South Africa: MultiChoice may face competition authorities for abuse of dominance

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On Digital Media (“ODM”), owner of TopTV, has filed a complaint with the South African Competition Commission (“Commission”) against the Naspers controlled company, MultiChoice (which owns DStv as well as SuperSport) alleging abuse of dominance.

ODM alleges that SuperSport unfairly refused to share rights to all Premier Soccer League (“PSL”) matches from 2011 until 2016 with ODM. ODM submits that there is “not another sports broadcaster in the world today that enjoys a similar level of dominance to that of SuperSport” and has accused MultiChoice of contravening the Competition Act 89 of 1998 (“Act”) by refusing to give it access to, what ODM believes, is an “essential facility”, when it is feasible to do so.

The ODM complaint was lodged with the Commission several months ago following a statement made in parliament by Communications Minister Dina Pule, that the Minister would issue a policy directive to the Independent Communications Authority of South Africa to address competition in the broadcasting sector.

Commission spokesman, Keitumetse Letebele, said that the complaint is still being processed by the Commission’s screening unit who will write a recommendation to the Commissioner to either drop the case or pursue further investigation.

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Class Actions in South Africa?

Nortons Inc., together with the South African Chamber of Commerce and Industry (SACCI) and the Mandela Institute at Wits School of Law, have gathered together a panel of experts to discuss the judgment in Pioneer Foods last year and the effects it has on South Africa’s jurisprudence & business community.

The seminar is entitled: “A new class – the problems and promises of class action litigation in South African law” and runs from 8:00 am – 4:30 pm on Wednesday, 12 June 2013, in Johannesburg at the Wits School of Law (map).

For more information, a full schedule, and to RSVP & sign up,

please visit the event page here.

Background:

On 29 November 2012, Judge Wallis of the Supreme Court of Appeal (the “SCA”) handed down judgment in The Trustees of The Children’s Resource Centre / Pioneer Foods (Pty) Limited & Others. The case related to the certification of a class in respect of a number of class actions against three bread producers arising from an investigation by the Competition Commission into price fixing and market allocation in respect of various bread products (the “Bread class action litigation”).

The appeals were brought by a bread distributor in the Western Cape and by a number of organisations in relation to a so-called “consumer” class action for damages after their applications were dismissed by the Western Cape High Court (the “WCHC”).

In its decision the SCA held that class actions should be recognised, not only in respect of constitutional claims, but also in any other case where access to justice in terms of Section 34 of the Constitution required that it would be the most appropriate means of litigating the claims of the members of the class. The SCA then laid down the requirements for such an action, commencing with the need for certification by the court at the outset, before even the issuing of summons. For this purpose, the SCA set out the following criteria before a court could certify a class action:

  • there must be an objectively identifiable class;
  • a cause of action must exist which raises a triable issue;
  • there must be common issues of law and fact that can appropriately be dealt with in the interests of all members of the class;
  • there must be appropriate procedures for distributing damages to the members of the class; and
  • the representatives must be suitable to conduct the litigation on behalf of the class.

The SCA found that the appellants’ case had changed during the course of the litigation; and it held that their definition of the proposed class was over-broad and the relief they sought inappropriate. However, Wallis JA held that their claim was potentially plausible and, as this was the first time that the SCA had laid down the requirements for bringing a class action, it was appropriate to afford the appellants an opportunity to remedy the flaws in their papers in compliance with these new requirements. Accordingly, the SCA remitted the matter back to the WCHC.

ArcelorMittal, Telkom, now Sasol? “Excessive pricing” case going to trial in South Africa

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Settling the South African Competition Commission’s case against alleged collusion in the polypropylene market [for no less than R111 million] back in 2010 was not to be the end of Sasol‘s long antitrust journey in the polymers world.

