COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: 91/CR/Dec09
2008Apr3682
In the matter between:
1time AIRLINE (PTY) LIMITED Complainant/Applicant
And
LANSERIA INTERNATIONAL AIRPORT (PTY) LIMITED 1st Respondent
COMAIR LIMITED t/a KULULA.COM 2nd Respondent
Panel : Norman Manoim (Presiding Member),
Yasmin Carrim (Tribunal Member)
Thandi Orleyn (Tribunal Member)
Heard on : 02 July 2010
Order issued on : 29 July 2010
Reasons issued on : 29 July 2010
Reasons for Decision and Order
Introduction
1]This is an application for leave to amend a complaint referral brought in terms
of section 51(1). We have decided to grant the application and set out our
reasons below.
1
Background
1]The applicant is 1time Airline (Pty) Ltd (“1time”), which offers low-fare
scheduled passenger services within South Africa. The first respondent is
Lanseria International Airport (Pty) Ltd (“Lanseria”) a company which owns
and operates a private airport in Gauteng (“Lanseria Airport”). The second
respondent is Comair Limited trading as Kulula.com (“Kulula”). Kulula
competes with 1time in the provision of low fare scheduled services within
South Africa.
2]On 16 April 2008 1time filed a complaint with the Competition Commission
(“the Commission”) against Lanseria and Kulula in terms of section 49B of the
Competition Act, 1998, as amended (“the Act”). In its complaint, 1time
alleged that certain terms of an exclusive agreement and/or arrangement
concluded between Lanseria and Kulula relating to Kulula’s usage of
Lanseria constituted a contravention of section 8(c), alternatively section 5(1),
of the Act, and that this had the effect of substantially preventing or impeding
1times’ growth within the relevant market.
3]The Commission, upon completion of its investigation, issued a Certificate of
Non-Referral.1 1time then proceeded with a direct referral, in terms of section
51(1) of the Act, read with Rule 14(1)(b) of the Rules for the Conduct of
Proceedings in the Competition Tribunal. 2
4]In its complaint referral 1time alleges that an agreement between Kulula and
Lanseria has precluded it from operating from Lanseria Airport.3
5]On the basis of the allegations contained in its founding affidavit 1time sought
an order from the Tribunal on the following terms:
5.1] “1. Declaring the exclusive covenant between
Lanseria and Kulula to be a prohibited practice in
contravention of section 5(1) alternatively section 8(c)
of the Act;
5.2] 2. Declaring the exclusive covenant between
1 On 30 November 2009.
2 On 21 December 2009.
1 On 30 November 2009.
2 On 21 December 2009.
3 Complaint referral founding affidavit, par 33-48 (Complaint referral bundle page 10-19).
2
Lanseria and Kulula void;
5.3] 3. Ordering the Respondents to pay the costs of this
matter;
5.4] 4. Granting further and/or alternative relief.”
6]Lanseria and Kulula duly filed answering affidavits to 1time’s self-referral, and
1time filed a replying affidavit thereto. Thereafter 1time filed an application to
amend its referral, the subject matter of this decision.
7]1time seeks to amend its referral by the addition of the following paragraphs
in its founding affidavit:
7.1] “A: By insertion after paragraph 1 under the heading
“Concise Statement of the order of relief sought” on
page 2 of Form CT1(2) of the following:
7.2] 1A.1the insistence by Kulula upon the inclusion of an
exclusivity clause and a right of first refusal over
certain routes in an agreement with Lanseria; and/or
7.3] 1A.2the conclusion by Kulula of an agreement with
Lanseria that contained an exclusivity clause and a
right of first refusal over certain routes; and/or
7.4] 1A.3the enforcement by Kulula of the agreement with
Lanseria on the basis of an extensive interpretation of
the terms of the right of first refusal”.
8]It also seeks to amend its prayers by seeking a declaration that Kulula has
contravened section 8(d)(i) of the Act together with an order requiring the
payment of an administrative penalty.4
9]Kulula opposed the amendment application on two main grounds, namely
lack of jurisdiction and failure to disclose a cause of action.
10]In relation to the jurisdictional ground Kulula contended that it is not
4 Applicants’ Notice of Motion in the Amendment Application.
3
competent for 1time to refer a complaint to the Tribunal against Kulula under
section 8(d)(i) of the Act because the conduct complained of does not fall
within the parameters of the complaint that was originally submitted by 1time
to the Commission. 5 It argued that at the time when 1time lodged its
complaint with the Commission 6 no contravention of section 8(d)(i) was
alleged and that the averments that were made at that time by 1time cannot
cognisably be linked with a complaint under section 8(d)(i). Moreover 1time
by its own account had conceded that it had not complained of a section 8(d)
(i) contravention at that time because it only became aware from the
answering papers that “Kulula had insisted on the inclusion of an exclusivity
clause and a right of first refusal over certain routes in an agreement with
Lanseria”. Accordingly the Tribunal lacks jurisdiction to consider such a
complaint. Great reliance was placed by Kulula on the decision of the
Competition Appeal Court in Glaxo Welcome (Pty) Limited and Others v
National Association of Pharmaceutical Wholesalers and Others7.
