Brief Summary

Competition Law — Intervention — Application for leave to intervene in complaint proceedings — Comair Limited seeks to intervene in proceedings initiated by the Competition Commission against South African Airways (SAA) — SAA opposes the intervention and applies for condonation for late filing of its answering affidavit — Tribunal must determine whether to grant condonation and whether Comair has a sufficient interest not adequately represented by the Commission — Tribunal condones late filing and finds Comair has demonstrated a material interest in the proceedings as a competitor and original complainant, allowing its intervention.

Comprehensive Summary

Summary of Judgment

Introduction

The decision concerns an application for leave to intervene in complaint referral proceedings before the Competition Tribunal in terms of section 53(1)(a)(ii) of the Competition Act and Tribunal Rule 46(1). The intervention application was brought by Comair Limited (the applicant in the intervention proceedings), which was the original complainant whose complaint formed the basis of the Competition Commission’s referral against South African Airways (Pty) Ltd (SAA).

The parties in the intervention application were Comair Limited as applicant; the Competition Commission as first respondent (which had referred the complaint to the Tribunal); and South African Airways (Pty) Ltd as second respondent (the respondent in the referred complaint proceedings). SAA opposed Comair’s intervention. Separately, SAA applied for condonation for the late filing of its answering affidavit in the intervention application, which Comair opposed.

Procedurally, Comair lodged its complaint with the Commission on 13 October 2003. The Commission referred the complaint to the Tribunal on 12 October 2004 under section 50 of the Act, alleging prohibited conduct by SAA. Comair then filed the intervention application on 17 November 2004. SAA’s answering affidavit in the intervention application was due on 1 December 2004 but was only filed on 2 February 2005, leading to the condonation application.

The general subject-matter of the underlying dispute (the complaint referral) concerned alleged anti-competitive conduct by SAA in relation to payments to travel agents, including allegations of abuse of dominance and prohibited agreements. The immediate dispute decided in this ruling, however, was whether Comair should be permitted to participate as an intervening complainant in the referral proceedings and, if so, on what scope; and whether SAA’s late filing should be condoned.

Material Facts

Comair submitted a complaint to the Commission on 13 October 2003. The Commission referred the matter to the Tribunal on 12 October 2004 in terms of section 50. The Commission alleged that SAA engaged in prohibited conduct in terms of section 8(d)(i) alternatively section 8(c) of the Act, and that agreements between SAA and travel agents were prohibited in terms of section 5(1).

The Commission sought relief declaring that SAA’s contracts with travel agents—whereby SAA paid amounts over and above the normal 7% commission—were prohibited practices for purposes of section 65, and sought the imposition of an administrative penalty of up to 10% of annual turnover in South Africa, payable to the National Revenue Fund contemplated in section 213 of the Constitution of the Republic of South Africa, Act 108 of 1996.

Comair sought to intervene on the basis that the Commission’s requested relief did not adequately address the alleged ongoing anti-competitive harm affecting Comair (as competitor) and other competitors. If permitted to intervene, Comair indicated it would seek relief including an interdict against SAA’s conduct; declaratory relief that specific override commissions and trust payments (and similar loyalty-based arrangements) constituted prohibited practices for purposes of section 65; and an order declaring relevant agreements between SAA and travel agents void.

It was also relevant background that there was an earlier complaint referral involving SAA brought by Nationwide Airlines (referred to as the “Nationwide complaint”), which was still being considered by the Tribunal. SAA raised a preliminary contention in the intervention proceedings that the Comair complaint referral was not properly before the Tribunal because it allegedly related substantially to the same conduct as the Nationwide complaint, and that the later matter would be res judicata once the earlier matter was decided. The Commission and Comair contended that this objection was not appropriately determined within the intervention application and that the complaints related to different time periods.

On the condonation issue, it was common cause that SAA filed its answering affidavit 43 business days late, and that it did so after a written request from the Tribunal dated 25 January 2005. SAA advanced reasons for delay including the December holiday period and internal restructuring, but the Tribunal found the explanation factually inadequate in important respects.

