COMPETITION TRIBUNAL
REPUBLIC OF SOUTH AFRICA
Case No: 18/CR/Mar01
In the matter concerning:
The Competition Commission
and
South African Airways (Pty) Ltd
DECISION
This is an application brought by the respondent, South African Airways (Pty)
Ltd, to postpone the hearing of a prohibited practice case that the Competition
Commission ( the Commission) has brought against it pursuant to a complaint
from the Nationwide Airlines Group ( Nationwide). 1
The respondent asks for the matter to be postponed pending:
1.1 “the finalisation of the applicant’s investigation of the complaint
currently being investigated by the Competition Commission under
Case No. 2003/Oct/6000 (“the Comair complaint”);
1.2 the final decision of this Tribunal concerning the joinder of the
complainant in the Comair complaint.”
It will be convenient, to refer, as the respondent has, to the current case
before us as the ‘Nationwide complaint’ and the one currently being
investigated by the Commission as the ‘Comair complaint’.
The essence of the respondent’s application is that the Nationwide complaint
be postponed so that at the appropriate time we can consider an application,
from whom it is not clear, to have the Comair complaint ‘joined’ as part of the
Nationwide complaint.
The procedural history of this application is pertinent. On 18 October 2000,
1 The Nationwide Group comprises Nationwide Airlines (Pty) Ltd, Nationwide Air Charter (Pty)
Ltd, Nationwide Aircraft Maintenance (Pty) Ltd and Nationwide Aircraft Support.
1
Nationwide, a rival airline to the respondent in the domestic market, filed a
complaint with the Commission alleging that the respondent had contravened
the Competition Act ( the Act) specifically sections 8(c) and 8 (d)(i) in the
following respects:
These complaints related to allegations that SAA was engaged in:
I) An anticompetitive incentive scheme for travel agencies;
II) An anticompetitive incentive scheme for consultants/employees of
travel agencies;
III) Predatory pricing;
IV) Poaching of key personnel by the Respondent from the
Complainant.
The Commission investigated this complaint and seven months later filed a
complaint referral with Tribunal. In this complaint referral, or what we have
termed the Nationwide complaint, the Commission made it clear that it had
not referred all the issues that were contained in the original complaint but
only those that related to compensation for travel agents the socalled
override scheme and the Explorer Scheme. 2 The period of the complaint
referral was confined to 1 September 1999 to April 2001 .
Despite the fact that the complaint was filed in October 2000, it only became
ready to be heard on the 26 April 2004, the same day that we heard the
present application. The fact that this complaint has limped along is partly
attributable to the Commission having amended its case after the respondent
had filed its answering affidavit thus causing a delay, as all parties had to file
amended pleadings. However most of the delay appears attributable to an
abortive attempt by the respondent to have the Commission’s referral
reviewed in the High Court, which delayed the further prosecution of the
matter by a period of nearly 15 months. The respondent abandoned its review
after the Supreme Court of Appeal had decided a case raising the same point
after the Supreme Court of Appeal had decided a case raising the same point
of law in the Commission’s favour. 3
A series of prehearing conferences were then held in order to get the matter
to hearing. At a hearing on 24 November 2003, the matter was set down for
hearing for 4 days, commencing on the 26 April 2004, with the consent of both
parties.
On 9 October 2003, Comair, another airline that is a domestic rival of the
respondent, filed a complaint with the Commission alleging that the
respondent had contravened the Act again as in Nationwide, sections 8(c)
and 8 (d)(i) thereof, by engaging in exclusionary practices. The exclusionary
practices alleged included the use of the override scheme and something else
2 See affidavit of Wouter Meyer attached to the Complaint referral paragraph 5.2.
3 See Menzi Simelane NO and Others v SevenEleven Corporation (Pty) Ltd 480/2001 SCA .
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referred to as ‘trust payments’ to travel agents in terms of which travel agents
receive a lump sum at the end of SAA’ s financial year based on the agents
sale of SAA tickets. The Comair complaint relates to the period of 1
September 1999 to date. It thus overlaps with the period of the Nationwide
complaint a period of some 18 months.
On 18 March 2004 the Commission wrote a letter to the respondent advising it
that it was investigating the Comair complaint and asking a number of
questions of the complainant. The letter was addressed to a Mr Chavarika,
SAA’s corporate counsel, a person who has filed affidavits in the Nationwide
complaint and thus can be assumed to be familiar with the latter.
