 1993 the applicant was involved in a price
dispute with DWAF because it was resisting the price increases introduced by DWAF for the
years 1991/1992, 1992/1993 and 1993/1994. Consequently, while all the other customers of
DWAF were paying the 1993/1994 prices, the applicant was still paying the 1990/1991
prices. In 1994 the parties reached a settlement regarding the outstanding price increases and
the applicant began paying the same price as the other long-term customers of SAFCOL.
13.The parties have since found it difficult to agree on price revision, and York has, as a rule,
insisted that no arbitration can take place before the Minister expresses the opinion that the
parties are unable to reach agreement. The Minister has refused to intervene in these
disputes and SAFCOL has therefore been unable to enforce the arbitration clause. On 10
November 1998, after several attempts to get the applicant to agree to arbitration on the
1995, 1997 and 1998 price revisions, SAFCOL purported to cancel the long-term contracts
between the parties and instituted an action for a declarator confirming the validity of the
purported cancellation. Pending the outcome of this action the parties agreed to implement
the contracts as if they were still in operation. The applicant contends that the purported
cancellation is unlawful.
14.SAFCOL continued to negotiate the price revisions with the applicant. The applicant
declined SAFCOL’s requests that they undertake arbitration on the three outstanding price
revisions without the Minister’s involvement. It was not until 1999 that the applicant agreed
to arbitration, and even then only on the 1995 price revisions.
15.When SAFCOL tried to implement new prices in 2000 that the other sawmills had agreed to,
the applicant again resisted. By this time the applicant was still paying the 1995 prices as per
the arbitration award as it had refused to subject itself to arbitration on the 1997 and 1998
price revisions. On 25 August 2000 SAFCOL sent an ultimatum to the applicant requiring it
to declare whether it was willing to pay the 1997, 1998 and 2000 price increases or go to
arbitration on the issue. The applicant committed to neither and SAFCOL purported to
cancel the agreement governing the implementation of the long-term contracts. SAFCOL
has applied to the High Court for a declarator on the validity of this purported cancellation
as well. Both the application for a declarator regarding the purported cancellation of the
long-term contracts and the agreement governing their implementation are still pending.
16.On 14 September 2000 the parties entered into an ad hoc supply agreement terminable on 30
days notice. In terms of this agreement the applicant would pay for the saw logs supplied the
same price paid by other long-term customers of SAFCOL for the year 2000. The source and
volume of saw logs, i.e. 6 675m 3 per month from the Witklip plantation, remained
unchanged from the disputed long-term contracts. On 14 February 2001 SAFCOL notified
the applicant that it was no longer feasible to continue supplying the guaranteed volume (6
675m3 per month) from the Witklip plantation and this would be reduced to 2 222,2 m 3 as
from 01 May 2001. SAFCOL claimed that the reduction in volume supplies was necessary
from 01 May 2001. SAFCOL claimed that the reduction in volume supplies was necessary
for the long-term sustainability of the plantation.
17.An understanding of the history of sawlog volumes between the parties is necessary to
contextualise SAFCOL’s notice. The original sawlog volumes to be supplied by SAFCOL to
the applicant from the Witklip and Swartfontein plantations was 2, 000 000 (two million)
cubic feet over five years. By 1988 the applicant’s guaranteed volumes was 55 000m 3 per
annum; 30 000m 3 from the Witklip plantation and 25 000m 3 from the Swartfontein
plantation. During this year substantially more volumes became available and DWAF
offered the applicant an extra 30 000 3 per annum for the next five years. When SAFCOL
took over the plantation in 1993 the applicant therefore had a guaranteed volume of 85
000m3 per annum from these plantations. In 1994 as part of a settlement in one of a number
of price disputes between the parties it was agreed to keep the guaranteed sawlog volumes at
85 000m3 per annum until 31 March 1997; thereafter the volumes would revert back to 55
000m3 per annum. In yet another settlement between the parties in 1996 they agreed on
volumes of 75 100m 3 per annum from Witklip which by that time also included
Swartfontein. The volumes of 75 100m 3 were to be supplied to the applicant from 1 April
1997 until 31 March 2002.
18.The need to reduce the sawlog volumes, SAFCOL claimed in its notice to the applicant, was
a consequence of the applicant’s insistence on the supply of volumes in excess of the
sustainable yield of the plantation. This had resulted in severe overfelling. It is this reduction
of the volumes of logs supplied to the applicant that is the subject of this application.
19.The applicant claims that its business is dependent on SAFCOL for well over 90% of its saw
log supply volumes. It claims that transport costs make it infeasible to obtain saw logs from
other suppliers who are situated long distances away. A reduction of almost two-thirds in its
current log supply volume as per SAFCOL’s notice will, therefore, eventually lead to the
demise of its business - its standing overheads and other fixed costs cannot be covered at a
production rate of a third of its capacity. In addition, the applicant claims that its break-even
point is volume sensitive with profit only made on the top of its current log supply volume
of 6675m3; as a result scaling down the operations of the business will not save it.
20.The applicant also claims to have made an investment of R10 million in 1995 upgrading its
processing facilities based on volumes then guaranteed to them by SAFCOL. It would not be
possible to recover this investment as planned if the purported reduction in its log supply
materializes and the loan re-payments will hasten the demise of the business.
THE NATURE OF THE RELIEF CLAIMED
21.We now consider the relief claimed. Ordinarily we would not consider this issue until the
end of our decision once we had decided whether the requirements of section 49C had been
met. In this case however a wide range of prayers were sought and the respondent has
argued convincingly at the outset that only three are competent at the interim relief stage.
22.The three which it says are competent at this stage are prayers 8, 9 and 11.Prayer 8 provides
for interim relief from the alleged refusal to deal and contains two different formulations of
order to remedy the alleged problem. Prayer 9 provides that they serve as an interim order
and prayer 11 is for costs.
23.At the hearing the applicant abandoned prayer 10 which related to the imposition of an
administrative fine and no more need be said about that.
administrative fine and no more need be said about that.