Legal Issues

The Tribunal was required to determine three central questions. The first was whether condonation should be granted to SAA for the late filing of its answering affidavit opposing intervention, which required an evaluative decision on whether good cause had been shown.

The second question was whether Comair had demonstrated, for purposes of section 53(1)(a)(ii)(bb) of the Act (read with Rule 46(1)), that its interest in the complaint referral proceedings was not adequately represented by another participant, particularly the Commission. This question involved the application of statutory standards to the procedural position and the nature of the relief sought.

The third question was the scope of intervention to be permitted if Comair met the statutory threshold, including whether and how the Tribunal should limit Comair’s participation “only to the extent required” for its interests to be adequately represented, and whether it was appropriate at that stage to impose any substantive limitation.

The dispute primarily concerned the application of law to fact and the exercise of the Tribunal’s procedural discretion regarding participation and condonation, rather than the merits of the underlying prohibited practice allegations.

Court’s Reasoning

The Tribunal approached the intervention application through the framework of section 53 of the Competition Act, read with Tribunal Rule 46(1). It treated Rule 46(1) as the general procedural rule for intervention in Tribunal proceedings and accepted that a complainant whose complaint formed the basis of a referral would ordinarily have a sufficient material interest. Referring to The Competition Commission of South Africa and Anglo American Medical Scheme and Engen Medical Fund and United South African Pharmacies and Members of United South African Pharmacies and further Respondents – 4/CR/Jan02, the Tribunal reiterated that alleging complainant status in relation to the referral is sufficient to establish the requisite interest. On the facts, Comair had demonstrated a direct and material interest both as complainant and as competitor of SAA.

The Tribunal then dealt with SAA’s preliminary objection that the Comair complaint was not properly before the Tribunal because of overlap with the Nationwide complaint. It accepted the Commission’s submission that this kind of objection should be raised and determined in the hearing of the complaint proceedings, not within the intervention application. The Tribunal reasoned that to decide intervention it was not required to determine whether the Comair complaint was valid, whether it differed from the Nationwide complaint, or whether it would ultimately be barred; intervention depended on whether Comair’s interests were inadequately represented, not on the merits or procedural viability of the referral.

Turning to whether Comair’s interests were adequately represented by the Commission, the Tribunal treated the difference in relief sought as central. It found material divergence between the Commission’s relief and the relief Comair wished to pursue. The Commission’s relief was directed to a declaration that SAA’s conduct to date was unlawful and to an administrative penalty. Comair, by contrast, sought an interdict aimed at constraining alleged ongoing (future) anti-competitive conduct, reflecting a different remedial focus.

The Tribunal also accepted that Comair sought declaratory relief directed specifically at the “loyalty incentives” (override and trust payments), whereas the Commission’s formulation referred generally to commissions paid above a standard 7% and did not specifically identify the loyalty incentives in the same way. It further noted that Comair sought an order declaring relevant contracts void, relief not sought by the Commission. The Tribunal considered these remedial differences to be related to addressing the effects of the alleged prohibited practice on Comair’s commercial interests and found that the Commission had neither sought nor indicated it intended to seek that relief. The fact that the Commission did not oppose the intervention application was also part of the context considered.

In addressing SAA’s contention that complainant intervention should not be allowed merely because the Commission did not refer the complaint in identical terms, the Tribunal relied on both Tribunal and Competition Appeal Court authority. It referred again to the Anglo American Medical Scheme decision, where the Tribunal had found that different relief sought by an intervening complainant could demonstrate an interest not adequately represented by another participant. It also relied on the Competition Appeal Court’s decision in American Soda Corporation v Competition Commission 2003(5) SA 633, which held that participation rights are not limited to questioning witnesses or inspecting documents but include the right to address the Tribunal, make representations, and formulate and claim relief. In addition, the Tribunal referred to authority confirmed in American Soda Corporation v Competition Commission 2003(5) SA 633 that a complainant seeking interdictory relief need not allege or prove damages at that stage.

