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 if Comair has a sufficient interest not adequately represented by the Commission — Tribunal condones late filing and finds Comair has demonstrated a material interest as a competitor and complainant, thus allowing the intervention.

Comprehensive Summary

Summary of Judgment

Introduction

The proceedings concerned an application for leave to intervene in complaint referral proceedings before the Competition Tribunal, together with an ancillary application for condonation for the late filing of an answering affidavit opposing intervention. The intervention application was brought under section 53(1)(a)(ii) of the Competition Act and Tribunal Rule 46(1).

The applicant in the intervention application was Comair Limited (Comair). The respondents cited in that application were the Competition Commission (first respondent) and South African Airways (Pty) Ltd (SAA) (second respondent). Although the Commission did not oppose the intervention, it made submissions. SAA opposed the intervention and sought condonation for its late answering affidavit; Comair opposed condonation.

Procedurally, Comair had submitted a complaint to the Commission on 13 October 2003. The Commission referred the complaint to the Tribunal on 12 October 2004 in terms of section 50 of the Competition Act. Comair launched its intervention application on 17 November 2004. SAA’s answering affidavit opposing intervention was due on 1 December 2004, but was only filed on 2 February 2005, prompting the condonation application.

The general subject-matter of the underlying complaint referral involved allegations that SAA engaged in prohibited conduct in contravention of section 8(d)(i) alternatively section 8(c) of the Competition Act, and that agreements between SAA and travel agents were prohibited under section 5(1). The intervention dispute was directed at whether Comair, as complainant and competitor, could participate in the Commission’s referral proceedings to pursue additional forms of relief and to protect interests it contended were not adequately represented by the Commission.

Material Facts

Comair lodged the original complaint that formed the basis of the Commission’s complaint referral against SAA. The Commission’s referral alleged prohibited practices linked to SAA’s arrangements with travel agents, including payments to travel agents beyond the normal 7% commission. The Commission sought relief in the form of a declaration that specified contracts were prohibited for purposes of section 65, and an administrative penalty of up to 10% of SAA’s annual turnover in South Africa (paid to the National Revenue Fund as contemplated in section 213 of the Constitution).

Comair sought leave to intervene on two principal grounds. First, it contended that the Commission’s requested relief did not adequately address the ongoing (future) anti-competitive harm allegedly caused by SAA’s conduct to Comair and other competitors. In addition to the Commission’s declaratory and penalty relief, Comair proposed to seek interdictory relief, as well as declaratory relief identifying particular forms of payments (including override commissions and trust payments, described as “loyalty incentives”) as prohibited practices, and a declaration that the relevant agreements between SAA and travel agents were void.

Second, Comair contended that there were differences between its complaint and the Commission’s referral, including differences relating to the definition of the relevant market and the nature and effect of the alleged anti-competitive conduct, which it said demonstrated that its interests were not adequately represented.

SAA opposed the intervention. It raised a preliminary objection that the Commission’s complaint referral was allegedly not properly before the Tribunal because it substantially related to the same conduct as a separate complaint referral brought earlier by Nationwide Airlines (the “Nationwide complaint”), which was already under consideration by the Tribunal. SAA argued that if the Comair complaint could not proceed because of the Nationwide matter (including a suggested res judicata consequence), Comair’s intervention should be refused. SAA also contended that Comair’s proposed relief was, for all practical purposes, not materially different from that sought by the Commission, and that section 53 was not intended to broaden the ambit of the complaint referral.

The delay in filing SAA’s answering affidavit was not in dispute. It was common cause that SAA filed its answering affidavit 43 business days late, and only after a written request from the Tribunal dated 25 January 2005.

Legal Issues

The Tribunal was required to determine, first, whether condonation should be granted to SAA for the late filing of its answering affidavit opposing intervention. This involved the application of the statutory “good cause” standard and the Tribunal’s discretion, taking into account fairness and the public interest.

Second, the Tribunal had to decide whether Comair had demonstrated that its interest in the complaint referral proceedings was not adequately represented by another participant (in particular, the Commission), as contemplated by section 53(1)(a)(ii)(bb) of the Competition Act, read with Rule 46(1).

Third, if intervention was to be allowed, the Tribunal had to determine the scope of Comair’s participation, bearing in mind section 53’s limitation that participation is permitted “only to the extent required” for the complainant’s interest to be adequately represented.

These questions predominantly concerned the application of law to fact and the exercise of procedural discretion, rather than the determination of the merits of the underlying prohibited practice allegations.

Court’s Reasoning

The Tribunal approached the condonation application and the intervention application as distinct matters, while recognising that both implicated the Tribunal’s control over procedure and its statutory mandate to conduct proceedings in the public interest.

On intervention, the Tribunal identified section 53 of the Competition Act and Rule 46(1) as the governing provisions for participation by a complainant and intervenors in Tribunal proceedings. It noted that Rule 46(1) generally allows intervention by any person with a material interest. Referring to its prior decision 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, the Tribunal stated that, for purposes of Rule 46(1), it is sufficient for an applicant to allege that it was the complainant whose complaint formed the basis (or part of the basis) for the referral, because such a complainant is assumed to have the necessary interest. On the facts, Comair was both the complainant and a competitor of SAA and therefore had the requisite direct and material interest.

