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[2013] ZACT 103
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Venter v Law Society of the Cape of Good Hope and Others (014688) [2013] ZACT 103; [2013] 2 CPLR 477 (CT) (14 October 2013)

COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case
No.: 24/CR/Mar12 (014688)
In
the matter between:
Johan
Venter
Complainant
and
The
Law Society of the Cape of Good Hope
Respondent
The
Law Society of South Africa
First
Third Party
The
Competition Commission
Second
Third Party
Panel
Norman
Manoim. (Presiding Member)
Andreas
Wessels (Tribunal Member)
Takalani
Madima (Tribunal Member)
Heard
on
20
August 2013
Order
issued on
14
October 2013
Reasons
issued :
14
October 2013
DECISION
1.
This case involves the question of whether a rule of a professional
association, the Law Society of the Cape of Good Hope, contravenes

section 4(1) of the Competition Act, Act 89 of 1998 (“the Act”)
which prohibits horizontal agreements i.e. agreements
between
competitors that restrain competition.
2.
To decide this case we first have to determine a dispute as to
whether the rule in question is subject to section 4(1) of the
Act
and then, if we find that it does, which of the two sub-sections of
section 4(1) applies, for they involve different legal
burdens for
the party alleging the illegality of the rule, as we go on to
discuss.
1
BACKGROUND
3.
This case comes to us via an unusual route. It emanates from a
referral to us by the High Court in the Western Cape in terms
of
section 65(2)(b) of the Act.
2
That section states that if a question arises in a civil trial
concerning conduct that might be anti-competitive, and if it would
be
decisive in determining a civil dispute to determine the legality of
that conduct under the Act, the Court should, if requested,
refer the
matter to the Tribunal to decide.
3
What the Tribunal decides in this process, is not the dispute before
the civil court, but the legality, in terms of the Act, of
the
conduct referred to it. The reason this circuitous route has to be
followed is that the Tribunal and the Competition Appeal
Court
(“CAC") have exclusive jurisdiction over such matters and
hence a civil court cannot decide the issue of the legality
of the
conduct under the Act.
4
4.
In this case the High Court was considering an application to have an
attorney, Johan Venter, the applicant in this matter, stuck
off the
role at the behest of his Law Society, the Law Society of the Cape of
Good Hope (the “CLS”). Venter currently
practises as a
sole practitioner in Somerset West.
5.
In brief, a complaint had been laid against Venter by his erstwhile
clients in a Road Accident Fund (“RAF”) case,
in which
his firm had initially represented them. Venter, it is common cause
had acquired these instructions through the medium
of a consultant, a
certain Ms Lindveldt, who was not an attorney, but in the language of
the CLS’s rule, which we consider
later, a ‘non-qualified’
person. Lindveldt had allegedly solicited the instruction for Venter
whilst visiting the clients
in hospital
5
.
At some stage the clients became dissatisfied with Venter’s
services and terminated his instructions and briefed a new attorney.

The other attorney assisted the clients in lodging a complaint
against Venter with the CLS.
6.
The CLS instituted an enquiry and having found Venter had contravened
its rules that prohibit ‘touting’ and overreaching
6
brought an application to the Cape High Court to have him struck off
the roll in terms of section 22 of the Attorneys Act.
7
The Court concluded, as appears from its judgment, that due to
disputes of fact - these being application proceedings - the charge

based on overreaching had not been established.
8
However the Court held that the charge of ‘touting’ could
be established on the facts of the respondent’s (Venter’s)

version and thus on common cause facts. The Court sets these out in
the following passage:
“
Accepting
that Ms Lindveldt worked as independent consultant the respondent
[Venter] appears to concede that the express or tacit
arrangement or
scheme of operation that he had with her had the result or potential
result that professional work
was
secured
for him which
was
solicited
by Ms Lindveldt, being an ‘unqualified
personMoreover,
in terms of that arrangement or scheme, she would enjoy, share or
participate in fees or other charges for professional work or

earnings or commission from the supply or any commodity, service or
facility. On his own version, therefore, the respondent’s
[Venter’s]
arrangement
with Ms Lindveldt appears to fall foul of the provisions of the
applicant’s
[CLS’]
Rule
14.6.1 read with the Ruling of 26 August 2002.’’
9
7.
In the course of this High Court litigation Venter indicated that he
would assert that the provisions of the CLS’s Rule
14.6.1 were
in conflict with the Competition Act and hence were not enforceable
against him. It was indicated to the Court that
the rule in question,
had been the subject of a prior, but unsuccessful, application for
exemption made by the Law Society of South
Africa (the “LSSA”),
(the umbrella association of attorneys’ societies to which the
CLS is affiliated) to the
Competition Commission (“Commission”).
Whilst there was some disagreement between Venter and the CLS about
what the
implications of the refusal were for the purpose of the rule
in
casu,
the Court was quite clear that there had been no ruling on this point
by either the Tribunal or the Competition Appeal Court and
hence this
meant that their validity had not yet been determined. Because the
Court was precluded from making this determination
it referred the
matter to the Tribunal in the following terms.
“
In
terms of
section 65(2)
of the
Competition Act, 89 of 1998
, the
question as to whether or not the provisions of the applicant’s
Rule 14.6.1 and its Ruling of 26 August 2002 are prohibited
in terms
of the Act is referred to the Competition Tribunal.”
10
8.
Hence with the failure of the other charges against him, Rule 14.6.1
becomes the crucial hurdle for Venter to overcome in mounting
his
defence against the striking off application, which explains why the
matter comes before us.
RULE
IN QUESTION
9.
The rule subject to challenge is rule 14.6.1 of the rules of the CLS,
the relevant part of which states:
“
14.6.1
A member shall not directly or indirectly enter into any express or
tacit agreement, arrangement or scheme of operations,
the result or
potential result whereof is:
14.1.6.1.1.to
secure for the member professional work solicited by an unqualified
person; and/or
14.1.6.2.
that an unqualified person will enjoy, share or participate in fees
or other charges for professional work or earnings
or commissions
from conducting auction sales, the sale or letting of immovable
property
,
the
sale or other supply of any commodity, service or facility, the sale
of insurance or work on behalf of a bank, unless such unqualified