24.Prayer one relates to condonation of time periods which was not put in issue and prayer
twelve was the usual further and alternative relief formulation customary in all such
applications so no more need be said of either.
25.This then leaves us with prayers 2 – 7. What the applicant asks us to do is to make
declaratory orders declaring conduct of the respondent to be a prohibited practice in terms of
various provisions of section 8 and 9 of the Act. These are to be found in prayers 2 –6 .
Prayer 7 requests us to issue a notice in terms of section 65(6)(b) certifying the above as
prohibited practices.
26.The applicant wants these orders so that it can institute civil proceedings for damages and
also, we understand, for the purpose of the civil proceedings in which the parties are
currently engaged before the High Court. The respondent contends that an interim
declaratory order is a contradiction in terms.
27.A party cannot institute a claim for civil damages without filing with the relevant civil court
a certificate from the Chairperson of the Tribunal, or the Judge President of the Competition
Appeal Court stating that the conduct which forms the basis for the civil action has been
found to be a prohibited practice.
28.The question to be determined is whether this certificate can be issued pursuant to a finding
in an interim relief case or only after the granting of final relief pursuant to a complaint
referral.
29.Although the language of section 65(6) does not expressly limit it to complaint referral
proceedings it seems clear to us that the certificate can only be issued at the end of final
proceedings and not interim proceedings.
30.The reason for this is obvious. An applicant may be granted interim relief because the
burden of proof in this proceeding is less exacting but may not be granted final relief. If the
applicant could get a certificate after an award of interim relief and commenced action for
damages in a civil court and was successful what would happen if it did not succeed in
gaining final relief. The legislature could not have intended such an untenable result.
31.In any event the language of section 49C says that the Tribunal may grant an interim order.
An order finding conduct to be a prohibited practice for the purpose of section 65 is certainly
not of an interim nature.
32.Our interpretation is also strengthened by section 65(8) which states:
“An appeal or application for review against an order made by the Competition
Tribunal in terms of section 58 suspends any right to commence an action in a
civil court with respect to the same matter.”
33.The clear implication of this provision is that the civil action should not commence until the
matter has been exhaustively heard by the Competition authorities. It follows that if an
matter has been exhaustively heard by the Competition authorities. It follows that if an
appeal suspends the right to institute a civil action the right contemplated must be pursuant
to a final not an interim order.
34.In section 65(9) the right to claim commences on the date the Tribunal has made a
“determination...” This language too suggests a final not an interim order is contemplated.
35.We find accordingly that prayers 2 – 7 are not competent for us to consider at interim relief
stage. Accordingly we confine ourselves in this decision to considering prayers 8, 9 11 and
12.
Standard of proof required for an interim relief application.
36.Prior to the amendment, on the 1 st February 2001, of the Competition Act by the
Competition Second Amendment Act, the standard of proof for an interim interdict was no
different to the standard for complaint referral proceedings and was the balance of
probabilities.2
37.Various amendments were made to the section providing for interim relief (section 59) so
that the present section 49C differs from it in important respects. One of the changes relates
to the standard of proof required in interim relief applications which now receives specific
mention in the section.
Section 49C(3) of the Act states:
‘In any proceedings in terms of this section, the standard of proof is the same as the
standard of proof in a High Court on a common law application for an interim
interdict.”
38.It is important to note that the section mandates the application of the common law
“standard of proof”, for an interim interdict ,but not the common law requirements for an
interim interdict.
39.The common law requirements for an interim interdict are well known and are usually stated
as follows:
1. A prima facie right on the part of the applicant;
2. A well-grounded apprehension of irreparable harm if the interim relief is not granted
and the ultimate relief is eventually granted;
3. A balance of convenience in favour of granting the interim interdict; and
4. The absence of any other satisfactory remedy.
40.The requirements for interim interdict in terms of section 49C are set out in section 49C(2)
(b)
i. “The Competition Tribunal -
ii. may grant an interim order if it is reasonable and just to do so, having regard to the
following factors:
1. The evidence relating to the alleged prohibited practice;
2. the need to prevent serious or irreparable damage to the applicant; and
2
3. the balance of convenience.”
41.It will be observed that these requirements, although similar to, are not identical to, the
requirements for an interim interdict at common law.
42.However as the applicant points out we are required to follow the Act in so far as the
requirements are concerned, although we are expressly required to look to the common law
on interim interdicts to determine the standard of proof.
43.It is common cause that this means a standard of proof less exacting than the civil burden of
a balance of probabilities but how exacting is that burden.
44.Erasmus has observed that:
“In the majority of cases an applicant for an interlocutory interdict cannot establish
his right clearly upon affidavits, his allegations more often than not met by counter
allegations or denials. Therefore since the application is merely interlocutory and
the effect of the granting thereof is only temporary and not finally decisive of either
party’ s rights, the court will grant an interdict upon a degree of proof less exacting
than that required for the grant of a final interdict. It is in attempting to define this
degree of proof – an almost impossible task, it has been held – that the court have
used such varied expressions as ‘a clear right’, ‘a prima facie right’, ‘prima facie
proof of a clear right’, ‘a prima facie case for an interdict’ and prima facie grounds
for an interdict.” (Erasmus E8 – 9 – 10)
45.These questions were resolved in the well-known case of Webster v Mitchell3. Here Claydon
J in a frequently cited paragraph observed:
“The use of the phrase “prima facie established though open to some doubt”
indicates I think that more is required than merely to look at the allegations of the
applicant, but something short of a weighing up of the probabilities of conflicting
versions is required. The proper manner of approach I consider is to take the facts
as set out by the applicant, together with any facts set out by the respondent which
as set out by the applicant, together with any facts set out by the respondent which
the applicant cannot dispute, and to consider whether, having regard to the inherent
probabilities, the applicant could on those facts obtain final relief. If serious doubt is
thrown upon the case of the applicant he could not succeed in obtaining interim
relief, for his right, prima facie established, may only be open to “some doubt”. But
if there is mere contradiction, or unconvincing explanation, the matter should be left
to trial and the right be protected in the meanwhile, subject of course to the
respective prejudice in the grant or refusal of interim relief.”
