THE COMPETITION COMMISSION OF SOUTH AFRICA
Case No: 11/CR/Febr04
In the matter between:
The Competition Commission Applicant
And
Telkom SA Ltd Respondent
Panel: N Manoim (Presiding Member)
Y Carrim (Tribunal Member)
M Mokuena (Tribunal Member)
Heard on: 19 November 2010
Order Issued on: 14 December 2010
Reasons for Decision
Introduction
1] In this application the Commission has sought to amend its pleadings to
include an additional contravention. We heard the matter on 19 November
2010 and on 14 December issued an order dismissing the application. The
order stated:
1
a. After having heard the parties, the Tribunal orders that the Commission’s
amendment application in terms of Rule 18(1) of the Competition Tribunal
Rules is dismissed on the grounds that the proposed amendments do not
contain sufficient particularity to enable the respondent to answer a margin
squeeze case in terms of section 8(c).
2] We did not give reasons at the time we made our order. We do so now.
Background
3] The Commission’s amendment application seeks to introduce a margin
squeeze complaint against the respondent Telkom Limited (“Telkom”). The
amendment comes very late in the day in the history of a much delayed case.
At present in this case the complaints relate to excessive pricing (section 8(a)
and price discrimination (section 9(1)). The Commission also relies on section
8(c).
4] This complaint referral was filed with the Tribunal on 24 th February 2004. But
the complaint referral is an amalgam of complaints laid by various
complainants dating back to May 2002.
5] One of the reasons this litigation has taken so long is an unsuccessful
jurisdictional challenge brought by Telkom which was finally rejected by the
Supreme Court of Appeal on 27 November 2009.
The margin squeeze objection
6] We held in Senwes that a margin squeeze comprises the following elements:
“1) The supplier of the input (or translated into our jurisprudence the
dominant firm) is vertically integrated;
(2) The input in question is in some sense essential for downstream
competition;
(3) The vertically integrated dominant firm’s prices would render the
activities of an efficient rival uneconomic;
(4) There is no objective justification for the dominant firm’s pricing
arrangements.” 1
7] The CAC has essentially affirmed this approach on appeal.2
8] In this case the Commission has pleaded only that: 3
“12.7.5. By the differential pricing, and by charging the higher prices as set
out above, Telkom engages in a margin squeeze strategy that serves to
strengthen its position in the downstream market, in which it competes
against the private VANS licensees, at the expense of the private VANS
licensees. The result of the pricing strategy is that the private VANS
licensees and/or their customers pay significantly more than Telkom’s
customers of VANS and/or competing services/products. This results in
the private VANS licensees suffering negative margins over the complaint
period such as to make it difficult for them to expand in the downstream
market, so as to effectively compete against Telkom downstream. ”
9] The remaining paragraphs sought to be inserted by the amendment have not
been quoted as they contain legal conclusions that take the matter no further.
10] It is clear that paragraph 17.2.5 lacks the necessary averments which would
at minimum make the pleading comply with our rule 15(2) when measured
against the Senwes requirements.4
11] In order for the amendment to overcome the objection it needs to set out
these elements. It would not be sufficient to simply to regurgitate them in a
rote manner. They require some flesh in particular the elements set out in
points 2 and 3. In relation to the fourth requirement however, the pleader need
do no more than aver that there is no objective justification . It will be for the
1 See Tribunal decision in Competition Commission v Senwes Ltd Case No 110/CR/Dec06 at paragraphs 139 and
146
2 See CAC decision in Senwes Ltd v The Competition Commission Case No: 87/CAC/Feb09 at paragraphs 65 and
66.
3 Par 17.2.5, Record page 12
4 Tribunal Rule 15(2) states “Subject to Rule 24(1), a complaint referral must be supported by
an affidavit setting out in numbered paragraphs- (a) a concise statement of the grounds of
the complaint; and (b) the material facts or the points of law relevant to the complaint and
relied on by the Commission or complainant as the case may be.”
.
3
respondent to allege such justification if it exists.
12] The Commission argued that because in the Senwes case a margin squeeze
count had been upheld even though it did not appear in the pleadings , it was
not necessary for it to make any further assertions. However the Senwes
decision was not relevant to the adequacy of pleadings. It was common cause
that the margin squeeze had not been pleaded. Senwes related to whether at
the end of the case , the Commission could still proceed with a margin
squeeze not pleaded and whether the respondent had been prejudiced. The
tribunal, upheld by the Court , decided that it could. This has no relevance to
the facts of this case and the question of the adequacy of the pleaded
amendment now.