person is in the full time employ of such member.”
10.
This rule has since been amended, but it is common cause that for the
purpose of our present decision we should confine ourselves
to the
rule as it was at the time of the alleged contravention. Note that
although this rule is commonly referred to as the ‘no
touting
rule’, no reference to the term ‘touting’ appears
in the rule. (During the course of argument, it was
common cause that
we should only determine the validity of the rule 14.6.1. The ruling
of the CLS of August 26 2002 which the High
Court refers to, was
simply the CLS’s interpretation of the rule i.e. a guidance
note, and could not affect its validity.
We have not therefore
considered the terms of this ruling further.)
OUR
PROCEEDINGS
11.
Venter duly referred the case to the Tribunal in accordance with the
High Court’s directive. The CLS opposed the case.
Pleadings
closed and a hearing of oral evidence was held onthe14
th
and
15
th
November 2012. Each side called only one witness. Venter called
Nicolaas Terblanche, a professor from Stellenbosch University,
who
specialises in marketing, whilst the CLS called Phillip Sutherland, a
law professor from the same university, who specialises
in
competition law.
12.
With final argument due to begin, Mr Koen who appeared for the CLS,
advised the Tribunal that he wished to raise an
in
limine argument
regarding the application of section 4(1) of the Act to the rules of
the CLS.
11
As we had heard in the course of these proceedings that the LSSA had
been involved in negotiations with the Commission for an exemption

from the Act for its affiliates rules, and that central to the issues
between them was the status of rules against touting - the
objective
apparently of the rule in question in this case - we therefore felt
it appropriate to require the joinder of the Commission
and LSSA, to
enable them to address argument on this issue if they wished. As it
was, both took up the opportunity and submitted
heads of argument.
13.
On 20 August 2013, the hearing resumed and we heard argument from all
four parties.
14.
We have approached these reasons by considering each of the issues
raised in a logical sequence i.e. moving from questions of

jurisdiction, to those of application and then finally to the merits,
and at each step, considering the respective arguments made
by the
parties which addressed them.
WHOSE
CONDUCT HAS BEEN REFERRED
15.
In oral argument the Commission argued that the conduct referred was
not the rule of the CLS but the conduct of Venter. None
of the other
parties agreed with this approach. Nor do we. The conduct raised is
conduct allegedly in violation of the Act. That
conduct, which was
raised as an issue by Venter, was the CLS’ rule and it is this
conduct, not Venter’s that clearly
was the subject of the
referral. The Court’s decision is quite clear on this.
12
DOES
THE ACT APPLY—THE JURISDICTION POINT
16.
An initial argument that it appeared the CLS was going to address,
was that the Act did not apply to rules of the CLS, because
the CLS
is a regulatory authority and that its rules therefore have the
character of public regulation. At one time,
“...acts
subject to or authorised by pubiic regulation” were
excluded from the ambit of the Act.
13
Since an amendment to the Act in 2000, this exclusion was deleted and
replaced with a regime of concurrent jurisdiction.
14
17.
The argument, the logic of which was difficult to follow, appears to
contend for two consequences of this. Because there is
now concurrent
jurisdiction, where the Law Society makes rules pursuant to powers
given to it under the Attorneys Act, it acts
as regulatory authority
making public regulation. Where it makes a rule, an attorney is
subject to it, as it has the force of law.
If the same rule also
conflicts with the Act, they appear to argue that the rule cannot be
set aside by the Tribunal because such
a declaration would be
ultra
vires
given that only courts can strike down laws in terms of the
Constitution.
15
18.
The logic of this argument seems to be that once one regularity
authority makes a rule over an area of concurrency the other

authority must respect this and not strike it down. Then there
appears to be a separate but unrelated argument of constitutional

competence.
19.
Neither of these arguments is correct. Concurrent jurisdiction
suggests an authority has jurisdiction over a sphere of activity
but
shares it with another and hence the term concurrency. It does not
suggest jurisdiction is ousted by the one in favour of the
other -
quite the contrary. Secondly, the Act makes it clear that concurrency
exists in respect of a regulatory authority which
has jurisdiction in
respect of the conduct regulated in terms of Chapters 2 and 3 of the
Act i.e. competition matters.
20.
As the Supreme Court of Appeal has noted in the
Telkom
case,
“
Concurrent
jurisdiction exists only where the other regulatory authority has the
competence to adjudicate the competition aspects
of the conduct. ”
16
21.
There is nothing in the Attorneys Act which grants such a competition
competence to Law Societies; the mere fact that societies
may
regulate their members does not mean that they regulate conduct
referred to in Chapters 2 and 3 of the Act. But even if they
do have
such authority, concurrent jurisdiction does not mean such authority
is ousted, absent some express intention to do so.
As we go on to
show in the next section, a schedule to the Act contains a provision
dealing with a regime for the exemption of
rules of professions from
the Act. Why would such a schedule have been inserted unless the
clear legislative intention was that
such rules would be subject to
the Act? Nor is the argument based on the Constitution correct. The
provision applies only to the
constitutional validity of Acts of
Parliament and provincial authorities, not to rules made pursuant to
a statutory mandate where
the challenge is based on the provisions of
the Act, not the Constitution.
22.
This argument was not pursued further in oral argument, but because
it was unclear if it had been abandoned, we have dealt with
it. We go
on to consider in greater detail an argument advanced by both the CLS
and LSSA about the application of section 4(1)
which was pursued by
both in oral argument.
DOES
SECTION 4(1) APPLY TO RULES OF A LAW SOCIETY?
23.
The further argument about application advanced by the LSSA and the
CLS is a narrower one.
17
They do not suggest that the Act does not apply to rules made by Law
Societies pursuant to the Attorneys Act, as did the previous
argument
of the CLS.
18
Rather, they argue that only section 4(1) - at least insofar as it is
relied upon by Venter in this case - is not of application.
24.
To follow the argument we must first examine the text of section 4(1)
of the Act.
25.
Section 4(1) prohibits two forms of horizontal conduct, sometimes
referred to as the
per
se
offence and the
rule
of reason
offence.
19
26.
The Law Societies argue, correctly, that the essential prerequisite
for either contravention is that the horizontal practice
subject to
challenge must take the form of an agreement, a concerted practice
or
a decision by an association of firms.
27.
Venter alleges that the rule Is a rule of the CLS and since it is an
association of competitor firms, the rule subject to challenge,

