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[2011] ZACT 39
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Competition Commission v Telkom SA Ltd (11/CR/Febr04) [2011] ZACT 39; [2011] 1 CPLR 196 (CT) (23 June 2011)
Competition
Tribunal
South Africa
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)
T Madima (Tribunal Member)
Heard on:
21 April
2011
Order Issued on: 4 May 2011
Reasons Issued: 23 June 2011
Reasons for Decision
Introduction
[1]
In this application the Commission sought to amend its pleadings for
the second time. The first category of amendments relate
to the
range of products and services which are the subject of the
Commission's complaint,
the
second category involved allegations that the Commission relies on
section 8(c) in the alternative to sections 8(a) and 9
in respect of
the same conduct and the third to make certain additional
allegations in relation to the excessive pricing complaint
relied on
under section 8(a) of the Act.
[2] Initially Telkom opposed
the application in its entirety. However at the hearing of the
matter on 21 April 2011 Telkom dropped
its opposition to the first
category of amendments in return for certain amendments and
commitments provided by the Commission.
Accordingly we issued an
order as per clause 1 of Annexure A granting the Commission leave to
clarify the range of VANS and services/products
that compete with
VANS and to clarify the VPN solutions referred to in the founding
affidavit and to limit the complaint period
to the end of 2004.
Hence there is no need for us to deal with this category of
amendments any further.
[3] Telkom persisted with its
objections to the other two categories of amendments. After hearing
both parties we dismissed the
Commission's application in respect of
both. We did not give reasons at the time we made our order. We do
so now.
[4] We find that when a party
seeks to amend its affidavits it must justify its reasons for doing
so. We now examine why we consider
the Commission has not
sufficiently justified the amendments it now seeks.
Background
[5] This
matter has had an extremely long history. On 24 February 2004 the
Commission referred its complaint to the Tribunal in
which it
alleged that Telkom had engaged in anti-competitive conduct in
relation to its downstream VANS competitors in that it
had charged
excessive prices,
1
engaged in
price discrimination
2
and had
refused to peer.
3
Telkom
challenged the referral on jurisdictional grounds. The matter was
embroiled in litigation for the next five years until
the
jurisdictional point was rejected by the Supreme Court of Appeal on
27 November 2009.
[6] The
matter then proceeded in our forum. Telkom finally filed its
answering affidavit on 12 April 2010 and the Commission its
replying
affidavit on 22 June 2010. In its answering affidavit Telkom
observed that the Commission's excessive pricing allegations
did not
comport to the approach set out by the CAC in
Mittal
4
The
Commission in its repiy had asserted that it was unnecessary for it
to so amend and that it was confident that it could prove
its
excessive pricing case as pleaded.
[7] On 27
September 2010 the Commission filed an application to amend its
founding affidavit to introduce a margin squeeze case
in the 2004
referral ("the first amendment"). The Tribunal dismissed
that application on 14 December 2010 for lack
of sufficient
particularity but directed the Commission in its reasons, which were
released on 17 January 2011, on how to rectify
the objections
against the amendment.
5
The
Commission never revived this amendment.
[8] In the course of pre-trial
preparations the Commission sought discovery of Telkom's underlying
costs in relation to the excessive
price case. Telkom had refused
this on the basis that the Commission in its pleadings had not made
necessary averments to justify
this information. At a hearing during
January 2011 regarding access to confidential documents it became
clear that the Commission
had sought this information on the basis
that Telkom had alleged differentia! costs as a justification for
the difference in
its prices. At that hearing Telkom indicated that
it might on further consideration drop its defence.
[9] On 9 February 2011, Telkom
indicated that it would no longer rely on differences in underlying
costs in relation to the price
discrimination/excessive pricing
complaint against it as pleaded in its answering affidavit in the
main complaint.
[10] On 10 February 2011 the
Tribunal, concerned about the impact of any further amendments on
the hearing of this matter, requested
the Commission to indicate
whether it still intended to pursue its amendment application. The
Commission responded to the Tribunal's
request in the letter dated
15 February 2011 as follows:
"At present the
Commission has not decided to file an amendment application. This
may, however, change depending on developments
in the case. Should
the Commission decide to fife an amendment application (in respect
of a margin squeeze case or any aspect
of its pleadings), it will
notify the Tribunal and Telkom without delay so that, if necessary
the hearing dates may be timeously
freed up. We realise that this
may cause inconvenience to the Tribunal and Telkom. Such
inconvenience as may occur is regretted.
The Commission has given
much thought and consideration to the issue of a possible amendment
and the lack of a clear answer at
this stage is a consequence
largely of lack of clarity as to the defences that Telkom relies
upon."