11]In relation to the no cause of action ground, Kulula contended that that a
complainant must satisfy two requirements in pleading of its complaint
referral:
11.1] A complainant may not simply refer to a complaint on the basis of
a bald allegation – it must at least allege that the elements of the
transgression that it seeks to prove are, in fact present8.
11.2] The factual averments contained in the complaint referral must, (if
proved in due course) amount to a prohibited practice under the
Act.9
12]Mr Wilson on behalf of Kulula argued that 1time’s complaint did not make out
a case that the conduct referred to in its proposed amendment constituted a
contravention of section 8(d)(i) of the Act because no “factual foundation” was
laid for the claim made by 1time that the agreement was in fact “enforced” by
laid for the claim made by 1time that the agreement was in fact “enforced” by
Kulula. Secondly that the mere insistence by Kulula on the provisions
5 Second Respondent’s Heads of Argument page 2 par 3.1.
6 In April 2008.
7 Case No. 15/CAC/Feb02.
8 Sappi Fine Papers Limited v Competition Commission [2001-2002] CPR 486 (CT) at para
33.
9 Page 21 of Kulula’s heads of arguments.
4
contained in clause 5 of its agreement with Lanseria and its conclusion of
such an agreement on this basis could never amount to “requiring or inducing
a supplier or customer not to deal with a competitor ” within the meaning of
section 8(d)(i) of the Act. There was nothing in 1time’s complaint that
supported the conclusion that Lanseria was somehow induced into the
exclusive agreement. Absent an element of persuasion or inducement the
requirements of section 8(d)(i) were not met and accordingly no cause of
action had been shown. If 1time wished to pursue a section 8(d)(i) case now
it had to first initiate a complaint with the Commission, which could then lead
to a referral to the Tribunal, either by the Commission or 1time itself. In
support of his argument Mr Wilson relied on the Tribunal’ approach in
Competition Commission v Senwes Limited 10 and Competition Commission v
South African Airways (Pty) Ltd.11 We understood this objection to be directed
to both 1time’s complaint lodged with the Commission and the referral.
13]1time’s explanation for seeking this amendment is that at the time when it
lodged a complaint with the Commission it had alleged that the agreement
between Kulula and Lanseria contravened section 8(c) alternatively section
5(1) only. It did not at that time explicitly refer to section 8(d)(i). During the
exchange of pleadings in this matter however it became apparent to 1time
that the exclusive arrangement between Kulula and Lanseria came about at
the insistence of Kulula and it was for this reason that it now sought to include
the proposed amendments. 12 However, this was not the only basis upon
which the amendment was sought. Ms Engelbrecht appearing on behalf of
1time, submitted that the conduct namely the exclusive arrangement between
Lanseria and Kulula and the enforcement thereof, had been complained of by
1time to the Commission, although at that time 1time had not made any
1time to the Commission, although at that time 1time had not made any
reference to a particular section of the Act. Moreover the conduct consisting
of Kulula’s insistence on exclusivity was already the subject of the complaint
lodged with the Commission. In accordance with the dicta of the Competition
Appeal Court a complainant was not required to quote a particular section for
purposes of lodging the complaint with the Commission. All it had to do was
complain about the conduct, which it had done. This conduct could rationally
be linked to either section 8(c) or 8(d)(i). Thus the Tribunal enjoyed
10 Case No. 110/CR/Dec06.
11 Case No. 18/CR/Mar01. See also Nationwide Airlines (Pty) Ltd and Another v South
African Airways (Pty) Limited, Case No. 80/CR/Sept06.
12 Amendment founding affidavit, par 4-5, Amendment bundle page 5-6.
5
jurisdiction over the respondent and the proposed amendments did not create
a jurisdictional problem. However in order for the applicant to obtain a
declaratory order to the effect that the conduct constituted a contravention of
section 8(d)(i) and ask for appropriate relief in these proceedings it was
necessary to seek the proposed amendments.