constitutes a decision of an association of firms.
20
28.
The Law Societies argue that the rules of a law society, made
pursuant to the empowering provisions of the Attorneys Act, do
not
constitute a decision of an association of firms.
29.
They offer several reasons for this argument. In the first place, the
rules are not decisions as they are made pursuant to a
statutory
mandate. The Law Society is given regulatory powers over its members
by an Act of Parliament and this confers on its
rules a public
character that renders them something akin to
regulation,
not decisions of an industry association.
30.
Section 58(a) of the Attorneys Act gives the Law Society the power to
“...
regulate
the exercise of the profession”.
More specifically, in terms of section 74 of the Attorneys Act, which
according to the CLS is the statutory source of rule 14.6.1,
the Law
Society is empowered to make rules as to (inter alia)
“(a)
conduct which on the part of any practitioner... shall constitute
unprofessional or dishonourable or unworthy conduct”.
31.
The Law Societies argue that the claim for the public character of
the rules is further enhanced by the fact that the Attorneys
Act
requires that the rule contemplated above
“...shall
be made with the approval of the Chief Justice of South Africa, and
if the Chief Justice is of the opinion that
the interests of justice
of the public would be adversely affected by the provisions of any
such rule, with the approval of the
State President”
32.
Since the Chief Justice is neither a competitor nor a member of the
association of firms, his approval of the rules, without
which they
would lack legal effect, transforms what may have been a decision of
an association of firms, to rules approved by a
judicial officer
charged with protecting the public interest.
33.
We now examine the various components to this argument.
If
something is public regulation does that mean it cannot be a
decision?
34.
The Act defines the terms ‘public regulation’ and
‘regulatory authority’.
“
Public
regulation means any national, provincial or local government
legislation or subordinate legislation, or any licence, tariff,

directive or similar authorisation issued by a regulatory authority
or pursuant to any statutory authority; and
“
regulatory
authority means an entity established in terms of national,
provincial or local government legislation or subordinate
legislation
responsible for regulating an industry, or sector of an industry.
21
35.
Even if we accept that, in terms of the Act, the rules are made by a
regulatory authority (viz. a Law Society) and that they
constitute
‘public regulation’, this does not exclude them from, at
the same time, constituting a decision of an association
of firms, as
the two notions are not mutually exclusive.
36.
The Law Societies argument suggests they must be but this approach is
not supported by the text of the Act.
37.
There are two clear indications that the legislature intended public
regulation of this kind to be subject to the provisions
of the Act.
38.
The first is a question of statutory interpretation that relies on
inference. Prior to its amendment in 2000, as noted above,
the Act
exempted
“...acts
subject or authorised by public regulation
”.
The import of this was that but for their express exclusion, these
acts would otherwise have been subject to the Act. Once
the exclusion
was deleted, acts subject to or authorised by public regulation fell
within the Act’s purview.
39.
The second, and even clearer indication, is to be found in Schedule 1
of the Act, which deals with the manner in which professional
bodies
can get their rules exempt from the Act.
40.
Most notably in the Act, Schedule 1 provides in item 1 and 2 that:
“
(1
)A professional association whose rules contain a restriction that
has the effect of substantially preventing or lessening competition

in a market may apply in the
prescribed
manner
to the Competition Commission for an exemption in terms of item 2.
(2)
The Competition Commission may exempt all or part of the rules of a
professional association from the provisions of Part A of
Chapter 2
of this Act for a specified period
,
if,
having regard to internationally applied norms, any restriction
contained in those rules that has the effect of substantially

preventing or lessening competition in a market is reasonably
required to maintain -
professional
standards; or
the
ordinary function of the profession. ”
41.
In item 9 of Schedule 1, we find the following definitions.
“
In
this Schedule —
'professional
association’ means an association referred to in
Part
B
of this Schedule;
‘
professional
rules' means rules regulating a professional association that are
binding on its members;
‘
rules’
includes
public
regulations,
codes of practice and statements of principle.”
(Our emphasis)
42.
The Attorneys Act is then listed in Part B. Thus it is quite clear
that the legislature intended that rules of a professional

association were intended to be subject to the Act, that the
Attorneys Act was one of the associations contemplated, and
that
further it was contemplated that these rules could include public
regulation. It is because the Act recognises that professional
rules
might contain restrictions on competition that could be justified on
wider public interest grounds that they were given separate
treatment
for the purpose of exemption. The implication is clear. The rules are
subject to the Act notwithstanding their character
as public
regulation. But because they might constitute public regulation, they
were given their own dispensation for exemption,
most importantly by
granting a qualified public interest test for exemption not found
elsewhere in the body of the Act; i.e. not
in any of the purely
economic defences permitted in Chapter 2 of the Act nor in the other
categories for exemption set out in section
10 of the Act.
22
43.
It is quite clear then that the Act applies to the rules of Law
Societies. True, the Schedule does not state in express terms
that it
applies to section 4(1). It speaks more generally about exemption
from the operation of the Act. But it is hard to conceive
of any
other section of the Act that would apply to professional rules other
than section 4(1).
44.
Of the three types of prohibited practices in the Act, section 5
applies to firms in a vertical relationship - and hence would
not
apply to attorneys, whose relationship to one another is horizontal,
whilst sections 8 and 9, apply only to dominant firms
i.e. to
unilateral conduct by single firms, not to co-ordinated conduct by
associations of competing firms. In any event the exemption
only
applies to Part A of Chapter 2, thus sections 4 and 5, and not Part
B, which refers to sections 8 and 9. Thus if the Act is
to apply to
Law Societies’ rules, the only relevant provision would be
section 4(1) - it would be impossible to house its
application
anywhere else.
45.
Therefore the fact that the rules of Law Societies might also
constitute public regulation, as defined in the Act, does not,
for
that reason alone, mean that they are not also decisions of an
association of firms in terms of the Act.
Is
the Act expressly or impiiedly ousted at common law?
46.
The only way remaining to support an argument that section 4(1) does
not apply, is to contend that the Act is ousted in this
respect as a
matter of statutory interpretation to avoid a conflict of law. The
argument of conflict of laws was raised in the
CLS’s heads of
argument and for this reason we need to deal with it.
23
47.
There is certainly no express ouster. As for an implied ouster, the
argument made at one stage was that this was a case of a
‘hard
conflict’ of two laws. Attorneys haplessly have to comply with
both, so the terms of the more specific law should
override the
general law.
24
But there is no hard conflict. The empowering provision of section 74
of the Attorneys Act provides for rules that prevent dishonourable