46.In Gool v Minister of Justice and Another 4 Ogilvie Thompson J commented that the criteria
3
4
on the first branch of the enquiry leaned too heavily in favour of the applicant and he
proposed the following addition to the test:.
“With the greatest respect, I am of opinion that the criterion prescribed in this
statement for the first branch of the inquiry thus outlined is somewhat too favourably
expressed towards the applicant for an interdict. In my view the criterion on an
applicant’ s own averred or admitted facts is: should (not could) the applicant on
those facts obtain final relief at the trial. Subject to that qualification, I respectfully
agree that the approach outlined in Webster v Mitchell... is the correct approach for
ordinary interdict applications.”
47.The Webster test with the Gool rider has now become the accepted common law test for the
standard of proof in an interim interdict and many courts have followed it. 5Most recently it
has been confirmed by the Supreme Court of Appeal in Simon NO v Air Operations of
Europe AB and Others 6. For the purpose of this decision we will refer to this approach as
the ‘orthodox approach’.
48.The applicant argues that the Gool qualification is not part of our test because of the
requirement in section 49C(2)(b) for an interim order to be granted if it is “ reasonable and
just to do so ” . The applicant thus appears to accept Webster but not Gool.7 No basis for
following the common law in the first instance and abandoning it in the second is given. As
we point out below there is nothing inherent in the meaning of the words reasonable and
just that suggests that the balance should be tilted in favour of either the applicant or
respondent.
49.What the applicant appears to be advancing is that we distinguish between a prima facie
“case” and a prima facie “right”.8 The distinction in classification appears to be based on the
use of these terms in the Webster judgment where Claydon J identifies the prima facie case
approach as one where one looks at the applicant’s case and sees if he has furnished proof
approach as one where one looks at the applicant’s case and sees if he has furnished proof
which if uncontradicted and believed at the trial would establish his right. Claydon J goes on
to say that the use of the phrase
“'… prima facie established though open to some doubt” indicates I think that more
is required than merely to look at the allegations of the applicant, but something
short of weighing up the probabilities of conflicting versions is required.”9
50.Hence he arrives at the test we have discussed above.
51.It must be conceded that the case has been made for departing from the orthodox approach
in two recent decisions although this is not an argument that has been made by the applicant.
Let us first consider these decisions and then examine the consequences of them.
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52.The first case involved an application for interim relief in relation to an alleged
constitutional right. Here Heher J 10 decided the Court was not bound by the same standard
that applies in an ordinary application for an interim interdict. The justification for this
departure was because:
“We are at large to arrive at our own decision as no rule has been laid down for such
interdicts involving constitutional issues.”11
53.Heher J considered what is held to be a rival approach to these issues, that favoured by the
House of Lords in American Cyanamid Co v Ethicon Ltd12. In that case, Lord Diplock stated
that an applicant need no longer demonstrate a strong prima facie case. Rather he held it
would suffice if he or she could satisfy the court that the claim is not:
“ frivolous or vexatious ; in other words that there is a serious matter to be tried.”
54.Heher J went on to state that he could see no reason why the ‘serious question to be tried
approach’ (i.e. that favoured in American Cyanamid)
“ should not be accorded equal status with the traditional approach”13
55.The Land Claims Court in Chief Nchabeleng v Chief Pasha followed this approach,
preferring American Cyanamid.14Here the court after considering Heher J’s decision held:
“For similar reasons I am of the view that this Court should adopt the approaches in
the two decisions of Holmes JA and the American Cyanamid case, which for all
practical purposes, are the same.”
56.The Court held that it was not bound by the common law approach (i.e. the orthodox
approach) for several reasons. Firstly, because the Land Claims Court was not bound by
precedents of provincial divisions of the Supreme Court and High Court and could find no
Appellate Division or Supreme Court of Appeal decision on the issue 15. Secondly, because
its powers to confer an interim interdict were based on a statute that had not previously been
interpreted by any court. Thirdly because its statute requires that Court to have regard to the
requirements of equity and justice. Finally, because the right sought to be enforced in the
case before them was a right to restitution which had its origins in the interim Constitution.
57.Yet these decisions, carefully argued as they are, relate to instances where the courts felt
able to depart from the orthodox approach. Here we are mandated to follow it. Given that in
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14
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Simon, which was decided after these two decisions, the Supreme Court of Appeal reiterates
the orthodox approach we can see no basis to depart from it. It is not for us to determine
whether the common law approach is correct – it is for us to ascertain what it is and having
done so to apply it.
58.At best for the applicant it can be said that the language of “ reasonable and just to do so” in
section 49C(2)(b) suggests that we are at large to follow the American Cyanamid 16approach
because we have been given through this language some form of equitable jurisdiction. The
terms “reasonable and just” do not suggest this. Their ordinary meaning is neutral in relation
to the contending approaches. Against this, we have in 49C(3) an express requirement to
apply the common law. If anything there are indications in section 49C that some weighing
of the conflicting evidence is required. In section 49C(2) it is stated that:
(2) “The Competition Tribunal –
(a) must give the respondent a reasonable opportunity to be heard, having regard to the
urgency of the proceedings…”
59.This provision is more consistent with the orthodox common law approach than the one
commended to us by the applicant.
60.This debate is only relevant if the different approaches lead to different results. It has been
suggested by Franklin J17 that the test in American Cyanamid is less stringent than the test of
a prima facie right which is open to some doubt ( i.e. the orthodox approach). One leading
academic writer has suggested that this may not be so and that there is no obstacle to
equating the two notions.18
61.This however is not a problem that we can resolve and until our courts have more
authoritatively came out in favour of the American Cyanamid approach or decided that the
two approaches are to be equated we must stay on the orthodox road.
