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[2016] ZACT 25
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AGS Frasers International (Pty) Ltd v Competition Commission; Competition Commission v AGS Frasers International (Pty) Ltd; In re: Competition Commission v AGS Frasers International (Pty) Ltd and Another (CR025MAY15, DEF098AUG15, EXC099JUL15) [2016] ZACT 25; [2016] 1 CPLR 55 (CT) (7 April 2016)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
CASE
No: CR025MAY15
DEF098AUG15
/
EXC099JUL15
In
the strike out and exception applications between:
AGS
FRASERS INTERNATIONAL (PTY) LTD
APPLICANT
and
THE
COMPETITION
COMMISSION
FIRST RESPONDENT
and
In
the default judgment application between:
THE
COMPETITION
COMMISSION APPLICANT
and
AGS
FRASERS INTERNATIONAL (PTY) LTD
FIRST RESPONDENT
In
re
the complaint referral between:
THE
COMPETITION
COMMISSION
APPLICANT
and
AGS
FRASERS INTERNATIONAL (PTY) LTD
FIRST
RESPONDENT
JH
RETIEF TRANSPORT
CC SECOND
RESPONDENT
Panel
: Norman Manoim (Presiding Member)
Yasmin Carrim (Tribunal
Member)
Mondo Mazwai (Tribunal
Member)
Heard
on
: 04 March 2016
Order
issued on
: 04 March 2016
Reasons
issued
: 07 April 2016
REASONS
FOR DECISION
INTRODUCTION
[1]
This
matter
concerns
three
interlocutory
applications
all
related to
a complaint
referral
("the
main
matter")
in
which
collusive
tendering
by
the
respondents
-
both
furniture
removal
firms
-
is alleged.
[1]
More specifically
the
conduct
complained
of
in the
main
matter
relates to
so-called
'cover
pricing',
a term we
explain
later.
[2]
We
gave
a
composite
order
in
respect
of
all
three
interlocutory
matters
on
4
March
2016,
the
same
day
we
heard
argument,
so
as
not
to
f1c1rther
delay
pleadings
in this
case.
[3]
We now set out our reasons for that order. For convenience the order
is again attached to these reasons.
[4]
The Competition
Commission
("Commission")
referred
the
main
matter against
the
respondents
on
25
May
2015.
it
does
not
seek
relief
against
the
second
respondent
in that
case,
JH
Relief
Transport
CC
("JH
Retief')
[2]
only
the
first
respondent,
AGS
Frasers
International
(Ply)
Ltd,
("AGS")
[3]
.
[5]
AGS has objected to the referral for several reasons. It has
made its objections by way of two separate applications;
one is an
exception and the other an application to strike out.
[6]
The third application has been brought by_ the Commission for a
default order to be granted against AGS because it has
not yet filed
its answering affidavit.
[7]
It is clear that although the applications have been brought
separately their respective resolutions are inter-dependent if
we are
to escape the present procedural deadlock. AGS argues that a
respondent is not required to answer to a complaint referral
that is
defective and it was therefore entitled to have its objection
considered first. The Commission argues that while a respondent
may
object to a referral, it must do so as part of its answer and must
otherwise plead its case on the merits, the practice known
as
pleading over.
[8]
For this reason at a pre-hearing we directed that
all three applications be decided
at the same time
and on 4 March 2016 we gave a composite order relating to all three.
These reasons also relate to all three.
Exceptions
[9]
AGS' notice of exception raised several points. However when
it came to argument Ms Norton, who appeared for the
firm, in
our view correctly, persisted with only three of them. We confine
ourselves to considering only these.
[10]
The first exception relates to insufficiency of pleading. AGS argues
that the Commission has not alleged what conduct by it
constituted
collusive tendering.
[11]
In the referral the Commission relies on two separate counts of
collusive tendering that it states took the form
of cover
pricing. Since they are set out briefly we will quote them in full.
[12]
In respect of the first count the allegation contained in paragraph
20 of the referral is as follows:
"On
or about 2007, AGS
and JH Retief concluded an
agreement
to exchange
cover
prices
in
that
one
Ansie
Niemand, an
employee
of
JH
Retief who wished to win-a tender, requested
one
Lesley, an employee
of AGS,
to provide
her with
a
cover price in respect of
a
tender
issued by the South African
Police
Services
("SAPS'),
for the
transportation
of furniture
belonging
to
one
Captain
C.