On 15 April 2004, four weeks after the Commission dispatched the letter, the
respondent’s attorneys wrote a letter to the Commission asking for the
hearing of the Nationwide complaint to be postponed pending the outcome of
the Comair complaint so that the two complaints could eventually be
consolidated. The respondent motivated why it believed that consolidation
was appropriate. We deal with this below. The respondent indicated that
unless the Commission agreed to this proposal it would bring a consolidation
application before the Tribunal.
On 19 April 2004 the Commission’s attorneys wrote back to the respondent’s
attorneys advising that their client was opposed to consolidation and
explaining why. Again we deal with these reasons later.
On 23 rd April 2004, the Friday before the commencement of the Nationwide
hearing, the respondent served the present application. The Commission
opposed the application although it did not file a set of papers and argued on
the basis of the respondent’s papers.
The application was argued before us on 26 April prior to the commencement
of the hearing. We ruled against the respondent. The respondent then
advised us that it intended to review or appeal our decision to another forum
advised us that it intended to review or appeal our decision to another forum
and asked us to provide reasons for our decision and to postpone the hearing
to give it time for the appeal/review. We postponed the proceedings sine die.
We agreed to give our reasons on an expedited basis.
Basis for the application
The respondent argues that the Comair complaint will be based substantially
on the same points of law and issues of fact as the Nationwide scheme. Both
relate to the exclusionary effects of the override scheme and although the
periods of the alleged transgressions are not identical there is at least one
and a half years of overlap. It argues that because the Comair complaint will
inevitably be referred, if not by the Commission then by Comair, there will be
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a duplication of hearings on substantially the same issues. The benefit of
evidence of Comair will not be available for the Tribunal. There is also the
danger, the respondent alleges, that if there are multiple proceedings
conflicting decisions may be reached on similar facts. The respondent also
alleges that if the second complaint is persisted with it may be fined twice for
the same conduct.
It alleges that these advantages outweigh any prejudice occasioned by the
delay.
The Commission refutes all these contentions in its letter dated 19 April 2004.
In the first place it points out that the Comair complaint is still subject to
investigation by the Commission. Secondly, it alleges that the time periods of
the complaints are different. Thirdly, the Commission argues that the trust
payment is a feature of the Comair complaint not the Nationwide one. Whilst
the Commission concedes that if the Comair complaint is referred there may
be a duplication of evidence, it will be minimal and not sufficient to justify the
consolidation of the two complaints. It points out that the Commission will not
be deprived of the evidence of Comair as a representative of Comair will be
called by the Commission to testify in the Nationwide hearing.
The Commission alleges that the postponement will lead to extreme prejudice
to it, its witnesses and other parties involved. It points out that it has prepared
for the commencement of the hearing on 26 April at great expense. It has
subpoenaed witnesses and arranged for expert witnesses to come from
London to attend the hearing.
Reasons
The jurisdictional basis for the application has been somewhat muddy. At
times in the letter of 10 April 2004, and in the application the respondent
appears to be seeking a postponement so that there can be a ‘consolidation’
of the case and at other times a postponement, so that there can be a
‘joinder’. We understand the reference to joinder to be a reference to a
‘joinder of convenience’ as opposed to a ‘joinder of necessity’. 4 During the
hearing, counsel for the respondent Mr Subel, whilst relying on rule 45(1) of
the Tribunal rules, which provides for joinder and is the mirror of rule 10(1) of
the High court rules on joinder, also at times referred to the application as one
for consolidation.
Counsel, when asked to clarify the situation, suggested that there was no
substantial difference between a joinder application and a consolidation
application when it came to the application of the principles. In this respect we
agree with the respondent. Harms in his treatise makes this point relying on
4 See the discussion in Herbstein and Van Winsen “The Civil Practice in the Supreme Court
of South Africa, Fourth Edition, pages 166177
4
Nel v Silicon Smelters (Edms) Bpk 5. Harms states that the principles remain
the same, namely the objects of consolidation of actions are similar to those
that apply in the case of joinder or issuing a third party notice: convenience,
prevention of multiplicity of actions with resultant cost savings and the
prevention of conflicting judgements.
We will assume then in the respondent’s favour, that the application need not
be labelled one or the other and that regardless of whether we regard it as a
joinder of convenience or a consolidation application, the same principles
apply.
Rule 11 of the High Court Rules is the rule that provides expressly for
consolidation of actions. 6 Although we have no equivalent of this rule in the
Tribunal rules there is no bar to applying it. Section 55(1) of the Competition
Act gives the Tribunal member presiding a wide discretion to determine
procedural issues. Rule 55(1) of the Tribunal rules states that if a question of
practice arises in a case not provided for the in the Tribunal’s rules, the
Tribunal member presiding may have regard to the High Court rules. This
makes it clear that the Tribunal could make the provisions of High Court rule
11 apply to our proceedings. Whilst Mr Subel argued that we have this
procedural discretion he did not appear to make the link between this latitude
to adopt High Court rules and High Court rule 11.
