Competition Commission v Cytek Cycle Distributors CC (73/CR/JUL12) [2013] ZACT 39 (30 May 2013)

75 Reportability

Competition Law

Brief Summary

Competition — Settlement Agreement — Alleged contravention of section 4(1)(b)(i) of the Competition Act — Competition Commission initiating complaint against Cytek Cycle Distributors CC for engaging in price-fixing conduct — Cytek admitting to contravention and agreeing to cooperate with the Commission — Tribunal confirming the Settlement Agreement as an order, concluding all proceedings related to the alleged contravention.

Comprehensive Summary

Summary of Judgment

Introduction

The matter concerned an application to the Competition Tribunal for the confirmation of a consent (settlement) agreement as an order of the Tribunal in terms of the Competition Act 89 of 1998. The proceedings were not a contested hearing on the merits of the cartel allegations, but a request by the parties that their concluded settlement be made an enforceable Tribunal order.

The parties to the settlement were the Competition Commission of South Africa (applicant) and Cytek Cycle Distributors CC (respondent). The settlement also arose within a wider complaint referral involving Fritz Pienaar Cycles (Pty) Ltd and 19 others, being firms cited as respondents in the Commission’s broader referral under Tribunal case number 73/CR/JUL12.

Procedurally, the Tribunal heard the matter on 29 May 2013 and decided it on 30 May 2013, issuing an order that confirmed (as a Tribunal order) the consent agreement dated 12 March 2013, together with Annexure “A” dated 29 May 2013.

The general subject-matter of the dispute was an alleged contravention of section 4(1)(b)(i) of the Competition Act (cartel conduct), specifically price fixing or the fixing of trading conditions, arising out of interactions between participants in the cycling industry relating to pricing, mark-ups, discounting, and recommended retail prices.

Material Facts

The court record before the Tribunal (as reflected in the consent agreement and the Tribunal’s order) identified a sequence of events beginning with information received by the Commission in September 2008 from an anonymous source. This information concerned meetings allegedly held in Cape Town and Gauteng involving various cycling retailers and wholesalers, and included minutes of one such meeting. Those minutes were also said to have been posted on the “Hub Website”, a web-based forum for cycling enthusiasts, and related specifically to a meeting held on 10 September 2008 in Midrand.

According to the minutes referenced by the Commission, the September 2008 meeting discussed proposals aimed at increasing retailer gross margins, including increasing mark-ups for cycling accessories and bicycles; a proposed implementation date for price increases (from 1 October 2008); discouraging discounting and undercutting between shops; and encouraging wholesalers to provide higher recommended retail prices (RRPs) and to advertise these prices to the public.

On the basis of this information, the Commission initiated a complaint under section 49B on 5 March 2009 against Fritz Pienaar Cycles and Cycle Lab (now Melody Street 18 (Pty) Ltd). The Commission later obtained additional information implicating other firms and amended the initiation on 12 May 2009. Following an investigation, the Commission referred a complaint to the Tribunal on 25 June 2010 against 28 respondents (retailers and wholesalers), and later filed an amended notice of motion and supplementary referral affidavit on 12 November 2010. The Commission then withdrew this first referral on 10 June 2011.

A fresh complaint was initiated on 18 July 2011 under Commission case number 2011Jul0155, directed primarily at the September 2008 meeting allegations, and the Commission recorded that it received additional information from certain respondents during that investigation. Following the investigation, the Commission concluded that Cytek’s conduct, together with that of other respondents, constituted a contravention of section 4(1)(b)(i), and it decided to refer the complaint on 5 July 2012 to the Tribunal for determination.

In the settlement agreement, Cytek admitted that it had engaged in conduct amounting to a contravention of section 4(1)(b)(i). The settlement further recorded Cytek’s undertakings regarding cooperation with the Commission, including potential testimony and provision of information (to the extent in existence and within its possession or control), and commitments regarding future compliance measures (including refraining from cartel-related meetings and implementing compliance training).

Legal Issues

The central legal question before the Tribunal, as reflected in the order issued, was whether the Tribunal should confirm the parties’ consent agreement (including its annexure) as an order of the Tribunal under section 49D, read with sections 58(1)(b) and 59(1)(a) of the Competition Act.

The dispute before the Tribunal was therefore not a determination of contested factual allegations on cartel conduct. Rather, it concerned the application of statutory powers to an agreed procedural disposition: whether a concluded settlement agreement, containing admissions and undertakings, should be made binding and enforceable as a Tribunal order. To the extent the underlying complaint concerned cartel conduct, the settlement recorded an admission by Cytek of a contravention of section 4(1)(b)(i), but the Tribunal’s decision in this matter was directed to confirmation of the agreement rather than adjudication of liability on the basis of evidence.

Court’s Reasoning

The Tribunal’s reasoning is reflected concisely in its order. It recorded that it was asked to confirm the attached consent agreements as agreed to and proposed by the Commission and Cytek. The Tribunal’s approach was to exercise its statutory authority to confirm a consent agreement as an order of the Tribunal, as contemplated by the Competition Act provisions invoked by the parties in the settlement agreement.

The Tribunal confirmed both the main agreement dated 12 March 2013 and Annexure “A” dated 29 May 2013. The confirmation had the effect of giving binding force to the settlement’s operative provisions, including (as set out in the agreement itself) Cytek’s admission of contravention, its undertakings to cooperate with the Commission in relation to the prosecution of other respondents, its commitment to desist from the conduct complained of, its commitment not to participate in meetings aimed at cartel conduct, and its commitment to implement competition law compliance training for relevant personnel and to repeat and update training annually. The Tribunal’s order also confirmed the annexure providing for the display of a compliance notice in a prominent place at the firm’s premises for six months from the date of the Tribunal’s order.

No separate evaluative discussion of evidence or competing versions appears from the order; the Tribunal’s determination was confined to confirming the agreed terms as a Tribunal order.

Outcome and Relief

The Tribunal confirmed the consent agreement between the Competition Commission and Cytek Cycle Distributors CC as an order of the Tribunal. The order expressly confirmed (i) the main agreement dated 12 March 2013, and (ii) Annexure “A” dated 29 May 2013.

The Tribunal’s order, as provided, did not set out a separate costs order.

Cases Cited

No cases were cited in the Tribunal order or in the attached consent agreement text provided.

Legislation Cited

Competition Act 89 of 1998 (as amended), including sections 4(1)(b)(i), 19, 22, 26, 49B, 49D, 58(1)(b), and 59(1)(a).

Rules of Court Cited

No rules of court were cited in the Tribunal order or in the attached consent agreement text provided.

Held

The Competition Tribunal held, by order dated 30 May 2013, that the consent agreement concluded between the Competition Commission and Cytek Cycle Distributors CC should be confirmed as an order of the Tribunal, including the principal settlement agreement dated 12 March 2013 and Annexure “A” dated 29 May 2013 (providing for the display of a compliance notice for six months).

LEGAL PRINCIPLES

A consent (settlement) agreement concluded between the Competition Commission and a respondent firm in relation to alleged prohibited practices may be placed before the Competition Tribunal for confirmation as an order of the Tribunal in terms of section 49D, read with sections 58(1)(b) and 59(1)(a) of the Competition Act 89 of 1998.

Conduct consisting of an agreement or concerted practice between firms in a relevant line of business to directly or indirectly fix prices or trading conditions constitutes prohibited cartel conduct contemplated by section 4(1)(b)(i) of the Competition Act; in this matter, the settlement recorded an admission by Cytek that its conduct amounted to such a contravention, and the Tribunal confirmed the settlement embodying that admission and associated compliance undertakings as an enforceable order.