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[2013] ZACT 93
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Chitando v Fitzgerald and Others, Chitando v Webber Wentzel and Others (016550, 016568) [2013] ZACT 93; [2013] 2 CPLR 507 (CT) (19 September 2013)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case
No: 016550
In the matter between:
SIMBA
CHITANDO
...........................................................................................................
Applicant
And
MICHAEL
FITZGERALD
.......................................................................................
First
Respondent
RUSSEL
MACWILLIAM
..................................................................................
Second
Respondent
MICHAEL
WRAGGE
............................................................................................
Third
Respondent
Case
No: 016568
And the matter
between:
SIMBA
CHITANDO
............................................................................................................
Applicant
And
WEBBER
WENTZEL
.............................................................................................
First
Respondent
BOWMAN
GILFILLAN
.....................................................................................
Second
Respondent
SHEPSTONE
WYLIE
...........................................................................................
Third
Respondent
NORTON
ROSE
.................................................................................................
Fourth
Respondent
Panel:
Norman
Manoim (Presiding Member)
Andiswa
Ndoni (Tribunal Member)
Imraan
Valodia (Tribunal Member)
Heard
on:
19 August 2013
Order
issued on:
19 September 2013
Reasons
issued on
:
19 September 2013
Decision
and order
Introduction
[1]
Maritime law is considered a specialist area amongst practitioners
both at the bar and in the attorneys’ profession. As
a result a
handful of practitioners in both branches of the profession command a
major share of the instructions received. A notable
feature of the
pattern of briefing is the absence of African lawyers, in particular
African advocates, as recipients of such instructions.
It would
appear from the evidence in this case that at least at the Cape Bar
no African advocate has been briefed in such matters
at the time this
application was brought. That this is an unhealthy state of affairs
that requires remedial action is self-evident.
However this case is
about something far more modest.
[2] Given that the Competition
Tribunal (“Tribunal”) is a creature of statute that must
act within the powers conferred
upon it by the Competition Act
(“Act”), the question we have to decide is whether the
social exclusion alleged by the
Applicant is to be remedied by the
instrument of Competition law.
[3] In this
application, which is for interim relief, Simba Chitando (herein
referred to as the “Applicant”) is an African
advocate of
Zimbabwean nationality, practising as such at the Cape Town Bar. He
holds an L.L.B degree, an L.L.M degree in Commercial
Law, with
Maritime Law being one of his elected courses. He received exposure
to the work of an Advocate in general as well as
shipping litigation
under the mentorship of the third respondent in the Advocates’
case. He was then admitted as an Advocate
at the Cape Bar in 2009.
1
[4] Ordinarily in a prohibited
practice case the race or nationality of an applicant would not be
relevant factors. In this case
they are because the Applicant alleges
that these attributes form the rationale for anti-competitive
exclusion of persons in his
class from briefs in shipping law
matters.
[5] The
Applicant has brought two separate applications for interim relief.
In the first he cites as respondents, namely Michael
Fitzgerald SC,
Russel
Macwilliam SC and Michael Wragge
SC. All three are prominent advocates at the Cape Town bar and are
regarded as experts in the field
of shipping law. All three are white
males. We will refer to this aspect of the case as the ‘Advocates’
case.
[6] In the Advocates’ case the
Applicant alleges that all three respondents have contravened
sections 4(1 )(a), 4(1 )(b)(ii),
5(1) and 8(c) and 8(d)(i) of the
Act.
[7] In the second matter, the
Applicant cites four law firms as the respondents, namely Norton
Rose, Bowman Gilfillan, Webber Wentzel
and Shepstone & Wylie. The
four firms all have significant shipping law practices that involve
representing clients in this
area of law, inter alia in the Cape
Courts, which entails them briefing from time to time, when
appropriate, counsel from the Cape
Town Bar. We will refer to this
aspect of the case as the ‘Attorneys’ case. In the
Attorneys’ case, the Applicant
alleges that all four
respondents have contravened sections 5(1), 8(c) and 8(d)(i) of the
Act.