Relevant provisions of the agreement
14]The agreement between Kulula and Lanseria commenced on 1 January 2006
and expires in February 2011. Clause 5 of the agreement, referred to as an
MoU by the parties, grants Kulula an exclusive right to operate scheduled
airline services from Lanseria airport in the first year of the agreement (which
expired in 2007), and thereafter grants Kulula a right of first refusal for the
remaining period until its expiration in February 2011.13
Approach to amendment applications
15]This Tribunal has previously set out its approach to amendment applications
in a number of decisions. 14 Suffice to say that the approach taken by this
body is a permissive one along the lines of that followed by the High Court in
civil proceedings. While we are required to consider carefully jurisdictional
objections in amendment proceedings we are cautioned not to convert these
proceedings into trial proceedings. The strength or weakness of an
applicant’s case is to be tested in the context of trial and not amendment
proceedings.
16]At the outset we note that this matter has not yet been set down for hearing,
nor have the parties engaged in any pre-trial preparations such as discovery
or exchange of witness statements. Furthermore the respondents do not
allege any prejudice that could be caused to them in the event that the
application was granted. The only issue for consideration by us are the
objections raised by the respondents.
13 See clause 5 of the agreement.
14 See Competition Commission v Yara SA (Pty) Ltd, Omnia Fertilizer Ltd Case No.
14 See Competition Commission v Yara SA (Pty) Ltd, Omnia Fertilizer Ltd Case No.
31/CR/May05, The Competition Commission v SAA Case No. 18/CR/Mar01, Competition
Commission v Sasol Chemical Industries (Pty) Ltd Kynoch Fertilizer (Pty) Ltd and African
Explosives and Chemical Industries Ltd Case No. 45/CR/May06, Competition Commission v
Loungefoam (Pty) Ltd & others Case No. 103/CR/Sep08.
6
17]In Glaxo Wellcome & Others v National Association of Pharmaceutical
Wholesalers and Others15 Hussain JA held that the submission of particulars
of complaint to the Commission “is the jurisdictional fact or precondition which
must be satisfied before the Tribunal can exercise its powers over a
respondent”.16 In the event of a certificate of non-referral or a deemed non-
referral a complainant was entitled to refer the matter directly to the Tribunal
in terms of section 51(1), as has happened in this case. However when
referring a complaint in this way, it was not competent for a complainant to
add particulars to the complaint which had not previously been complained of
to the Commission.
18]At paragraph 22 the Court, referring to the provisions of section 50, stated
that “it was not intended that in the event of a non-referral by the Commission
that the complainant is given carte blanche in its referral and may thereby
introduce a new complaint or particulars of complaint not mentioned in the
conduct which formed the subject of the complaint in terms of section 49B.”
19]Further the Court stated that –
19.1] “Section 51 cannot be interpreted to allow, where the
Commission decides not to refer a complaint in its entirety, a
complainant to add to the referral particulars of conduct which
were not complained of or referred to the Commission in terms of
section 49B.”17
20]Kulula relied upon the above dicta of the CAC to argue that 1time was
precluded from bringing this amendment because it had not complained of a
section 8(d)(i) contravention to the Commission.
21]The Court in Glaxo explained the reason for this approach was because the
Commission was –
21.1] “...the legislature’s ‘ plaintiff of first choice’ . Only if the Commission
decides not to refer or fails to refer a complaint of a prohibited
practice can a complainant refer that complaint “directly” to the
15 Case No. 15/CAC/Feb02.
16 Para 29.
15 Case No. 15/CAC/Feb02.
16 Para 29.
17 Para 24.
7
Tribunal”. 18
22]The CAC has however, in that very same case, emphasised that in order to
ensure that the objects of the Competition Act are not frustrated a
complainant need only identify the “conduct of which it complained.”19
23]Indeed at paragraph 15 Husain JA states –
23.1] “Section 49B focuses on a “prohibited practice” and does not
require a complainant to identify prohibited conduct with reference
to various sections of the Act. A complainant is not required to
pigeonhole the conduct complained of with reference to particular
sections of the Act.”
24]Furthermore –
24.1] “While the complaint need not be drafted with precision or even a
reference to the Act, the allegations or the conduct in the
complaint must be cognisably linked to particular prohibited
conduct or practices. There must be a rational or recognisable
link between the conduct referred to in a complaint and the
prohibitions in the Act, otherwise it will not be possible to say
what the complaint is about and what should be investigated.”20
25]Hence all that is required is that the conduct, which is the subject of a
complaint to the Commission, be rationally linked to a section or sections of
the Act. In order to address Kulula’s objection to the amendment we are
required to consider whether the conduct complained of in 1time’s form CC1
could be rationally linked to the provisions of section 8(d)(i). Whatever our
conclusion, we must then examine the provisions of the proposed
amendment to assess whether or not they introduce a new complaint or refer
18 See paragraphs 26 and 27
19 Glaxo CAC, para 15 and see also National Association of Pharmaceutical Wholesalers
Others v Glaxo Wellcome Others Case No. 45/CR./Jul01 and Clover Industries Limited and
Others v The Competition Commission Case No. 103/CR/Dec06.
