By Charl van der Merwe, assisted by Christine Turkington & Gina Lodolo

The South African competition Commission (SACC) has suffered yet another procedural setback- related to the facts pleaded in its referral affidavit – this time, in its ongoing saga with Computicket and Shoprite Checkers, apropos Computicket’s alleged abuse of dominance.

In its initial case against Computicket, which ultimately went to the Competition Appeal Court, SACC succeeded in holding Computicket to account for abuse of dominance in contravention of section 8(d)(i) of the Competition Act (Computicket One). Computicket One was based on the fact that Computicket had entered into exclusive agreements with customers which had the effect of excluding competitors from the market. See exclusive AAT article on Computicket One case here.

The SACC was critical of the conduct of Shoprite Checkers as, in Computicket One, the SACC alleged that the exclusive agreements were entered into between Computicket and Shoprite Checkers shortly after the Computicket was acquired by Shoprite Checkers. Computicket One was based on the agreement entered into for the period 2005 to 2010.

Accordingly and shortly after the conclusion of Computicket One, the SACC referred a second complaint against Computicket for abuse of dominance. The cause of action is substantively similar as that which had been found to be a contravention in Computicket One, however, this time based on the agreements entered into from January 2013 and which are alleged to be ongoing (Computicket Two). In Computicket Two, however, the SACC now seeks to hold Shoprite Checkers jointly and severally liable with Computicket in its capacity as the ultimate parent company of Computicket. Moreover, the SACC appears to seek the imposition of a penalty based on the higher turnover of Shoprite Checkers.

Note that Computicket Two was referred to the Tribunal prior to the enactment of the Competition Amendment Act, which provides for parent companies to be held jointly and severally liable for the conduct of subsidiaries and/or allows for the calculation of an administrative penalty, based on the turnover of the parent company where the parent was aware or ought to have been aware of the conduct of the subsidiary.

The Tribunal, therefore, found the SACC’s referral affidavit to be flawed and lacking of the facts (and points of law) necessary to sustain a cause of action, particularly in so far as it seeks to hold Shoprite Checkers liable. In this regard, the Tribunal expressly held that they view Computicket and Shoprite Checkers as separate economic entities and should thus be treated separately with respect to the allegations made in the Commission’s complaint referral.

The Tribunal went on the emphasize that on the consideration of dominance (which is the statutory first step to an assessment under section 8), “… the Commission conceded that Shoprite Checkers is not active in the market for outsourced ticketing services to inventory providers in which Computicket is active. Unsurprisingly, no market shares attributable to Shoprite Checkers are reflected anywhere in the Commission’s referral. It is simply unclear of what we are to make of the allegations against Shoprite Checkers.”

In order to correct these defects and instead of dismissing SACC’s case, the Tribunal ordered the SACC to file a supplementary affidavit. The Tribunal held that “[g]iven that the Commission’s reliance on the single economic entity doctrine fails and the question of dominance is abundantly opaque, the Commission must rectify its referral to properly reflect and clarify the case against Shoprite Checkers in order for it to meet the case put against it.”

Should the SACC fail to file its supplementary affidavit, within the 30 business days, as order by the Tribunal, Shoprite Checkers and Computicket may approach the Tribunal for an order that the case be dismissed.

John Oxenham, director of Primerio, notes that the Tribunal’s order in allowing the SACC an opportunity to first supplement or amend its referral affidavit is in line with the recent orders of both the Tribunal and Competition Appeal Court to first allow such opportunity for the SACC to remedy its case, instead of ordering an outright dismissal of the case on an interlocutory basis. This is likely to form the precedent for interlocutory applications, even where the facts suggest that the SACC’s case is opportunistic and incapable of being remedied.

According to competition lawyer, Michael-James Currie, the recent orders which have come out of the Tribunal and Competition Appeal Court in interlocutory applications will hopefully have a positive effect on the manner in which cases are referred and prosecuted in South Africa.

The SACC has at times demonstrated a tendency to be overly broad in its complaint referrals, causing respondent firms to engage in costly and time consuming internal investigations to assess the merits of such cases. With the development of the previously underutilized interlocutory processes, respondent firms are now able to, at an early stage of the litigation process, ensure that the SACC sets out its case in a concise manner, substantiated with the requisite factual allegations required to sustain its case, thereby avoiding the unnecessary cost of expansive internal investigations and protracted litigation.