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[2023] ZACT 61
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Mlonzi and Another v Eskom Holdings Soc Limited and Another (IR1360CT22) [2023] ZACT 61; [2024] 1 CPLR 2 (CT) (2 August 2023)
IN
THE COMPETITION TRIBUNAL OF SOUTH AFRICA
Case
No: IR1360CT22
In
the matter between:
NOTHEMBA
MLONZI
First
Applicant
ECON
OIL & ENERGY (PTY)
LTD
Second
Applicant
and
ESKOM
HOLDINGS SOC LIMITED
First
Respondent
THE
COMPETITION COMMISSION OF SOUTH AFRICA
Second
Respondent
Panel:
M
Mazwai (Presiding Member)
T
Ngcukaitobi (Tribunal Member)
F
Tregenna (Tribunal Member)
Heard
on: 29
May 2023
Date
of Last Submission: 19
June 2023
Order
issued on: 2
August 2023
Reasons
issued on: 2
August
2023
REASONS
FOR DECISION
INTRODUCTION
1.
Since 2003 the Applicant (or Econ Oil & Energy (Ply) Ltd ("Econ
Oil")) has supplied Eskom
Holdings SOC Limited ("Eskom")
(or the First Respondent) with fuel oil. In 2018, Eskom investigated
certain allegations
of improper and unethical conduct against Econ
Oil. It concluded that there was substance to the allegations and
terminated the
supply agreement which was in place between ii and
Econ Oil.
2.
On 17 August 2022, Eskom informed Econ Oil that ii would be
de-registered as a supplier to Eskom for
a period of ten years. This
decision is the subject of this application. Econ Oil applied for
interim relief to prohibit Eskom
from giving effect to this decision.
3.
Ms Nothemba Mlonzi ("Ms Mlonzi"), the First Applicant, is
the sole shareholder and director
of Econ Oil, the Second Applicant.
The Competition Commission ("the Commission") is cited as
the Second Respondent, but
ii played no part in these proceedings.
4.
The Applicants ask for three orders:
4.1.
first, a declaratory order that they are a single economic entity or
firm as defined in the Competition Act, 89 of 1998
("the
Competition Act"
;);
4.2.
secondly, an interim order interdicting and restraining Eskom from
"refusing to deal" with ii pending the final
determination
of a complaint lodged by the Applicants with the Commission on 16
September 2021 under Case No. 2021SEP0034; and
4.3.
thirdly, an order permitting Econ Oil to "participate in Eskom's
tenders for the supply of fuel oil to Eskom Power
Stations".
5.
The application is opposed by Eskom.
Section 49C
of the
Competition
Act is
the gateway to interim relief pending the outcome of a
complaint before the Commission or a referral before the Competition
Tribunal
("Tribunal"). We shall first consider the
requirements of this section before setting out the elements of the
cause of
action.
ANALYSIS
OF
SECTION 49C
OF THE
COMPETITION ACT
6.
Section
49C(1) of the
Competition Act permits
an applicant to apply
for an interim order before the Tribunal "at any time, whether
or not a hearing" into an alleged
prohibited practice has
commenced.
7.
Section 49C(2)(b)
of the
Competition Act regulates
the powers of the
Tribunal when evaluating whether or not to grant or refuse an
application for interim relief. It gives the Tribunal
the discretion
to grant an interim order. In the exercise of the discretion the
Tribunal must be satisfied that it is "reasonable
and just"
to grant an interim interdict in a given case.
8.
When deciding what is "reasonable and just", the Act sets
out a closed list of factors to be
considered by the Tribunal.
Firstly, there must be prima facie evidence relating to the alleged
prohibited practice. Secondly,
the Tribunal must consider the need to
prevent serious or irreparable damage to the Applicant. Thirdly, the
balance of convenience
must favour the granting of the interim
interdict.
9.
In terms of section 49C(3) the standard of proof in interim relief
proceedings before the Tribunal is
the same standard of proof in a
High Court applying the common law.
10.
The duration of an interim order in terms of Section 49C(4) may not
extend beyond the earlier of the conclusion
of a hearing into the
alleged prohibited practice or a date that is six months after the
date of issue of the interim order.
11.
Both Applicants have filed complaints against Eskom. Econ Oil's
complaint is dated 16 September 2021 and Ms Mlonzi's
complaint was
signed on 20 October 2022. Accordingly, the Applicants qualify as
"complainants". The complaints contain
a description of the
prohibited practice, which reads:
"Eskom
is abusing its dominance in that it is engaging in exclusionary acts
that have anti-competitive effects in the market
for the supply of
fuel oil”.
12.
If established, these allegations would amount to a "prohibited
practice". Therefore, the requirements
of section 49C(1) would
be met.
13.
The real debate in this case was whether or not the Applicants have
met the requirements of section 49C(2)(b). As
noted above, the
Tribunal has a discretion to grant an interim interdict if it is
reasonable and just to do so. It seems to be
contemplated within the
structure of section 49C that relief may also be withheld even if the
factors listed in section 49C(2)(b)(i)
to (iii) are met.
14.
A logical way of applying the section is to start by asking whether
the three factors listed in section 49C(2)(b)
are met. While the
requirement to show a prima facie case for a prohibited practice is
mandatory, the Tribunal has held that the
requirements of balance of
convenience and serious damage or irreparable harm can be weighed off
and balanced against each other.
[1]
15.
The case of York Timbers v South African Forestry Company is the
leading authority on how the three factors in section
49C(2) are
balanced when applied to the facts of a given case:
"64.
Applying this analysis to our Act means that we must first establish
if there is evidence of a prohibited practice,
which is the Act's
analogue of a prima facie right. We do this by taking the facts
alleged by the applicant, together with the
facts alleged by the
respondent that the applicant cannot dispute, and consider whether
having regard to the inherent probabilities,
the applicant should on
those facts establish the existence of a prohibited practice at the
hearing of the complaint referral.
65.
If the applicant has succeeded in doing so we then consider the
'doubt' leg of the enquiry. Do the facts set out by the respondent
in
contradiction of the applicants case raises serious doubt or do they
constitute mere contradiction or an unconvincing explanation.
If they
do raise serious doubt the applicant cannot succeed.
66.
As far as ... irreparable damage and the balance of convenience,
these are not looked at in isolation or separately but are
taken in
conjunction with one another when we determine our overall
discretion."
16.
In e-Media Investments (Pty) Ltd v Multichoice (Pty) Ltd &
Another
[2]
Victor J made the
following relevant remarks in relation to the functions of the
Tribunal when evaluation applications for interim
relief:
"{80]
In applying the three principles in s 49C(2) cognisance must be taken
of whether clear, non-speculative and uncontroversial
facts have been
presented by an applicant from which it could be reasonably and
logically inferred, on a balance of probabilities,
that the alleged
irreparable harm would occur. In considering the balance of
convenience at the interim stage, the Tribunal has
to consider "which
of the two parties will suffer the greater harm from the granting or
refusal of interim relief, pending
a decision on the merits. If there
is clear and non-speculative evidence regarding the general extent of
the harm that one party
would suffer if the relief requested is not
granted, then the interim relief ought to be granted."
17.
In applications for interim relief disputes of fact often arise. But
as the Competition Appeal Court ("CAC")
noted, the Tribunal
should not be unduly detained by disputed facts to the extent that it
cannot fulfil its function to make factual
determinations when
deciding applications for interim relief. Where appropriate the
Tribunal should take a robust view of the evidence.
Where an
applicant puts forward facts which cannot be seriously disputed at
the interim stage, that should facilitate the determination
of
interim relief. The Tribunal must apply an objective standard to the
facts, to facilitate the determination of the matter.
18.
