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[2018] ZACT 45
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Tourvest Holdings (Pty) Ltd v Competition Commission, Trigon Travel (Pty) Ltd v Competition Commission (CR209Feb17/EXC134Aug17, CR209Feb17/EXC132Aug17) [2018] ZACT 45 (10 January 2018)
COMPETITION
TRIBUNAL OF SOUTH AFRICA
Case
No.: CR209Feb17/EXC134Aug17
In
the Exception application between:
TOURVEST
HOLDINGS (PTY) LTD
Excipient (First Respondent)
and
COMPETITION
COMMISSION
And
Case
No.: CR209Feb17/EXC132Aug17
In
the Exception application between:
TRIGON
TRAVEL (PTY) LTD
Excipient (Second Respondent)
and
COMPETITION
COMMISSION
In
Re:
The
Complaint referral between:
THE
COMPETITION
COMMISSION
Applicant
and
TOURVEST
HOLDINGS (PTY)
LTD
First Respondent
TRIGON
TRAVEL (PTY)
LTD
Second Respondent
Panel
: Norman
Manoim (Presiding Member)
Enver Daniels (Tribunal Member)
Anton Roskam (Tribunal Member)
Heard
on
:
08
December 2017
Order
issued on
:
10
January 2018
Reasons
issued on :
10 January 2018
REASONS
FOR DECISION
Introduction
[1]
This
case concerns two exceptions the respondents have brought to a case
referral from the Competition Commission.
Background
[2]
This
is the second time in this matter that the two respondents, Tourvest
Holdings (Pty) Ltd ("Tourvest") and Trigon Travel
(Pty) Ltd
("Trigon"), have filed exceptions to the Competition
Commission's complaint referral. In response to the first
round of
exceptions, which we upheld, we required the Commission to file a
supplementary affidavit. The Commission has done so.
The respondents
allege that despite the supplementary affidavit the referral remains
excipiable.
[3]
To
explain the present decision it is necessary to consider the referral
as it was, and its deficiencies, and then to consider whether
it has
been remedied by the supplementary affidavit.
Original
referral
[4]
The
Commission alleges that in 2015, Parliament issued a tender to the
travel industry for the provision of travel services for
members of
Parliament. The services included, booking of flights and
accommodation. Sixteen firms submitted tenders, amongst them
the
respondents, Tourvest and Trigon.
[5]
The
Commission's case was that the respondents had reached an agreement
to fix prices and tender collusively, thus contravening
sections
4(1)(b)(i) and 4(1)(b)(iii) of the Act.
[1]
[6]
The
Commission concluded that the respondents had entered into an
agreement based on the following facts. First the similarities
in
their bids. They had submitted an identical price for their
transaction. Secondly, they had the same B BEE status and
thirdly the same procurement level recognition. In addition they had
submitted their bids on the same date. The Commission also
alleged
that the firms were related to one another. Trigon is owned by the
Travel Assignment Group (TAG). TAG is alleged to be
a franchisee of
Tourvest.
Tribunal's
first Decision
[7]
In
the first round of exception applications, Tourvest and Trigon had
filed exception applications on the basis that the Commission's
complaint referral raised no cause of action, and is thus vague and
embarrassing. The nub of the respondents' criticism was that
the
facts on which the Commission relied, did not constitute a sufficient
basis on which to conclude the existence of an agreement.
During
argument the Commission conceded that it had no proof of an agreement
and was relying on a case based on inference, although
it had not
pleaded this. The second criticism was that if the Commission was
alleging a case of bid rigging it made no sense for
the respondents
to have submitted an identical price. In response to this valid
criticism, counsel for the Commission indicated
that she was
instructed that the prices were not the same, and that the Commission
would supplement its referral, if allowed to
do so. We gave the
Commission an opportunity to remedy its complaint referral by
ordering that the Commission allege all the facts
on which it seeks
to rely onto draw the inference that Tourvest and Trigon have engaged
in an agreement to tender collusively.
The Commission duly filed its
supplementary affidavit which revealed the following:
4.1
"Tourvest is the incumbent
service provider of travel services to Members of Parliament; and the
request for tenders issued
by Parliament allowed for an award of the
tender to more than one bidder at the discretion of the Secretary of
Parliament."
4.2
"Tourvest has substantial
scale and uses its bargaining power to negotiate better travel deals
on behalf of itself and its
affiliates like TAG. The relationship
between TAG and Tourvest is for their mutual benefit, because TAG's
additional volumes enable
Tourvest to negotiate higher discounts with
travel services providers, to the benefit of Tourvest and TAG and its
subsidiaries
such as Trigon."
4.3
"The tender that is the
subject of this referral allowed for an award to more than one bidder
at the discretion of the Secretary
of Parliament. A possibility
therefore exists that, given the
size
of the tender, Tourvest and Trigon
could both win the bid at the same price. Alternatively, Tourvest as
the incumbent could retain
the existing tender in the event
Parliament decides not to award the tender that is the subject of
this referral on the suspicion
of collusion."
[8]
This
resulted in Tourvest and Trigon then filing a second set of exception
applications, on the basis that the Commission's complaint
referral,
as supplemented, is still defective as it discloses no cause of
action against them and is thus vague and embarrassing.
Both Tourvest
and Trigon raised the same grounds for the current applications as
they had raised in the first round of applications.
At the hearing,
the respondents argued that based on the facts in the Commission's
referral and supplementary affidavit, no inference
can be drawn that
the respondents agreed to tender collusively.