62.We conclude that the approach taken in Webster’s case as supplemented by Gool’s case
62.We conclude that the approach taken in Webster’s case as supplemented by Gool’s case
correctly reflects the standard of proof in a common law application for an interim interdict
in the High Court which we must apply for the purposes of section 49C.
63.Although the Webster test is often stated as a single requirement Selikowitz J 19 has pointed
out that it involves two stages.
“Once the prima facie right has been assessed, that part of the requirement which
refers to the doubt involves a further enquiry in terms whereof the Court looks at the
facts set up by the respondent in contradiction of the applicant’ s case in order to see
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whether serious doubt is thrown on the applicant’ s case and if there is a mere
contradiction or unconvincing explanation, then the right will be protected. Where,
however, there is serious doubt then the applicant cannot succeed.”
64.Applying this analysis to our Act means that we must first establish if there is evidence of a
prohibited practice, which is the Act’s analogue of a prima facie right .We do this by taking
the facts alleged by the applicant, together with the facts alleged by the respondent that the
applicant cannot dispute, and consider whether having regard to the inherent probabilities,
the applicant should on those facts establish the existence of a prohibited practice at the
hearing of the complaint referral.
65.If the applicant has succeeded in doing so we then consider the “doubt’ leg of the enquiry.
Do the facts set out by the respondent in contradiction of the applicants case raises serious
doubt or do they constitute mere contradiction or an unconvincing explanation. If they do
raise serious doubt the applicant cannot succeed.
66.As far as the remaining factors in 49C(3) are concerned viz. irreparable damage and the
balance of convenience, these are not looked at in isolation or separately but are taken in
conjunction with one another when we determine our overall discretion.20
THE APPLICATION
67.As indicated earlier the only prayers left for us to consider are prayers 8, 9 and 11. In effect
we have been asked to interdict SAFCOL from reducing the extent of its guaranteed log
supply to York Timber. The applicant avers that this constitutes an abuse of dominance on
SAFCOL’s part. More particularly the applicant invokes Section 8(d)(ii) of the Act,
alternatively Section 8(c) in support of its case.
68.Section 8(d)(ii) reads:
“It is prohibited for a dominant firm to:
(d) engage in any of the following exclusionary acts, unless the firm concerned can
show technological, efficiency or other pro-competitive gains which outweigh the
show technological, efficiency or other pro-competitive gains which outweigh the
anti-competitive effects of its act –
(ii) refusing to supply scarce goods to a competitor when supplying those
goods is economically feasible.”
69.Section 8(c) reads:
20
“It is prohibited for a dominant firm to-
engage in an exclusionary act other than an act listed in paragraph (d) if the
anti-competitive effect of that act outweighs its technological, efficiency or
other pro-competitive gain.”
70.Section 7 of the Act provides:
“A firm is dominant in a market if –
1. it has at least 45% of that market;
2. it has at least 35%, but less than 45% of that market, unless it can
show that it does not have market power; or
3. it has less than 35% of that market, but has market power.”
Is SAFCOL a ‘dominant firm’?
71.In order to consider a claim in terms of Section 8 the Tribunal must be satisfied that the
respondent is either dominant in the market in which the alleged abuse is perpetrated or that
the effect of the abuse is experienced in a related market, one either upstream or downstream
of the market in which the alleged perpetrator of the abuse is dominant. However where that
is the case, it still remains to be established that the perpetrator of the alleged abuse is, by
drawing on its power in the market in which it is dominant, attempting to create or to
exercise market power in this related market. In the matter before us it is alleged that a
supplier – SAFCOL - has refused to provide a key input, saw logs, to the applicant, York
Timber, a participant in a downstream market. It is further alleged that SAFCOL is dominant
in the market for the supply of saw logs and that it participates in the downstream market. In
other words, this matter falls into the second of our two categories of dominance – it is
alleged that the firm dominant in the upstream market is attempting to leverage its power
downstream.
72.There are thus two products markets at issue in this matter. The first is the market for saw
logs. We shall refer to this as the upstream market. The second is the market in which these
saw logs are converted into various sawn timber products. This is the downstream market.
saw logs are converted into various sawn timber products. This is the downstream market.
York and SAFCOL do not compete in the upstream market. They are, however, both active
in the downstream market.
73.York avers that SAFCOL is dominant in the upstream market. SAFCOL contests this. At
least it insists that its market share is below that threshold – 45% - at which, in terms of
Section 7 of the Act, it is deemed to enjoy market power. At market shares below 45% the
absence (Section 7(b)) or existence (Section 7(c)) of market power has to be established in
order to prove dominance.
74.SAFCOL also argues that it does not possess market power, defined in the Act as ‘the power
of a firm to control prices, or to exclude competition, or to behave to an appreciable extent
independently of its competitors, customers or suppliers’. It cites the long-term contracts that
it has entered into with its customers as evidence of its lack of market power. It avers that
because these contracts, which govern the sale of approximately 60 (sixty) percent of the
volumes produced by SAFCOL in Mpumalanga, specify price and quantity over varying
periods (usually three years), it is restrained from exercising market power. SAFCOL, in
fact, appears to argue that market power is absent because the price is determined through a
process of negotiation, or, if that fails, compulsory arbitration.
75.It is common cause that the market for saw logs is geographically bounded. That is, it does
not make commercial sense to transport saw logs over a significant distance and,
accordingly, the downstream converters, the saw mills, are obliged to purchase saw logs
from plantations within a confined geographical reach of their mills. While the applicant in
this matter has not provided us with much hard evidence regarding the extent of the
geographical market it seems again to be common cause that the province of Mpumalanga
constitutes the geographic market for saw logs. That is, in the face of a significant rise in the
price of saw logs emanating from the Mpumalanga plantations, sawmills in the province
would not be able to substitute logs grown in other parts of the country.