[11] But at that stage Telkom
had already indicated that it no longer relied on the underlying
cost defence. More than two months
later, on 16 March 2011 the
Commission launched this application.
The amendments relating to
exclusionary conduct
[12] The
Commission wants to insert the words
'and/or
8(c)'
after
the words
'section
9'
in
par
MA
A.
In
par 17.1.1 of its Founding affidavit the Commission alleges that:
"Telkom engages in
price discrimination and/or excessive pricing in contravention of
sections 9 and 8(a) of the Act respectively.
There are two aspects
to this complaint"
[13] Telkom alleges that the
Commission is attempting to introduce a margin squeeze case by the
backdoor. The Commission vehemently
denies this and states it is not
intending to rely on a margin squeeze. The Commission explanation
for this amendment is that
it was a matter of dispute between
theparties whether and to what extent the Commission was relying on
section 8(c) of the Act,
an issue that arose sharply in the first
amendment application when the Commission sought to introduce the
margin squeeze complaint.
According to the Commission it had always
been part of its case that the material facts relied on for the
excessive pricing and
price discrimination complaints also had an
exclusionary effect under section 8(c). Moreover, there was no
reason in law why
the conduct alleged to give rise to excessive
pricing and price discrimination could not, even if proved not to
satisfy the requirements
of these sections, amount to a
contravention of section 8(c). It therefore wished to make clear by
amending its founding affidavit
that it also relies on sec 8(c) in
the alternative to section 8(a) and 9 in respect of the same
conduct.
[14] However the explanation is
not clear. If this 8(c) case was always there and is not something
new as contended, then the
amendment seems unnecessary. A cursory
glance at the relevant provisions of the Commission's founding
affidavit and Telkom's
answering affidavit confirms the following:
a.
In relation
to Prayer 1: Contractual Restrictions on Competition, the Commission
has alleged a contravention of s8(b) and/or 8(c).
6
Telkom in
its answer summarises the Commission's allegation that this conduct
contravened s8(b) and/or 8(c) and proceeds to plead
its case
thereto.
7
b.
In relation
to Prayer 2: Refusal to lease VANS licensees, the
Commission
alleges a contravention of s8(b) and/or 8(c) and/or 8(d)(i).
In
para 16 of the founding affidavit a case is made out for
this
allegation. Telkom in its answer again summarises the
Commission
allegations and then proceeds to plead its case in
denial thereof.
8
c.
In relation
to Prayer 3: Alleged price discrimination and excessive
pricing,
we find a similar scenario. The Commission alleges a
contravention
of s8(a), s8(c) and /or s 9 of the Act.
9
Telkom
againsummarises the Commission's allegations and then proceeds to
plead thereto.
10
it denies
that it contravened section 9 or 8(a). In relation to 8(a) it also
observes that the Commission's pleaded case does
not support an
allegation of excessive pricing as required by the test set out by
the CAC in M/ffa/.
11
In relation
to the 8(c) allegation Telkom states that
"it
must be established that the conduct in question has given rise to
anticompetitive effects. Even if it were to be found
that Telkom has
engaged in an exclusionary act (which is denied), ...this did not
give rise to ant'hcompetitive effects...to
justify a finding that
s8(c) has been contravened'.'
12
d. In
relation to prayer 4: Refusal to peer, we find the same approach.
The Commission alleges a contravention of s8(b) and/or
8(c)
13
Telkom
summarises it and denies that it has contravened these sections.
14
[15] Hence there can be no
doubt from the above quoted paragraphs that the Commission had
pleaded an alternative s8(c) case in
respect of each alleged
contravention and that Telkom itself, as evidenced by its own
summary of the Commission's allegations
in its answer and pleading a
denial thereto, understood this to be the case. In our view the
proposed amendment in respect of
8(c) in this application cannot
make the matter any clearer and nor can Telkom now distance itself
from an allegation it clearly
understood to have been made in the
pleadings.
The amendments relating to
excessive pricing
[16] The
Commission argues that its amendment is intended to make certain
additional allegations in relation to the excessive
pricing
complaint under section 8(a) in order to meet the
Mittal
test
for excessive pricing to which it did not have access when it
initially pleaded the case. When the Commission had filed its
replying affidavit in June 2010 it was of the opinion that it could
still prove an excessive pricing case against Telkom even
though it
did not plead its case in line with the
Mittal
judgment.
However, the Commission has taken further advice and has
reconsidered its position.
[17] In our
view this amendment was not adequately justified by the Commission.
It is true that the complaint referral was brought
some years ago,
prior to
Mittal
being
decided but the Commission had already been alerted to the possible
defects in its pleadings by Telkom in April 2010. This
was after the
Competition Appeal Court had handed down its decision in
Mittal.