Botha,
a
police
member
of
SAPS,
from
77
Formosa St,
Groenewide Park, George,
to Wolseley. The
tender was valued
at
R40186.00
and
was rewarded
to
JH
Retief'.
[13]
In respect of the second count the allegation contained in paragraph
21 of the referral is as follows:
"During
or
about
2007,
AGS
and
JH
Retief
concluded
an
agreement
to exchange
cover
prices
in respect of
a
tender issued by
Grand
Palm
Casino
and
Resort
for
the
relocation
of
furniture
belonging
to
Mr.
M
De Klerk which JH Retief
wished to win. The
tender was valued at R15 241.80 and was awarded
to JH
Retief.
JH
Retief subsequently
won the tender".
[14]
The Commission's case against AGS is that it engaged in collusive
tendering which is a contravention of section 4(1)(b)(iii)
of the
Act. The Commission makes it clear that in this case the collusive
tendering took the form of cover pricing. It explains
what cover
pricing is in paragraph 18.3 of the referral:
"Cover
price
is
a
price
that is
provided by
a
firm that wishes to win
a
tender to
a
firm
that
does
not
wish
to
do
so.
The cover price
is
given
to
enable the
firm
that
does
not
wish to
win
the
tender,
to submit
a
higher price.
A cover
price
may
also
be provided
by
a
firm
that
does
not
wish
to
win
a
tender
to
a
firm
that
does
wish to
win
the
tender,
to
enable
the
firm
that wishes to win the
tender
to submit
a
lower price".
[15]
It follows from this explanation that cover pricing requires some
form of conduct on behalf of the recipient of the request
- in this
case AGS - in response. Yet the complaint referral contains no
allegations of any response by AGS. In respect of the
first count,
apart from someone called Lesley receiving the request from JH
Retief, nu other conduct pursuant to that request by
AGS is alleged.
The same holds for the second count. Here the pleading is even
sparser, as not even the name of the recipient of
the request is
alleged.
[16]
In argument Mr Trengove for the Commission submitted that it did not
need to plead these facts, as it had alleged that the
conduct in
respect of both counts constituted an 'agreement'. In this regard he
relied on paragraph 19 of the referral which states
as follows:
"This
complaint
referral
is based
on
the
Commission's
findings
and conclusions
that AGS
entered
into
a
collusive agreement
with JH
Retief in respect
of
a
relocation
tender
issued by the South African
Police Services ("SAPS')
and
a
relocation
tender issued by
Grand
Palm Casino and
Resort".(Our
emphasis)
[17]
He also argued that the allegation that an agreement had been
concluded is repeated when the specifics of both counts are set
in
paragraphs 20 and 21, respectively, which we cited above. This
observation is correct.
[18]
However the question to be decided is whether alleging the fact of an
agreement without pleading any further conduct suffices
at referral
stage?
[19]
In terms of Rule 15(2)(b) of the Tribunal Rules, a valid
referral requires, inter alia, "...a
statement
of
the
material
facts
or
the
points
of
Jaw
relevant
to
the
complaint
and relied
on by the
Commission."
[20]
A complaint under section 4(1)(b)(ii i) of the Act is not one of
unilateral but co ordinated conduct. The conduct to be
impugned
requires,
"
...an agreement
between
...firms
... in
a
horizontal
relationship
.
"
[21]
In this case the agreement involves the practice of collusive
tendering and, more specifically, cover pricing. It does not
suffice
for the Commission to allege only what one of the parties, in this
case JH Relief, the requesting party did. The Commission
also needs
to allege what AGS, the party which according to it was the recipient
of the request did. This conduct is a material
fact of the impugned
conduct which Rule 15(2) requires to be pleaded.
[22]
It does not suffice when the referral is silent on this point to
simply rely on the allegation that there has been an agreement
to
'glue' the actions of the two respondents together.
[23]
Alleging the existence of an agreement amounts to no more than a
statement of a legal conclusion. The Commission does not explain
what
AGS did to arrive at this conclusion. AGS is entitled to know this in
order to decide how to answer the referral.
[24]
It is thus correct, as AGS alleges, that the pleading fails to meet
the standard laid down by Rule 15(2) for pleading the material
facts.
[25]
For this reason the exception is upheld. However the deficiency can
easily be remedied by the supply of further particulars
and hence
clause 2 of our order provides for this.
[26]
The second exception was that the Commission had failed to allege in
respect of either count that the employee in question
had authority.
