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26 FEBRUARY 2021 COMPETITION ALERT IN THIS ISSUE > Beyond COVID-19: Recent abuse of dominance and prohibited practice (cartel) settlements (part 2) Following our previous alert detailing the developments in respect of merger control outside the realm of COVID-19 (accessible here), this alert focusses on other recent - non-pandemic-related - abuse of dominance and prohibited practice developments in South Africa, particularly with reference to settlement agreements. FOR MORE INSIGHT INTO OUR EXPERTISE AND SERVICES CLICK HERE
COMPETITION
Beyond COVID-19: Recent abuse of
dominance and prohibited practice
(cartel) settlements (part 2)
Following our previous alert detailing Although Rooibos does not admit to
the developments in respect of merger contravening the Competition Act 89
In an attempt to remedy control outside the realm of COVID-19 of 1998 (Act) in terms of the settlement
(accessible here), this alert focusses on agreement, it undertook to publish
this and conclude the
other recent - non-pandemic-related its production research on its website
matter, the Commission - abuse of dominance and prohibited without corresponding access conditions
and Rooibos entered into practice developments in South Africa, or restrictions. From a long-term
a settlement agreement particularly with reference to settlement supply agreement perspective, Rooibos
agreements. undertook not to enter into long-term
in 2020. supply agreements with producers which
Abuse of Dominance
exceeded a duration of five years; that
In 2015, the Competition Commission restricted or prevented producers from
(Commission) received a complaint that contracting to supply rooibos to Rooibos’
Rooibos Limited (Rooibos) had been competitors; and if the aggregate volume
engaged in anti-competitive conduct, of the rooibos suppled to Rooibos by virtue
including allegations that Rooibos had of long-term supply agreements annually
effectively induced producers not to deal equals more than 10% of the total annual
with its competitors through the conclusion rooibos crop as estimated by Rooibos in
of certain long-term supply agreements respect of that particular year.
relating to the procurement of rooibos tea
The settlement reaffirms that parties, who
from rooibos producers which required
for the purposes of the Act are dominant,
the producers not to deal with other
must exercise significant caution in the
rooibos processors.
drafting and implementation of long-term
Further in its capacity as a production supply agreements. Provisions which
researcher, Rooibos had also allegedly expressly or by effect induce a customer
leveraged access to its production research not to deal with a competitor should be
output in the rooibos tea industry by requiring avoided and thought should be given to
producers to supply up to 50% of their the efficiency justification for exclusivity.
rooibos tea production to Rooibos to the Bearing in mind that the Competition
exclusion of its competitors as a prerequisite Appeal Court has previously held that in
to access the research, thereby amounting to the analysis of efficiencies, it is relevant to
an alleged abuse of dominance. consider “whether they are relationship
specific, whether the parties can achieve
The allegations resulted in an investigation
them through less restrictive means and
by the Commission who found that
whether the efficiencies outweigh any
the long-term supply agreements and
anti-competitive effects on consumers”.
supply-based commitments had the
Further, more ‘unusual’ conditions, such
cumulative effect of locking in at least
as granting conditional access to research
39% of rooibos tea production in favour
output in lieu of greater supply, may not
of Rooibos, and to significantly foreclose
be the Commission’s cup of tea and may
other competitors from accessing it or to
be visited with investigation and possible
prevent their expansion in the market. In
sanctions under the Act.
an attempt to remedy this and conclude
the matter, the Commission and Rooibos
entered into a settlement agreement
in 2020.