conduct by persons practicing as attorneys. In implementing this
statutory mandate, the Law Society is not compelled to draft rules

that conflict with the
Competition Act. Thus
there is no hard
conflict.
48.
The next argument is whether there may be an implied ouster because
of a ‘soft conflict’. To use the language of
the now
repealed
section 3(1
)(d), an act otherwise anticompetitive might be
authorised by public regulation. However, the soft conflict problem
is expressly
provided for in Schedule 1 of the Act. We noted earlier
that the grounds for exemption provided in the Schedule contemplate
public
interest criteria peculiar to the issues faced by professions
in regulating their members conduct. These criteria as we noted are

not found elsewhere in the Act. The implication of this is clear. The
legislature contemplated that conflicts between the goal
of promoting
competition and regulating professions in the public interest could
be balanced through the exemption regime created
by the Schedule.
Are
rules decisions by an association of firms?
49.
Section 4(1)’s reference to a decision by an association of
firms mirrors the language of Article 101(1) of the Treaty
on the
Functioning of the European
Union
(“TFEU”). That section prohibits forms of conduct that
restrict competition. In defining the forms that conduct
might take,
it refers as well to agreements, concerted practices and
decisions
by associations of undertakings
..,”
25
50.
Whilst we must be mindful of blindly following foreign jurisprudence
on issues of jurisdiction, given the similarity of language
it is
worth considering the approach taken in the European Union to similar
arguments raised in this matter by the Law Societies.
51
.According to one leading work on European competition law,
“
The
concept of a
‘
decision’
includes the rules of the association in question, decisions binding
upon the members and recommendations, and in
fact anything which
accurately reflects the association’s desire to coordinate its
members’ conduct in accordance with
its statutes. Agreements
implemented within the framework of the association concerned may be
analysed either as
‘
decisions’
of that association or ‘agreements’ between the
members.
,
26
52.
We see no reason to find any differently. Schedule 1 as discussed
earlier would seem to confirm that this interpretation would
apply to
our Act as well. Clearly professional rules were contemplated within
the meaning of decisions of associations of firms.
Does
the concurrence of the Chief Justice render the ruies not decisions
of an association of firms?
53.lt
does not make any difference that another officer of state might have
to approve rules. In enacting the schedule, the legislature
can be
presumed to have been aware of the provisions of the enabling
statutes of those professions whose ruies might require the
approval
of another state functionary. That, in the view of the legislature,
did not remove them from the Act’s remit. For
instance, in
terms of the Schedule, provision is made for consultation with the
“...responsible
Minister or member of the Executive Council concerning the
application,./
27
The
reason is perfectly logical. Given that competition enforcement is
entrusted under the Act to the Commission this is not a
task another
functionary who may serve some role in approving professional rules
can or can be expected to fulfil.
There is
nothing in the Attorneys Act which suggests that the public interest
which the Chief Justice must safeguard, includes
ensuring the
competitiveness of the profession. The Attorneys Act, the rules made
pursuant thereto, preceded the commencement
of the Act, so this
could hardly have been what the legislature had intended at the
time. Moreover as the SCA held in
Telkom
:
“
(36)...where
specialist structures have been designed for the effective and speedy
resolution of particular disputes it is preferable
to use that
system...
(37)...determining
whether a matter involves a contravention of Chapter 2 may be complex
and technical. The Tribunal should not
be lightly deprived of the
authority to decide whether the complaints referred to involve such
contraventions”
28
Furthermore
the fact that a non-competitor may approve or be required to approve
a decision of an association of firms, does not
insulate the
decision from
Competition Act scrutiny
, otherwise this would become
a simple vehicle to evade the statute. The rules are in effect a
decision taken by competitors which
constrain them in their
behaviour. They do not seek to bind anyone else other than
competitors.
57.
That is precisely what the ambit of
section 4(1)
seeks to regulate;
to avoid possible anticompetitive agreements coming into operation
between competitors under the guise of professional
associations. As
Whish and Bailey point out in their work, it is precisely because
professional rules are made binding on all their
members,
who typically in a profession are numerous, that they constitute a
most effective mechanism for effecting collusive arrangements.
29
Cartels are typically vulnerable to problems such as reaching
agreements, communicating their terms, monitoring their enforcement

and punishing non-compliance. The rules of a professional association
effectively resolve all these problems.
58.
This approach is also followed, it is instructive to note, in
European law. Again, as Whish and Bailey note:
“
A
decision does not acquire immunity because it is subsequently
approved and extended in scope by a public authority, nor does a