It is however understandable why the respondent avoided the emphasis on
rule 11 of the High Court rules. That rule makes it clear that a consolidation is
competent when more than one ‘action’ is dependant on the same set of facts
or law. What is clear is that we are not dealing here with two procedures that
are at an equivalent stage of ripeness.
The Nationwide complaint is a matter that is fully pleaded, has gone through
The Nationwide complaint is a matter that is fully pleaded, has gone through
the pretrial phase (discovery, further particulars, exchange of witness
statements ) and but for this application, was set to be heard on the 26 th April.
The Comair complaint has yet to even reach the stage of a complaint referral
and thus pleadings have not even commenced. In High Court parlance it
cannot be classified yet as an ‘action’. In terms of the Tribunal’s rules, an
action commences only with the filing of a complaint referral. 7 This has yet to
occur in the case of the Comair complaint. It is still, as the letter from the
5 1981 4 SA 792(A) at 801802
6 The Rule states that were separate actions have been instituted and it appears to the court
convenient to do so, it may upon the application of any party thereto and after notice to all
interested parties, make an order consolidating such actions, whereupon – a.) the said
actions shall proceed as one action; b.) the provisions of rule 10 shall mutates mutandis apply
with regard to the action so consolidated; and c.) the court may make any order which to it
seems meet with regard to the further procedure , and may give one judgment disposing of all
matters in dispute in the said actions.
7 Rule 15 of the Tribunal rules states that a complaint proceeding may be initiated only by
filing a complaint referral in the form provided for by the rules.
5
Commission on which the respondent seeks to rely makes clear, an
investigation into a complaint not a complaint referral.
An investigation does not necessarily lead to a complaint referral nor if it does,
is a complaint referral premised on the same terms as the complaint. (Note
that this is precisely what has happened in relation to the Nationwide
complaint as the extract from the Commission’s referral affidavit has made
clear.) The Commission is at large to amend a referral or to refer only portions
of it. 8 Furthermore investigations are not expeditious proceedings. The Act
gives the Commission a year to refer or to decide to nonrefer a complaint.
This time period may also be extended with the consent of the complainant. 9
Unlike a typical High Court consolidation application where one has a full set
of pleadings to test whether factual and legal issues are similar, we have no
pleadings at all in respect of the Comair complaint and there is no certainty
that it will ever be referred. Mr Subel suggested it was inevitable that it would
be because both complaints relate to similar conduct, namely, override
incentives and that if the one is referred, it followed so would the other.
We disagree. As the respondent’s own experts suggest, it is the context in
which this type of agreement operates that may be crucial to whether it may
be impugned or not. 10 As the Commission is still investigating, we do not
know yet whether the context of the Comair complaint may differ from that of
the Nationwide complaint. Mr Pretorius , Counsel for the Commission, validly
pointed out that as the overlap period was short, it is entirely possible that in
the Comair complaint market conditions may be very different and that an
outcome cannot be assumed. Thus the factual situations in which the alleged
override scheme operates may be materially different and hence the burden
override scheme operates may be materially different and hence the burden
of the evidence either party seeks to adduce may be very different to what it
may be in the Nationwide complaint.
We also note that when the Commission amended its complaint referral it
specifically added the words “and/ or any other competitors” after the word
“complainant” in paragraphs 9.2 to 9.5 and paragraphs 10.2 to10.5, of the
Complaint referral. It is thus entirely conceivable that the Commission may
consider that at least one aspect of the Comair compliant, namely the period
which overlaps with the period of the Nationwide complaint, is already
contemplated in the present pleadings. Nor is the relief sought by the
8 See section 50(3)
9 See sections 50(2) and 50(4).
10 See page 18 of report by Theron and Du Plessis where the authors state: “The potential
anticompetitive exclusionary effects of a fidelity discount cannot be properly assessed
without close examination of its specific characteristics and the market in which the discount
is being applied...Rather, the investigation has to consider each case on its merits with
special attention to the following issues…these issues should be considered in detail for each
scheme under consideration.” The authors go on to examine how this issue is also affected
by the duration of the scheme, transparency and barriers to entry.
6
Commission, relief peculiar to Nationwide.
This also deals with the respondent’s jeopardy point. If these proceedings
overlap with those of the second complaint the respondent can rely on section
67(2) of the Act which states:
“A complaint may not be referred to the Competition Tribunal against
any firm that has been a respondent in completed proceedings before
the Tribunal under the same or another section of this Act relating
substantially to the same conduct.”