This exception is without foundation. The Commission alleges the
nexus to AGS by alleging that the person concerned
was an employee.
This suffices as a material fact in a section 4(1)(b) case for the
purpose of-pleading. If AGS wishes to allege
lack of authority as a
defence it can do so in its answer. AGS has not advanced any case
authority in competition law as to why
such an allegation needs to be
made out by the pleader in the referral.
[27]
The
one
Tribunal
decision
relied
upon, the
Gralio
case
is
not
authority
for
this
proposition.
[4]
While
it
is
correct
that
in that
decision
the
Tribunal
found
on
the
facts
that the
person
involved
in an
alleged
contravention
was
not
authorised
by the
respondent
firm,
the
conclusion
was
arrived
at after
a full
hearing of
the
evidence
about
the
individual's lack
of
authority.
It
was
not
decided at
the
pleadings
stage.
[28]
This exception is dismissed.
[29]
The third exception was that the Commission has no jurisdiction to
bring the complaint as the action has prescribed because
of the
limitation on bringing an action provision contained in section 67(1)
of the Act.
[30]
That section states:
"A
complaint
in respect
of
a
prohibited
practice
may
not be initiated more
than three years
after the practice
has
ceased."
[31]
We refer to this provision by the more familiar and convenient term,
prescription. Ordinarily a plea of prescription in a civil
case is
described as a special plea and would not be decided by way of
exception as there would need to be evidence.
[32]
This case is unusual however and as we go on to explain can be
determined by way of exception. Before we consider the factual
issues
raised by this case let us consider the Commission's argument.
[33]
The
Commission
argued
that
it does
not
need
to
allege
facts
to
show
that
the conduct
in question
has
not ceased.
As
a
general
proposition
the
Commission
is
certainly
correct.
Indeed
in
past
cases
we
have
found
that
this
is
a fact
on which
the onus is
on
the
respondent which means
that it
is
not
necessary
therefore
for
the
Commission
to
specifically
plead
this.
[5]
This
case
does
not
change
that
approach as a matter of
law.
[34]
However on the facts, this case raises the unique scenario, that
prima facie, on the Commission's own version, as set out in
the
referral, it would appear that the claim has prescribed.
[35]
We consider the referral to see why that is the case.
[36]
The Commission
appears to
allege that the complaint was initiated by it in 2011. We
say
'appears'
because in
paragraph
10
of
the
referral,
the
Commission
alleges that an initiation was made against firms
in
the
furniture removal industry on
3
November
2010,
but this
seems
to
be
alleged
only
by way
background,
because
it
goes
on
to
allege
that
the
2010
complaint
was
amended
on
1 June
2011, to
include
AGS.
This
would,
prima
facie,
suggest
that
the
2011,
rather
than
the
2010
date,
is
the
one
relied
on
as
the
date
of
initiation.
However
in
respect
of
both counts
the
conduct
is alleged
to
have taken
place
sometime in
2007. Cover
pricing,
as
described
by
the
Commission,
is
not
apparently
on these
facts,
ongoing
conduct.
[6]
Rather,
it
is
episodic
in
nature.
It
is
therefore
reasonable
to
i
nfer
that
i
f
AGS
had
provided
a
cover
price to
JH
Retief,
it was
given
in
20G7,
the
year
the
Commission
alleges
the
"agreement"
occurred
in
respect
of
both
counts,
and that
hence at
l
east
four
years
would
have
elapsed
between the date
of the
practice
having
ceased
and
the date
of
initiation.
[37]
Thus the Commission's pleading on the face of it - if we take the
time periods it alleges coupled with the specific nature
of the
conduct it relies upon - all suggest that the conduct complained of
in respect of both counts has prescribed. The Commission
in oral
argument stated it has an answer to this. It may; for this reason we
have given the Commission the opportunity to do so
by giving
particularity on this point as set out in clauses 2.1.1 and 2.1.3 of
our order.
Striking
out
[38]
The final objection relates to the striking out application. Although
AGS had applied for several parts of the referral to
be struck out,
Ms Norton contended for only one of them, again correctly in our
view.
[39]
The paragraph objected to is paragraph 17 of the referral. This
paragraph must be read with the preceding paragraph 16 both
of which
we quote below:
16.
"From 24
October 2014, the Commission
issued invitations
to furniture removal
companies
to settle
the instances
of collusive conduct
which they were involved
in.