The Tribunal rejected SAA’s public policy argument that intervention should not be permitted where a complainant seeks declaratory relief in order to support a future damages claim. It reasoned that the Competition Act itself contemplates that an affected party may pursue damages only after the Tribunal has made a finding of prohibited conduct and then only in the High Court under section 65. Because the scope of prohibited conduct found by the Tribunal would circumscribe a later civil claim, the Tribunal considered that section 53 exists precisely to ensure that a complainant can participate where necessary so that its interests are adequately represented. It thus held that there was nothing improper in a complainant seeking intervention to ensure it could later pursue its interests within the statutory scheme.

On the evaluative balance between efficiency and participation, the Tribunal acknowledged that intervention could slightly prolong proceedings, but held that the Act requires the Tribunal to encourage ventilation of issues and to give particular attention to a complainant’s interests. In that context, the Tribunal stated it was required to err on the side of caution when considering a complainant’s interests. It accordingly held that Comair’s interests were not adequately represented by the Commission or any other participant, and granted intervention without needing to decide Comair’s additional grounds based on differences between the complaint and the referral.

On the scope of intervention, SAA argued it should be limited only to the extent of inadequate representation, and that the hearing should be limited to aspects differing from the Nationwide complaint. The Tribunal declined to impose such limitations at that stage. It reasoned that the ambit of intervention was difficult to determine because SAA had not yet filed its response to the Commission’s referral, and premature limitation could undermine the public interest that participation is meant to serve. It emphasised that the Commission remained dominus litis in the complaint proceedings and could be expected to prevent unnecessary duplication and undue protraction.

Finally, the Tribunal addressed condonation. It applied section 58(1)(c) (“good cause”) and stated that it has a discretion which may be informed by High Court principles. Citing United Plant Hire (Pty) Ltd v Hills and Others 1976 (1) SA 717 (A), it identified relevant considerations including the degree of non-compliance, the explanation, prospects of success, importance of the case, convenience, and avoiding delay, while stressing that the list is not exhaustive and that the Tribunal acts in the public interest. Although it found SAA’s delay “extreme” and its explanation unsatisfactory (including the absence of confirmatory affidavits), it nevertheless concluded that the public interest would be better served by allowing SAA’s arguments on intervention to be considered, and therefore granted condonation, coupled with an adverse costs order against SAA. The Tribunal considered Comair’s opposition to condonation reasonable, relying on Regal v African Superslate (Pty) Ltd 1962 (3) SA 18 (A) for the costs principle where opposition to condonation is reasonable.

Outcome and Relief

The Tribunal granted condonation to SAA for the late filing of its answering affidavit in the intervention application, notwithstanding the inadequacy of the explanation, on the basis that it was in the public interest to consider SAA’s legal arguments, and it marked the indulgence with a costs order.

The Tribunal granted Comair leave to intervene as a participant in the complaint proceedings under case number 83/CR/Oct04. The intervention was granted with broad participatory rights, including attendance at pre-hearing conferences, adducing evidence and argument in support of the relief it sought, requesting the Tribunal to direct or summon persons and the production of documents or items, cross-examination, inspection of materials presented, and participation in interlocutory proceedings affecting Comair’s relief.

The Tribunal ordered Comair to file a statement of particulars of complaint within ten business days of the order. SAA was granted the right to answer those particulars and Comair the right to reply, with Tribunal Rules 15 to 17 to apply mutatis mutandis. The Tribunal also confined Comair’s relief to orders contemplated by sections 58(1)(a)(i), 58(1)(a)(v), and 58(1)(a)(vi) of the Act.

On costs, the Tribunal ordered SAA to pay the costs of Comair’s opposition to the condonation application (including the costs of two counsel) and to pay the costs of the intervention application (also including the costs of two counsel).

Cases Cited

The Competition Commission of South Africa and Anglo American Medical Scheme and Engen Medical Fund and United South African Pharmacies and Members of United South African Pharmacies and further Respondents – 4/CR/Jan02.

Competition Commission v South African Airways (Pty) Ltd (2) [2004] 1 CPLR 235 (CT).

American Soda Corporation v Competition Commission 2003(5) SA 633.

The Competition Commission and Botswana Ash (Pty) Ltd and Another v American Natural Soda Ash Corp 49/CR/Apr00 and 87/CR/Sep00.