76.The respondent, SAFCOL, has provided us with data that suggests that its share of the
output of the Mpumalanga plantations falls below 45%, the level at which dominance is
deemed to exist. First SAFCOL referred us to a report by the Department of Water and
Forestry (DWAF) dealing, inter alia, with the amount of land under pine plantation in the
Forestry (DWAF) dealing, inter alia, with the amount of land under pine plantation in the
country.21 According to this report, in the Mpumalanga region, in those areas surrounding
York’s sawmill, the total area under pine plantation is 220, 733.82 ha. The respondent claims
that only 73,215.5 ha of this area belongs to it, an equivalent of 33.2%. Second, relying on
two other reports 22, presumably also compiled by DWAF, SAFCOL estimates that it is
responsible for approximately 42% of the volume of logs produced in Mpumalanga. It then
argues that it does not possess market power drawing, as noted above, on the fact that its
behaviour is regulated and confined by the long-term nature of the contracts entered into
with its customers and that price is determined through negotiation with its customers or by
arbitration.
77.The applicant has, again, not provided us with much by way of concrete evidence in support
of its claim that SAFCOL possesses and exercises market power in the Mpumalanga saw log
market. It has provided us with a range of assertions to this effect drawing strongly on a
submission made several years ago to the erstwhile Competition Board by Mondi, a large
producer of saw logs as well as a large sawmiller and significant customer of SAFCOL. In
this submission Mondi argued that SAFCOL possessed market power by dint of its share of
the market and that it manifested its power in a ‘take it or leave it’ approach towards price
setting.
78.On balance for interim relief purposes we find that SAFCOL is indeed dominant in the
Mpumalanga market for saw logs. The arguments relied upon by SAFCOL, both in respect
of market share and market power, do not hold water. SAFCOL, in its construction of the
saw log market, has included that share of the output of vertically integrated producers – that
21
22
is producers active in both upstream and downstream markets – that is dedicated for use in
the vertically integrated structures. This includes the vast bulk of Mondi’s output of saw logs
as well as a significant share of the output of SAFCOL itself. This output does not enter the
market, it is, in other words, not available to the sawmill who, like the applicant, does not
possess its own supply of saw logs 23. SAFCOL has argued that this depends upon price –
that is, if Mondi was offered the ‘right’ price for its log output it would divert its supply from
its own mills to those of the independents. This argument is not persuasive, certainly not
over the short to medium term. That is, a long-term hike in the price of saw logs may
encourage an integrated producer to exit saw milling in favour of a focus on its plantations,
but this scenario is implausible over anything but the very long run.
79.Hence the market is properly defined as the quantum of saw logs available to the non-
integrated sawmills and, on this definition, SAFCOL’s share clearly exceeds the 45%
threshold. It is then deemed to be a dominant firm. Accordingly the applicant is not required
to prove the existence of market power and the respondent gains nothing from an attempt to
prove that it does not have market power. We should however add that the fact that a share
of this output is governed by long-term contracts does not constrain its exercise of market
power. That a supplier is contractually bound to honour, over the length of the contract, the
price established when the contract is entered into says nothing about its ability to exercise
market power. Market power is exercised at the time of the conclusion of the contract – at
that time SAFCOL’s customer are unable to substitute the SAFCOL supply with alternative
sources in the geographical market and, accordingly, SAFCOL is possessed of the power to
behave independently of its customers. Similarly, the fact that the price is the outcome of
behave independently of its customers. Similarly, the fact that the price is the outcome of
negotiation or arbitration does not determine whether or not market power exists. This is a
particularly crude interpretation of the market power concept. No monopolist has absolute
freedom to determine its price. There is a level of price at which even a monopolist will not
be able to dispose of its product. SAFCOL’s argument suggests that simply because it is
unable to lay down any price that it chooses, it does not possess market power.
80.As to the downstream market – the market in which saw logs are converted into sawn timber
– while it is common cause that SAFCOL is a competitor in this market, that is that it owns
and operates saw mills, it does not appear to be in a position to exercise or even to aspire to
exercise market power. Despite the voluminous record in this matter, we have in fact been
told remarkably little about this market. We do not know the geographical boundaries of the
market – is it regional or national or, indeed, international? Nor do we know the products
that comprise this market. We do not know what varieties of sawn timber are produced by
the applicant’s mills or the respondent’s mills, whether their products are in competition
with each other or not. From the little information made available – and that largely by the
respondent – it appears that the output of sawn timber produced by the York Mills somewhat
exceeds the output of the SAFCOL mills, at least that of SAFCOL’s Mpumalanga mills. At
paragraph 80.1 of its answering affidavit SAFCOL estimates, and York does not dispute, that
its share of the saw milling market is 8%, although neither the geographical boundaries of
this market nor the products of which it is comprised have been clearly specified by the
parties.
81.Our conclusion is then that on these papers we find that SAFCOL is dominant in the market
for saw logs in Mpumalanga. Where the market for sawn timber is concerned, the
for saw logs in Mpumalanga. Where the market for sawn timber is concerned, the
downstream market, SAFCOL has a relatively small market share and no evidence has been
23
presented suggesting that it possesses anything akin to market power in this market.
Has SAFCOL abused its dominance?
82.The question that must be posed and, in order for the applicant to succeed, must be
answered in the affirmative is: ‘Does SAFCOL’s dominance in the market for saw logs mean
that its alleged refusal to supply the applicant, even if proved, amounts to an abuse of this
dominant position?’
83.There are two questions here. First, is there a refusal to supply? Second, if there is, is this in
violation of the Competition Act?
84.We are not persuaded that there is a refusal to supply. This matter has to be viewed against
the background of the lengthy and acrimonious contractual battles between these parties.
