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[2016] ZACT 121
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SA Gym Group, a universitas personarum, trading as Fit-SA v Discovery Health Medical Scheme and Others (CRP172Nov15/AME067Jul16) [2016] ZACT 121 (16 October 2016)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case
No: CRP172Nov15/AME067Jul16
In
the matter between:
The
SA Gym Group, a
universitas personarum,
trading
as
Fit-SA
Applicant
and
Discovery
Health Medical Scheme
First Respondent
Discovery
Health Proprietary Limited
Second
Respondent
Discovery
Vitality Proprietary Limited
Third Respondent
Virgin
Active South Africa Proprietary Limited
Fourth Respondent
Planet
Fitness Proprietary Limited
Fifth Respondent
The
Competition Commission
Sixth Respondent
Panel
: Norman Manoim (Presiding Member)
: Medi
Mokuena (Tribunal Member)
:
Mondo Mazwai (Tribunal Member)
Heard
on
:
21
September 2016
Order
Issued on : 26 October 2016
Reasons
Issued on
:
26
October 2016
Reasons
for Decision and Order
Introduction
[1]
Th
i
s
matter concerns an application by The SA Gym Group, a voluntary
association
of
gym
clubs,
trading
as
Fit-SA
("Fit-SA")
to
amend
and
supplement
its
complaint
referral
in order
to
overcome
an
exception
application
filed
by Virgin
Active
South
Africa Proprietary Limited ("Virgin Active").
[1]
[2]
Only
Virgin Active and Planet Fitness Proprietary Limited ("Planet
Fitness") opposed the amendment application, and are
hereinafter
referred to as uthe respondents".
[2]
[3]
For reasons we explain later, it has become moot for us to decide the
amendment application. The only issue to decide is that
of costs. Our
decision and reasons in that regard follow.
Background
[4]
On 14 September 2015, Fit-SA filed a statement of complaint with the
Competition Commission ("Commission") wherein
it alleged
that the first to fifth respondents had engaged in exclusive
agreements in contravention of
sections 5(1)
and
8
(c) of the
Competition Act 89 of 1998
.
[5]
On 08 October 2015, the Commission served a notice of non-referral on
the Applicant, and advised that it had found no evidence
that the
agreements between the first to fifth respondents were exclusive.
Furthermore the Commission informed Fit-SA that its
investigation had
revealed, amongst other things, that Fit-SA did not meet the criteria
to be part of the scheme and further that,
there was evidence to
suggest that Fit-SA could instead be accommodated through another
program offered by Discovery, referred
to as Discovery VitalityFit, a
program which is allegedly designed specifically for small
independent health clubs.
[6]
Following the Commission's decision not to refer the complaint,
Fit-SA on or about 04 November 2015, filed a complaint referral
directly with the Tribunal in terms of
section 51(1)
of the Act.
[7]
In particular,
the conduct
underlying the complaint
referral,
concerned
agreements
that the first to third respondents had concluded with Virgin Active
and Planet Fitness respectively, in terms of which
the first to third
respondents subsidise their members' gym fees at each of Virgin
Active's
and
Planet Fitness'
gyms. Fit-SA
submitted that
no
new gym companies have been afforded the same partnership and that
Virgin Active and Planet Fitness continue to be the only two
gyms
which benefit from this subsidy scheme. This allegedly impairs the
ability of independent gyms to compete effectively with
Virgin Active
and Planet Fitness as they are unable to match the significantly
reduced rates offered by these gyms.
[8]
On 06 January 2015, Virgin Active filed an exception application to
Fit•SA's complaint referral on the grounds that the
allegations
contained therein did not disclose a competition law contravention by
Virgin Active; alternatively, that such allegations
were vague and
embarrassing in that Virgin Active was unable to ascertain what case
it was required to meet.
[9]
On 03 June 2016, Fit•SA filed an amendment application in which
it sought to overcome the grounds of objection contained
in Virgin
Active's exception.
[10]
On 13 July 2016, Virgin Active filed an answering affidavit opposing
the amendment application on grounds that the amended
complaint
referral still did not disclose a competition law contravention by
Virgin Active; alternatively was vague and embarrassing
in that
Virgin Active was unable to ascertain what case it was required to
meet. In essence, Virgin Active submitted that the amended
complaint
referral remained excipiable. Virgin Active prayed that the
application be dismissed with costs.
[11]
On 29 July 2016, Planet Fitness filed its answering affidavit
opposing the amendment application on similar grounds to those
of
Virgin Active and prayed that the application be dismissed with
costs.
Hearing
[12]
During the course of the proceedings it became increasingly clear
that Fit-SA had failed to discern the case it was trying
to make. In
particular, it was not clear what theory of harm
[3]
the
applicant espoused, i.e. whether the conduct Fit-SA sought to have
prohibited was conduct upstream by the first and/or second
and/or
third respondents at the level of medical insurance service
provision, or downstream at the gym services level.
[13]
Having heard Fit-SA's opening arguments, the Tribunal questioned the
probability of success of this application and afforded
Fit-SA an
opportunity to reconsider its position given that on the papers it
was unclear what case the respondents were required
to meet.
[4]
However,
Fit-SA was adamant that its amendment had cured the deficiencies and
requested to proceed to make submissions regarding
the amendment
application.
[5]
[14]
The respondents opposed the proposed amendments on the basis that
they did not remedy the deficiencies contained in the complaint
referral. They were of the view that even if the amendment
application were to be granted, the complaint referral would remain
excipiable on the grounds that it failed to disclose a cause of
action against them and was vague and embarrassing. The respondents
prayed that the application be dismissed with costs.