2 | COMPETITION ALERT 26 February 2021
COMPETITION
Beyond COVID-19: Recent abuse of
dominance and prohibited practice
(cartel) settlements (part 2)...continued
Prohibited Practice These conditions include that the applicant
under the CLP must: (i) honestly provide
The genesis of the cement cartel stretches
As a successful corporate back to 2008. Towards the backend of
the Commission with complete and truthful
disclosure of all evidence, information
leniency applicant under 2020, the Commission concluded a
and documents in its possession or under
the CLP, PPC was granted settlement agreement with successful
its control relating to any cartel activity;
corporate leniency applicant, Pretoria
final immunity from Portland Cement Company Limited (PPC),
(ii) generally be the first applicant to
both prosecution and an in terms of which it was granted final
provide the Commission with information,
evidence and documents sufficient to allow
administrative penalty. immunity from both prosecution in the
the Commission in its view, to institute
cement cartel cases.
proceedings in relation to a cartel activity;
As part of the Commission’s investigations, (iii) offer full and expeditious co-operation
it conducted a search and seizure raid on to the Commission concerning the
the premises of four of the five cement reported cartel activity. Such co-operation
producers subsequent to which PPC came should be continuously offered until
forward under the then new Corporate the Commission’s investigations are
Leniency Policy (CLP) to apply for leniency. finalised and the subsequent proceedings
in the Competition Tribunal or the
In terms of the settlement agreement
Competition Appeal Court are completed;
concluded between PPC and the
(iv) immediately stop the cartel activity
Commission, PPC admitted to having
or act as directed by the Commission;
contravened sections 4(1)(b)(i) and (ii) of
(v) not alert other cartel members or any
the Act thereby concluding all proceedings
other third party that it has applied for
with the Commission. PPC also undertook
immunity; (vi) not destroy, falsify or conceal
not to engage in any form of prohibited
information, evidence and documents
conduct, including price fixing conduct,
relevant to any cartel activity; and (vii) not
which contravenes the Act; and to ensure
make a misrepresentation concerning
it engages in competitive pricing. As a
the material facts of any cartel activity or
successful corporate leniency applicant
act dishonestly.
under the CLP, PPC was granted final
immunity from both prosecution and an Although the CLP serves to offer leniency
administrative penalty. to cartelists, parties would be best placed
to ensure, through careful and considered
This settlement agreement reaffirms that
evaluation, that their conduct at all times
successful applicants under the CLP may be
does not amount to a contravention of the
afforded certain benefits, such as immunity
Act. Particularly considering that, obtaining
from prosecution and administrative
final immunity is a cumbersome process
penalties. Important, however, is that the
and significant management time and
benefits that may be afforded to alleged
company resources can be tied up during
cartelists under the CLP are subject to
the often-lengthy period that prohibited
leniency applicants adhering, as PPC did,
practice matters take to conclude.
to a host of conditions under the CLP.
Albert Aukema, Preanka Gounden and
James Wewege
3 | COMPETITION ALERT 26 February 2021OUR TEAM
For more information about our Competition practice and services, please contact:
Chris Charter Albert Aukema Naasha Loopoo
National Practice Head Director Senior Associate
Director T +27 (0)11 562 1205 T +27 (0)11 562 1010
T +27 (0)11 562 1053 E albert.aukema@cdhlegal.com E naasha.loopoo@cdhlegal.com
E chris.charter@cdhlegal.com
Lara Granville Kitso Tlhabanelo
Director Senior Associate
T +27 (0)11 562 1720 T +27 (0)11 562 1544
E lara.granville@cdhlegal.com E kitso.tlhabanelo@cdhlegal.com
Andries Le Grange Preanka Gounden
Director Associate
T +27 (0)11 562 1092 T +27 (0)21 481 6389
E andries.legrange@cdhlegal.com E preanka.gounden@cdhlegal.com
Susan Meyer Duduetsang Mogapi
Director Associate
T +27 (0)21 481 6469 T +27 (0)11 562 1068
E susan.meyer@cdhlegal.com E duduetsang.mogapi@cdhlegal.com
Craig Thomas
Associate
T +27 (0)11 562 1055
E craig.thomas@cdhlegal.com
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PLEASE NOTE
This information is published for general information purposes and is not intended to constitute legal advice. Specialist legal advice should always be sought in
relation to any particular situation. Cliffe Dekker Hofmeyr will accept no responsibility for any actions taken or not taken on the basis of this publication.
JOHANNESBURG
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T +27 (0)11 562 1000 F +27 (0)11 562 1111 E jhb@cdhlegal.com
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