20 Glaxo CAC para 16.
8
to conduct that was not the subject of the complaint to the Commission.
When doing this exercise, importantly we must ignore the fact that in form
CC1 the complainant may have alleged that certain sections of the Act have
been contravened by the respondent. After all any legal conclusions that are
drawn as to whether or not a particular section of the Act has been
contravened are to be drawn ultimately by this Tribunal in accordance with
the provisions of the Act. We then turn to consider the provisions of the
proposed amendments to assess whether they seek to introduce a new
complaint or particulars of the complaint not mentioned in form CC1.
26] A similar approach was used by the Tribunal, which approach was met with
approval by the CAC, 21 in National Association of Pharmaceutical
Wholesalers Others v Glaxo Wellcome Others22 - :
26.1] “Thus in approaching a jurisdiction problem of the kind raised by
the respondent we examine the conduct alleged in the complaint
and compare it with that alleged in the subsequent Complaint
Referral. We ignore the fact that in the CC 1 the complainant may
have alleged that certain sections of the Act have been
contravened by the respondent inconsistent with the subsequent
contraventions alleged in the referral. We then examine the
conduct alleged in the CC1 and see if it is substantially the same
as that alleged in the referral. If it is, the complainant has
standing. If not the complainant does not and its remedy is to
lodge a new complaint with the Commission containing those
allegations. If the new complaint is closely linked to the pending
referral the complainant would then have to persuade the
Commission to refer or non-refer the additional counts on an
urgent basis so that the subsequent Complaint Referral at
whosever’s behest could be consolidated with the pending
referral.”23
Jurisdictional objection
referral.”23
Jurisdictional objection
21 Glaxo CAC para 33.
22 Case No. 45/CR./Jul01.
23 Glaxo Tribunal para 88.
9
27]In order to deal with this objection there is no need for us to compare the
contents of the complaint referral with that of the form CC1 because the
objection is directed to the amendment application and not the referral itself.
If the conduct in the proposed amendments is substantially similar to that in
form CC1 then there would be no basis for us to refuse the application.
28]We first consider the relevant provisions of the Act.
29]Section 8(d)(i) is found in that part of the Act that concerns itself with abuse of
dominance prohibitions . In general the entire section 8 prohibits dominant
entities from abusing their dominance in a particular market. Dominance is
defined in section 7. 24 Section 8(a) prohibits the charging of an excessive
price and section 8(b) prohibits the dominant firm to refuse to give a
competitor access to an essential facility. Section 8(c) prohibits the dominant
firm from engaging an exclusionary act other than that listed in 8(d). Section
8(d) then lists specified forms of exclusionary conduct that are prohibited.
30]The Tribunal has previously set out its approach to sections 8(c) and 8(d)(i) in
Competition Commission v South African Airways (Pty) Limited. 25 In general
we first assess whether the conduct complained of falls within the wording of
the section. Thereafter we assess whether the conduct had an anti-
competitive effect on competitors. The differences between 8(c) and 8(d) are
delineated by onus and consequences of contravention. The Tribunal’s
treatment of these two sections can be found at paragraphs 97 to 102. 26 It is
not necessary for us to describe it in great detail here. What however is
significant about 8(c) and 8(d) is that both sections fall within the realm of
exclusionary as opposed to exploitative conduct. 27 As can be seen from the
language of the two, section 8(c) concerns itself with exclusionary acts in
language of the two, section 8(c) concerns itself with exclusionary acts in
general while 8(d) concerns itself with specific forms of exclusionary conduct.
24 Section 7 : Dominant firms
A firm is dominant in a market if –
a. it has at least 45% of that market;
b. it has at least 35%, but less than 45%, of that market, unless it can show that it
does not have market power; or
it has less than 35% of that market, but has market power.
25 Case No. 18/CR/Mar01.
26 See also Nationwide Airlines (Pty) Limited and Another v South African Airways (Pty)
Limited 80/CR/Sep06 Competition Commission v Senwes Limited Case No. 110/CR/Dec06.
27 See our approach to sections 8(d)(i) and 8(c) in York Timbers Limited and South African
Forestry Company Limited Case No. 15/IR/Feb01, Competition Commission v Senwes Ltd,
Case NO. 110/CR/Dec06 and Competition Commission v British American Tobacco South
Africa (Pty) Ltd. Case No. 05/CR/Feb05.
10
The sub-sections of 8(d) are considered to be a sub-species of the general
species of exclusionary act contemplated in 8(c). The two may differ in
relation to onus and sanction, 28 but both sections are concerned with the
same species of conduct namely exclusionary conduct by dominant firms.