How should the three factors in section 49C(2) be understood? In
Business Connexion (Pty) Ltd v Vexall (Pty) Ltd
& Another
[3]
Unterhalter J delivered an authoritative exposition of the law,
holding, that in respect to each of the elements for the granting
of
interim relief:
18.1.
the "evidence of a prohibited practice" is concerned with
"the competitive position of competitors in
the market, judged
against the regulatory criteria of the prohibited practice defined in
Chapter 2 of the Act"
[4]
;
18.2.
the requirement for the need to prevent serious or irreparable damage
is "a party specific enquiry". Yet analogies
with interim
interdicts at common law should be approached with care. Section 49C
while similarly structured to the requirement
of irreparable harm
under the common law is distinct. Its primary focus is to prevent a
damage "to the competitive position
of the applicant".
Other forms of damage to the applicant are not relevant because the
purpose of the Act is to maintain and
promote competition in the
market
[5]
; and
18.3.
as far as the requirement of balance of convenience is concerned, the
Tribunal must weigh the prejudice the applicant
will suffer if the
interim interdict is not granted against the prejudice to the
Respondent if it is granted. But one again must
not reduce this into
a party specific enquiry. Instead, "the currency of prejudice is
reckoned by recourse to the consequences
for the competitive position
of the parties in the market".
[6]
19.
Once the three factors in section 49C(2) have been assessed, the
Tribunal will ask the over-riding question, whether
it is reasonable
and just to grant interim relief. If not, the application should be
refused. If yes, the relief may be granted.
We commence with the
first statutory requirement, namely the evidence of a prohibited
practice.
EVIDENCE
OF A PROHIBITED PRACTICE
20.
The cause of action of the Applicants is based on
section 8(1)(c)
of
the
Competition Act. That
section provides:
"It
is prohibited for a dominant firm to -
(c)
engage m an exclusionary act, other than an act listed in paragraph
(d), if the anti-competitive effect of that act outweighs
its
technological, efficiency or other pro-competitive gain".
21.
Since the prohibition applies to a "dominant" firm, it is
necessary to refer to
section 7.
In terms of this section, a firm is
dominant in a market if:
20.1
it has at least 45% of that market;
20.2
it has at least 35%, but less than 45% of that market, unless it can
show that it does not have market power); or
20.3
it has less than 35% of that market but has market power.
22.
In order to assess dominance, there must be a delineation of the
relevant market, as discussed below.
The
relevant market
23.
The relationship between the Second Applicant and Eskom is a
supplier, customer relationship. They do not relate
as competitors.
The submission of the Applicants is that a decision by Eskom to
de-register it as a supplier is an abuse of dominance.
24.
But dominant in which market? The market as defined by the Applicants
"is the market for the purchase of fuel
oil for use at Eskom
power stations". The Applicants say that fuel oil is delivered
to Eskom power stations by special tankers.
It is sourced from
refiners who are situated in KwaZulu-Natal, Free State and Gauteng.
It is then delivered to Eskom power stations,
situated in Mpumalanga,
Free State and Limpopo.
25.
The Applicants say that Eskom is a monopsony buyer of fuel oil. Eskom
has approximately 95% of the fuel oil procurement
market in South
Africa and 100% of the fuel oil procurement market for Eskom power
stations.
26.
The Applicants divide the Eskom fuel oil market into supply of Grade
1 fuel oil to Eskom power stations; supply
of Grade 2 fuel oil to
Eskom power stations; and supply of Grade 3 fuel oil (heavy fuel oil)
to Eskom power stations.
27.
Grade 1 fuel oil is manufactured by Sasol and supplied to Eskom for
use at three of its coal fired power stations,
Arnot, Kriel and
Duvha. Grade 2 fuel oil is manufactured by Sasol and used at Hendrina
coal fired power station. Grade 3, the category
relevant in this
case, is used at ten coal fired power stations and manufactured by
several oil manufacturers.
28.
Eskom confirms the three categories offuel oil alleged by the
Applicants. It notes that Grade 3 fuel oil is used
at twelve out of
its sixteen coal fired power stations.
29.
Eskom points out that from Econ Oil's website there are other
applications of Grade 1 and Grade 2 fuel oil, outside
of Eskom. These
include "any other plant with large boilers". Since fuel
oil cannot be used in other applications for
environmental reasons,
ii is processed to remove the sulphur content.
30.
In respect to heavy fuel oil, Eskom refers to the website of Sasol
which states that heavy fuel oil is a popular
price in the industry,
empowering mines, boilers, ports and manufacturing plants. Further
references are made to "final product
applications" such as
being the source of fuel by vessels and three ignition sources in
power plants. Eskom concludes that
fuel oil has multiple uses,
including power merchant ships and for industrial steam and hot water
boilers.
31.
In oral argument Mr Trengove SC, who appeared on behalf of Eskom
together with Mr Mbikiwa, criticised the market
definition advanced
by the Applicants as comprising "mere asserlions" without
any substantive content. The Panel debated
with him whether the
problem we face is not one of speculation on both sides. His retort
was that we should consider closely the
case made by the Applicants
as any deficiencies in the Respondent's case do not cure the problems
of the Applicant's case. We accept
this as a general statement. But
Mr Ngalwana SC, who appeared together with Mr Monareng for the
Applicants, is correct in his submission
that properly construed, the
Applicants are not relying on assertions without fact. They have made
specific allegations of fact
about Eskom's position in the market for
procurement of fuel oil. In those circumstances, to prevail, Eskom
should produce facts
which cast serious doubt at the version of the
Applicants.
32.
The Act says that we must apply the common law standard. The common
law is set out in the judgment of Webster v
Mitchell
[7]
where it is stated:
"In
the grant of a temporary interdict, apart from prejudice involved,
the first question for the Court in my view is whether,
if interim
protection is given, the applicant could ever obtain the rights he
seeks to protect. Prima facie that has to be shown.
The use of the
phrase 'prima facie established though open to some doubt' indicates
I think that more is required than merely to
look at the allegations
of the applicant, but something short of a weighing up of the
probabilities of conflicting versions is
required. The proper manner
of approach to consider is to take the facts as set out by the
applicant, together with any facts set
out by the respondent which
the applicant cannot dispute, and to consider whether, having regard
to the inherent probabilities,
the applicants could on those facts
obtain final relief at a trial. The facts set up in contradiction by
the respondent should
then be considered. If serious doubt is thrown
on the case of the applicant he could not succeed in obtaining
temporary relief,
for his right, prima facie established, may only be
open to 'some doubt."
33.
The judgment in Gool v Minister of Justice & Another
[8]
sought to qualify the statement in Webster v Mitchell. It was stated
in that case:
"With
the greatest respect, I am of the opinion that the criterion
prescribed in this statement for the first branch of the
inquiry thus
outlined is somewhat too favourably expressed towards the applicant
for an interdict. In my view the criterion on
an applicant's own
averred or admitted facts is: should (not could) the applicant on
those facts obtain final relief at the trial.
Subject to that
qualification I respectfully agree that the approach outlined in
Webster v Mitchell, supra, is the correct approach
for ordinary
interdict applications".
[9]
34.
The Applicants have averred that heavy fuel oil is primarily used at
Eskom's coal fired power stations. They have
also alleged that Eskom
has approximately 95% of the fuel oil procurement in South Africa.
Eskom's Answering Affidavit is tendentious
in this respect. It asks
speculative questions of the allegations of the Applicants, but never
seriously engages with them, either
by positively denying them or
advancing an alternative factual version. So, if Eskom did not buy
95% of all fuel oil in South Africa
as alleged by the Applicants, it
would have been easy to say so. And if Eskom was not the primary
consumer of fuel oil in South
Africa it would have said so. What the
Tribunal must pay attention to is whether serious doubt has been cast
on the case of the
Applicants. Eskom has, in effect left the
averments of the Applicants on market definition unchallenged. Yes,
it is true that Eskom
has sought to show that there are further
questions the Applicants should have asked to improve its market
definition. But that
cannot detract from the fact that the
Applicant's market definition has not been seriously challenged.