The most recent salvo in this commercial war of attrition was when SAFCOL gave notice
that it intended to reduce, with effect from 1 st May, the supply of logs that it had guaranteed
to provide to York from its Witklip plantation. The contract in force between the parties,
which is terminable on thirty days notice, guaranteed York a monthly supply of 6 675m 3
from Witklip. On 14 February 2001 SAFCOL notified York of its intention to reduce the
guaranteed amount to 2 222,2m 3 per month. SAFCOL claims that the Witklip plantation
cannot physically sustain the present guaranteed output of saw logs. This is disputed by
York. Both parties have presented conflicting expert evidence. It was this notice that gave
rise to the present litigation.
85.A reduction in supply – as opposed , that is, to a complete withdrawal – may well constitute
a refusal to supply. In this case it is alleged that supply has been reduced by two-thirds. We
have no doubt that the impact on the business of York of a reduction in the supply of raw
material of this magnitude would be significant. However SAFCOL insists that it has not
refused to supply York. It has simply reduced the amount guaranteed by it from the Witklip
refused to supply York. It has simply reduced the amount guaranteed by it from the Witklip
plantation. York, avers SAFCOL, is welcome to compete for the remainder of the amount
previously guaranteed, or however much additional it requires, from that portion of the
SAFCOL output that is not committed to long-term contracts. SAFCOL undertakes that it
will treat York tenders for log supply from this source on the same terms extended to any
other sawmill competing for this supply. SAFCOL points out that York has recently won a
tender for the supply of a large supply of this uncommitted part of SAFCOL’s saw log
output.
86.York clearly believes these undertakings to be disingenuous. It points to correspondence
that, it claims, is evidence of SAFCOL’s decision to deny it access to additional inputs. It
argues that the technical factors cited by SAFCOL in order to justify the reduction of the
guaranteed supply from Witklip are not the result of sudden, unforeseen events and, if valid,
should and could have been predicted well in advance. It believes that it was awarded the
recent tender precisely to provide SAFCOL with evidence required to render plausible an
undertaking to allow York access to its uncommitted supply.
87.It is not possible, within the limitations of an application for interim relief, to adjudicate
conclusively these conflicting claims, in particular the divergent views expressed by the
experts. Suffice to say that each of the contentions of the applicant is denied by the
respondents – while a more detailed investigation may come down on the side of the
applicant’s version, the respondent has put up a defense, that is, on the face of it, plausible.
Moreover, as we shall elaborate below, even if we had been satisfied that the reduction in the
guaranteed supply is equivalent to a reduction in actual supply, the applicant has still not
persuaded us that the alleged refusal constitutes a prohibited practice in terms of the
Competition Act.
88.There are three alternate explanations for SAFCOL’s decision to reduce York’s guaranteed
supply. One explanation – for which York contends – is that it is a refusal to supply. The
second – for which SAFCOL contends – is that it is driven by technical conditions of supply
that govern the log off-take from the Witklip plantation. In fact, a third explanation is, in our
view, most plausible. That is, when the current dispute is viewed against the backdrop of the
fraught relationship between the parties it appears that the conflict is, in reality, about price.
89.The ‘evergreen’ nature of the York contract is offensive to SAFCOL largely because it has
enabled York to continue receiving a log supply while simultaneously resisting upward
adjustment in the price of this supply. Clearly, after years of protracted litigation, SAFCOL
believes that the only way that it can ensure York’s willingness to accept regular price
adjustments is to eliminate its guaranteed supply and have it rely upon the ‘spot market’ in
which its uncommitted stock is sold. Should York be prepared to accept terms similar to
those of SAFCOL’s other customers, particularly with respect to price, then it is difficult to
identify the advantage that would accrue to SAFCOL from withholding supply to a paying
identify the advantage that would accrue to SAFCOL from withholding supply to a paying
customer – as we will demonstrate below, SAFCOL will not extend its market power even if
York were to exit the market and this cannot therefore explain its attack on York.
90.This explanation of SAFCOL’s conduct is bolstered by the following simple but persuasive
observation of anti-trust scholars Professors Phillip Areeda and Herbert Hovenkamp:
“The danger of ‘abuse’ through arbitrary refusals to deal seems quite low. Substantial
monopolies, run by directors responsible to stockholders, will generally behave
rationally and make all profitable sales.”24
91.We agree. This observation bolsters our view that this dispute centers around an attempt by
SAFCOL to improve the terms of its contract with York rather than an attempt to further its
own market position by denying York supply on any terms. The former is a contractual
issue; the latter is a competition issue. 25 Hence SAFCOL’s progressive exit from its
contractual relations with York and its undertaking to continue supplying York with logs are
not necessarily inconsistent. It is the contractual terms that SAFCOL find burdensome and
from which it desires to escape. SAFCOL will be willing to accept York’s custom as long as
it is satisfied with the contractual terms. York may or may not have a solid basis in contract
law for resisting SAFCOL’s efforts to escape contractual obligations but this is not the forum
for making that determination.
24
25
92.In any event SAFCOL has undertaken in these proceedings to supply York on terms equal to
those on which it supplies those of its other customers with whom it does not have a long-
term contractual relationship. Should York’s suspicions be realized, should SAFCOL not
honour this undertaking, then York may well be able to point to a refusal to supply or to
discrimination. Currently it is able to do neither.
93.However, even if the applicant had successfully evidenced a refusal to supply it has, in our
view, failed to establish the conditions necessary to render the refusal an abuse of
dominance. Areeda and Hovenkamp insist that,
“An ‘arbitrary’ refusal to deal by a monopolist cannot be unlawful unless it extends,
preserves, creates, or threatens to create significant market power in some market,
which could be either the primary market in which the monopoly firm sells or a
vertically related or even collateral market. Refusals that do not accomplish at least
one of these results do not violate Section 2 (of the Sherman Act), no matter how
much they might harm the person or class of persons declined service. Nor are such
refusals an ‘abuse’ of monopoly power in the sense of using power in one market as
‘leverage’ to increase one’s advantage in another market.”26
94.It may then well be that SAFCOL draws on its power in the market for saw logs to set a
price above the level at which prices may be set in a competitive market or, in general, to
secure improved trading terms for itself. However, the Act does not prevent a monopolist
from setting a monopoly price. In other words setting a monopoly price does not constitute
an abuse of a dominant position unless it can be shown that this also constitutes an
‘excessive price’ that may be impugned under Section 8(a) of the Act. Suffice to note that
the applicant has not brought suit under Section 8(a).