[8] Although the Applicant had brought
the Advocates and Attorneys cases as separate applications, by
agreement they were consolidated
into one matter. Since then he has
settled with two of the respondents Bowman Gilfillan and Webber
Wentzel, respectively the second
and third respondents. The nature of
the settlement was not made known to the Tribunal and hence we need
not consider it further.
It remains for us to consider his
application in respect of the three advocates and two remaining law
firms, Shepstone Wylie and
Norton Rose.
Relief Sought
[9] The
Applicant is requesting that the Tribunal grants an order which will
interdict and restrain the respondents in the Advocates’
case
and the Attorneys’ case from racial and xenophobic horizontal,
vertical and abuse of dominance restrictive practices,
so that the
Respondents select juniors with
shipping
law background equally without prejudice as to race or nationality,
and that the Applicant be included in this pool of
junior advocates.
2
Competition
Act
[10] The
provision expressly dealing with interim relief applications in the
Act is section 49 C. In assessing an interim relief
claim, the
Tribunal is required to take into account (i) the evidence relating
to the alleged prohibited practice, (ii) the need
to prevent serious
or irreparable harm to the applicant, and (iii) the balance of
convenience between the parties. As regards to
the type of harm that
the applicant must show, it has been held that, the harm must be a
competition harm arising out of the contravention
of the Act.
3
The standard of proof required of an application proceedings under
section 49C is that applicable to interim interdicts in the
High
Court, namely that the applicant must show
prima
facie
proof of entitlement to his or
her relief. We shall discuss these two cases below, so as to
ascertain whether the applicant is
entitled to the relief sought in
both cases.
Advocates’
case
Section 4(1 )(a) and Section 4(1
Xb) (ii)
[11] Section 4(1 )(a) of the Act
prohibits an agreement or concerted practice by firm or decisions by
an association of firms in
a horizontal relationship which have the
effect of substantially preventing or lessening competition in a
market, unless it can
be proved that there are technological
efficiency or other pro- competitive gains resulting from the
practice which outweighs the
anticompetitive effect.
[12] Section 4(1 )(b)(ii) prohibits an
agreement or concerted practice by firm or decisions by an
association of firms in a horizontal
relationship or concerted
practice by association in a horizontal relationship if it involves
dividing markets by allocating customers,
suppliers, territories or
specific types of goods or services.
[13] The
Applicant in his papers submits that there is an agreement amongst
the Respondents in the Advocates’ case to keep
the poo! of
advocates that compete for shipping law briefs small by choosing only
among a privileged class of juniors of the same
race and descent as
the Respondents and excluding juniors that do not fit this class. The
Respondents he submits are white, and
of British descent, and so are
the juniors that they brief.
4
[14] The
Applicant further submits that the Respondents have an agreement, or
practice amongst themselves to substantially exclude
and lessen
competition by selecting a small group of junior advocates at the
Cape Bar, namely Roy Gordon, Daryl Cooke, James McKenzie
and Pieter
Van EedenfFavoured Juniors”),
5
He submits further that that there is no technical, efficiency, or
other pro-competitive gain that justifies the Respondents’
inclusion of others and exclusion of himself.
[15] The Respondents denied any
existence of an agreement amongst them and submitted that the
Applicant has no factual basis for
this allegation.
[16] That the advocates in this case
are in a horizontal relationship is not in dispute.
[17] In order to sustain a case under
section 4(1), the Applicant must make out a case that there is an
agreement or concerted practice
in place between the advocates.
[18] An
agreement arises from the actions of and discussions among parties
directed at arriving at an arrangement that will bind
them either
contractually or by virtue of moral suasion or commercial interest.
It may be a contract which is legally binding,
or an arrangement or
understanding that is not, but which parties regard as binding upon
them. The definition of an agreement extends
the concept beyond a
contractual arrangement. However, what it requires is still a form of
arrangement that the parties regard
as binding upon themselves and
the other parties to the agreement.
6
To prove existence of an agreement the Applicant alleges that he has
seen the Respondents socialise together at the Maritime Law
Association (“MLA”) functions, and other bar events, and
openly discuss the juniors they prefer working with. He alleges
further that Respondents have a long working history in shipping law.