35.
The Tribunal must consider the relevant market, which is the market
in which the abuse of dominance is alleged.
Since this is a case
about buyer power, the market is where Eskom operates. Thus, the
Tribunal accepts for purposes of deciding
the present application the
following propositions:
35.1.
Eskom is the primary consumer of fuel oil in South Africa;
35.2.
Eskom consumes 95% of all available fuel oil in South Africa; and
35.3.
The relevant market is for the procurement of fuel oil.
Eskom
as a monopsony
36.
As Eskom is responsible for 95% of fuel oil procurement in South
Africa, it is plainly a monopsonic buyer of fuel
oil. Monopsonic
power is the mirror image of monopoly power. Sometimes referred to as
"buyer power', monopsonic power is defined
by the Organisation
for Economic Co-Operation and Development ("OECD") as
follows:
"A
buyer has market power if the buyer can force sellers to reduce price
below the level that would emerge in a competitive
market”.
37.
Buyer power therefore arises "if the buyer's side of the market
is sufficiently concentrated that buyers recognise
that they are
'price makers'." In this scenario buyers understand that if they
withhold demand and purchase less, the price
will fall, or if they
increase their purchases the price will rise.
[10]
38.
Competition law is thus concerned with monopsonic power, as with
monopoly power, because it enables the buyer to
exercise market power
to the detriment of competition in a market. Eskom has approximately
95% of the fuel oil procurement in South
Africa and therefore
dominant in terms of
section 7
of the
Competition Act. This
shows the
ability of Eskom to compel sellers to price below levels which would
emerge in a competitive market. The question is
then whether the
requirements of
section 8(1)(c)
are met, on a prima facie basis. We
consider this question next.
Abuse
of dominance
39.
Section 8(1)(c)
of the
Competition Act prohibits
a dominant firm from
engaging in an exclusionary act "if the anti-competitive effect
of that act outweighs its technological,
efficiency or other
pro-competitive gain". An exclusionary act is defined as "an
act that impedes or prevents a firm
from entering into, participating
in or expanding within a market".
40.
The Applicants allege that they have been impeded or prevented by the
conduct of Eskom from entering into, participating
or expanding
within the market for the supply of fuel oil to Eskom, a dominant
buyer of fuel oil. Eskom makes three arguments in
opposing the claims
of the Applicants. First, it states that bearing in mind the
impropriety with which Econ Oil is accused, it
is not possible to
regard the conduct of Eskom as exclusionary. Secondly, Eskom asserts
that since Econ Oil claims on its website
that it has multiple
customers in automotive, mining, tyre, milling and other industries,
it cannot argue that it has been prevented
from entering,
participating or expanding within a market. Thirdly, Eskom states
that the decision in any event is based on justifiable
grounds.
41.
It is common cause that Eskom has de-registered Econ Oil as a
supplier for a period often years. On what has been
established,
Eskom buys 95% of available fuel oil in South Africa.
42.
It is to be noted that the amendment in
section 1(h)
of the
Competition Act defines
"participate" as referring to the
ability of or opportunity for firms to sustain themselves in the
market. In our view,
it is conceivable that, if Econ Oil is unable to
supply a substantial customer such as Eskom, which consumes 95% of
fuel oil, it
would not be able to sustain itself in the market.
43.
It has been established that Ms Mlonzi has been excluded as a
supplier to Eskom. But the question before the Tribunal
is whether
this exclusion is prima facie evidence of a prohibited practice i.e.
an exclusionary act, as defined, which has anti-competitive
effects,
which cannot be justified on the legally recognised grounds.
[11]
44.
In Computicket (Pty) Ltd v Competition Commission of South
Africa
[12]
, a case which
concerned exclusionary conduct under the then section 8(d)(i) of the
Act the CAC held as follows:
"The
act is exclusionary if it falls within the conduct described in
section B(d)(i). That is, however, not the end of the
enquiry. The
Commission must still show that the conduct has an anti-competitive
effect. If that has been established, the onus
shifts to the
respondent, Computicket in this case, to justify the anti-competitive
effect on efficiency grounds. The Tribunal
was therefore correct in
its finding, that the prohibition contained in the second generation
exclusive agreements that inventory
providers may not utilise the
services of a competitor without Computicket's written consent for
the duration of the contract fell
within the definition set out in
section B(d)(i). That finding entails no per se prohibition because
the Commission must show the
anti- competitive effects of the
exclusionary conduct."
[13]
45.
Unlike the previous section 8(1)(d)(i) which specifies the
exclusionary acts that are regarded as anticompetitive,
section
8(1)(c) has a more general application to what may be considered an
exclusionary conduct. Therefore, in order to determine
whether the
exclusion of Mlonzi as a supplier to Eskom is a contravention of the
Act, we must first consider whether there are
any anti
competitive effects arising from the exclusion of Mlonzi.
Anti-competitive
effects
46.
In e-Media, the CAC noted that it was "clear that by excluding
the channels in question it is MultiChoice that
benefits from the
content aggregation provider market."
[14]
47.
e-Media was of course a case about the exclusion of a competitor who
was in the same market as the dominant firm.
The same principle also
features in cases of exclusionary conduct affecting suppliers who
participate in different markets to that
of a dominant firm. In Bulb
Man (SA) (Pty Ltd v Hadeco (Pty) Ltd
[15]
the Tribunal held that an arbitrary refusal to deal by a monopolist
cannot be unlawful unless it extends, preserves or creates
or
threatens to create significant market power in some markets, which
could be either the primary market in which the monopoly
firm sells
or a vertically related or even collateral market. Harm to an
applicant alone does not suffice.
48.
The Applicants place considerable reliance on the e-Media decision.
It must be recalled that in that case the dominant
firm, Multichoice,
had initially argued that its rationale for refusing e-Media access
to its platform for certain channels was
based on capacity
constraints. As the CAC noted, when the matter was argued on appeal
that justification had been abandoned.
[16]
The "important issue" for the CAC was whether the dominant
firm was able to justify its decision on objectively rational
grounds: "[o]nce there is an anti-competitive effect and no
justification for it, then the exclusionary aspect has to be
carefully balanced."
[17]
49.
Indeed, this must be so. Not every exclusionary act which is not
outweighed by technological, efficiency or other
pro-competitive
gains, amounts to an abuse of dominance. An adverse impact on a
complainant is not the only consideration. This
means that to get to
the "abuse" part, especially in cases of the exclusion of a
rival, the Tribunal should at least
answer the question: is the
exclusionary act likely to improve the market position of the
dominant firm? Since these are interim
relief proceedings this
question does not need to be answered on a definitive basis, but only
prima facie.
50.
In casu much as there is evidence of commercial harm alleged by the
Applicants, competition law requires evidence
of a likelihood of harm
to competition: "The enquiry as to whether exclusionary conduct
is anti-competitive yields a positive
answer if 'there is (i)
evidence of actual harm to consumer welfare or (ii) if the
exclusionary act is substantial or significant
in terms of its effect
in foreclosing the market to rivals."'
[18]
51.
This analysis need not change because the case is about buyer power.
The Applicants could acquit themselves of this
evidentiary burden by
showing - on a prima facie basis - how the market power of Eskom
would improve in a manner that would be
harmful to competition. This
is a requirement set out in e-Media: "The exclusionary conduct
can at least at this interim stage
be interpretated as MultiChoice
exercising its market power."