Remaining objections
13]Although the application has been dismissed because we found that the
pleadings do not contain sufficient averments , as this is something the
Commission can rectify , should it choose to do so , we therefore need to
consider the remaining two objections. The first relates to prejudice allegedly
to be suffered by Telkom if the amendments are allowed at this stage and
secondly whether the amendment would lead to a duplication of charges with
subsequent complaint referral the Commission has brought against Telkom.
We deal with these issues separately.
Prejudice suffered
14]Telkom complains that the amendments have been brought late without
acceptable explanation from the time when the outcome of the SCA decision
on jurisdiction was known until the date the amendment was filed - a period of
several months. This has occasioned prejudice in respect of discovery and
the possible loss of hearing dates. The latter arises because the amendment
has been sought after the pre-hearing at which the hearing and discovery
dates were determined.
15]First, it is not clear that the hearing dates will have to be lost. Secondly, if they
15]First, it is not clear that the hearing dates will have to be lost. Secondly, if they
do it hardly avails Telkom to now urge an expeditious hearing given its own
approach to the litigation in this matter has led to several years of delay.
16]It is also difficult to have much sympathy for its complaint in respect of
discovery. Telkom claims that is has already discovered in respect of this
matter and that this was a burdensome and time consuming task as records
were hard to find given the effluxion of time . The real reason for its burden in
relation to discovery was the length of time of the jurisdictional challenge
which was self -created. By the time discovery took place many years had
elapsed so no doubt the process was difficult but this was a risk Telkom took
in bringing its challenge if it failed. The amendment does not bring about the
prejudice and to the extent it may present an added burden – although no
specifics are given, this seems more like a rote complaint than one of
substance. The discovery that should have been furnished in relation to the
existing complaints of excessive pricing and price discrimination are
sufficiently overlapping in nature to that of the margin squeeze as not to pose
too great an additional burden.
Duplication of charges
17] There was much debate in the hearing as to whether the amendment is a
duplication of the charges contained in another matter proceeding against
Telkom which for convenience we refer to as the 2009 referral. 5 This referral
which was made in 2009 also contains allegations that Telkom has
perpetrated a margin squeeze in respect of leased lines for internet access.
The complaint period in respect of this referral is described as being between
2007 and 2009. In the present referral the complaint period is a matter of
dispute. Telkom is of the view that the complaint period ends on the date of
referral which would end it at 24 February 2004. The Commission in its
replying affidavit asserts that facts subsequent to this period are relevant as
the Commission considers the conduct of a continuing nature. Indeed for this
the Commission considers the conduct of a continuing nature. Indeed for this
reason the Commission seeks interdictal relief.
18] At first it was suggested by the Commission that there was no duplication as
there was no product overlap in the referrals, but the Commission later
5 The Competition Commission v Telkom SA Ltd Case No’s: 55/CR/Jul09, 73/CR/Oct09 and 78/CR/Nov09
5
conceded that there was, but nevertheless maintained that there was no
duplication as the complaints’ time periods did not overlap. 6 Telkom asserted
the opposite. We do not need to decide this point either. Assuming for Telkom
that there is duplication , the appropriate moment to address that is not now ,
but when the second matter is set down for hearing. In this respect the
Commission has correctly argued that this is how courts’ treat objections
about duplication and we see no reason to depart from this practice in our
procedures.7
Conclusion
19]The only objection that we find to have substance is the one concerning the
adequacy of the pleading. We have for this reason dismissed the amendment
application, but we have given directions to the Commission on how to rectify
this deficiency should it choose to do so.
17 January 2011
N Manoim Date
Y Carrim and M Mokuena concurring.
Tribunal Researcher: Rietsie Badenhorst
For the Applicant: NH Maenetje instructed by Gildenhuys Lessing Malatji
For the Respondent: A Cockrell SC instructed by Mothle Jooma Sabdia
6 See transcript pages 84 and 107.
7 Footnote ref Whitehead and Others v The State [2008] 2 All SA 257 (SCA) para 10