On 24 October 2014,
the
Commission
issued
invitations to
AGS
to settle
two instances
of
collusive
tendering
that it
was involved in. AGS
invitation
to
settle in attached hereto marked
KM2".
17.
"In response
to
the
invitation
AGS
admitted
having
engaged
in collusive
tendering in
respect of two relocation
tenders but refused
to
pay an administrative
penalty
in line
with the invitation".
[40]
AGS contends that paragraph 17 relates to the content of a letter
from it, which was a without prejudice communication when
there was
an attempt by AGS to settle the matter. Ms Norton argued that to
allow the Commission to make such allegations relying
on admissions
that were the subject matter of settlement negotiations, would chill
the negotiation process as respondent firms
would not be comfortable
to negotiate with the Commission if they feared such communication
might, if negotiations were unsuccessful
get used as admissions
against it. Since public policy should encourage the settlement
process such an approach by the Commission
should be impermissible.
Mr Trengove argued that it would be premature for us to decide the
point now. AGS should plead this point
in its answering affidavit and
we should await the Commission's reply as it may have an answer to
this.
[41]
As we understood him he was not defending the Commission's position
but urging us to decide this point only later once
AGS had filed its
answer. Thus the argument was not that the AGS point was a bad one
but rather it should not be determined now.
AGS must plead over.
[42]
We
are
not
persuaded
by
this.
On
the
Commission's
own
facts
the
so
called
admission
came
in
response to
an
invitation
to
settle.
[7]
Settlement
discussions
are by
their
nature
without
prejudice
to enable their success and to avoid lengthy and
expensive
litigation
for
all
parties.
Further,
the
reliability
of
an
admission
made
for
the
purposes
of
settlement
may
take
the
case
into
fruitless
ancillary
disputes.
It may well
be that
a firm
explores
making an
admission
purely for
the purpose of deciding whether
settlement
is a
cheaper option than
litigation.
This
type
of
admission
does
not amount
to
a
confession
and
if such
evidence
was
permitted,
l
engthy
disputes
about the
context
of the
admission
would
ensue.
[43]
The argument raised here that disclosing such admissions in the
course of negotiations is inadmissible as being against public
policy
to encourage settlement is compelling. There is little point in
deciding this issue later after pleadings close. The Commission
advances no other facts as to why AGS construction of the
communication as without prejudice is wrong. Further, this
construction
is a reasonable reading of the Commission's own
allegations in paragraphs 16 and 17of the referral. AGS' striking out
application
in this respect is upheld and hence clause 1 of our
order.
Default
judgment
[44]
It remains
for
us
to
consider
the
third
application,
i.e. the
Commission's
application for default judgment
Recall the
Commission's
argument
is that AGS
should
have filed
an answer
in which
it
raised
its
objections
and
it then
should have
pleaded
over.
Since
it
did
not file
an
answer
in the
period
prescribed
byrule 1
6
of
the
Tribunal
rules,
the
Commission
on
expiry of
this
period
was
entitled to
apply
in terms
of
rule 53 of
the Tribunal
rules for
a default
order.
[8]
[45]
Rule 53 is triggered when a person served with an initiating document
in this case the complaint referral) has not filed
a
"response". The term response is not defined but note the
rule does not use the term answer (the term used in complaint
proceedings as well as in the rule that deals with other applications
(rule 43)) which suggests that a response is something more
widely
defined than the filing of an answer.
[46]
If this interpretation is correct then filing an objection within the
time period otherwise required for filing an answer might
constitute
a
'
response' .
The question then is
whether any objection brought within the time period for filing an
answer and without pleading over should
be regarded as a response.
[47]
AGS argues that bringing these applications was reasonable as without
their resolution it was prejudicial to it to have to
file an answer.
It also argued that based on past practice in the Tribunal there was
a reasonable expectation that an objection
could be brought first
without pleading over.
[48]
Mr Trengove in reply fairly conceded that the Commission did not
expect to obtain a default order at this time but wanted clarity
from
the Tribunal that respondents who wish to take exceptions should
plead over to avoid delay in finalising litigation.
[49]
In our view granting a default order in the present circumstances
would not have been appropriate. AGS has not been a delinquent
litigant in this matter and has adequately engaged the Commission
with its concerns first in correspondence and then by way of
exception. There has thus been a response from it. There has been no
clear practice to date that this was not permissible. The
Commission
argued that AGS should have brought an application for directions
first. But this approach
would be self-defeating
for the expedition the
Commission seeks; increasing
rather than decreasing the burden of litigation.