[19]
Alternatively, the Applicants could show competition harm to a
related market which arises as a consequence of the dominant firm's
abuse of its dominance. The point is that whatever species of
competition harm is alleged, some evidence must at least be produced.
52.
The problem we face here is that the Applicants' papers do not make
out a case to show Eskom's abuse of dominance
in a manner which
preserves Eskom's market power or in a manner which adversely impacts
competition in an adjacent or related market.
53.
In the circumstances, our view is that the Applicants have not
demonstrated any anti-competitive effects from Eskom's
exclusion of
Econ Oil as a supplier to Eskom. Even if we were to find that there
are anti-competitive effects (which have not been
proven), section
8(1)(c) requires us to weigh up any anti-competitive effects of the
exclusionary act, and assess whether these
are outweighed by the
pro-competitive or technological, or other efficiencies arising from
the act.
54.
Eskom, being a dominant firm has special obligations to its
competitors and suppliers.
Section 8
of the
Competition Act
encapsulates
these. As a general rule Eskom is under a duty to afford
equal treatment to its suppliers and not to engage in arbitrary
discrimination.
Eskom is also under an express legislative duty not
to abuse its dominance.
55.
The question whether or not Eskom's conduct in this case amounts to
an abuse of dominance must also be answered
by reference to whether
it can be justified on objectively rational grounds. Where a dominant
firm engages in exclusionary conduct
which is harmful to competition,
it is required by competition law to provide objectively rational
grounds for the exclusionary
act. It is not up to the dominant firm
to decide whether its own reasons are objectively rational. This is
within the domain of
the Tribunal. The firm selects its reasons (if
it has any) for the exclusion. But whether or not the reasons so
pleaded are justifiable
is up to the Tribunal to decide. We consider
this next.
Technological,
efficiency or pro-competitive gains: the justification
56.
We need first to locate Eskom within the constitutional and
legislative setting. Eskom is an organ of state as defined
in section
239 of the Constitution. Section 7(2) of the Constitution casts
special obligations on it to "respect, protect,
promote and
fulfil the rights in the Bill of Rights". In the modern state
that duty entails "a duty to create efficient
anti-corruption
mechanisms."
[20]
.
Undoubtedly,
corruption and maladministration in state affairs constitute two of
the greatest scourges which inhibit South Africa's
developmental
objectives and its ability to meet the demands contained in the
Constitution.
[21]
Competition
law cannot be oblivious to this reality.
57.
Eskom is not only entitled but is required by law to combat internal
corruption and other acts of malfeasance when
it becomes aware of
them. Khumalo and Another v Member of the Executive Council for
Education: KwaZulu Natal
[22]
underscores the duty specially entrusted on public functionaries
thus:
"[36]
Public functionaries, as the arms of the state, are further vested
with the responsibility, in terms of section 7(2)
of the
Constitution, to 'respect, protect, promote and fulfil the rights in
the Bill of Rights.' As bearers of this duty, and in
performing their
functions in the public interest, public functionaries must, where
faced with an irregularity in the public administration,
in the
context of employment or otherwise, seek to redress it. This is the
responsibility carried by those in the public sector
as part of the
privilege of serving the citizenry who invest their trust and taxes
in the public administration."
58.
We can then consider the question: why did Eskom de-register Econ Oil
as a supplier? There are two reasons advanced
by Eskom why it
de-registered Econ Oil. The first is that it refused to co-operate
with an investigation into allegations of overcharging
fand the
second is that Econ Oil was involved in improper and unethical
business practices, inter alia, influencing Eskom's procurement
processes.
59.
Econ Oil submits that it has been unfairly targeted for
discriminatory reasons. It points out that it is a black
female owned
supplier to Eskom. In support of the allegation of discriminatory
treatment, Econ Oil has alleged that there were
other similarly
situated suppliers which were not de-registered.
60.
We are unable to find that Econ Oil's submissions are the reasons for
its de registration. We say this on account
of the following
facts which appear from the papers. The first reason is the failure
to co-operate with an investigation launched
by Eskom.
First
reason - failure to co-operate
61.
Econ Oil has been a supplier of fuel oil to Eskom since 2003. In 2016
McKinsey concluded that Econ Oil may have
overcharged Eskom to the
sum of approximately R379,886,593,00 during the period 1 April 2012
to 1 March 2016 for the supply of
Grade 3 fuel oil, which was the
only grade of fuel oil McKinsey ran calculations on.
62.
According to McKinsey, Econ Oil had tendered at a price that was
approximately 10% cheaper than FFS (Pty) Ltd, which
was its
competitor and as a consequence was contracted to supply 80% of
Eskom's fuel oil business. Over time Econ Oil's price advantage
had
diminished to such an extent that ii became significantly more
expensive than FFS. Eskom alleges that this suggested that Econ
Oil
had priced low in order to win the tender only to increase its prices
substantially thereafter.
63.
In December 2020 Eskom appointed the law firm, Bowmans, which also
came to the conclusion that Econ Oil had overcharged
Eskom for all
grades of fuel oil. The calculation by Bowmans showed an overcharge
in excess of R1,2 billion. Eskom has instituted
arbitration
proceedings for the repayment of the overcharged amounts.
[23]
64.
Now, what happened was that during the investigation into the alleged
over charging by Econ Oil, Bowmans required
access to all
invoices issued by Econ Oil to Eskom as well as the underlying
documentation. This was not forthcoming. The Chief
Executive Officer
of Eskom, Mr Andre de Ruyter in fact sought the information himself,
but this request was not complied with by
Econ Oil.
65.
Econ Oil had stated that it had compiled about 100 files which had
been ordered chronologically. But the problem
is that ii did not
supply Eskom with these files, but only submitted three files, which
contained documentation in respect of a
small percentage of the
information that was required. Econ Oil tendered to provide the
balance of the documents, but never did
so.
66.
Econ Oil has contended that Eskom requested some documents which it
already had under its possession. But in our
analysis of the
correspondence, what Eskom was asking for are documents within the
exclusive preserve of Econ Oil. Eskom was trying
to answer the
question of how Econ Oil came to the prices that were charged. Only
Econ Oil could have supplied that information,
but it did not, at
least until the discovery proceedings at the private arbitration
between the parties.
67.
Econ Oil asked for clarity as to what misrepresentation they were
accused of, sought a copy of Eskom's Supplier
Integrity Pact, and
disputed that the Supplier Integrity Pact was binding in respect of
the 2012 agreement concluded with Eskom.
68.
Econ Oil's position also appears in a letter to Eskom of 17 August
2020, which noted that Econ Oil "shall not
be granting you an
unqualified access to our records/documents (which in any event you
have in your possession) but should the
need arise, you should
specify the name and nature of the documents required and we shall
oblige".
69.
Eskom states that by 17 August 2020 it had already provided a list of
categories of documents required. On 23 October
2020 Eskom again
addressed a letter to Econ Oil requesting the same documentation.
70.
On 9 November 2020 Econ Oil's attorneys responded to Eskom stating
that they would only furnish the documentation
after being given a
reason for the specific documentation requested. Eskom was described
as "arrogant" for requesting
documentation without
explaining why it needed such documentation.
71.
The Replying Affidavit does not meaningfully engage with the
allegation of the refusal to co-operate. The Applicants
allege that
when they received the letter of 20 July 2020 from Mr de Ruyter, the
First Applicant was not aware that it was a request
for information
on behalf of Bowmans. It is unclear how any knowledge that this was a
request for information on behalf of Bowmans
would have impacted the
obligation on the supplier to comply with the request for
information.
Similarly,
Econ Oil's decision to seek legal advice does not address the issue
of the alleged refusal to supply the documents and
information
sought.
72.
By 19 November 2020 the documents had still not been provided.
Instead, Econ Oil wrote a further letter to Eskom
recording that
Eskom had failed to inform it of the basis for the allegations.