95.Following Areeda and Hovenkamp, what is rather at issue is whether the dominant firm,
95.Following Areeda and Hovenkamp, what is rather at issue is whether the dominant firm,
SAFCOL, has attempted to use – or ‘abuse’ – its dominance to extend or preserve its
dominant position, what US antitrust jurisprudence refers to as ‘monopolisation’. Where the
upstream market is concerned – that is the market for saw logs - this is clearly not the case.
SAFCOL’s dominance of the upstream market is unaffected by its alleged refusal to supply
York – it was dominant before the alleged refusal and this position is not strengthened by its
alleged refusal to supply the applicant.
96.But what of the downstream market? It is open to the applicant to establish that SAFCOL’s
conduct in the market in which it is dominant – the upstream market – leverages market
power in the downstream market. Because SAFCOL is active in both the upstream and
downstream markets, the applicant, a competitor in the downstream market, may, on the face
of it, be on strong ground.
97.However, here again we do not believe that the applicant has established an abuse of
dominance, that is we do not believe that the respondent has, by its alleged refusal to supply
York, extended, preserved, created or threatened to create power in the downstream market.
This caveat – that, in order to find an abuse of dominance from a refusal to supply, market
power must be shown to have been extended or created – is crucial if we are to give
26
expression to the requirement of the Act to the effect that it is a refusal to supply a
‘competitor’ that offends. Action against a competitor only offends when it is anti-
competitive and this will be measured by its capacity to extend or create market power.27
98.As already indicated there is, in this voluminous record, a conspicuous lack of evidence
pertaining to the downstream market. However, on the information that has been presented
there is none that suggests that an attack by SAFCOL on York would, even if successful,
create new sources of market power for SAFCOL. In other words, by refusing to supply saw
logs to its competitor, in the downstream market, SAFCOL has not improved its position qua
competitor in that market. Again this confirms our impression that what we have here is a
raging commercial dispute in which contractual relations are, at best, unsettled, and in which
personal relations are highly fraught. SAFCOL’s recent actions may well constitute an
unlawful attack on its contractual relationship with York and the attack may well be
designed to secure commercial advantage for SAFCOL. 28 There is even the possibility that
its actions are purely vindictive and personal designed simply to punish York and its leading
personnel for their resistance to SAFCOL’s attempts to raise the price of its product and
impose less favourable contractual terms on its longstanding customers. 29 If this is so York
may well have other remedies at its disposal. However, it is wholly possible to act in this
way and to remain, nevertheless, within the parameters of the Competition Act just as it is
possible to abide faithfully by the terms of a contract and yet transgress the same statute.
99.We conclude then that even if the facts had established a refusal to supply by SAFCOL, it
would not have been possible to impugn this practice under the Competition Act. It is not
would not have been possible to impugn this practice under the Competition Act. It is not
enough to show that a given practice is a product of market power. It must also be shown
that the act complained of actually extends that power or creates new sites of power. This
has not been established and, accordingly, the application for interim relief in respect of the
alleged violation of Section 8(d)(2) is denied.
100.The applicant alleges, in the alternative, that the respondent has violated Section 8(c). This
section places a considerably heavier burden on the applicant than does Section 8(d). As
already elaborated, we are not persuaded that the practice complained of, the reduction in the
guaranteed supply from Witklip, is ‘exclusionary’ within the meaning of the Act – that is, it
does not impede or prevent the applicant from expanding in the market but merely requires
that it competes for its supply of raw material on terms similar to those available to its
competitors. Moreover, even if the practice complained of were to be established as an
impediment to the applicant’s expansion in the market, it still remains for the applicant to
establish the ‘anti-competitive effect’ of the practice, to show, in other words, that market
power has been created or extended in consequence of the alleged act. This has not been
done. And, even if anti-competitive effects had been established, the applicant would have to
show that these outweighed any pro-competitive gains – this, too, has not been established.
Accordingly, the relief sought in terms of Section 8(c) is denied.
101.Note that Section 49C(2) requires that, when determining whether it would be ‘reasonable
and just’ to grant an order for interim relief, we should have regard to three factors, viz,
evidence relating to the alleged restrictive practice, the need to prevent serious or irreparable
damage, and the balance of convenience. We have dwelt on the evidence relating to the
27
28
29
alleged restrictive practice and found none. While we are not told how to balance, how to
‘have regard’ to, the three factors specified in Section 49C of the Act we would, regardless
of the prospect of damage or of the balance of convenience, be hard pressed to grant interim
relief in the absence of evidence of a restrictive practice. We should also note that if
SAFCOL honours its undertaking to supply York’s additional requirement (additional, that
is, to the reduced guaranteed amount), then the consequential harm, if any, would be small
and the balance of convenience undisturbed.
IT IS ORDERED THAT:
1. the application be dismissed; and
2. the applicant pays the respondent’s costs in the application on a party to party scale,
including the costs of two legal representatives.
_________ 09 May 2001
D.H Lewis DATE
Concurring: N.M. Manoim; P Maponya
The contractual relationship between the two parties to this matter is fraught with disputes of every kind. A number of
the legal disputes have been settled, arbitrated upon or decided by the civil courts, while others are still pending before
courts. In this decision we shall refer only to those we consider relevant for purposes of the matter currently before us.
Section 68 of the Act prior to amendment, which stated, “ In any proceedings in terms of Chapter 3 or this Chapter
[6]the standard of proof is on a balance of probabilities.” The interim relief remedy was located in Chapter 6 of the Act
as it was then.
1948(1) SA 1186 (W) at 1189.
1955 (2) SA 682 (C) at 688
See Herbstein and Van Winsen page 1069. The same observation is made by Erasmus in Superior Court Practice at E8-
10A.