The Tribunal dealt with SAA’s point in limine concerning overlap with the Nationwide complaint by holding that the intervention inquiry did not require it to decide whether the Comair complaint was valid, whether it duplicated another complaint, or whether it would be barred. It accepted the Commission’s submission that such objections were properly matters for the hearing of the complaint proceedings themselves, and not grounds to defeat an intervention application. The Tribunal also noted, without deciding the issue, that the Comair and Nationwide complaints appeared to relate to different time periods, which could imply different competitive dynamics; however, it considered that it was unnecessary to determine that issue at the intervention stage.

Turning to whether Comair’s interests were adequately represented, the Tribunal focused on the differences in relief sought. It regarded the most significant difference as Comair’s request for an interdict addressing alleged ongoing conduct, whereas the Commission’s relief was directed at declaring SAA’s conduct to date unlawful and seeking an administrative penalty. The Tribunal also highlighted that Comair’s proposed declaratory relief referred specifically to the “loyalty incentives” (override and trust payments) and to other agreements based on loyalty rather than efficiency benefits, whereas the Commission’s relief referred more narrowly to commission payments in excess of the standard 7%. The Tribunal further noted that Comair sought a declaration of voidness of agreements, which the Commission had not sought.

In addressing SAA’s argument that section 53 should not permit a complainant to intervene simply because the Commission did not refer the complaint on identical terms, the Tribunal relied on existing authority concerning the breadth of participation. It referred again 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, where the Tribunal had accepted that different relief sought by an intervenor could be prima facie related to addressing the effects of prohibited practices if proven, thus demonstrating inadequately represented interests. The Tribunal also relied on the Competition Appeal Court decision in American Soda Corporation v Competition Commission 2003 (5) SA 633, which held that the right to participate in hearings includes the right to address the Tribunal, make representations, and formulate and claim relief. In the same judgment, the Competition Appeal Court confirmed that interdictory relief could be sought without alleging or proving damages, as had been accepted in Tribunal proceedings involving The Competition Commission and Botswana Ash (Pty) Ltd and Another v American Natural Soda Ash Corp 49/CR/Apr00 and 87/CR/Sep00.

The Tribunal interpreted section 53 as anticipating that the Commission’s referral may differ from the original complaint, and that intervention is precisely the mechanism through which a complainant may ensure that its interests are adequately represented in that circumstance. It emphasised that the Act seeks to encourage, rather than curtail, participation by interested parties, particularly complainants, and that a complainant may have more than one statutory basis to participate.

In responding to SAA’s public policy argument that Comair sought intervention to facilitate a later damages claim in the High Court, the Tribunal considered the structure of section 65. It reasoned that, although the Commission and Tribunal act in the public interest, the Act also contemplates a complainant pursuing personal or commercial interests through damages, but only after a Tribunal finding of prohibited conduct and only in the High Court. In that context, the Tribunal considered it legitimate for a complainant to seek relief that ensures its interests are properly addressed in Tribunal proceedings, since the nature and extent of the prohibited conduct found by the Tribunal will circumscribe the basis on which damages may later be sought.

The Tribunal recognised that intervention could cause some protraction of proceedings, but stated that the Act required it to encourage ventilation of issues and to give particular attention to complainants’ interests. It held that, in considering a complainant’s interests, it was required to err on the side of caution. On this evaluative basis, it concluded that Comair had demonstrated that its interests were not adequately represented by the Commission or any other party, and granted intervention. Having granted intervention on the basis of the differences in relief, it found it unnecessary to decide whether other differences between the complaint and referral independently justified intervention.

On the scope of intervention, SAA argued that Comair’s participation should be limited to the extent necessary to cure inadequate representation and that the complaint hearing should be limited to the aspects that differed from the Nationwide complaint. The Tribunal declined to impose limitations at that stage. It reasoned that, because SAA had not yet filed its response to the Commission’s referral, it was difficult to determine the proper ambit of intervention, and premature limitations might undermine the public interest the Tribunal sought to promote by allowing intervention. It also noted that the Commission remained dominis litis and was expected to prevent unnecessary duplication and undue protraction.

On condonation, the Tribunal applied section 58(1)(c), which requires “good cause” for condonation, and noted that it has a discretion to grant condonation. It stated that, in exercising its discretion, it may have regard to High Court principles. It cited United Plant Hire (Pty) Ltd v Hills and Others 1976 (1) SA 717 (A) for the proposition that the discretion is exercised judicially with reference to all facts, fairness to both sides, and factors such as the degree of non-compliance, explanation, prospects, importance of the case, convenience, and avoidance of unnecessary delay. The Tribunal added that, as a statutory body, it acts in the public interest, and thus may consider prejudice, delay, and public interest in granting condonation.