73.
Eskom's conclusion that there had been a failure to comply with the
investigation is well-founded. The refusal to
co-operate must also be
seen in light of what was in fact being investigated, namely the
allegations of over-charging an organ
of state in the amount of R1,2
billion.
[24]
74.
The parties are before arbitration on whether in fact there was
over-charging. Before us, however, the limited issue
is about a
refusal to co-operate with an investigation lawfully initiated by an
organ of state. When we consider the duties of
Eskom under the
Constitution, they were entitled to ask for information where they
had evidence of alleged impropriety. Econ Oil
had no justifiable
basis to withhold information from Eskom, when they must have been
aware that the investigation was being conducted
in the interests of
the public. We cannot find that Eskom was not justified in regarding
the conduct of the Applicants as constituting
a refusal to co-operate
in breach of the provisions of the Supplier Integrity Pact.
Second
reason: improper conduct
75.
The second reason provided by Eskom relates to the conduct of the
First Applicant. She is accused by Eskom of improper
and unethical
attempts at influencing Eskom employees to breach their employment
contracts and to influence the procurement systems
in ways that
promoted the interests of Econ Oil.
76.
The source of this information is the report of an investigation
conducted by Bowmans between August 2018 and January
2019. That
report uncovered evidence of an improper relationship between Econ
Oil and an employee of Eskom, Ms Noluthando Patricia
Marah, who was
employed as the Senior Manager: Business Enablement. The report of
Bowmans contained the following findings:
76.1.
Bowmans uncovered evidence of a potentially improper relationship
between Ms Marah and Econ Oil. It was established
that Ms Marah had
requested and obtained sponsorships from the Applicants;
76.2.
Bowmans received information that Ms Marah may have improperly
interfered in Eskom's procurement processes on behalf
of Econ Oil and
to promote Econ Oil interests;
76.3.
Mr Boiketlo Mashila, who was Eskom's procurement manager, had
informed Bowmans that whenever he took issue with Econ
Oil, Ms Marah
would either attempt to resolve the issue or reprimand him;
76.4.
Ms Mlonzi contacted Mr Mashila after office hours on 28 June 2017
during the final negotiations stage of the closed
tender process for
the period 1 July 2017 to 30 June 2018. Ms Mlonzi requested Mr
Mashila to provide her with the prices of Econ
Oil's competitor (FFS)
in an apparent attempt to be able to address her prices accordingly;
76.5.
On 30 June 2017 the contract awards for the following year were made.
Econ Oil lost five power stations to FFS;
76.6.
Ms Mlonzi called Mr Mashila on Sunday, 2 July 2017 and requested him
to change the five power stations allocated to
FFA to Econ Oil. Mr
Mashila informed her that this was not possible;
76.7.
During the period December 2003 to November 2018 Eskom had paid Econ
Oil in excess of R15 billion; and
76.8.
According to Eskom's payment system report payments that exceeded the
contract value amounted to R540 million.
77.
Bowmans delivered a further report on 12 October 2020. In that report
they made the following additional findings:
77.1.
Ms Marah was instrumental in assisting Econ Oil to become an Eskom
supplier, including by facilitating the then Minister
of Public
Enterprises Malusi Gigaba to attend the opening of Econ Oil's
branding plant at Marble Hall.
77.2.
The same day Ms Marah requested a contribution of R10 000,00 to an
organisation called "Women in Dialogue",
which Econ Oil
duly paid.
77.3.
Econ Oil invited Ms Marah to an African National Congress fundraising
gala dinner and paid for various Eskom officials,
namely Mr Matshela
Koko, Mr Dan Morokane and Ms Marah to attend the gala dinner and to
sit at a table together with Econ Oil representatives.
The prices for
a table accommodating seven people ranged from R150 000 to R700
000,00.
77.4.
Ms Marah requested donations from Ms Mlonzi towards the 2014 National
Election Campaigns of the ANC and Econ Oil paid
R100 000,00 into the
requested bank account.
77.5.
During the 2012 to 2017 contract period Ms Mlonzi attempted to obtain
contract extensions without a procurement process
being followed,
which was supported by Ms Marah.
77.6.
In March 2017 an employee of Eskom, Mr Ntuthuko Zulu raised a concern
about the over-charging of Econ Oil in light of
the findings of
McKinsey and sought to obtain and reconcile Econ Oil's invoices. Ms
Mlonzi requested Eskom to remove Mr Zulu from
the project, which in
fact happened. Mr Zulu and Mr Mashila met with Ms Mlonzi in order to
obtain clarity on Econ Oil's pricing
data and in order to understand
the nature and extent of any over-charging. Ms Mlonzi refused to
provide her pricing data. She
proposed that Econ Oil would provide a
discount to Eskom's power stations but in return Eskom should
undertake not to order from
alternative suppliers and that Mr Zulu
should be removed from managing the Econ Oil contract.
78.
In June 2017 Eskom initiated a closed tender process in which Econ
Oil and FFS were the only bidders. Mr Mashila
alleged that there were
further attempts by Ms Mlonzi to influence and interfere in Eskom's
procurement process. One of these was
a request by Ms Mlonzi to be
provided with the prices of FFS, the direct competitor of Econ Oil
which had offered to supply fuel
oil to Eskom. When the allocation of
Econ Oil's power stations was reduced, Ms Mlonzi requested Mr Mashila
to change the award
of the contract in Econ Oil's favour.
79.
According to Bowmans, the pricing information of FFS was in fact sent
to Ms Mlonzi from a private e-mail of Ms Marah
in July 2017. In 2018
Ms Marah also asked Mr Leslie Barker to change the technical
specifications of a tender in a manner that
would favour Econ Oil.
80.
Before us the approach of the Applicants to these allegations has
been one of confession and avoidance. For instance,
she has denied
that she received the e-mail of July 2017 which contained pricing
information of Econ Oil's competitor, FFS. The
problem is that an
actual copy of the e-mail together with a personal e-mail address of
the First Applicant has been attached to
the Answering Affidavit. The
matter is not meaningfully engaged in reply.
81.
Despite denying knowledge of the e-mail, the First Applicant states
that it would have in any event been perfectly
legitimate for her to
receive confidential pricing information because the tender process
had run its course and that the sharing
of such information would
have served the interests of transparency in State procurement. She
has admitted contacting Ms Marah
and Mr Mashila and making the
request for the removal of Mr Zulu from the project. She has
attempted to justify the contact with
the employees of Eskom at
crucial stages when procurement decisions affecting her company were
being taken, and she has also admitted
to making payments to entities
and causes linked to Ms Marah. In these circumstances, it is not
possible to conclude that Eskom
was not justified in taking the view
that it had to take steps to protect its interests from the conduct
of its suppliers.
82.
There is more. Notwithstanding the contents of the report of Bowmans
of January 2019 Econ Oil was invited by Eskom
to a closed tender
process for the procurement of fuel oil under Bid Corp 4786. This
process resulted in an award of contracts
to Econ Oil to the value of
approximately R8 billion. As subsequently held by the High Court the
process was riddled with grave
irregularities. There was no technical
evaluation of the bids. The bids that were received by Eskom were
incomparable. There was
no meaningful financial evaluation or
financial comparison. After Eskom had completed the price preference
scoring process it entered
into negotiations with the bidders,
ignoring the competitive tender process which it had undertaken.
83.
This process also sought to benefit Econ Oil. Initially the price
preference evaluation resulted in Sasol and British
Petroleum South
Africa being allocated all the power stations except for Hendrina
which was allocated to Econ Oil. Econ Oil was
allocated a Grade 2
fuel oil power station. The procurement team of Eskom then sought a
mandate to negotiate after the tender with
the suppliers.