[50]
However we are mindful of the Commission's concerns about the problem
of opportunistic objections delaying the closing of pleadings.
Although we have found that three of the objections made in this case
were sound and justified being raised without pleading over,
the
remainder would not fall into this category and were of the sort that
either were not good at all or could be raised at the
same time as
pleading over. Put differently they may not have been sufficient to
constitute a response without pleading over.
[51]
In general
where
a
respondent wishes to
raise an
objection
it should
plead over
unless
the
nature
of
the
objection
goes
to
the root
of
the
referral
and
the
respondent
is
unable
to
plead
over.
We
decline
in this
case to
set
out
a
list of
which
objections
fall
into this
category
and which
do
not,
as
this
would
be too
categorical an
approach.
Case law
over
time may
develop
this.
This case
illustrates
three
points
of
exception
and one point
of
striking
out
where an
objection
taken
prior
to
pleading
was
justified.
The
remaining
exceptions
are
good
examples
of
ones
that
do
not.
[9]
[52]
We reaffirm
our
approach
to
the
taking of
objections
as
set
out
in
National
Association
of
Pharmaceutical
Wholesalers
and
Others
v
Glaxo
Welcome
and Others.
[10]
Here we
held that
an
objection
taken
at
what
was
described
as
the
'first
stage'
(i.e.
before
a
respondent
has
pleaded)
would
be
considered
premature,
unless
it
could
be
shown
that
it would
substantially
curtail
further
pleadings.
In this
case the
points
upheld fall
into this
category.
Conclusion
[53]
AGS also raised several other objections in its papers which were not
pursued in oral argument. Ms Norton, who had come into
the case only
after heads of argument had been filed, confirmed that we did not
need to consider them. We have however dismissed
the remainder
formally for the sake of clarity although as there was no dispute
about them any longer, we haven't needed to give
reasons.
[54]
We have also required AGS to plead over, provided the Commission has
complied with our order, as given the length of
time in this matter,
there are unlikely to be any objections of a nature that would still
warrant deferring pleading over.
07
April 2016
Date
__________________
Norman
Manoim
Yaimin
Carrim and Mondo Mazwai concurring
Tribunal
Researcher
: lpeleng Selaledi
For
AGS Frasers
: Adv. Michelle Norton SC
with Adv. F.B. Pelser instructed
by Edward Nathan Sonnenbergs Attorneys
For
the Commission
: Adv. Wim Trengove SC with Adv. Tembeka Ngcukaitobi instructed
by Ndzabandzaba Attorneys
[1]
Section 4(1)(b)(iii).
In the
main
matter the
respondents
are cited
as AGS
Frasers
International (Ply)
Ltd, (the
first
respondent)
and
JH
Relief
Transport
CC,
(the
second
respondent).
[2]
See paragraphs 23.3 and 24.3 of the Commission's complaint referral,
record page 14.
[3]
We have shortened the name to AGS as this is the form of the name
used in the referral.
[4]
See
Competition
Commission
v
Gralio Pre
Cast
(Pty)
Ltd.
Case
number
23/CR/Feb09
where the
question
was
whether a person who at one time had been an agent of the firm had
authority to bind it
to a
pricing decision at
a
time
when
the
frrm
had
acquired
new
owners.
[5]
Paramount
Mills v Competition Commission
[2012] ZACAC 4
(27
July
2012).
[6]
See paragraph 18.3 of the referral.
[7]
As stated in paragraph 16 of the referral quoted earlier.
[8]
Rule 53
of
the
Tribunal's
Rules
provides
for
default
orders
where
a
person
who
has
been
served
with an
initiating
document
has
not filed
a
response
within
the
prescribed
period.
The
prescribed
period
is to be
found
in
Rule 20 which
provides
that an answer
must be
filed within
20 days of
the respondent
having
been served with
the
complaint
referral.
[9]
Some
of
these
exceptions were: (i)
the
allegation
in
form
CT 1
(1)
(specifying
an
agreement,
alternatively
...prohibited
practice) is
similarly
inconsistent with the plurality of "agreement") in
paragraph
22 (read
also with paragraphs 20 and 21), themselves contradicted by the
singularity of "agreement" in paragraph 19
and (ii)
whether the alleged agreement was oral, tacit (and if so, pursuant
to what conduct by
both
alleged
parties to the agreement) or in
writing.
[10]
Case number 45/CR/Jul01 in particular as set out in paragraphs
56-65.