Less haste, more de­tail the key to ex­cep­tions

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Tri­bunal shows its flex­i­ble ap­proach as it or­ders company to amend pa­pers

THE Com­pe­ti­tion Tri­bunal, on Septem­ber 3, pub­lished the rea­sons for its decision to grant an ex­cep­tion ap­pli­ca­tion by In­ven­sys plc, In­ven­sys Sys­tems (UK) Ltd and Eurotherm Ltd in re­spect of the self-re­fer­ral of a com­plaint by Protea Au­to­ma­tion So­lu­tions.

The rea­sons re­state a po­si­tion that is well known by com­pe­ti­tion prac­ti­tion­ers: the tri­bunal will, where pos­si­ble, adopt a flex­i­ble ap­proach to its pro­cesses, giv­ing pri­macy to its in­quisi­to­rial pow­ers and favour­ing con­sid­er­a­tions of fair­ness and flex­i­bil­ity over for­mal­ism.

The com­plaint has a long his­tory. The In­ven­sys Group man­ages the in­ter­na­tional pro­duc­tion, sales and dis­tri­bu­tion of var­i­ous in­dus­trial au­to­ma­tion and con­trol sys­tem com­po­nents, in­clud­ing through the “Eurotherm” and “Foxboro” brands. Un­til re­cently the re­spon­dent, Protea, was — in terms of an ex­clu­sive dis­tri­bu­tion agree­ment with In­ven­sys — the sole South African sup­plier of Eurotherm and Foxboro prod­ucts.

The cat­a­lyst to the present lit­i­ga­tion was the ter­mi­na­tion by In­ven­sys on March 1 2011 of its ex­clu­sive agree­ment with Protea and its sub­se­quent decision to con­clude a sim­i­lar ar­range­ment with EOH Mthombo — which is to­day the sole and ex­clu­sive distrib­u­tor of Foxboro and Eurotherm prod­ucts in SA. Ac­cord­ingly, Protea is now able to ob­tain Foxboro and Eurotherm prod­ucts only from EOH Mthombo, and not from In­ven­sys di­rectly.

Ag­grieved by this state of af­fairs, Protea lodged a com­plaint with the Com­pe­ti­tion Com­mis­sion and, fol­low­ing the is­su­ing of a no­tice of non-re­fer­ral by the com­mis­sion, re­ferred the com­plaint to the tri­bunal it­self un­der sec­tion 51(1) of the Com­pe­ti­tion Act, No 89 of 1998 (as amended). In its com­plaint re­fer­ral, Protea al­leged that the ar­range­ments be­tween In­ven­sys and EOH Mthombo, and be­tween EOH Mthombo and it­self, con­tra­vened the hor­i­zon­tal (sec­tion 4), ver­ti­cal (sec­tion 5), abuse of dom­i­nance (sec­tion 8) and price dis­crim­i­na­tion (sec­tion 9) pro­vi­sions of the Com­pe­ti­tion Act.

In its an­swer to the com­plaint, In­ven­sys al­leged as a “point in limine” (that is, a point taken at the out­set of the suit) that the re­fer­ral was fa­tally de­fi­cient for a va­ri­ety of rea­sons. This kind of re­sponse, in which a re­spon­dent ob­jects at the out­set on the ba­sis that a com­plainant’s plead­ings are legally de­fi­cient (be­cause, for ex­am­ple, they fail to dis­close a cause of ac­tion), is known as an ex­cep­tion. In this re­gard, In­ven­sys ar­gued that Protea had had am­ple op­por­tu­nity to rec­tify the de­fi­cien­cies in its plead­ings, which in­cluded i) an er­ro­neous re­liance on the hor­i­zon­tal pro­vi­sions in sec­tion 4 of the Com­pe­ti­tion Act (er­ro­neous be­cause In­ven­sys and EOH Mthombo were not com­peti­tors of one another); ii) a fail­ure to pro­vide suf­fi­cient facts to support its claim that In­ven­sys was dom­i­nant in any mar­ket; and iii) the mis­join­der of the non-trad­ing In­ven­sys hold­ing company.