84.
These negotiations resulted in a re-allocation of power stations for
the benefit of Econ Oil. Econ Oil had initially
been allocated one
power station to the value of approximately R800 million. After the
direct negotiations Econ Oil was allocated
eleven power stations to
the value of approximately R8 billion. With the changes in management
of Eskom, it was ultimately decided
to challenge the decision to
allocate the awards to Econ Oil.
85.
An application to the High Court for the review and setting aside of
the award was launched in October 2020. In
its judgment on 29 June
2021 the High Court reviewed and set aside the award. The application
for leave to appeal to the Supreme
Court of Appeal was dismissed.
86.
Given the above, we cannot find that Eskom was not justified in
deregistering Econ Oil as a supplier for its alleged
involvement in
improper and unethical business practices.
The
procedure followed in the decision to de-register Econ Oil
87.
The process of the de-registration is regulated by Eskom's Supplier
Integrity Pact. It requires suppliers to maintain
an unimpeachable
standard of integrity in all their business and personal dealings.
Furthermore, suppliers must take reasonable
measures necessary to
prevent all dishonest, unfair, fraudulent, corrupt, and illegal
practices during any stage of the Eskom procurement
process including
the execution of contracts and contract modifications. Suppliers must
ensure that they are familiar with all
publicly available Eskom
policies, procedures and codes that impact the supply chain process.
They must not abuse the trust placed
in them by Eskom employees or
misuse opportunities arising in the course of their interaction with
Eskom for personal gain.
88.
Where the Supplier Integrity Pact is violated, Eskom is entitled to
implement the supplier re-consideration and
suspension processes.
There is a committee at Eskom known as the Supplier Reconsideration
Committee (SRC). It is entitled to de-register
or mark for deletion a
supplier following an investigation or proof of misconduct. Ms Mlonzi
in fact signed the Supplier Integrity
Pact and is bound by its
provisions.
89.
It seems that Eskom followed this process in the termination. The SRC
met on 26 November 2020 to consider the allegations
against Econ Oil.
Allegations were sent to Econ Oil on 9 December 2020. Econ Oil was
informed that its status as a supplier was
under review in light of
the corrupt relationship which was alleged between the First
Applicant and Ms Marah and the refusal to
comply with the audit
requests.
90.
On 22 January 2021 Econ Oil's attorneys addressed a further letter to
Eskom stating that Econ Oil was not able to
meaningfully respond to
the charges without certain information. This information sought does
not appear to have been relevant
to the allegations against Econ Oil.
91.
By 26 January 2021 there was no response from Econ Oil. They were
then given until 1 February 2021 to respond to
the allegations. It
was made clear that the matter was urgent. Econ Oil still failed to
respond to the charges. They made a request
for further information
on 29 January 2021. Eskom responded on 2 February 2021 making it
clear that there was sufficient information
given to Econ Oil.
92.
Econ Oil failed to make its representations timeously. A high court
interdict which it brought was not persisted
with. It was then given
additional time to make its representations. By 16 February 2021 no
representations were made. There were
further protestations of unfair
treatment. Eskom decided to act. An urgent application which was
brought was struck from the roll.
Finally the representations were
made on 24 February 2021. A provisional decision was made by Eskom
and additional representations
were sought from Econ Oil, which were
only submitted on 9 September 2021. A final decision was made on 16
August 2022.
Findings
on justification
93.
In Bulb Man the Tribunal held:
756]
We can look at the anti-competitive effect from another perspective.
Why is the dominant firm refusing to deal? As the authorities
show,
even dominant firms are entitled to refuse to deal. However, if the
dominant firm lacked a proper explanation
for its
conduct, this might shift the probabilities in favour of the
applicant. 'Faul and Nickpay observe in relation to
European
jurisprudence that: A refusal to deal by a dominant undertaking will
not be considered an abuse under Article 82 of the
EC Treaty if it is
objectively justified. This will be the case if the refusal can be
justified on business grounds other than
the intention to eliminate a
competitor from the market."'
94.
In the light of the above facts, it is not possible to conclude that
there is no "proper explanation"
for Eskom's conduct or
that the reasons it has provided lack objective rationality or
justification. We also cannot find that the
decision to de
register Econ Oil was motivated by a desire to entrench Eskom's
dominant position or to enable it to leverage
its market power at the
expense of Econ Oil.
95.
The Tribunal holds that the decision of Eskom was justified. This
means that the Applicants have not established,
prima facie, that
there is an abuse of dominance in terms of
section 8(1)(c)
of the
Competition Act.
UNFAIR
DISCRIMINATION
96.
The Tribunal should also consider the submissions of the Applicants
that they have been discriminated against by
Eskom on the grounds of
race and gender. In support of the allegations of discrimination the
Applicants refer to Eskom's 2021 Integrated
Annual Report which lists
Econ Oil as the only supplier that was, at that stage, subject to the
threat of de-registration. The
Applicants complain that this is
inconsistent and discriminatory. The comparators which have been used
by the Applicants to show
the inconsistency and discrimination are
the following:
96.1.
Deloitte Consulting (Pty) Ltd for allegedly benefitting from a
contract which was awarded irregularly;
96.2.
PWC South Africa for allegedly receiving unlawful payments through a
risk-based contract intended to realise savings
on capital projects;
96.3.
Impulse International (Pty) Ltd which was investigated by the Special
Investigating Unit (SIU) and the National Prosecuting
Authority
(NPA);
96.4.
ABB South Africa which made a voluntary disclosure in respect of
over payments relating to the Kusile Project;
96.5.
Tubular Construction and its Chief Executive Officer Mr Antonio
Trindade;
96.6.
Group Five and its former Chief Executive Officer Mr Michael Thomas
who is alleged to have been charged with fraud and
corruption;
96.7.
Glencore which entered a guilty plea in the United States of America
for foreign bribery and market manipulation.
97.
Yet despite this, so the Applicants contend, these firms continue to
do business with Eskom.
98.
Eskom states that it is pursuing multiple investigations into
suppliers, employees as well as former Eskom Board
members and
executives. Some of these have been referred to the SIU and the South
African Police Service. Eskom adds that the penalty
to be imposed on
a particular supplier depends on the facts of each case and the
response of that supplier to the charge of misconduct.
99.
In the specific instance, for instance of ABB, Eskom shows that the
firm made a voluntary disclosure and has subsequently
made a
repayment to Eskom in the amount of R1,56 billion. Eskom does not
specifically respond to the allegations of misconduct
against
Impulse, Deloitte, PWC, Tubular, Group Five and Glencore. Nor does it
explain how it applied its policies in respect of
the identification
of the firms to be subject to a review.
100.
The problem with this however, is that the Tribunal is required to
determine if there is evidence of a prohibited practice.
It is the
Applicants who must set out the evidence of a prohibited practice. It
is not enough to make generic conclusory statements,
not supported by
actual facts, and then to ask the Tribunal to deduce from such
statements evidence of a prohibitive practice.
Since the Applicants'
case is in part based on discrimination, they are required to provide
the facts to show the similarities
between their case and the
comparators they have chosen. They have failed to do so. As a result,
we are unable to make any meaningful
comparison between the case of
the Applicants and the other examples referred to in the founding
papers.
101.
This issue ought to rest here. The discrimination claims have been
found to be speculative.
REMAINING
ELEMENTS OF INTERIM RELIEF
The
need to prevent serious or irreparable harm
102.
The CAC
[25]
has noted that the
requirement to prove the need to prevent serious or irreparable harm
is a party specific enquiry. However, unlike
interim interdicts at
common law, it is the damage to the competitive position of the
Applicants that the prohibited practice may
cause that is relevant.
There may be other forms of damage, but they are not relevant because
the purpose of the Act is to maintain
and promote competition in the
market.