They are in and out of each other’s offices. This he
submits
gave him the impression that there is a horizontal relationship that
one could reasonably infer that there is an understanding
among
them.
7
[19] The
Applicant further alleges that the Respondents allocate briefs in the
market to competitors in the market for shipping
law work with whom
they are most comfortable with regardless of qualifications. He
submits that by virtue of the Respondents’
relationship over
the years, they entered into an arrangement to divide the market for
shipping law briefs in Cape Town for members
of the Bar of a specific
racial demographic profile. This he submits amounts to dividing the
market.
8
[20] The allegations made by the
Applicant to prove that an agreement exists to satisfy the
requirements of both Section 4(1 )(a)
and (b) fall short of the
standard to be met. Our decision is that the applicant has not made
out a case for an existence of an
agreement or a concerted practice
even by way of inference. As regards to s4(1)(b) even if it were
accepted that the Respondents
had the capacity to allocate work to
certain juniors, which the Respondents deny, the vertical allocation
of work from a senior
colleague to a junior one, would not fall
within the definition of agreements aimed at allocating markets
between competitors.
In the absence of an agreement, there is no need
to deal with the question of adverse effect on the competition.
Section 5(1)
[21] Section 5(1) of the Act provides
that an agreement between parties in a vertical relationship is
prohibited if it has the effect
of substantially preventing or
lessening competition in a market, unless a party to the agreement
can prove that any technological,
efficiency or other competitive
gain resulting from that agreement outweighs that effect.
[22] Regarding
this allegation the Applicant submits that the Respondents have
prohibited vertical relationships with the partners
of the major
shipping law firms in Cape Town. The relationship, he alleges, is
used to create vertical restraints to prevent Africans
like him, from
accessing the shipping briefs in the market.
9
[23] The
Applicant further alleges that this vertical relationship described
above has been used by the respondents to unlawfully
restrict the
market by creating an exclusive club of lawyers (attorneys and
advocates) that work on shipping law briefs.
10
In addition to this, the Applicant submits that during his mentorship
under the third respondent, the third respondent had the
pick of the
juniors he wanted to work with him. The partners in the big law firms
and other attorneys, looked to the third respondent
to decide, who
was on the list of juniors to be briefed and who was not.
11
Thus the Applicant submits that if the third respondent wanted to
help him break in the industry he could have done so.
[24] However,
the third respondent denies that he ever offered to “break the
Applicant into the industry”, and further
submits that all he
did was to merely introduce the Applicant to fellow members of the
profession and members of
MLA.
12
[25] The third
respondent denies having any power to exclude any advocate in the
alleged product market of the Applicant, being
the Shipping Law
industry.
13
[26] The
Applicant’s allegation of the third respondent’s power in
the industry is based on his submission that the
third respondent was
the Chairman of MLA in 2012, Deputy Chair in 2011 and that the major
firms are represented at the MLA. Thus
his position at MLA gives him
a unique vertical relationship with these firms that other Advocates,
like him (Applicant) do not
have.
14
The Applicant’s allegation of an existence of a vertical
relationship is further supported by his submission of an incident,
whereby an unnamed African person who works at one of the law firms
cited as Respondents in the current case, told him that these
firms
have a list. The respondents are on top of the list and the juniors
the respondents endorse follow on the list. This to him
suggests a
vertical relationship between the respondents and the law firms.
15
[27] Again the
Respondents deny any existence of such list, and further submit that
because the person is unnamed, they do not wish
to comment any
further.
16
[28] Finally,
the Applicant submits in his replying affidavit of the Advocates’
case, that the alleged vertical relationship
could exclude groups
such as Africans and foreigners when prejudiced silks are involved.
17
[29] Again, we conclude that the
Applicant has failed to submit evidence of the existence of an
agreement and has rather based the
existence of an agreement from his
own inferences. The applicant has not adduced evidence to show
existence of an arrangement that
the parties regard as binding upon
themselves and the other parties to the agreement.
Abuse of Dominance
[30] Section 8(c) prohibits a dominant
firm to engage in an exclusionary act if the anti-competitive effect
of that act outweighs
its technological, efficiency or other
pro-competitive, gain or
[31] Section 8(d)(i) prohibits a
dominant firm from requiring or inducing a supplier or customer to
not deal with a competitor,
unless the firm concerned can show
technological, efficiency or other pro-competitive, gains which
outweigh the anti-competitive
effect of its act.