Analysis
of the second round of exceptions
[9]
The
issue for us to decide is whether the Commission has now made
sufficient allegations to make out a case in terms of sections
4(1)(b)(i) and 4(1)(b)(iii) of the Act.
[10] It is now clear
from the supplementary affidavit that the Commission's case is based
on inference.
[2]
The inference sought to be drawn is that the respondents submitted
identical bids because they had colluded.
[11]
It is common cause that a case for
collusion can be based on inference. The debate between the
respondents and the Commission is
whether the facts pleaded by the
Commission were sufficient to make out a cause of action. The
respondents approached the matter
by arguing that the similarities
taken in isolation were unremarkable and hence did not constitute a
sufficient basis for drawing
an inference. The respondents
concentrated on the similarities in 8-BEE status, procurement level
and said that these were not
matters that parties could fix. Nor was
there anything significant in the fact that the bids were submitted
on the same dates.
Most firms, they argued, would submit bids close
to the closing date. The respondents had less to say about the
similarity in the
transaction fees. Note the Commission still alleges
that this fee is identical and counsel's submission from the bar on
this aspect
in the first hearing has not found its way into the
supplementary affidavit.
[12]
The
respondents did not refer us to any legal authority on what the legal
test for a case based on inference should be at the time
of
exception. Cases we were referred to were not in point.
[13]
Case
law exists for the test in civil cases where several inferences may
be drawn. In the leading case of
Cooper,
[3]
the Appellate Division, as it was then, held that an inference may be
drawn in favour of a party who bears the onus if it is the
most
probable inference to be drawn.
[14]
However this test does not apply in a
case based on exception, where the respondents, as in this case, have
not put up their own
facts. We thus have no other facts to consider
other than those alleged by the Commission in the referral. The
proper test at this
stage, is whether the Commission has alleged
sufficient facts, from which a reasonable possible inference may be
drawn that the
respondents had reached a collusive agreement.
[15]
The
new facts alleged by the Commission are this. First, the tender
envisaged that more than one firm might win the tender. Thus
the fact
that two firms bid the same price is no longer as irrational as it
seemed when this allegation was first made and, it
seemed, in the
absence of other facts, an all or nothing bid. The Commission now
alleges that it is possible, given the size of
the tender, that both
firms could win the tender at the same price.
[4]
The existence now of a rational explanation for the pricing
behaviour, which was Jacking in the referral as originally pleaded,
makes the inference sought to be drawn more reasonable.
[16]
Second,
it is now alleged that Tourvest is the incumbent supplier. The
Commission alleges that the services being put up for tender
are the
same as those currently provided by Tourvest.
[5]
It is thus possible that Tourvest as the incumbent, knowing that it
might have to lose some share of the revenue to a rival, would
have
an incentive to ensure it could do so in circumstances where it would
still have some economic gain. The Commission now alleges
what that
motive might be, as it explains the relationship between Tourvest and
Tigon more fully in the supplementary affidavit.
Recall that Tigon is
a subsidiary company in the TAG group. Tourvest is alleged to procure
airline and accommodation services on
behalf of its affiliates, one
of which is TAG. This enhanced bargaining power benefits both groups
because they get better discounts.
Thus to the extent that Tigon, a
TAG subsidiary wins some of the services from Parliament, would still
benefit Tourvest.
[17]
The
third relevant fact about Tourvest being an incumbent means it is
aware of what transaction fees Parliament is currently paying.
In the
referral it is alleged that the bidders transaction fees ranged from
R75.00 to R1700.50 per transaction compared to the
R150.00 offered by
both the respondents. This wide range suggests that at least some
bidders lacked any information as to what
Parliament was likely to
accept. Fourth, the fact that fees had such a wide range and were not
clustered around a narrower range
makes the coincidence sought to be
drawn from the similar prices, more probative. Moreover the
incumbent's knowledge of the client's
current pricing would have been
useful to Tigon.
Conclusion
[18] Based on our
analysis above, we are of the view that the exceptions must be
dismissed, because on the
facts of the Commission's papers, as now
supplemented, a reasonable possible inference can be drawn that the
respondents may have
contravened the Act. Of course the respondents
may well have an answer to all these points but that is for them to
raise in an
answering affidavit. The respondents must therefore file
their answering affidavits to the Commission's complaint as
supplemented.
[19]
There is no order as to costs.
ORDER
1.
We
hereby dismiss Tourvest's exception application under case number
CR209Feb17/EXC134Aug17, and Trigon's exception application
under case
number CR209Feb17/EXC132Aug17.
2.
Tourvest and Trigon must file
answering affidavits to the Commission's complaint referral within 20
(twenty) business days of this
order.
Mr
Norman Manoim
Mr
Enver Daniels and Mr Anton Roskam concurring.
10 January 2018
Date
Tribunal
Researcher:
Caroline Sserufusa and Ndumiso Ndlovu
For
the 1
st
Respondent: PMP Ngcongo instructed by Cliffe
Dekker Hofmeyr
For
the 2
nd
Respondent: GD Marriot instructed by Nortons Inc.
For
the Commission: K
Madise and M Ngobese
[1]
Competition Act 89 of 1998
, as amended.
[2]
See supplementary affidavit, paragraphs 5 and 11
[3]
Cooper and Another v Merchant Trade Finance Ltd
(1999) JOL
5830 (A).
[4]
Supplementary affidavit paragraph 9.
[5]
Ibid.