trade association fall outside of Article 101(1) because it is given
statutory functions or because its members are appointed by
the
Government The Court of Justice has specifically stated that the
public law status of a national body (for example an association
of
customs agents) does not preclude the application of Article
101
(
1).’
30
59.
In the United States, courts, whilst being respectful of the policy
considerations underlying restraints on competition that
might exist
in professional rules, have nevertheless held that professional rules
are not immunised from consideration under the
antitrust laws.
31
60.
We thus find that the rules of the CLS constitute decisions of an
association of firms and are thus subject to the provisions
of
section 4(1) of the Act.
32
WHICH
PROVISION OF SECTION 4(1) APPLIES?
61.
In his complaint referral Venter relies on both the provisions of
sections 4(1 )(a) and 4(1 )(b) of the Act.
33
62.
The essence of the complaint is this. The relevant market is alleged
to be the market for legal services in connection with
RAF claims
within the jurisdiction of the Western Cape High Court.
34
63.
Venter alleges that the rule binds all attorneys who practice in the
Western Cape. The effect of the rule he alleges is that
attorneys are
precluded from making use of the most efficient form of soliciting
for that particular person. As a result of this
prohibition he
contends attorneys cannot compete with one another on an unfettered
basis and this results "...
into
making prices of the said service rigid and/or stable and/inflexible
and or/more firm."
35
64.
In a request for further particulars from the CLS, Venter was asked
to expand on this contention. His reply was that
“rules
that limit the marketing activities of firms result in the
consequences referred to by the respondent [CLS].
"
36
65.
His conclusion is that Rule 14.6.1 contravenes either section 4(1)(a)
or 4(1 )(b) or both.
DOES
THE RULE CONTRAVENE 4(1)(b)(i)
66.
Section 4(1 )(b) as we noted earlier is the per se provision. In oral
argument, Venter’s counsel indicated that he relies

specifically on section 4(1 )(b)(i) of the Act.
37
That sub-paragraph reads:
“
4(1)
An agreement between or concerted practice by firms or a decision by
an association of firms, is prohibited if it is between
parties in a
horizontal relationship and if-
(a)
(b)
it involves any of the following restrictive horizontal practices:
(i)
directly or indirectly fixing a purchase or selling price or
any
other trading condition
.
(Our
emphasis)”
67.
Counsel for Venter contended that the restriction on soliciting in
Rule 14.6.1 constituted a ‘trading condition’
and hence
4(1 )(b)(i) applied. Whilst the term ‘trading condition’
is susceptible to a wide range of meanings, we would
suggest that it
must be interpreted both in its context and with an appreciation of
the need to interpret the restrictions in section
4(1 )(b) of the Act
narrowly, given that they admit of no defence, unlike section 4(1
)(a) of the Act. The term ‘trading
condition’ is the last
phrase in a sub-paragraph that deals with price collusion. Whilst the
term is intended to be broader
than price, one must be cautious in
interpreting it in a manner that is so wide that any restriction that
competitors may impose
on one another’s conduct becomes a
trading condition.
68.
As we previously held in
Patensie
:
“
In
our view the range of trading conditions hit by this sub-section is
limited by the contextual cobbling together of price fixing
and the
fixing of ‘any other trading condition’, which, in our
view, points to aspects of a particular trade/ transaction
that are
intimately related to price, i.e. quantity and quality. Hence for a
‘trading condition’ to be hit by this
section of the Act
it should be part of the price-quantity-quality nexus of the
concerned transactions/trade
.
"
38
69.
The use of the qualifier “other” that precedes ‘trading
condition’ suggests, at the very least, it is
in some way
similar, albeit not identical, to the notion of price. At its very
least it must constitute a term on which a firm
trades or offers to
trade with its customers or refuses to offer as a term to customers.
The prohibition contained in the rule
is of no such kind. It is a
prohibition on the use of a certain class of person to perform a
certain function. That is not a trading
term in some nature akin to
price.
70.
Thus Rule 14.6.1 is not a trading condition and hence does not
contravene the provisions of section 4(1)(b) of the Act
DOES
THE RULE CONTRAVENE SECTION 4(1 )(a)?
71.
It remains for us to consider whether the Rule contravenes section
4(1 )(a) of the Act. This provision requires the complainant
to
allege that the practice has "...
the
effect of substantially preventing, or lessening, competition in a
market....”
39
(As a convenient short hand we will refer to this phrase as the
“anticompetitive effect requirement”).The practice
in
this case of course is Rule 14.6.1.
72.
Beyond the injunction to ‘characterise’, our case law on
the application of section 4(1) is not well developed.
40
The characterisation exercise was to establish whether conduct
complained of properly fits the description of the conduct described

in section 4(1 )(b). United States law on horizontal restraints
recognises that certain conduct is treated under the
per
se
rule and others under the ‘rule of reason’. In this way,
although not located in separate sections of the statute as
ours is,
the approach to horizontal restrictive practices is similar.
73.
Restraints characterised under the
per
se
rule, are those considered presumptively harmful and no evidence that
they may not be, is permitted. In US law, those restraints
on conduct
treated in this way have developed over the years by way of case law
so that a core of certainty has developed. In our
Act we do not have
to rely on case law - the forms of conduct to be analysed as
per
se
contraventions
are set out expressly in section 4(1)(b).
74.
In US law, in contrast to those restraints examined under the
per
se
rule, those analysed under a rule of reason, are those
“...whose
competitive effects can only be evaluated by analysing the facts
particular to the business, the history of the
restraint, and the
reason why it
was
imposed.
”
41
75.
But recent US cases suggest that the approach to rule of reason
analysis has become more nuanced. This is possibly because of
a
recognition that cases judged under this standard may become bogged
down in interminable disputes over the effect of a practice.
As one
US commentator has succinctly put it:
“
When
everything is relevant nothing is dispositive... Litigation costs are
the product of vague rules combined with high stakes
and nowhere is
that combination more deadly than in antitrust litigation under the
Rule of Reason.’
42
76.
Apparently mindful of this concern, courts in the US have, even when
restraints in question fell within a rule of reason standard,

nevertheless taken an approach that this so-called “full-blown”
approach to evidence was not required. Rather the courts
have
favoured an approach, where they have eschewed an approach to
elaborate industry analysis, where some intermediate enquiry

demonstrates the anticompetitive nature of the agreement. This has
been dubbed by some commentators as “the quick look approach”.