[32] The prohibition against the abuse
of dominant position does not apply to all firms. A firm must be
dominant in a market for
a prohibition to find application.
[33] With
regards to the abuse of dominance allegations, the Applicant submits
that the Respondents are dominant individuals in
the market for
shipping law briefs in Cape Town. They have abused their dominance,
to his detriment, by engaging in exclusionary
acts generally, and
more specifically, including law firms that practise shipping law not
to deal with him.
18
[34] The
Respondents deny that they are dominant and have submitted in their
papers that in as much as they do receive shipping
briefs, the briefs
they receive are only a few of such shipping briefs.
19
Respondents
deny that they have abused their dominance and, submit that they
cannot be held to have abused that which they don’t
have.
[35] The
Applicant goes further to submit that it is common knowledge in the
shipping industry that the Respondents have market
power, such
evidence he submits, can easily be procured by an investigation in
the briefing patterns of the major law firms that
practise shipping
law.
20
At the hearing the Applicant submitted that:
[36]
“
The
term silk in itself attaches a form of dominance”. They are
very much dominant just by being silks and more dominant by
being the
silks that are known in the market place as the top silks. That is
what makes them dominant’
.
21
[37] In support of the section 8(d)(i)
contravention the Applicant submits that the Respondents, by choosing
to deal with white
juniors to the exclusion of African lawyers with
sufficient qualifications, have deliberately induced law firms
practising shipping
law not to deal with African Advocates.
[38] To this the
Respondents also deny the Applicant’s allegations of abuse of
dominance in contravention of S8(d)(i).
22
[39] For the Applicant to establish an
abuse of dominance, he must first establish that each Respondent is
dominant, in order to
do that he must identify the relevant market.
Without a definition of the market there is no way to measure a
firm’s ability
to lessen or destroy competition.
[40] The Applicant has not attempted
to engage in a proper market definition exercise or to provide
evidence to the Tribunal why
he defines the market as the “market
for shipping law briefs”. He has not told us how big he
considers the relevant
market to be, what percentage of that market
he considers the Respondents to have or what facts and circumstances
warrant the conclusion
that the Respondents enjoy market power within
the defined market.
[41] The Respondents submitted that
there is no market for “shipping law briefs” and that
shipping law is but one area
of the law in which all advocates
compete with each other for work.
[42] As to the
geographical extent of the market, the Respondents submitted that
counsel who practice in other areas of the country,
notably KwaZulu
Natal, are briefed in “shipping matters” heard in Cape
Town.
23
They argue further that the instructing attorneys are spread
throughout South Africa and so called shipping matters emanate from
attorneys practising in KwaZulu Natal, Eastern Cape, Gauteng and
Namibia as well as Cape Town.
[43] They submit that the relevant
market for purposes of this application must be taken to be the
market for the provision of legal
services by advocates in the
Republic of South Africa.
[44] In our
previous decision we have held that where the Tribunal is not
presented with a persuasive view of the relevant market,
or if there
is a failure to properly identify the relevant market, it is not
possible to make a finding of dominance, a necessary
precursor to
proving a claim under section 8 of the Act.
24
[45] We are therefore unable to make a
finding that each of the Respondents are dominant, let alone that
they abused their dominance.
[46] In the absence of evidence to
prove dominance by the Respondents there is no need to deal with the
question of inducement of
customers and resultant exclusion of the
Applicant.
The
Attorneys’ case
Section 5(1)
[47] The
Applicant submits that the Respondents
25
in the Attorneys’ case, by virtue of the vertical relationship
between them and the silks in the Advocates’ case are
contravening the Act.
[48] The
Applicant submits in his founding affidavit that the best evidence to
prove that there is a vertical relationship between
the Respondents,
and the elite group of white advocates, is the briefing patterns they
have with advocates at the Cape Bar. One
of the attorneys who work
for the Respondents told him that they (Attorneys) have a policy to
brief Advocates on a special list
of white advocates endorsed by the
advocates cited as Respondents in the Advocates’ case.