31]An exclusionary act is defined in section 1 (x) as “an act that impedes or
prevents a firm entering into or expanding within a market”.
32]Section 8(c) provides –
32.1] 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. (our emphasis)
33]Section 8(d) then prohibits a number of specified forms of conduct. Section
8(d)(i) states that it is prohibited for a dominant firm to engage in any of the
following exclusionary acts.–
33.1] “(i) requiring or inducing a supplier or customer not to deal with a
competitor”
34]An ordinary reading of section 8(c) shows that it does not include in its ambit
exclusionary acts by dominant firms that “require” customers or suppliers not
to deal with its competitors. That conduct is to be found in the ambit of
section 8(d)(i). An ordinary reading of the provisions of section 8(d)(i) show
that it is not only an act of inducement that is prohibited but also an act of
requiring. While both must have the same causation or the same outcome in
order for the requirements of the section to be met – namely that a customer
or supplier must not deal with its competitors – the two cannot be elided into
the same thing. In other words, and to avoid rendering the section
meaningless, the conduct contemplated in the element of “requiring” cannot
be identical to the conduct contemplated in “inducing”. However the
consequence or outcome of that conduct, namely that of “not to deal with its
competitors” should be the same for both.
competitors” should be the same for both.
28 A first time contravention of section 8(c) by a dominant firm does not attract an
administrative penalty whereas a contravention of section 8(d) does. See the provisions of
section 59(1)(a) and (b).
11
35]Hence section 8(d)(i) does not require that only an element of inducement or
persuasion must be shown for the facta probanda of that section to be met. It
is sufficient to show that there was a “requirement”. An agreement between
two parties which has the element of the one “requiring” the other not to deal
with a third party is by definition an exclusive agreement and could easily fall
within the ambit of 8(d)(i) in the first instance by being exclusionary in nature
and in the second by having an element of one party “requiring” the other not
to deal with its competitors.
36]Such an agreement of course may not necessarily have an anti-competitive
effect on a competitor. However the conduct, namely that of one party
requiring the other not to deal with a third party through the conclusion of an
exclusive agreement or some other mechanism, is clearly contemplated in
the wording of section 8(d)(i).
37]In Competition Commission v Senwes Limited 29 the Tribunal, in exploring the
difference between section 8(c) and 8(d)(i), stated –
37.1] “In theory, every act of exclusion perpetrated against a
competitor could be said to induce customers or suppliers not to
deal with a competitor, because one has made such dealings
commercially unattractive, for instance by raising the costs of
rivals”.30
38]Further at paragraph 162 of that judgement the Tribunal states that -
38.1] “It would seem that section 8(d)(i) requires that the exclusionary
act complained of constitutes a process of enticing or persuading
a customer or supplier not to deal with a competitor. Absence the
features of persuasion or enticement to either a specific customer
or supplier or a class of them, the requirements of this subsection
would not be met”.31
39]It is this passage that Mr Wilson pounced upon to argue that absent an
element of inducement or persuasion the requirements of section 8(d)(i)
29 Case No. 110/CR/Dec06.
30 Para 157.
31 Para 162.
12
could not be met.
40]However both Senwes and SAA are distinguishable from the facts of this
case. In both those cases the conduct complained of did not consist of an
explicit exclusive agreement or arrangement between two parties. In SAA,
the conduct under consideration consisted of the incentive scheme offered by
SAA to travel agents, the operation of which was the subject of the
contravention. In Senwes, the conduct in question consisted of farmers
allegedly being verbally promised “free storage” by Senwes’ employees on an
ad-hoc basis.
41]Neither of the two cases dealt with an explicit agreed mechanism between
two parties which by its very definition “required” one of the parties not to deal
with the other’s competitors. In both those cases the applicants argued an
inducement case on the basis of conduct, which on the face of it was not
exclusionary, but was in effect a contravention of section 8(d)(i). The
“requirement” leg of section 8(d)(i) was never argued or considered by the
Tribunal.
42]Furthermore, we have to take into account that the enquiry in Senwes and
SAA32 was different to the one under consideration here. We must be careful
not to conflate the relevant enquiry in this application with that of a trial
proceeding. In those cases the Tribunal was considering the effects of
conduct that was not inherently exclusionary and arrived at its assessment of
whether or not section 8(c) or 8(d)(i) had been contravened after having the
benefit of the evidence led in those matters.