Applying these principles, the Tribunal found the delay (43 business days) to be extreme and the explanation in SAA’s affidavit unsatisfactory, including the absence of a full and detailed account and the absence of confirmatory affidavits from persons allegedly awaited. It referred to its earlier expression of concern about a “cavalier approach” to timeframes and formulaic condonation applications, as stated in Independent Estate Agents Action Committee v KwaZulu-Natal Property Service Ltd (25/CR/Apr02). Despite this criticism, it concluded that the public interest would be better served by admitting SAA’s legal arguments in the intervention application, and therefore granted condonation, coupled with an appropriate costs order.

In dealing with costs related to condonation, the Tribunal relied on Regal v African Superslate (Pty) Ltd 1962 (3) SA 18 (A) for the principle that where opposition to condonation is reasonable, the applicant for condonation should bear the costs of that opposition. It found Comair’s opposition reasonable and ordered costs accordingly.

Outcome and Relief

The Tribunal granted condonation to SAA for the late filing of its answering affidavit opposing Comair’s intervention application, despite finding the delay extreme and the explanation unsatisfactory, on the basis that the public interest favoured consideration of SAA’s arguments.

The Tribunal granted Comair leave to intervene as a participant in the complaint proceedings under case number 83/CR/Oct04. The scope of intervention was granted broadly, including attendance at pre-hearing conferences, adducing evidence and making argument in support of relief sought, seeking directions/summonses for witnesses and documents, cross-examination, inspection of materials presented at the hearing, 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. It permitted SAA to answer and Comair to reply, applying Tribunal Rules 15 to 17 (mutatis mutandis). It confined Comair’s relief to orders contemplated by sections 58(1)(a)(i), 58(1)(a)(v), and 58(1)(a)(vi) of the Competition Act.

On costs, the Tribunal ordered SAA to pay Comair’s costs of opposing the condonation application, including the costs of two counsel, and also ordered SAA to pay the costs of the intervention application, again 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, Act 108 of 1996, section 213

Competition Act, sections 5(1), 8(c), 8(d)(i), 49C, 49D, 50, 53(1)(a)(ii)(aa), 53(1)(a)(ii)(bb), 58(1)(a)(i), 58(1)(a)(v), 58(1)(a)(vi), 58(1)(c), 65

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, although objections that the complaint referral duplicated earlier proceedings (including contentions resembling res judicata) might be raised in the complaint hearing, such matters were not determinative of whether Comair should be permitted to intervene. The intervention inquiry was confined to whether Comair’s interests were not adequately represented by the Commission or another participant.

The Tribunal held that Comair’s interests were not adequately represented because the relief sought by Comair differed materially from the Commission’s relief, including an interdict against ongoing conduct and declaratory/voidness relief more specifically directed at the “loyalty incentives” and agreements underpinning Comair’s commercial interests. In this context, the Tribunal held that section 53 allows a complainant, to the extent necessary for adequate representation, to participate in proceedings and to formulate and claim relief.

The Tribunal held that SAA had not provided a satisfactory explanation for its extreme delay in filing its answering affidavit, but nonetheless granted condonation in the public interest, while ordering SAA to pay the costs occasioned by the condonation dispute and the intervention application.

LEGAL PRINCIPLES

Section 53(1)(a)(ii)(bb) of the Competition Act permits a complainant to participate in a complaint referral hearing where, in the opinion of the presiding member, the complainant’s interest is not adequately represented by another participant, and participation is then allowed only to the extent necessary to ensure adequate representation.

Rule 46(1) allows a person with a material interest to apply to intervene in Tribunal proceedings. Where the intervenor is the complainant whose complaint formed the basis (or part of the basis) of the Commission’s complaint referral, the complainant is treated as having the requisite interest for purposes of intervention.

A complainant’s right to participate in a hearing is not confined to questioning witnesses or inspecting documents; it includes the right to address the Tribunal, make representations, and formulate and claim relief, consistent with American Soda Corporation v Competition Commission 2003 (5) SA 633.

The Tribunal may treat differences between the Commission’s formulated relief and the complainant’s proposed relief as a basis for finding that the complainant’s interest is not adequately represented, particularly where the complainant seeks relief directed at addressing ongoing effects or commercial consequences of the alleged prohibited practice.

In exercising the discretion to grant condonation under section 58(1)(c), the Tribunal applies a good cause standard informed by fairness and consideration of all relevant circumstances, including the degree of non-compliance, adequacy of explanation, prejudice, importance of the matter, avoidance of unnecessary delay, and the public interest, with reference to principles stated in United Plant Hire (Pty) Ltd v Hills and Others 1976 (1) SA 717 (A).

Where opposition to a condonation application is reasonable, the party seeking condonation may be ordered to pay the costs of that opposition, consistent with Regal v African Superslate (Pty) Ltd 1962 (3) SA 18 (A).

Competition Commission and South African Airways (Pty) Ltd / Comair Ltd Comair Ltd (83/CR/Oct04) [2006] ZACT 88 (4 December 2006)