26
However,
the alleged attorney and law firm is not named by the Applicant
[49] The Respondents are alleged to
have a “longstanding understanding” with the advocates by
which they exclude the
Applicant from shipping law briefs.
[50] For the Applicant to succeed in
this case, he is required to allege an agreement between the
Respondents and the three advocates,
the effect of which is
significantly to prevent or lessen competition in a market. There is
no evidence of the terms of an express
agreement, nor can any
evidence from which one could infer the existence of such an
agreement is implied.
[51] The Applicant has made no
allegation that supports the conclusion that there is in existence an
agreement.
Abuse of Dominance
[52] With
regards to the abuse of dominance allegation, the Applicant alleges
that the Respondents are dominant in the market to
sell shipping law
services to shipping insurance companies, and other companies
involved in the shipping industry. He goes on to
further submit that
they have abused their dominance by specifically refusing to deal
with him, whilst dealing with his competitors
instead and as such
this has devastated his practice
27
[53] The Respondents all deny being
dominant in the alleged product market of the Applicant.
[54] The
Applicant also submits that the Respondents have an arrangement to
use their dominance, to work with a small group of advocates,
within
MLA and the Bar, who belong to a particular demographic and exclude
others like him. He submits the reason for this to be
due to the
Respondents’ aim of maintaining the
status
quo
of racial subjugation and
economic dominance by white advocates in the lucrative market of the
legal practice.
28
[55] Similar to
the Advocates’ case, the Applicant has not attempted to engage
in a proper market definition exercise. He
has simply asserted
without any supporting evidence that the Respondents are “dominant
in the market to sell shipping law
services to shipping insurance
companies and other companies involved in the shipping industry.
29
At the hearing, the Applicant submitted:
[56]
“
The firms are dominant by their own market
power. They have tremendous market power. If is hard to prove,
because I don't have the
details of exactly how much money Norton
Rose makes or has or is worth to say that they are dominant or what
section of the market
they command.”
30
[57] In the absence of evidence to
substantiate dominance we are unable to make a finding that the
Respondents are dominant let
alone abused their dominance.
[58] The
Applicant further alleges that “the cited firms have abused
their dominance in the market by inducing their clients,
the primary
consumer of legal services, not to deal with me, but instead to deal
exclusively with my competition, the superior
race and nationality”.
31
[59] Although we have indicated that
we are unable to make a finding of dominance, a prerequisite to a
finding of abuse, there is
yet a further weakness in the Applicant’s
case even if he had crossed this hurdle. We point out that section 8
(d) (i) prohibits
a dominant firm from requiring or inducing a
supplier or customer to not deal with a competitor. The Respondents
submit that if
on his own case the Applicant is not a competitor of
the Respondents, then the conduct of which he complains of, which is
denied,
is not prohibited by section 8(d)(1). This is because the
Applicant is a potential supplier to the law firms and not a
competitor.
Balance
of Convenience
[60] As submitted above, the Applicant
has failed to establish a prima facie right, as a result thereof the
balance of convince
does not favour him.
Irreparable
Harm
[61] The
Applicant has failed to prove that he will suffer irreparable harm if
the interim relief he seeks is not granted. This
is supported by his
submission that he has managed to keep his practise abreast for three
years despite having received no shipping
law briefs.
32
The Applicant further submitted that:
[62]
“
I
can confidently say that
during my years at the Cape Bar I have been fortunate enough to work
on high profile briefs led by some
of South Africa’s most
prominent silks
".
33
Conclusion
[63] For all the above reasons, we
conclude that in both cases the Applicant has not made out a case for
the contravention of the
Act on which he relies. He has not come
close to satisfying the requirements of making a case out in
competition law and therefore
his application for interim relief is
dismissed.
[64] As we indicated in our
introduction, the skewed briefing patterns are an issue that require
remedial action. Unfortunately
it is not an issue that can be
remedied through the Act. During the hearing, the Applicant was asked
whether he had considered
taking the issues of social exclusion,
which are real issues, to the Equality Courts. In our view the
Applicant stands a better
chance in the Equality Court which has
jurisdiction over such issues.