43]In this application we are only dealing with a proposed amendment to a
complaint referral and are not concerned with assessing th e strength or the
weakness of 1time’s case. The allegations that are contained in the referral
and the proposed amendment are yet to be tested in trial proceedings before
we can arrive at a conclusion that the facts of this do or do not support a
we can arrive at a conclusion that the facts of this do or do not support a
section 8(d)(i) contravention. All of this remains to be dealt with when the
merits of the case are considered. In this case we only need to assess
whether there is a rational connection between the conduct complained of in
32 See also J T International SA (Pty) Ltd v British American Tobacco SA (Pty) Ltd Case No.
55/CR/Jun05
13
form CC1 and a section of the Act for purposes of pleading. An agreement
of the kind complained of is susceptible to constituting a requirement with a
supplier not to deal with a competitor; whether in fact it is, will be a matter for
trial.
44]Let us then consider the subject matter of the complaint lodged by 1time with
the Commission.
45]In its form CC1 of 14 March 2008, the attorney representing 1time sets out
the background to its complaint, as was known to it then. Recall that at this
stage 1time has not had sight of the agreement and could only infer the
provisions of it through the utterances of the parties thereto. In paragraph 1 of
Concise Statement of Conduct (which it seeks to amend) 1time states it
seeks relief as follows -
45.1] “Declaring the exclusive covenant between Lanseria and Kulula
to be a prohibited practice in contravention of section 5(1)
alternatively section 8(c) of the Act;”
46] In paragraph 2 of the attached statement it states that 1time was informed in
a meeting with representatives of Lanseria that Kulula had a “one year
exclusivity agreement with Kulula which prevented other airlines from flying
domestic services from Lanseria”. In paragraph 12 it is stated that “On or
about 4 March 2008 a Business Travel Now article reported that Mr Gidon
Novick, executive director of Kulula acknowledged that Kulula had an
exclusive agreement but denied that it was anti-competitive.” Thus the
exclusive agreement and the fact that it had been enforced – even though
that word was not expressly used – was the subject of the complaint.
47]In paragraph 4 it is stated that: “During August 2007 a further meeting was
held with Lanseria however 1time was advised that Lanseria and Kulula were
in disagreement on the interpretation of their exclusivity agreement. Kulula
believed it was an exclusive agreement, the effect of which was that 1time
believed it was an exclusive agreement, the effect of which was that 1time
would be excluded from conducting operations from Lanseria. On the other
hand Lanseria apparently believed that the agreement granted Kulula the
right of first refusal.” Again we see the conduct – namely the exclusivity
agreement – being complained of. The dispute between Kulula and Lanseria
14
as to the interpretation of their agreement lends weight to the inference that
the exclusivity persisted beyond the first year of the agreement and that
Kulula was requiring exclusivity from Lanseria.
48] In paragraphs 2, 6 and 13 we see that Lanseria abides (in other words gives
effect to) by the terms of the agreement between it and Kulula. In paragraph
2, we are told that Lanseria simply refused to talk to 1time on the basis of the
exclusivity agreement. This amounts to nothing more than an act of
enforcement. In paragraph 6, Lanseria does not agree to 1times’ proposal of
a daily flight to Cape Town and Durban on the basis that these were to be
given to Kulula for approval. In paragraph 7, the attorney complains that to
his surprise Kulula announced that it would be increasing its flights to Cape
Town and Durban, implying that because no approval was forthcoming from
Lanseria, Kulula had exercised its right of first refusal to the detriment of
1time. This is clearly a complaint about the agreement between Kulula and
Lanseria being enforced. The attorney does not expressly say at whose
insistence such enforcement took place. However in the later paragraph 4
quoted above infers that the agreement operates to Kulula’s benefit. Since
Kulula is dominant in the market for domestic scheduled low fare air travel
enough is stated to suggest that Lanseria, the supplier, is being required by a
dominant firm not to deal with a rival namely 1time.
49]We see further that 1time, not having sight of the agreement and with limited
facts at its disposal, complains about the exclusive agreement between
Kulula and Lanseria even where these are not recorded in a written
agreement.33
50]Finally we see 1time requesting the Commission to investigate Kulula’s and
Lanseria’s conduct on the grounds that the conduct “appears” to constitute a
contravention of section 8(c) alternatively 5(1). The fact that the Commission
contravention of section 8(c) alternatively 5(1). The fact that the Commission
was pointed to these two sections does not mean that the conduct
complained of could not be cognizably linked to section 8(d)(i). Indeed the
author of the form CC1 himself by using the word “appears” gives us an
indication of the prevailing uncertainty with regard to the relevant sections of
the Act. We see that same degree of latitude in para 17 when he states
“Without limiting the basis for an investigation by the Competition
33 Para 16 of 1time’s Form CC1 of 14 March 2008.
15
Commission, it is submitted that the conduct that is the subject of this
complaint ...”