Doctrinal disputes in US law over whether this has created some third
category of analysis to horizontal restraints need not concern
us
given our statute’s construction. What is useful however is its
approach to a more subtle issue over evidential onus.
It is possible
on this approach, that a restraint that should be decided under the
rule of reason, or in our Act one that falls
to be analysed under 4(1
)(a), could, by its nature, be so facially anticompetitive that once
its terms have been established,
an evidential burden may shift to
the respondent to rebut. This is not to be confused with the second
leg of 4(1 )(a), where the
onus shifts to the respondent to justify
the restraint. Here the initial debate between the complainant and
the respondent is solely
about the anticompetitive effect.
77.
In what circumstances might such an evidential shift in a 4(1 )(a)
enquiry move from the complainant to the respondent regarding
the
existence or otherwise of an anticompetitive effect? Well, if we
follow US law as instructive on this point, it might be when
from the
terms of the restraint, the anticompetitive effect was prima facie
apparent or where from prior experience of that practice
or from
economic learning it had such effects.
78.
Several American cases recognise this. For instance in
California
Dental Association,
Souter J, described this as a circumstance where one could draw an
“...intuitively
obvious inference of an anticompetitive effect
...”
- although he cautioned that there were no categorical lines to
identify this circumstance from those requiring the full-blown

analysis.
43
79.
Applying this approach to the present facts, we ask if the ban on
direct solicitation by non-attorneys would be susceptible
to this
‘quick look’ approach.
44
If it does, then an evidential burden would shift to the CLS, and if
not, it would remain with Venter.
80.
It is by no means obvious that the prevention of one form of
marketing entails a substantial lessening or prevention of
competition.
The pro-competitive aspect of advertising that is
generally recognised is that it provides information to consumers
about who can
provide a service and their price and quality so that
consumers are enabled to make informed decisions about their choices.
81.
US decisions are again instructive as several cases have involved
some restriction on professional advertising. In
Bates
,
the court held:
“
Advertising"
serves to inform the public of the availability, nature and prices of
products and services
,
and
thus performs an indispensible role in the allocation of resources in
a free enterprise system.’
45
82.
Important to this notion of the pro-competitive benefit of
advertising is that consumers are able to make an informed decision.

In that way they are able to make, or at least begin to make, a more
informed choice about the price or quality or availability
of a
particular service.
83.
Direct solicitation does not necessarily have these elements to it.
Put differently it does not exhibit the intuitively obvious

anticompetitive characteristic that a ban on advertising one’s
services might have. Indeed, direct solicitation, might well
act
contrary to the pro-competitive aspect of the consumer coming to an
informed decision, because in direct solicitation the consumer
is
informed of one service - that of the solicitor’s principal,
and then induced at the same time to give the instruction.
This
suggests that the decision of the consumer in those circumstances is
more likely to result in an uninformed one, as the ability
to compare
services offered or prices with other offers is not present.
Transparency is an essential component of the pro-competitive
aspect
of advertising, because consumers can make an informed choice about
the offering and if possible compare it to others, whilst
no less
importantly, competitors can react.
84.
It is thus not intuitively obvious that the restriction imposed by
Rule 14.6.1 has an anticompetitive effect. Nor do we have
any
experience that such a rule would obviously have such an effect. On a
quick look approach the evidential burden thus remains
with Venter
85.
We therefore have to consider the rule on a full-blown rule of reason
analysis. We now consider if we have such evidence before
us on the
present record.
86.
In his referral, Venter, as we noted earlier, is very brief on this
aspect.
46
He states that the rule prevents attorneys from competing in the
manner most efficient for them. This theme was further developed
in
evidence by the expert witness for the CLS, namely Professor
Terblanche. The essence of his testimony was that firms need to

utilise the most appropriate forms of marketing opportunities
available to them; restrictions on forms of marketing fetter firms

ability to be competitive. But he could not advance Venter’s
case beyond this general proposition.
87.
He did not claim to have any particular knowledge of the legal
service industry.
47
He did not know about whether word of mouth marketing was having a
big impact in places such as the United Kingdom, even when asked
by
his own counsel.
48
Nor did he claim to be an economist
“in
the true sense"
49
When asked pertinently if he could comment on why the rule might lead
to the effects contended for, he was frank that he could
not
understand exactly what was meant by it, and that he would rather
refrain from guessing.
50
88.
The most he could add to Venter’s case is contained in the
following passage from his testimony. It was put to him by
Venter’s
counsel that:
“
Mr
Pretorius: Now, if you consider the mix of the smaller firm, and
let’s consider that direct marketing like payment for
referrals
is one of the
-
one
of the elements in this mix
,
if
you should prohibit that, would that affect his ability to compete?
Professor
Terblanche: Definitely, because I think specifically your smaller
firms
,
for
them to break through what we call the “clutter” in the
market place of advertising and other communications, they’re