Costs
[65] Normally in an interim relief
application costs ordinarily follow the outcome of the case, thus the
Applicant is liable for
all the Respondents’ costs on the party
and party scale. Given that this was not a case of any complexity
there is no reason
for any respondents to have employed more than one
counsel.
ORDER
1.
The applications in case number 016550 and case number 016568 are
dismissed.
2.
The applicant is liable to pay the costs of the first to third
respondents in case number 016550 and the third to fourth respondents
in case number 016568 on a party and party scale but limited to the
costs of one counsel.
ANDISWA
NDONI
19
September 2013
Date
Norman
Manoim and Imraan Valodia concurring.
Tribunal
Researcher: Caroline Sserufusa
For
the Applicant: Simba Chitando on his behalf
For
the Advocates: Advocate Brassey SC instructed by Cliffe Dekker
Hofmeyr
Inc.
For
the 3
rd
Respondent: Advocate Alfred Cockerel SC instructed by
Shepstone
& Wylie
For
the 4
th
Respondent: Advocate Lwandile Sisilana instructed by Cliffe
Dekker
Hofmeyr Inc.
1
See
Applicant’s Replying Affidavit in Attorneys’ pleadings
bundle at page 209-211 respectively.
2
See
Applicant’s Heads of Argument at para 4 page3.
3
Nyobo
Moses Malefo & Others v Street Pole Ads (SA) (Pty) Ltd, Case No:
35/IR/May05 at para 35 page 12.
4
See
Applicant’s founding affidavit in the Advocates’
pleadings bundle at para 21 page 11.
5
Ibid
at para 23 page 12.
6
Netstar
(Pty) Ltd & Others v Competition Commission & Ano [2011 ]1
CPLR 45 (CAC) at para 25 page 15.
7
See
Applicant’s founding affidavit in the Advocates’
pleadings bundle at para 32 page13.
8
Ibid
at para 48 page 17.
9
See
Applicant’s founding affidavit in the Advocates' pleadings
bundle at para 47 page 17.
10
Ibid
11
Ibid
at para 55 page 18.
12
See
Respondents’ answering affidavit in the Advocates’
pleadings bundle at para 127.2 - 127.3 page 78.
13
Ibid
at para 128.4
14
See
Applicant’s founding affidavit in the Advocates’
pleadings bundle at para 57 page 18-19.
15
Ibid
at para 58 page 19.
16
See
Respondents’ answering affidavit in the Advocates’
pleadings bundle at para 129.1-129.2 page 79.
17
See
Applicant’s replying affidavit in the Advocates’
pleadings bundle at para10.3 page 141.
18
See
Applicant’s founding affidavit in the Advocates’
pleadings bundle at para 61 page 20.
19
See
Respondents’ answering affidavit in the Advocates’
pleadings bundle at para 133 page 80.
20
See
Applicant’s founding affidavit in the Advocates’
pleadings bundle at para 65 page 20.
21
See
Transcript of hearing at page 31.
22
See
Respondents’ answering affidavit in the Advocates’
pleadings bundle at para 137 page 81.
23
Ibid
at para 31 page 41.
24
Cancun
Trading no 24 CC and Others v Seven-Eleven Corporation South Africa
(Pty) Ltd Case No: 18/IR/Dec99, at para 32 page 8.
25
Please
note: any reference made to Respondents under the heading Attorneys’
case refers to the four law firms cited as respondents
at para 7
above.
26
See
Applicant’s founding affidavit in the Attorneys’
pleadings bundle at para 33, page 13.
27
See
Applicant’s founding affidavit in the Attorneys’
pleadings bundle at para 41 page 15.
28
See
Applicant’s founding affidavit in the Attorneys’
pleadings bundle at para 44 page 16.
29
Ibid
at para 11 page 9.
30
See
Transcript of hearing at page 30.
31
See
Applicant’s founding affidavit in the Attorneys’
pleadings bundle at para 47 page 17.
32
See
Applicant’s replying affidavit in the Attorneys’
pleadings bundle at para 27-32 at pages 211 -212.
33
Ibid
at para 8 page 205,