103.
We repeat that this is a case about monopsonic power. Eskom is a
buyer of products supplied by Econ Oil. We have accepted the
Applicants' definition of the market as comprising the market for the
procurement of fuel oil in South Africa. In that market Eskom
is
responsible for approximately 95% of procurement. Econ Oil says that
it stands to suffer irreparable harm if the decision comes
into
operation.
104.
Although Econ Oil refers to "State work" in general, this
case is concerned with Eskom. The Tribunal is not considering
whether
or not the de-registration decision would be applied across the board
in relation to State work. Econ Oil says that if
it ultimately
succeeds in its abuse of dominance proceedings against Eskom, by the
time that decision is reached it would likely
have exited the market.
The prospects of its return would be very slender. It also suggests
that its much larger and better capitalised
competitors would quickly
fill the gap left by Econ Oil's forced exit. The net result would be
that the important contribution
made by its presence as a black
female owned supplier would be lost.
105.
Eskom says that Econ Oil's website suggests that it has a diverse
product and service offering which is not limited to fuel
oil and a
diverse customer group that is not limited to Eskom but includes
customers in the automotive, mining, tyre, milling and
other
industrial sectors. Eskom also points out that Econ Oil unduly
delayed before instituting these proceedings, having waited
for a
period of more than 18 months.
106.
The Tribunal's function is to consider whether or not there is a need
to prevent serious or irreparable harm to the Applicants.
Had the
Applicants established a prima facie case, it seems plain that there
would have been a need to prevent serious or irreparable
harm to the
Applicants. The evidence suggests that Eskom is the only realistic
large-scale consumer of the products supplied by
Econ Oil. There is
no evidence showing the type of product and volumes supplied by Econ
Oil to other customers. There was in fact
no evidence as to who these
"other" customers might possibly be. A realistic view is
that Econ Oil is primarily dependant
on Eskom as its main customer.
If that relationship is terminated, there will in all probability be
no other significant customers
of its fuel oil products. The
consequences, contemplated by Econ Oil, of an exit do not appear to
be as speculative as suggested
by Eskom. It appears indeed that would
be a need to prevent serious or irreparable harm. It is not necessary
to reach definitive
findings in this regard given our conclusion that
no prima facie evidence of a prohibited practice has been
established.
Balance
of convenience
107.
The balance of convenience concerns the weighing of the prejudice to
be suffered by the Applicants if the interim interdict
is not granted
as against the prejudice to the Respondent if the application is
successful. In Business Connexion
[26]
the question was formulated as follows: If the application succeeds
but the complaint is later dismissed, what prejudice will be
suffered
by the respondent and how could this be remedied? That question is
contrasted with another: If the application is dismissed
and the
complaint succeeds, what prejudice will be suffered by the applicant
and how could this be remedied?
108.
We have considered the prejudice to be suffered by the Applicants.
Their ability to compete in the market will be severely
constrained
by the loss of Eskom as a customer. But this must be balanced with
the prejudice suffered by Eskom. Eskom is a public
entity. As a
public entity it has constitutional and legal obligations in the way
it engages with its suppliers. It has concluded
that the Applicants
have engaged in unethical, improper and possibly corrupt practices in
relation to procurement and relationship
with Eskom's employees. It
has produced the evidence in support of its conclusions. It has also
been supported by external investigations
and findings. These
allegations have not been credibly denied by the Applicants. In fact,
in some instances the allegations have
been confirmed. It is plain
that the Applicants did not co-operate with the investigation
initiated by Eskom. It is also established
that the Applicants sought
to interfere with the procurement process by making direct contacts
with several officials at Eskom.
It is also established that payments
were made by the Applicants for the benefit of employees of Eskom or
causes associated with
them.
109.
Judging the balance of convenience in those circumstances requires
the Tribunal to take the burden we could impose on Eskom
as an organ
of State into account. We are unable to hold in circumstances such as
the present, where a strong justification is
given as to why an organ
of State refuses to engages with a supplier, that the balance of
convenience nevertheless justifies the
continuation of that
relationship.
110.
We therefore conclude that the balance of convenience does not favour
the granting of the interim interdict.
111.
That means the application fails in respect of two of the three
mandatory requirements (prima facie evidence of a prohibited
practice
and balance of convenience) for an interim interdict. In these
circumstances the Tribunal cannot hold that it is reasonable
and just
to grant the application.
SINGLE
ECONOMIC ENTITY
112.
The Applicants ask for an order that they should be declared as a
single economic entity for the purposes of this application.
For the
purposes of this case, it is not necessary to make that declaration.
The First Applicant is a complainant in her own right.
Eskom has
de-registered both Applicants. Although when the case began, a
decision on whether or not the First Applicant would be
de-registered
was awaited, we were informed in oral argument that the decision has
indeed been taken. The de-registration decision
is based on the same
reasons as those applicable in respect of the Second Applicant. Thus,
both Applicants have standing to bring
this application jointly or
separately.
113.
A finding that they are a single economic entity is a superfluous
finding with no practical consequences. In fact, Eskom
has not
disputed the standing of the First Applicant to bring a separate case
alongside the Second Applicant.
114.
We have concluded that the application should fail because no cause
of action is established. We consider the further
arguments raised in
the heads of argument and persisted with in oral argument.
SECTION
49C INTERIM RELIEF AGAINST ADMINISTRATIVE DECISIONS
115.
We now consider Eskom's argument that the decision to de-register
Econ Oil is an administrative decision
[27]
,
in terms of
section 1
of the
Promotion of Administrative Justice Act
3 of 2000
. We would have preferred not to express a view on this
issue at this stage, but since it has been pressed in both written
and oral
argument, we should deal with it.
116.
Eskom says that its decision is binding until set aside, relying on
the principle first established in the judgment of
the Supreme Court
of Appeal in Oudekraal Estates (Ply) Ltd v City of Cape Town and
Others
[28]
. That principle is
encapsulated in this passage:
"[26]
For those reasons it is clear, in our view, that the Administrator's
permission was unlawful and invalid at the outset.
Whether he
thereafter also exceeded his powers in granting extensions for the
lodgement of the general plan thus takes the matter
no further. But
the question that arises is what consequences follow from the
conclusion that the Administrator acted unlawfully.
Is the permission
that was granted by the Administrator simply to be disregarded as if
it had never existed? In other words, was
the Cape Metropolitan
Council entitled to disregard the Administrator's approval and all
its consequences merely because it believed
that they were invalid
provided that its belief was correct? In our view it was not. Until
the Administrator's approval (and thus
also the consequences of the
approval) is set aside by a court in proceedings for judicial review
it exists in fact and it has
legal consequences that cannot simply be
overlooked. The proper functioning of a modem state would• be
considerably compromised
if all administrative acts could be given
effect to or ignored depending upon the view the subject takes of the
validity of the
act in question. No doubt it is for this reason that
our Jaw has always recognized that even an unlawful administrative
act is
capable of producing legally valid consequences for so long as
the unlawful act is not set aside."
117.
It is not clear how this principle is relevant at all.
117.1
Firstly, the Tribunal is not being called upon by the Applicant to
express an opinion on whether or not Eskom has made
a decision under
PAJA. Nor have we been called upon to review any administrative
decision under PAJA. In any event we have no power
to review
administrative decisions under PAJA.
[29]
117.2
Secondly, the Tribunal's power to grant interim relief is expressly
conferred by
section 49C
of the
Competition Act, unlike
what
transpired in the Group Five judgment where the power of judicial
review of administrative decisions under PAJA or the principle
of
legality could not be sourced in legislation.