just
[not]
in
a position to afford those very expensive media. So they have to rely
on the more one-on- one sort-of customer communication
means
.
And
if that is not the case, in my view you can’t have competitive
rivairy. ”
51
89.
What Professor Terblanche has proposed at most, is that smaller firms
need to focus their marketing. They therefore have to
rely more on a
direct marketing relationship with a customer. If they were not
allowed to do so, this would affect competitive
rivalry. When asked
by counsel for Venter the most important question for the purpose of
the 4(1 )(a) case - how big the restriction
on competition would be -
Professor Terblanche gives an equivocal answer:
“
Professor
Terblanche: Well, if it’s - it’s very difficult to judge
the extent, you know
;
because
I think all the firms have different client bases, etc. But I think
any - in any event, if such a means is not
-
or
such a sort-of marketing channel is not available to somebody, it can
in some instances be severe. ”
90.
The extent of this evidence goes no further than to state that for
some firms who provide RAF services, a form of direct marketing
may
be foreclosed as a result of the rule. But even if this is so, we
have no evidence at all on its impact.
91.
We do not know how many firms might be affected, why they don’t
have other alternatives for low cost marketing that do
not infringe
the rule, how so-called touts are rewarded and whether this cost is
passed on to the consumer or absorbed by the practitioner,
whether
firms employing touts are more cost competitive than firms who don’t,
and the most important question whether the
foreclosure of this
channel has an effect on their fees in the manner alleged.
92.
Venter himself would have been a more relevant witness given that he
runs a practice suffering this alleged disability to compete;
yet he
did not testify nor did he call anyone else similarly placed. Whilst
Professor Terblanche fairly answered questions put
to him, he was not
in a position to comment on the essential issue for Venter - why the
restriction on this particular form of
marketing would have an
anticompetitive effect on firms competing in the market for the
provision of RAF legal services.
93.
Without such evidence or even a prima facie case on this for the CLS
to rebut, Venter has failed to make out his ease under
section 4(1
)(a) of the Act regarding the requirement of anticompetitive effect.
It is not necessary for this reason for us to
comment on whether the
CLS has properly justified the existence of this rule.
52
QUESTION
OF WHETHER THE RULE IS OVERBROAD
94.
The Commission has suggested, as has Venter, that the Rule is too
broad to meet its stated objective.
53
We do not need to decide this issue now, as we are not dealing with
an application for the exemption of the Rule, where a concern
that a
rule is too broadly framed to meet its legitimate objective, might
well be a proper consideration for denying it exempt
status.
CONCLUSION
95.
Since Venter has failed to make out a case under sections 4(1 )(a) or
4(1 )(b) of the Act, his referral is unsuccessful.
96.
On the evidence of the case before us we cannot find that the rule
contravenes the
Competition Act.
>
COSTS
97.
Although Venter has ultimately been unsuccessful in this matter, at
least half the costs of the litigation were incurred as
a result of
unsuccessful challenges raised by the CLS. We have therefore decided
to award it only half of its costs.
GENERAL
COMMENT
98.
This decision is limited in scope. It has not served to immunise this
rule, or its analogue in other Law Societies’ books,
from
future challenge in terms of the Act. It has done no more than decide
its validity on the evidence presented. We cannot speculate
whether
the finding might have been different, if better evidence of the
anticompetitive effects may have been presented. Nor should
the
decision in anyway influence the fate of the exemption application
before the Commission, which regrettably since April 2012
seems to
have reached a stalemate.
54
99.
The LSSA and its affiliates owe it to their profession and the
clients whom they seek to protect to bring that issue to certainty.

Without certainty those more cautious in their interpretation may
fail to market themselves more aggressively, in a manner the

societies may not consider objectionable, whilst those less
scrupulous, may seek to take advantage of an uncertain regulatory
regime, to behave in a manner the societies could legitimately claim
is unacceptable.
ORDER
100.
The referral is dismissed
101.
The Respondent is awarded the half the costs of this application on
party and party scale, such costs to be paid by the Complainant.
102.
No costs are awarded in respect of the First and Second Third
Parties’ costs.
NORMAN
MANOIM
14
October 2013
DATE
Andreas
Wessels and Takalani Madima concurring
Tribunal
Researcher: Nicola llgner
For
the Complainant: W. Pretorius instructed by Hannes Pretorius, Bock &
Isaacs
For
the Respondent: Bisset, Boehmke McBlain Attorneys
For
the First Third Party: G. Marcus S.C. and B. Lekokotla, instructed by
the Commission
For
the Second Third Party: H. Maenetje S.C.and P. Ncongo, instructed by
Webber Wentzel Attorneys
1
The
relevant sub-sections are 4(1 )(a) and 4(1 )(b) of the Act and are
discussed more fully below.
2
See
the
Law
Society of the Cape of Good Hope v Johan Venter
case number 17292/10, Western Cape High Court, Cape Town,
unreported, dated 15 February 2012. (Hereinafter to be referred to