[15]
Following a full day of hearing, Fit-SA eventually conceded that its
papers (even if the proposed amendments were granted)
needed further
amendment.
[6]
In light of this,
the Tribunal is no longer required to make a decision on the
excipiability of the amendment application, except
for the question
of costs.
[7]
Costs
[16]
Fit-SA submitted that costs should not be awarded against it, as
procedurally, the respondents have not raised their exception
on
notice, but rather in their answering affidavits opposing the
amendment application. Fit-SA submits that, had the exceptions
been
brought on notice as is practice in the High Court, it would have had
an opportunity to respond to the exception and these
proceedings
could have been avoided.
[17]
Virgin Active and Planet Fitness submitted that there was nothing
irregular with the procedure they followed. This is because
following
Fit-SA's original complaint referral, Virgin Active filed an
exception application (Planet Fitness addressed a letter
to Fit
SA concurring with Virgin Active's exception application)
[8]
-.
Fit-SA then withdrew the referral against some of the respondents and
filed an application to amend its original referral
[9]
,
to
which the respondents filed answering affidavits in which they
opposed the amendment on grounds,
inter
a/ia,
that the amended referral would remain excipiable,
[18]
Virgin Active submitted that there was no prejudice to Fit-SA as,
although it did not file another exception, it alleged in
its
answering affidavit that the amended complaint referral remained
excipiable, an allegation Fit-SA was aware of.
[19]
Furthermore, Virgin Active submitted that Fit-SA persisted with
arguing the amendment despite the Tribunal's invitation to
reconsider
its position following the deliberations during the proceedings.
Virgin Active submitted that, in the circumstances,
the only
appropriate remedy was a dismissal of the application with costs.
[10]
[20]
Planet Fitness concurred with Virgin Active and added that the costs
should include the cost of two counsel against not only
Fit-SA, but
also its members jointly and severally.
[11]
[21]
It is trite that the Tribunal is an administrative body. As such, the
Tribunal is not bound by High Court rules. This means
our proceedings
are informal, with the proviso that we act fairly
.
Although there
is no specific provision in our rules for exception applications, we
have previously heard them under rule 42 of
the Tribunal Rules
.
However,
in this case,
it makes no material difference
that the
exception was raised in answer to the amendment application, and not
on notice.
[22]
This is because Fit-SA knew from Virgin Active's answer that it
opposed the amendment on grounds that it did not cure the
deficiencies in Virgin Active's earlier exception application, which
had been brought on notice (and was not proceeded with as Fit-SA
advised Virgin Active that it intended to amend its referral).
[23]
It was open to
Fit-SA, on receiving Virgin Active's answer, to reconsider its
position regarding the amendment application, but
it persisted with
defending the amendment application, fu y aware of Virgin Active's
submission that the amendment remained excipiable.
It was also open
to Fit-SA to address this submission in reply but it did not
do
so.
We
are,
therefore,
not
persuaded
that
Fit-SA
has
been
prejudiced
by
the manner in
which the exception was brought.
[24]
We find,
therefore, that Fit-SA is liable for the respondents' costs. However,
in our view, the costs of two counsel are unwarranted
in the
circumstances of this case. We also have found no basis to grant a
cost order against individual member gyms of Fit
SA, as
contended for by Mr Symon, as they did not appear before us in their
individual capacities.
[25]
We therefore make the following order.
Order
[26]
Fit-SA is granted leave to amend its complaint referral affidavit.
[27]
Fit-SA is liable for the costs of the fourth and fifth respondents in
the amendment application, on a party and party scale,
including the
cost of one counsel.
Ms
Mondo Mazwai
26
October 2016
DATE
Mr
Norman Manoim and Ms Medi Mokuena concurring
Tribunal
Researcher:
Karissa Moothoo Padayachie
For
the Applicant:
Adv Quentin Donaldson instructed by
Higgs
Attorneys
For
the First Respondent:
Wade Graaff from ENSafrica
For
the Second and Third Respondents: Ryan Goodman from ENSafrica
For
the Fourth Respondent:
Jerome Wilson S.C. instructed by
Webber
Wentzel
For
the Fifth Respondent:
Shem Symon S.C. and Adv Kendall Turner
instructed
by Tugendhaft Wapnick Banchetti
and
Partners
For
the Commission:
The Commission was unrepresented
[1]
Planet
Fitness did not formally file an exception application but
associated itself with Virgin Active's exception application.
See
letter dated 15 January 2016, page 255 of the trial bundle.
[2]
Discovery
Health Medical Scheme, Discovery Health Proprietary Limited and
Discovery Vitality
Proprietary
Limited attended the hearing only on a watching brief and submitted
that they would abide
the
decision of the Tribunal.
[3]
See
transcript page 6
[4]
See
transcript pages 19-20, see transcript pages 23-25
[5]
See
transcript page 28 lines 1-8
[6]
See
transcript page 121 lines 3-11, see also transcript,
inter
alia,
page
36 line 16-25, page 44 lines 8- 25 and page 45 lines 1-3
[7]
Given
that the applicant requested the Tribunal not to make a decision as
to the amendment application, we do not go into detail
regarding the
arguments that were put forward In this regard and focus only on the
issue of costs.
[8]
See
letter dated 15 January 2016 on page 255 of the trial bundle
[9]
See
Applicants Consolidated Notice of Motion page 87 of the trial
bundle.
[10]
See
transcript page 83 to 84
[11]
See
transcript page 107, lines 1-6.