Protea op­posed the ex­cep­tion ap­pli­ca­tion on the ba­sis that its re­fer­ral re­flected a prima fa­cie case. Al­ter­na­tively, it ar­gued that even if the re­fer­ral was in­deed de­fi­cient, the ap­pro­pri­ate rem­edy would be for it to be al­lowed to amend its re­fer­ral rather than to dis­miss its com­plaint.

In its rea­sons, the tri­bunal pro­vided a use­ful ex­po­si­tion of its gen­eral ap­proach to ex­cep­tion ap­pli­ca­tions. In this re­gard, there are three cen­tral con­sid­er­a­tions by which it is guided. First, com­plaint pro­ceed­ings in the tri­bunal are “sui generis” (of their own kind), mean­ing that they con­sti­tute a hy­brid process, con­tain­ing el­e­ments of civil mo­tion and trial pro­ceed­ings. Sec­ond, the sub­ject mat­ter of tri­bunal pro­ceed­ings lies at the in­ter­sec­tion of law and eco­nomics, with the re­sult that a par­tic­u­lar set of facts can of­ten rea­son­ably be viewed through the lens of var­i­ous sec­tions of the Com­pe­ti­tion Act. Third, the tri­bunal is en­dowed with a wide dis­cre­tion, and its pro­ceed­ings are in­quisi­to­rial and flex­i­ble rather than for­mal­is­tic. Cu­mu­la­tively, th­ese con­sid­er­a­tions de­mand the adop­tion of a fact­spe­cific and flex­i­ble stance.

That said, the tri­bunal recog­nised that fair­ness re­quires re­spon­dent par­ties to be placed in a po­si­tion where they know the case they are re­quired to meet. In ad­di­tion, it noted that ex­cep­tions are a use­ful means by which to ex­pe­dite a trial through the clar­i­fi­ca­tion of is­sues be­tween the par­ties.

Im­por­tantly (and cor­rectly, in our view), the tri­bunal re­jected an ar­gu­ment by Protea that the Con­sti­tu­tional Court decision in Com­pe­ti­tion Com­mis­sion v Sen­wes es­tab­lished a prece­dent that a com­plainant’s plead­ings need not set out its en­tire case, which may be sup­ple­mented through sub­se­quent wit­ness state­ments. The tri­bunal’s pro­ceed­ings may be in­quisi­to­rial and flex­i­ble, but a com­plainant is re­quired to pro­vide full par­tic­u­lars of the case it wishes to bring.

The de­fault rem­edy for a suc­cess­ful ex­cep­tion ap­pli­ca­tion is for the tri­bunal to grant the of­fend­ing party an op­por­tu­nity to amend its plead­ings. By corol­lary, it is only in ex­cep­tional cir­cum­stances that the tri­bunal will dis­miss a case pur­suant to an ex­cep­tion ap­pli­ca­tion.

How­ever, cir­cum­stances such as th­ese are rare; in fact, as noted above, the tri­bunal re­gards it as in the very na­ture of its pro­ceed­ings that they com­prise mixed ques­tions of law and fact. And the present case did not de­vi­ate from that norm. So although it de­clared Protea’s plead­ings to be in­ad­e­quate, the tri­bunal or­dered that the ap­pro­pri­ate rem­edy was not to dis­miss the re­fer­ral out­right, but to af­ford Protea the op­por­tu­nity to amend its pa­pers.

In light of this, re­spon­dents to com­plaint re­fer­rals would be wise not to bring ex­cep­tion ap­pli­ca­tions hastily as a means of cur­tail­ing pro­ceed­ings. In­stead, lit­i­gants would be bet­ter ad­vised to utilise the re­quest for fur­ther par­tic­u­lars pro­ce­dure prior to the fil­ing of an an­swer­ing af­fi­davit. If, hav­ing done so, the com­plainant still fails to clar­ify its case suf­fi­ciently, the re­spon­dent will then be bet­ter po­si­tioned to ar­gue for the out­right dis­missal of the com­plaint.

Ryan Good­man is a di­rec­tor and Michael Mbikiwa is a can­di­date at­tor­ney in the ENSafrica com­pe­ti­tion law depart­ment.

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