as the “High Court decision”.)
3
It
must also be satisfied that the issue had not been raised in ‘a
frivolous or vexatious manner’ (see section 65(2)(b)(i)
of the
Act).
4
See section 62(1) of the Act.
5
See
CLS' answering affidavit, record page 28, paragraph 11.
6
The
rule in question does not use the word touting, but is widely
understood to address the issue of
touting.
Overreaching is understood to mean overcharging. This aspect of the
dispute concerns the
treatment
of Ms Lindtveld’s fee for soliciting the instruction.
7
Act
53 of 1979.
8
See
High Court judgement, ibid, paragraph 15.
9
Ibid
paragraph 16.
10
See
High Court judgement, ibid, paragraph 24.
11
See
pages 180 - 182 of the transcript of proceedings.
12
See
High Court judgement, ibid, paragraph 22.
13
See
section 3(1 )(d) of the Act, prior to its amendment in 2000.
14
By
section 2(a)
of the
Competition Second Amendment Act, No 39 of 2000
.
15
See
section 172(2) of the Constitution.
16
See
Competition
Commission v Telkom
(623/2008)
[2009] ZASCA 155
(27 November
2009)paragraph
28.
17
For
convenience when they take a common approach we will refer to them
as the “Law Societies”.
18
The
LSSA indicated that it made no submissions on what it termed the
concurrent jurisdiction issue. See LSSA’s supplementary
heads
of argument, paragraph 2.
19
Section
4(1 )(a) of the Act is the rule of reason offence as it permits a
defence of justification whilst section 4(1 )(b) of
the Act, once
its requirements are established, does not.
20
See
paragraph 10 of Venter’s heads of argument. Venter also argues
that it could constitute an
agreement.
21
See
sections 1(1)(xxv) and 1(1 )(xxviii) of the Act respectively.
22
See
item 2(a) and (b) cited earlier.
23
See
CLS’ heads of argument, paragraphs 29 -30.
24
Ibid
paragraph 30.
25
The
one linguistic difference is that in Article 101(1), the reference
is to
“undertakings,
whilst
our
Act
uses the term
“firm".
26
See
Roth, P. Ed. 2001.
Bellamy
and Child
-
European
Community Law of Competition.
5
th
ed.London:
Sweet and Maxwell. 59, paragraph 2-032.
27
Schedule
item 3(c) and 4.
28
See
Telkom, supra.
29
See
Whish R.&Bailey D. 2012.
Competition
Law.
7
th
ed. New York: Oxford University Press. 110 -
111
.
30
See
ibid, page 92, as well the cases the authors cite in the footnote in
support of this proposition.
31
See
Fox, E.M.
Cases
and Materials on U.S. Antitrust in Global Context.
Third ed. New York: West. 76 and 110. Fox cites as authority for the
application point,
Goldfarb
v Virginia State Bar,
[1975] USSC 159
;
421 US 773
( 1975)
32
This
approach accords with the conclusion to an issue that was similarly
argued in the leading case on the point in the EU. In
the case of
JCJWouters
vAlgemene Raad van de Nederlandse Orde van Advocaten
Case C-309/99
[2002] ECR 1-1577
,which dealt with the validity of a
rule that prohibited multidisciplinary partnerships, the Dutch Bar
association argued that
it was not an association of the type
contemplated in Article 101(1) as it was exercising regulatory
functions conferred by statute.
The Court rejected this and found
that was an association for the purpose of Article 101. The Court
held the position might have
been different if the majority of its
members had been appointed by the state and if the state had
specified the public interest
criteria to be taken into account by
the Bar Council. Nevertheless the Court held that the rule was
reasonable.
33
See
paragraph 16 of the complaint referral which is framed in terms of
an
and/or
proposition.
34
Paragraph
12 of the complaint referral supra.
35
Paragraph
15 of the complaint referral.
36
See
Complainant’s reply to request for further particulars, record
page 52, paragraph 2.
37
Venter’s
heads of argument deal only with issues of jurisdiction and
application.
38
See
The
Competition Commission v Patensie Sitrus Beherend Beperk,
Tribunal case no. 37/CR/Jun01, para 35.
39
The
sub-section goes on to provide
“...unless
a party to the agreement, concerted practice, or decision can prove
that any technological, efficiency or other
pro-competitive gain
resulting from it outweighs that effect.”
40
See
American
Natural Soda Ash Corporation and Another v Competition Commission
and others [2005] 3 All SA (SCA) at paragraphs 44-52.
41
1
National
Society of Professional Engineers
[1978] USSC 67
;
435 U.S. 679
, at 692.
42
Easterbrook,
F.H. 1984.
The
Limits of Antitrust.
63 Texas Law Review 1
, 12-13. Passage cited in decision of the court
in
Polygram
Incorporated v Federal Trade Commission.
[2005] USCADC 165
;
416 F.3d 29)
(D.C.Cir 2005).
43
See
California
Dental Association v FTC
[1999] USSC 38
;
526 US 756
(1999) In that case the court split on the facts over
whether the restraint in question a ban on various forms of
advertising
for dentists by their professional association, fell
within this intuitively obvious category. The majority held that it
did
not the minority held it did. Writing for the minority in that
case, Breyer J expressed his views forthrightly.
“But
why should I have to spell out the obvious? To restrain truthful
advertising about lower prices is likely to restrict
competition in
respect to price ...”
44
Perhaps
the best rendition of this for our purposes it to be found in a
district court decision by Judge Ginsburg in
Polygram
where he explained it in this way:
“
If
based upon economic learning and the experience of the market, it is
obvious that a restraint of trade likely impairs competition,
then
the restraint is presumed unlawful, and in order to avoid liability
the defendant, must either identify some reason the
restrain is
unlikely to harm consumers or identify some competitive benefit that
plausibly offsets the apparent or anticipated
harm.”
See
Polygram
supra,
footnote 41.
45
Bates
v State Bar of Arizona,
[1977] USSC 167
;
433 US 350
, at 364
46
The
CLS notes this in its answering affidavit and complains, fairly so,
that
“
Mr Venter does not base the arguments raised in his affidavit on any
evidence or facts, nor does he explain how the enforcement
of the
Rule can have the effect of preventing or lessening competition or
fixing prices, or other trading conditions. It is not
possible to
deal, in answer, with the arguments he raises in the absence of the
facts upon which such arguments are based.”
See answering affidavit record pages 35-6 paragraph 43.
47
See
page 34 of the transcript of proceedings (14 November 2012).
48
See
pages 19-20 of the transcript of proceedings (14 November 2012).
49
See
page 36 of the transcript of proceedings (14 November 2012).
50
See
pages 45-6 of the transcript of proceedings (14 November 2012). The
question to which the answer is given appears on page
44.
51
See
pages 18-19 of the transcript of proceedings (14 November 2012).
52
Much
of Professor Sutherland’s evidence went to this aspect and
hence we have not needed to
consider
it.
53
See
the Commission’s heads of argument, paragraph 8.3.
54
The LSSA as we noted earlier had applied in 2004 for the exemption
of the rules of its member associations. In May 2010 the Commission

announced that it had refused the exemption. This process has
resulted in a stalemate. The Commission indicated that some of
the
rules did not qualify for exemption and should be reformulated;
amongst those falling in this category were rules prohibiting

touting, similar it appears in intent, to the rule in question in
this case. This outcome created confusion for the profession.
As a
result the LSSA and the Commission decided on 17 April 2012 to put
out a press statement to clarify the issue. In the press
statement
the Commission acknowledged that whilst some ruies restricted
competition and could not be exempted, the rules could
not be
dispensed with until new ones were promulgated. Both parties
indicated practical difficulties with formulating new rules;
the
Attorneys Act was the problem as well as the pending Legal Practice
Bill. In the meantime on the subject of touting rules,
it was
suggested that they would continue to apply except that any
restriction on advertising would be lifted provided the advertising

was truthful and not misleading. The path going forward from this
was unclear. Both parties undertook to work with one another
and the
Department of Justice.