The case law on consolidation often refers to sets of facts that are undeniably
similar; the same motor vehicle collision or defamatory statement. In
competition law the factual fabric that leads to theories of exclusion, or lack of
it, is often so nuanced that it is dangerous to make a priori assumptions that
case A will resemble case B. Mr Subel may of course be proved correct. But
that is still a hypothetical possibility on what we know of the Comair complaint
at this stage, that is very little, it is not the categorical probability for which he
contends.
Thus, it is by no means clear that the complaint referral is inevitable either in
the form it is in presently or at all. This illustrates why the courts are reluctant
to order a consolidation prematurely. In Beier v Thornycroft 11 the court
referred to an earlier case of Hess v Marks 12, and in explaining why in that
case consolidation had been refused, the court made the point that the one
action was on the roll ready for trial while the others were not.
We find that a consolidation or joinder of convenience is not competent when
there is no other complaint referral to consolidate the present one with and
that to grant a postponement on the basis that there may one day be one, is
similarly, not competent.
However even if we are wrong on this, we find that the application does not
meet the test of convenience that the respondent alleges. The fact of its
prematurity suggests that the complaint referral in Comair is by no means
imminent. It appears to be early days in the investigation and if the Nationwide
investigation is a guide, it could take several months to conclude. Recall that
the Commission has a year to refer and that this complaint was filed in
October 2003, exactly three years after the Nationwide complaint was filed.
Then there would need to be the filing of a complaint referral, the exchange of
the other two pleadings a matter of at least another 3 months. Then after
close of pleadings would follow discovery, the preparation and exchange of
witness statements, and requests for further particulars, all of which were
features of the present case. It is highly unlikely that the matter would be
11 1961 (4) SA 187 (N)
12 (1894) 1 O.R.175
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ready for hearing, or put another way, reach the same stage of the race as the
Nationwide complaint, before the end of the year. To delay the Nationwide
complaint for this period of time in the vague hope that the other complaint will
arrive and be susceptible of consolidation in that it relates to similar issues of
fact or law, would substantially prejudice not only Nationwide, but the public
interest the Competition Commission is there to protect. Recall that
Nationwide, if there is a finding in its favour, is entitled to pursue a civil claim
but only if we find that there has been a restrictive practice. The Act does not
allow it to pursue a civil claim until there is a determination by the Tribunal that
there has been a prohibited practice. 13 It is therefore also prejudiced in this
respect, as well by a delay. Nor can we ignore that the thrust of the
Nationwide complaint referral is the allegation that there has been
exclusionary conduct. These are not allegations that should wait adjudication
any longer than the three and a half years that have elapsed since the date
the complaint was filed with the Commission. If the Commission’s theory of
exclusion is established, the complainant may have already exited the market,
rendering relief academic.
We thus find that the applicant has not made out a case of convenience for
having the matter postponed to await the Comair complaint’s outcome. On the
contrary, this application in itself would occasion substantial inconvenience.
The Commission had prepared an overseas expert who had travelled to
South Africa and was ready to commence testifying. Four days of hearing had
been set aside and the Tribunal and the Commission had reserved time for
this. The delay would cause not only logistical inconvenience but considerable
expense in wasted costs as well.
The case law suggests that we have a wide discretion as to whether to order
The case law suggests that we have a wide discretion as to whether to order
consolidation.14 The case law also makes it clear that the party bringing an
application for consolidation bears the onus. 15 We find that the respondent
has failed to discharge the onus in this respect and that there will be
considerable inconvenience occasioned by a postponement and prejudice to
both the Commission and Nationwide.
The application is thus dismissed for two reasons: in the first place, it is
premature and secondly, the applicant has not discharged the onus of
establishing that it would be convenient to postpone sine die the present
hearing for the possibility of subsequent consolidation with the Comair
complaint, when it reaches an appropriate stage of procedural ripeness, itself
at this stage a matter of conjecture, not certainty.
13 See Section 65(9).
14 Mpotsha v Road Accident Fund And Another 2000 (4) SA 696 (C)
15 London & Lancashire Insurance Company Ltd v Dennis, NO and Others 1962 (4) SA 640
(N)
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____________________ 30 April 2004
N. Manoim Date
Concurring: D. Lewis, U. Bhoola
For the Commission: W. Pretorius, instructed by Roestoff, Venter, Kruse
Attorneys
For the merging parties: Adv. A. Subel, instructed by Knowles Hussain
Lindsay Inc on behalf of Edward Nathan and Friedland
9