117.3
Thirdly, in terms of
section 3(1)
the
Competition Act "applies
to all economic activity within, or having an effect within, the
Republic". Plainly, a decision of the State which constitutes
an
economic activity within the Republic is subject to regulation by the
Act. Section 49C does not contemplate the exclusion of
administrative
decisions if they constitute economic activity within the Republic or
have an effect in the Republic.
117.4
Fourthly, the mere fact that an administrative decision is binding
until set aside does not mean that interim relief
cannot be granted
to suspend its operation, until a final determination is made. The
fact that we have no jurisdiction to review
an administrative
decision does not mean we have no power, in terms of
section 49C
of
the
Competition Act to
grant interim relief if the Act applies to the
decision in terms of
section 3
of the
Competition Act.
117.5
Fifthly
,
section 81
of the
Competition Act makes
it clear that the
Competition Act binds
the State.
118
We hold that to make exclusions for certain decisions taken by organs
of State where they meet the requirements
of
section 3
would
sterilize the Act and undermine its objects and effectiveness. As
such, the Tribunal has the power to grant interim relief
under
section 49C in respect of decisions of an administrative nature, if
such decisions are covered by section 3 of the Act.
CONCLUSION
119
We conclude that the Applicants have not made out a case for interim
relief. The application stands to be dismissed.
120
There remains a final comment to make. During the argument it was
debated with Eskom's counsel whether or not there was
a specific
reason to impose a period of ten years, rather than for instance,
five years. No specific reason could be given. This
is an issue we
considered, but we ultimately elected not to express a view on it as
the Notice of Motion does not attack the period
of ten years as being
disproportionate. Nor have we been addressed on whether an
alternative order would have been appropriate.
121
In the circumstances, we should dismiss the application.
ORDER
[1]
The application is dismissed.
[2]
There is no order as to costs.
Date:
2 August 2023
Mr
Tembeka Ngcukaitobi
Ms
Mondo Mazwai and Professor Fiona Tregenna concurring
Tribunal
Case Managers: Theodora
Michaletos and Kameel
Pancham
For
the Applicant: Adv
Vuyani Ngalwana SC assisted
Adv
Katlego Monareng instructed by
Thea
Kilian of Stan Fanaroff and Associates
For
the First Respondent: Maya
Swart for the Commission
For
the Second Respondent: Adv Wim
Trengove SC assisted
Adv
Michael Mbikiwa instructed by
Derek
Lotter and Richard Bryce Bowmans
[1]
York Timbers Limited vis South African Forestry Company IR078Feb01.
[2]
[2022] ZACAC 9
;
[2022] 2 CPLR 23
(CAC).
[3]
[2020] 2 CPLR 490 (CAC).
[4]
Business Connexion at para 20.
[5]
Business Connexion at para 21.
[6]
Business Connexion at para 22.
[7]
1948 (1) SA 1186
(W) at 1189.
[8]
1955 (2) SA 682
(C).
[9]
Gool at paras 688 D-E.
[10]
OECD Policy Round Tables: "Monopsony and Buyer Power"
(2008) page 26. Accessible at
https://www.oecd.org/daf/competition/44445750.pdf.
[11]
See: Competition Commission of South Africa v Uniplate Group (Ply)
Ltd (CR188Nov15)
[2019] ZACT 61
; Apollo Studios (Ply) Ltd and
another v Audatex SA (Ply) Ltd and another IR198Mar23. In Mercantile
Bank and others v Mohamed
Iqbal Surve CAC Case No: 206/CAC/Oct22/
the Competition Appeal Court held:
"[38]
The problem with the Tribunals' approach is that the case falls at
the first hurdle. Even under section 4(1)(a) which
unlike 4(1)(b)
does not itemise specific anticompetitive practices, there needs to
be some theory of harm. The subsection refers
to the concerted
practice having an anticompetitive effect. Making this conclusion
based on parallel conduct in a concentrated
market does not amount
to an explanation of why the conduct is anticompetitive. What the
Tribunal did was to conflate an outcome-
exclusion from the market-
with an anticompetitive effect. While exclusion may be the result of
an anticompetitive practice it
does not suffice to use it as a
substitute for analysing whether, as a fact, there has been an
anticompetitive practice; particularly
where the Sekunjalo Group did
not allege that any of the banks had a direct or indirect interest
in any relevant market that
was in issue."
[12]
(170/CAC/Feb19)
[2019] ZACAC 4
(23 October 2019).
[13]
Computicket at para 17.
[14]
e-Media at para 98, italics added.
[15]
[2006] ZACT 86.
[16]
The Court recorded the following at para 98:
"MultiChoice
and eMedia had been competitors in the upstream market. It is clear
that by excluding the channels in question
it is MultiChoice that
benefits from the content aggregation provider market. It is
undisputed that MultiChoice has been a dominant
firm in the market
for decades and that its dominance will not change in the near
future. This fact does satisfy the first enquiry
into an abuse of
dominance case. The exclusionary conduct can at least at this
interim stage be interpretated as MultiChoice
exercising its market
power. It is also undisputed that MultiChoice does not have capacity
constraints and can easily carry the
foreclosed channels. Cognisance
is taken of the incorrectly claim in its answering affidavit but it
wisely conceded that there
were no capacity constraints in
argument."
[17]
e-Media at para 108, italics added.
[18]
Computicket at para 18.
[19]
e-Media at para 98.
[20]
Glenister v President of the Republic of South Africa and Others
2011 (3) SA 347
(CC) at para 177.
[21]
See: Glenister at paras 172-173 where the following appears:
"172.
Expectedly, our courts too have warned of the pernicious threat
corruption poses to our collective enterprise to entrench
a just and
democratic society. In S v Shaik and Others, this Court warned that
corruption is "antithetical to the founding
values of our
constitutional order." Similarly, in South African Association
of Personal Injury Lawyers v Heath and Others,
this Court held that-
"[c]orruption
and maladministration are inconsistent with the rule of law and the
fundamental values of our Constitution.
They undermine the
constitutional commitment to human dignity, the achievement of
equality and the advancement of human rights
and freedoms. They are
the antithesis of the open, accountable, democratic government
required by the Constitution. If allowed
to go unchecked and
unpunished they will pose a serious threat to our democratic State."
(Emphasis added.)
173.
In S v Shaik and Others, the Supreme Court of Appeal pointed out
that
"[t]he
seriousness of the offence of corruption cannot be overemphasised.
It offends against the rule of law and the principles
of good
governance. It lowers the moral tone of a nation and negatively
affects development and the promotion of human rights.
As a country
we have travelled a long and tortuous road to achieve democracy.
Corruption threatens our constitutional order.
We must make every
effort to ensure that corruption with its putrefying effects is
halted. Courts must send out an unequivocal
message that corruption
will not be tolerated and that punishment will be appropriately
severe."
[22]
(2014) 35 /LJ 613 (CC) at paras 35-37.
[23]
These amounts are disputed by Econ Oil.
[24]
There has now been a disclosure of the documents that were sought
during the investigation. That happened in the course of private
arbitration proceedings where the First and Second Applicants
discovered the relevant documents.
[25]
Business Connexion at para 21.
[26]
At para 22.
[27]
Subject to certain exclusions, PAJA defines and administrative act
as follows:
"administrative
action" means any decision taken, or any failure to take a
decision, by-
(a)
an organ of state, when-
(i) exercising
a power in terms of the Constitution or a provincial constitution;
or
(ii) exercising
a public power or performing a public function in terms of any
legislation;
or
(b)
a natural or juristic person, other than an organ of state, when
exercising a public
power or performing a public function in terms
of an empowering provision, which adversely affects the rights of
any person and
which has a direct, external legal effect".
[28]
[2004] 3 All SA 1 (SCA).
[29]
See: Competition Commission of South Africa v Group Five
Construction Ltd
[2023] 1 CPLR 1
(CC).