The S.A. Competition Tribunal is hearing the excessive-pricing portion (which was not settled) of the Commission‘s claims against the refining & steel giant this month.  The relevant legal underpinning of the case is the provision against excessive pricing by a dominant firm.  Precedent has declared prices excessive that “bear no reasonable relation to the economic value of the good or service” at issue.  Pheeew.  Facts.  Economics.  Nice.  Looks like a coming battle of the experts to me…

By comparison, in the U.S., antitrust law of course does not forbid “excessive pricing.”  While setting and reaping apparently high prices may be indicative of monopoly power, such acts are not in themselves anti-competitive or illegal in the States.  In Verizon v. Trinko, the U.S. Supreme Court held famously that:

The mere possession of monopoly power, and the concomitant charging of monopoly prices, is not only not unlawful; it is an important element of the free-market system. The opportunity to charge monopoly prices—at least for a short period—is what attracts “business acumen” in the first place; it induces risk taking that produces innovation and economic growth.

Interestingly, there is a notable history of failures in the area of ‘excessive pricing’ complaints in South Africa, as well, despite the statutory legitimisation of the cause of action.  In the prior ArcelorMittal and Telkom cases, the Commission and/or Tribunal lost in the end, either at trial or on appeal to the Competition Appeal Court.  That Court had found, in the ArcelorMittal case, that the antitrust watchdogs could not use the ‘excessive pricing’ provision of the statute to combat perceived anti-competitiveness in the “market structure rather than price level.”

We will, of course, report on the ongoing trial and ultimate outcome of this high-profile case, as it unfolds.

South Africa targets private healthcare sector in CC’s ‘market investigation’

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As reported today by Reuters and SA MoneyWeb, the South African government has announced that the South African Competition Commission will launch an investigation into the private healthcare sector. This is part of a larger initiative to conduct so-called “market inquiries,” on which we previously reported here and here, and which are a direct consequence of the March 2013 effective date of the South African Competition Amendment Act of 2009.

The Economic Development Minister Ebrahim Patel said that “[v]arious stakeholders have raised concerns about pricing, costs and the state of competition and innovation in private healthcare.”

Likely affected companies are all major players in the healthcare industry, including providers such as Life Healthcare, Mediclinic International and Netcare Ltd.

Dutch suit against “paraffin mafia” cartel moves forward

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A Dutch district court has set what some believe may be a new landmark precedent in the area of private cartel enforcement in the European Union, including against South African company Sasol.

The case is what appears to be a fairly straight-forward “follow-on” civil action, i.e., a complaint brought in civil court by injured parties (or those who acquired those parties’ rights to sue) that is based entirely on a European Union Commission decision condemning illegal cartel activity within the common EU market.

My neighbors on the Avenue Louise here in Brussels, CDC (Cartel Damages Claims), had bought the rights to sue from various purchasers of paraffin wax and lodged the complaint against the “paraffin mafia” (Shell’s words, quoted by Neelie Kroes – also see here) in September 2011. The 13-year cartel (1992-2005)** may well result in sizeable civil damage awards (Sasol’s reduced EC fine alone was 318 million €) once the procedural and jurisdictional hurdles have been cleared. And this most recent ruling goes a long way in doing so. The key “procedural issues” that had to be resolved first were whether all of the cartel members could be sued in the Netherlands, even though not all of them operated in that country, and whether the pending EU court appeals against the 2008 Commission decision effectively stayed the parallel civil proceedings in the Dutch court.

The court ruled in favour of the plaintiff group on both accounts, holding that all cartelists could be sued together for damages in the jurisdiction in which any one of their fellow co-conspirators has its seat [here, that would notably be Royal Dutch Shell, ironically the cartel’s whistle-blower that escaped the EC ruling with a zero-€ fine] . That is, even though purported ring-leader Sasol or any of the other [non-Dutch] alleged cartelists may not have had any operations in the Netherlands, they can still be subject to a full-blown civil lawsuit there. In effect, the ruling says that the European Union’s antitrust decisions, combined with the civil protections afforded EU companies and citizens, creates a de facto long-arm statute, reaching beyond the traditional geographic jurisdictional boundaries.