Despite
this, the Commission's response at that time was a steadfast
reliance on the case as was pleaded
then.
In
its founding affidavit for this application the Commission provides
no explanation why it brought this amendment so late in
the day and
the reason for its change of stance. Only in its Heads of Argument
did the Commission explain that the amendment
had come about on
recent advice given to it, to bring the pleadings in line with the
Mittal
decision.
But this was something the Commission had already been advised to
consider in
April
2010.
Nor
did the Commission seek this amendment in September 2010 when it
brought its application to introduce the margin squeeze allegation.
In our view the Commission's tardiness in bringing this amendment
has not been adequately explained. All the more so given how
long
this litigation has already taken. Whilst not all the delays can be
blamed on the Commission it had a duty to expedite the
matter once
the Supreme Court of Appeal had found in its favour. This is
particularly relevant in this case which involves dynamic
technology
markets. Many changes have occurred in the telecommunications sector
since the lodging of the complaint in 2002, both
in respect of the
regulatory framework and in relation to market structure. In our
view these factors would increase the burden
of justification for
further delay occasioned by a proposed amendment By changing its
position on the excessive pricing pleading
with an explanation of "a
recent change of mind" in circumstances when it had already
been challenged to do more than
a year ago, the Commission has not
discharged this burden.
[18] Given our decision above
there is no need for us to consider the issue of prejudice to
Telkom.
Conclusion
[19] We have for these reasons
dismissed the amendment application in respect of s8(c) and s8(a).
23 June 2011
Y Carrim
Date
N Manoim and T Madima
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
ANNEXURE
A
COMPETITION
TRIBUNAL
REPUBLIC
OF SOUTH AFRICA
Case
No's: 11/CR/Feb04
In
the matter between:
The
Competition Commission Applicant
and
Telkom
SA Ltd Respondent
Panel
N Manoim
(Presiding Member), YCarrim (Tribunal
Member), and T Madima (Tribunal
Member)
Heard on
21 April
2011
Order released: 4 May 2011
Order -Second Amendment
Application
After having heard the parties,
the Tribunal orders as follows:
1. The Commission is granted
leave to amend the founding affidavit in the complaint referral as
follows:
1.1. By
inserting, after the words
'VPN
Solutions'
in
paragraph 3.2.1.2.5, the following words:
'which
encompasses a range of technologies, namely X.25, frame-based VPN,
cell-based VPN, ATM-based VPN, iP-based VPN and MPLS-based
VPN
solutions'
,
and
1.2. By
inserting the following sentence at the end of paragraph 11.1.2.2:
'VANS
and/or competing services are internet Services provision and VPN
services which are provided using a range of technologies,
namely
X.25, frame-based VPN, cell-based VPN, ATM-based VPN, IP-based VPN
and MPLS-based VPN services:
1.3. By
inserting the following paragraph after 17.1.3:
'the
VANS and/or competing services referred to in par 17.1.2 and 17. L3
above relate to the services stipulated in par 11.2.2
above.'
The Commission is granted
leave to file a supplementary founding affidavit to give effect to
the amendments set out in par 1
above.
The Commission is granted
leave to file an amended Notice of Motion to provide for limiting
the complaint period to the end
of 2004.
The respondent is granted
leave to file a supplementary answering affidavit in respect of the
matters contemplated in paragraphs
2 and 3 above, provided if does
so within 20 business days of the filing of the Commission's
supplementary affidavit.
The Commission's application
to introduce certain changes in relation to the complaint of
excessive pricing as set out in paragraphs
5(a), 5(b), 7(a), 7(c)
and 8 of Annexure A to the Commission's Founding Affidavit in the
amendment application is dismissed.
The Commission's application
to insert section 8(c) as an alternative allegation to sections
8(a) and 9 of the Act in respect
of the same conduct as set out in
paragraphs 3, 6 and 7(b) of Annexure A to the Commission's Founding
Affidavit in the amendment
application is dismissed.
7. There is no order as to
costs.
N
Manoim
Concurring:
Y Carrim and T Madima
1
Section
8(a}
2
Section
9{1}
3
Section
8{c}
4
Mittal
Steel South Africa Ltd and others v Harmony Gold Mining Company Ltd
and others,
Case
No: 70/CAC/Apr07 which was released on 29 May 2009
5
See
Tribunal's Reason's Case No H/CR/Febr04, dated 17 January 2011
6
5
FA para 14 and 15.4.1 &2
7
AA
paras 5.2.1 -5.2.8
8
AA
paras 5.3.1-5.3.8
9
FA
para 17
10
AA
para 5.4.
11
Mittal
Supra.
12
AA
para 5.4.9
13
FA
para 18
14
AA
5.5. and especially 5.5.4 in relation to 8(c).