1999 (1) SA 217 (SCA), 228 G- H.
This is surmise on our part. Webster is referred to in the applicants heads but it is not suggested that we do not follow it
the approach taken with Gool.
The case law here is confusing and sometimes these terms have been used interchangeably. See for instance the
discussion in Prest page 55. Prest suggests the correct meaning is the one given in Webster i.e. proof which if
uncontradicted and believed at the trial would establish his right .The author goes on to say that the use of ‘prima facie
though open to some doubt’ means that something more is required than simply to look at the allegations of the
applicant but something short of weighing up the probabilities of conflicting versions is required.
Supra at 1186.
Ferreira v Levin NO and others; Vryenhoek and others v Powel NO and others 1995(2) SA 813 (W). Although this case
was heard by a full bench on this point Heher J was the only member of the Court to feel the point needed to be
decided.
At page 836 .
[1975] UKHL 1; [1975] AC 396
At page 836.
1998(3) (SA) 578 (LCC) at587
This is a hierarchy of the courts issue. The LCC is bound by decisions of the SCA but decisions of provincial or local
divisions of the High Court have only persuasive authority,
The applicant has not referred us to any of these cases but we have thought it appropriate to consider the debate raised
by them in coming to an understanding of what the common law approach is and whether we are required by the section
to favour one approach as opposed to another.
See Beecham Group v B- M Group (Pty ) Ltd 1977 (1) SA 50 T at 56.
See Prest “ The Law and Practice of Interdicts” Juta page 148.
Spur Steak Ranches v Saddles Steak Ranch, Claremont and another 1996(3) SA 706 (C) at 714.
See our decision in Natal Pharmaceuticals (98/IR/Dec00) and that of the High Court in Spur Steak Ranches supra.
“Department of Water Affairs and Forestry, Report on Commercial Timber Resources and Primary Roundwood
Processing in South Africa 1996/97”
Entitled “Revised Commercial Timber Resources and Roundwood Processing in South Africa 1997/98” and
“Commercial Timber Resources and Roundwood Processing in South Africa 1998/99”.
For example, in annexure GSA8 to its supplementary answering affidavit, SAFCOL relied on a report by its Forestry
Division demonstrating that out of the total softwood saw log-producing area of 189 004 ha in Mpumalanga, only 85
791 ha belongs to SAFCOL. A closer look at the report however reveals that out of the total figure of 189 004 ha
approximately 70 000 ha belonging to Mondi and Sappi whose sawlogs are not made available to independent sawmills.
A total of only 119 004 ha is therefore available in the Mpumalanga market and SAFCOL owns 85 791 ha of it;
approximately 72%.
Phillip E. Areeda and Herbert Hovenkamp – Antitrust Law – V olume IIIA (Little, Brown and Company) 1996, p.172
While we do not deny the possibility of a nexus between contractual and competition issues, the following observation,
with which we concur, cautions against a simple conflaton of the two: ‘Complex contractual settings are pervasive in
our economy…..In such a world, change in relationships is inevitable. Parties may become disillusioned with each
other, and lawsuits may result. These complex contractual settings present complex issues for antitrust. Although anti-
competitive actions are possible when relationships change, they are by no means likely, let alone inevitable’. (Timothy
Muris – The FTC and the Law of Monopolisation – Antitrust Law Journal, V ol. 67, No. 3, 2000). In other words, the
nexus, if any, between a contractual dispute and an antitrust violation must be proven. It cannot simply be assumed.
Areeda and Hovenkamp - (op cit) at Page 167
The applicant cited the judgment of the European Court of Justice in Istituto Chemioterapico Italiano SpA and
Commercial Solvents Corporation v E.C. Commission (Cases 6-7/73). In this case a refusal to supply was indeed found
to constitute an abuse of a dominant position however the facts of this case are not on all fours with the present matter.
First, the fact of the refusal to supply was clear and uncontested. It is not so in our case. Second, the Court’s finding is
explicitly based on the position of the dominant supplier of the raw material input in the ‘derivative’ or downstream
market. The Court accordingly held ‘..that an undertaking which has a dominant position in the market in raw materials
and which, with the object of reserving such raw material for manufacturing its own derivatives , refuses to supply a
customer, which is itself a manufacturer of these derivatives, and therefore risks eliminating all competition on the part
of this customer, is abusing its dominant position within the meaning of Article 86’ (paragraph 25 at p341, our
emphasis). We repeat: in the present matter there is no evidence that SAFCOL is withholding a supply of logs to York
‘with the object of reserving such raw material for manufacturing its own derivatives’. Indeed even if SAFCOL did
divert York’s entire log supply to its own saw mills it would, on the scanty evidence before us, not establish market
power downstream.
Robert Pitofsky, the immediate past Chairman of the Federal Trade Commission, writes that ‘A monopolist cannot
coerce or induce customers or competitors to bend to its will by using its monopoly power, if it is reasonably likely that
{the} course of conduct will injure competition and the monopolist does not have a good business reason for its
conduct’ ( Roundtable Conference with Enforcement Officials, 67 Antitrust Law Journal 453 , 457 – 1999) (our
emphasis). Note then that Pitofsky, who is inclined to lessen the burden of proof on a plaintiff in a monopolization suit,
still qualifies his view with the rider that the conduct complained of must be shown to injure competition. His successor
Timothy Muris puts it as follows: ‘It necessarily follows that showing a link between the exclusionary conduct and the
monopoly requires a determination of the impact of the conduct on competition. In short, the anticompetitive effect
must be assessed if the conduct is to be found to have the necessary connection to the monopoly. (Muris, op cit, p.697)
‘Even an act of pure malice by one business competitor against another does not, without more, state a claim under the
federal antitrust laws; those laws do not create a federal law of unfair competition’. (Brooke Group Ltd v Brown and
Williamson Tobacco Corporation., [1993] USSC 105; 509 U.S. 209 (1993)