In addition, it held that a pending appeal against an EC cartel decision should not result in an automatic stay of any civil proceedings, as this would unduly curtail the fundamental right to seek compensation of injured parties under EU law.

While I don’t read Dutch — and therefore cannot analyse the actual decision of the NL royal court — I trust that CDC summarised its findings accurately, even though the company clearly has a stake in this and thus a likely bias.

** According to Neelie Kroes’s speech, the cartelists initially met at the “Blue Salon” at a Hamburg hotel bar (my home town, coincidentally). I have a feeling it was this place — it’s always fun to visualise cartel activity in the flesh, just like “The Informant” did for moviegoers in 2009…:

Blauer Saal Kempinski Hamburg

Ironic? S.A. & Russia to “influence” platinum market “without cartel”

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South Africa and Russia plan to “influence” global platinum market “without cartel” — [it escapes the author how this is possible].

Russia and South Africa, who together hold approximately 80% of worldwide platinum reserves, have signed a provisional agreement to co-ordinate efforts to control the global platinum market. Details of the plan emerged at the fifth summit of emerging economies of Brazil, Russia, India, China and South Africa (“BRICS”), held in Durban, South Africa last week.

South Africa is the world’s largest producer of platinum, controlling approximately 70% market share, whilst Russia is the world’s top palladium producer, accounting for approximately 40% of the palladium market; Russia notably also holds a further 10% of the platinum market. The two countries jointly possess almost complete market dominance over platinum. The only other significant reserve of platinum that has been extracted outside of Russia and South Africa is in Canada’s Yukon territory, accounting for approximately 3% of the worldwide reserves. In recent years, platinum producers have faced rising production costs and a drop in prices, due to poor demand for the metal.

Therefore, as Russian Natural Resources Minister Sergey Donskoy explained the purpose of the provisional agreement, “Our goal is to co-ordinate our actions accordingly to expand the markets. The price depends on the structure of the market, and we will form the structure of the market.”

South African Mining Minister Susan Shabangu confirmed the plan with Russia, saying: “We’re not really controlling the market” and We want to contribute without creating a cartel, but we want to influence the markets.” The South African Department of Trade and Industry Director-General, Lionel October, said, in support of other comments by Shabangu that “We will give access to minerals and then incentivise companies to add value locally.”

Russia and South Africa’s plans may be derailed due to competition concerns, however.  For example, previous attempts at consolidation within the platinum industry have raised red antitrust flags and were ultimately abandoned. In 1996, Lonmin and Gencor lost an appeal against a European Commission decision blocking the planned merger of their South African platinum mines (Case No. IV/M.619, Commission decision of April 24, 1996). This was the first E.C. decision prohibiting a merger on collective dominance grounds. The Court of First Instance (now called the EU’s General Court) upheld the decision of the Commission, validating its concerns that the merger would result in collective global platinum market dominance (Case T-102/96).

South African market-inquiry provision comes into effect

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President Jacob Zuma has signed the market inquiry provisions of the South African Competition Amendment Act of 2009 (“Amendment Act”) into force today, 8 March 2013.

The president set 1 April 2013, as the date on which section 6 of the Amendment Act will become effective.

Section 6 empowers the S.A. Competition Commission (“Commission”) to conduct an inquiry into the general state of competition in any market in South Africa, without referring to specific prohibited conduct or a particular firm.  Under this provision, the Commission may initiate a market inquiry when it has reason to believe that any features of an identified market may be distorting or restricting competition in that market, e.g., where a market is not functioning optimally, but where no prohibited conduct, such as cartel activity, has been identified.

Section 6 also regulates how the Commission may conduct such market inquiries.  More specifically, the Commission may use its powers to request information from firms but may not use its search and seizure (i.e., dawn raid) powers to gather information for a market inquiry.

At the conclusion of the market inquiry, the Commission must publish its findings and may also make recommendations to the Minister of Trade and Industry or other regulatory authorities relating to any competition matters identified.