United Plant Hire (Pty) Ltd v Hills and Others 1976 (1) SA 717 (A).

Independent Estate Agents Action Committee v KwaZulu-Natal Property Service Ltd (25/CR/Apr02).

Regal v African Superslate (Pty) Ltd 1962 (3) SA 18 (A).

Michaels v Wells NO 1967 (1) SA 46 (C).

Van Deventer v Louw 1980 (4) SA 105 (O).

Legislation Cited

Constitution of the Republic of South Africa, 1996 (Act 108 of 1996), section 213.

Competition Act (sections 5(1), 8(c), 8(d)(i), 49C, 49D, 50, 53, 58(1)(a)(i), 58(1)(a)(v), 58(1)(a)(vi), 58(1)(c), and 65), as referenced in the decision.

Rules of Court Cited

Competition Tribunal Rule 15.

Competition Tribunal Rule 16.

Competition Tribunal Rule 17.

Competition Tribunal Rule 43(1).

Competition Tribunal Rule 46(1).

Competition Tribunal Rule 54(1).

Held

The Tribunal held that, for purposes of participation in complaint referral proceedings, a complainant such as Comair has a sufficient material interest and may be permitted to intervene under section 53(1)(a)(ii)(bb) where its interests are not adequately represented by the Commission or another participant. The Tribunal found that the differences between the Commission’s relief and the relief Comair sought—particularly the pursuit of an interdict addressing ongoing conduct and further declaratory and contractual invalidity relief—demonstrated inadequate representation.

The Tribunal held that objections such as allegations of overlap with other proceedings and potential res judicata consequences are matters to be determined in the complaint hearing and were not decisive in deciding whether the intervention should be granted.

The Tribunal held that, while SAA’s delay in filing was extreme and inadequately explained, condonation could be granted in the public interest, and that this indulgence should be accompanied by a costs order against SAA given the reasonableness of Comair’s opposition to condonation.

LEGAL PRINCIPLES

Section 53(1)(a)(ii)(bb) of the Competition Act contemplates complainant participation in Commission-referred complaint proceedings where the presiding member considers that the complainant’s interests are not adequately represented, and the participation is then permitted to the extent required for adequate representation. This provision is directed at situations where the Commission’s referral may not mirror the complainant’s complaint in all respects, including differences in relief sought.

Tribunal Rule 46(1) permits intervention by any person with a material interest in the matter, and complainant status in relation to the referred complaint provides a sufficient basis to establish such interest, consistent with the approach in The Competition Commission of South Africa and Anglo American Medical Scheme and Engen Medical Fund and United South African Pharmacies and Members of United South African Pharmacies and further Respondents – 4/CR/Jan02.

Participation rights for an intervening complainant are not confined to procedural acts such as questioning witnesses and inspecting documents, but extend to addressing the Tribunal, making representations, and formulating and claiming relief, consistent with American Soda Corporation v Competition Commission 2003(5) SA 633.

A complainant does not need to allege or prove damages as a precondition to seeking interdictory relief in the Tribunal, as recognised in the authorities referenced and confirmed in American Soda Corporation v Competition Commission 2003(5) SA 633. The statutory damages scheme in section 65 frames damages as a subsequent High Court process dependent on a Tribunal finding of prohibited conduct, which informs why complainant participation may be necessary to ensure adequate representation of interests.

Condonation under section 58(1)(c) requires good cause, and the Tribunal exercises a discretion informed by fairness and factors articulated in United Plant Hire (Pty) Ltd v Hills and Others 1976 (1) SA 717 (A). Even where delay is serious and explanation inadequate, the Tribunal may grant condonation where the public interest in properly determining the matter warrants it, while using costs orders to address the prejudice and to mark disapproval of non-compliance, consistent with the costs approach exemplified in Regal v African Superslate (Pty) Ltd 1962 (3) SA 18 (A).

Comair Limited and Competition Commission South African Airways (Pty) Ltd (83/CR/Oct04) [2005] ZACT 20; [2005] 1 CPLR 273 (CT) (6 April 2005)