51]Notwithstanding the fact that 1time’s representative referred only to sections
8(c) and 5(1) we find that the conduct itself – namely the requirement by
Kulula that Lanseria not deal with its competitors, through either an exclusive
agreement or some other mechanism such as a right of first refusal, in word
or deed, was clearly the subject of the complaint to the Commission.
Moreover the conduct involving the enforcement of the agreement between
Kulula and Lanseria was also the subject of the complaint. This conduct can
be cognisably or rationally linked to either or both section 8(c) and 8(d)(i)
because it contains within it elements of both exclusivity and requirement.
52]We see that this is also the conclusion arrived at by the Commission, when it
conducted its investigation. In paragraphs 3 and 4 of its notice of non-referral
the Commission states –
52.1] “the Commission considered that before Kulula launched flights at
Lanseria, no scheduled commercial passenger airline had
previously succeeded in sustaining a domestic airline service at
the airport – launching at Lanseria posed a high degree of risk to
Kulula. The Commission found that were it not for the exclusionary
MOU, the risks would not have been mitigated, and Kulula would
have probably chosen not to launch the service out of Lanseria.
The Commission therefore concluded that the MOU was
necessary to minimise risk and thereby make it feasible for Kulula
to operate out of Lanseria.”
52.2] “Although the MOU between Kulula and Lanseria was found to be
anti-competitive gains arising from it outweigh the anti-competitive
effects. The Commission also considers the five year period to be
reasonable for the purposes of allowing Kulula to justify its
investment but has strong concerns that any renewal of the MOU
investment but has strong concerns that any renewal of the MOU
in its current form could be problematic to competitive forces in the
domestic airline market as a whole.” 34
34 Complaint referral founding affidavit, Annexure “C” (Complaint referral bundle page 29).
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53]Whilst we cannot use the Commission’s letter to interpret the content of the
CC1, the fact that the Commission, the “legislature’s plaintiff of first choice” 35
had applied its mind to the question of the exclusive nature of the agreement
indicates that our interpretation of CC1 is one that a reasonable reader would
come to.
54]We turn now to consider the proposed amendments (‘the amendment”).
55]Kulula’s objection was focused on paragraph 1A.1 of the amendment 1time
which seeks to introduce the following paragraph –
55.1] “the insistence by Kulula upon the inclusion of an exclusivity
clause and a right of first refusal over certain routes in an
agreement with Lanseria”
56]Kulula contends that because this fact came to 1time’s attention only after the
exchange of pleadings (and that it is not contained in form CC1) and on the
basis of the dicta in Glaxo, this amendment is not competent. In our view,
this is a self-serving misreading of the CAC’s approach in Glaxo.
57] The Competition Appeal Court has already required us to adopt a
purposive approach to section 49B. In Woodlands Dairy (Pty) Ltd,
Milkwood Dairy (Pty) Ltd v The Competition Commission 36, the Court held
that –
57.1] “The dictum of this court in Glaxo Welcome which was cited by Mr
Bhana develops a substantive as opposed to a formalistic
approach to the definition of a complaint. The question arises as to
whether the complaint had to be against a specified entity as
opposed, for example, to an industry. The spirit of the Glaxo
Welcome dictum seeks to promote the objectives of the Act.”
58]The Court in Glaxo made it abundantly clear that all that a complainant need
provide was sufficient detail to the Commission that would enable it to assess
“what the complaint was about and what should be investigated ”. Sufficiency
35 Glaxo para 26
36 Woodlands Dairy (Pty) Ltd and Another v Competition Commission Case No.
36 Woodlands Dairy (Pty) Ltd and Another v Competition Commission Case No.
88/CAC/Mar09 [2009] ZACAC 3, Para 33.
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is met when there is a “rational connection” or the conduct is “cognizably
linked” to the prohibitions (not only one section) in the Act. A complainant
could not be expected to state a fact or a particularity related to the conduct
that it could not have known at that time. Indeed at that time, 1time could not
for example have known particulars such as who all the parties to this
agreement were (if there were more than two) or at whose insistence the
agreement was exclusive. Obviously a complainant cannot enjoy carte
blanche when it self-refers a matter to the Tribunal and it is necessary that
conduct referred to the Tribunal must first be lodged with the Commission.
But to require specificity of details such as time, dates or the identities of all
the parties related to that specific conduct, in circumstances where the
complainant has not been privy to the information obtained by the
Commission in its investigation or has not had sight of the documents
obtained that may been produced which could shed further light on the
matter, is to render the workings of the Competition Act sterile.37
59]The conduct which was the subject matter of the complaint lodged with the
Commission – namely that Kulula was insistent on an exclusivity
arrangement, by word or by deed, with Lanseria - is indeed rationally linked to
section 8(c) or 8(d)(i). An examination of the conduct described in paragraph
1A2 and 1A.3 reveals that it is nothing more than a reiteration of the conduct
in form CC1. The conduct as complained of in the form lodged with the
Commission, let alone that in the proposed amendment, is unquestionably
rationally linked to both sections 8(c) and/or 8(d)(i).
60]In our view the conduct complained of in 1A.1 is also substantially similar to
that complained of in CC1 and does not introduce a new complaint. The
amendment refers to the conclusion of the exclusive agreement – which has
amendment refers to the conclusion of the exclusive agreement – which has
already been the subject of the complaint to the Commission. It also refers to
Kulula’s insistence on exclusivity, conduct which has already been
complained about in CC1. All that is new, if at all is the fact that the
insistence is described in an earlier period. The amendment might introduce
a new minor fact, hitherto unknown to the complainant, but the material
elements of the amendment have already been the subject of the complaint
to the Commission.
37 See also our discussion in Omnia Fertilizer Ltd v The Competition Commission Case No.
31/CR/May05, Competition Commission v Loungefoam (Pty) Ltd & others Case No.
103/CR/Sep08.
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61]We find that the conduct complained of in the 1time’s form CC1 is rationally
linked to section 8(c) or 8(d)(i) and the proposed amendments do not
introduce a new complaint.
No cause of action objection
62]In the above discussion we also highlighted that 1time’s form CC1 contains
sufficient averments to establish a cause of action under 8(d)(i). 1time alleged
that Kulula required Lanseria not deal with its competitors through either an
exclusive agreement or the enforcement of a right of first refusal. What
remains to be dealt with is these objection in relation to the complaint referral
itself.
63]Paragraphs 13 – 25 of 1time’s founding affidavit in the complaint referral are
substantially similar if not identical to paragraphs 2- 13 of its statement in
form CC1 and establish the following facts: Kulula and Lanseria had
concluded an agreement in terms of which Kulula enjoyed exclusivity for the
first year of that agreement, such exclusivity resulting in Lanseria not dealing
with Kulula’s competitors. They also establish that at the insistence of Kulula
and through the enforcement of the right of first refusal, Lanseria did not
approve any flight schedules for 1time. In paragraphs 42- 44.3, the complaint
referral sets out possible market definitions and the basis of calculating either
Lanseria’s or Kulula’s dominance depending on the how the market is
defined.38 This exercise is done under a heading “The section 8(c)
infringement”. As we have discussed above, the fact that 1time might have
used this heading does not lead to the conclusion that we are limited to only
examining an s8(c) infringement. The factual averment of Kulula’s or
Lanseria’s dominance in a particular market would be relevant to either a
section 8(c) or 8(d)(i) enquiry. In our view all the factual averments
necessary to establish a cause of action for purposes of section 8(d)(i) are
present in the complaint referral.
Conclusion
present in the complaint referral.
Conclusion
64]We find that the conduct which constituted the subject of the complaint
lodged by 1time with the Commission and of the subsequent direct referral is
38 Clearly it had still not had sight of the agreement
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clearly rationally linked to both section 8(c) and 8(d)(i) and the jurisdictional
fact of initiation by the Commission has been met. The complainant had
already laid a sufficient factual basis for pleading/alleging either a section 8(c)
or 8(d)(i) contravention. The amendments do not introduce any new
complaints to that lodged with the Commission on 14 March 2008. If the
amendment were allowed, the Tribunal would enjoy jurisdiction. The
respondent’s objection as to both lack of jurisdiction and no cause of action
directed at the form CC1 and the proposed amendments are without merit
and the amendment application is hereby granted.
65]Accordingly we make the following order:
65.1] 1time’s application for the proposed amendments contained in
the Notice of Motion is granted; and
65.2] 1time is required to file within 10 days of date hereof a
comprehensive complaint referral document clearly indicating the
amendments granted in this application (“the amended
complaint”);
65.3] The Respondents may, within 20 days after the filing of 1time’s
amended complaint, file answering affidavits and if they do, they
must also file a comprehensive document clearly indicating
supplementary answers to the amended complaint referral (“the
comprehensive answer”); and
65.4] 1time may file a reply within 5 days of the filing of the answers in
above.
66]There is no order as to costs.
____________________ 29 July 2010
Yasmin Carrim DATE
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Norman Manoim and Thandi Orleyn concurring.
Tribunal Researcher: Thandi Lamprecht
For the Complainant/Applicant: Adv Engelbrecht instructed by Schindlers
Attorneys
For the 1st Respondent: Adv Wilson instructed by Weber Wentzel
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