Competition Commission and Federal Mogul Aftermarket Southern Africa (Pty) Ltd Others (08/CR/Feb01) [2003] ZACT 5 (28 January 2003)

Competition Commission and Federal Mogul Aftermarket Southern Africa (Pty) Ltd Others (08/CR/Feb01) [2003] ZACT 5 (28 January 2003)

The Tribunal found that the distribution of Ferodo products was governed by a well-known and clearly understood pricing convention, whereby wholesalers sold at a 35% rebate off the Federal Mogul list price. Periodic meetings were held to monitor compliance, and deviation from the convention invited sanctions, such as rebate reduction. The evidence established that Federal Mogul reduced Pee Dee Wholesalers' rebate in response to its participation in a price war, not due to creditworthiness concerns. The Tribunal held that this conduct constituted resale price maintenance in contravention of Section 5(2) of the Competition Act, as the practice was enforced through a credible sanction and...

Citation
[2003] ZACT 5
Parties
Applicant: Competition Commission of South Africa; Respondent: Federal Mogul Aftermarket Southern Africa (Pty) Ltd; Respondent: Federal Mogul Friction Products (Pty) Ltd; Respondent: T & N Holdings Ltd; Respondent: T & N Friction Products (Pty) Ltd
Court
Competition Tribunal
Jurisdiction
South Africa
Judgment Date
28 January 2003
Case Number
08/CR/Mar01
Procedural Posture
Competition Enforcement / Decision and Reasons
Outcome
The Tribunal found that Federal Mogul Aftermarket Southern Africa (Pty) Ltd contravened Section 5(2) of the Competition Act by engaging in resale price maintenance.
Judges
D. Lewis, M. Moerane, N. Manoim
Legal Topics
Resale Price Maintenance, Vertical Restrictive Practices, Section 5 2 Competition Act, Rebate Structures, Sanctions for Non Compliance
Competition Law Commercial and Corporate Resale Price Maintenance Vertical Restrictive Practices Section 5 2 Competition Act Rebate Structures Sanctions for Non Compliance

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Parties

Competition Commission of South Africa

Applicant

Federal Mogul Aftermarket Southern Africa (Pty) Ltd

Respondent

Federal Mogul Friction Products (Pty) Ltd

Respondent

T & N Holdings Ltd

Respondent

T & N Friction Products (Pty) Ltd

Respondent

Procedural Posture

Competition Enforcement / Decision and Reasons

Legal Issues

  1. 1 Did Federal Mogul Aftermarket Southern Africa (Pty) Ltd engage in resale price maintenance in contravention of Section 5(2) of the Competition Act?
  2. 2 Was the reduction of the rebate to Pee Dee Wholesalers a sanction for breaching a pricing convention?
  3. 3 Is the existence of an agreement or understanding necessary to establish a contravention of Section 5(2)?

Ratio Decidendi

The Tribunal found that the distribution of Ferodo products was governed by a well-known and clearly understood pricing convention, whereby wholesalers sold at a 35% rebate off the Federal Mogul list price. Periodic meetings were held to monitor compliance, and deviation from the convention invited sanctions, such as rebate reduction. The evidence established that Federal Mogul reduced Pee Dee Wholesalers' rebate in response to its participation in a price war, not due to creditworthiness concerns. The Tribunal held that this conduct constituted resale price maintenance in contravention of Section 5(2) of the Competition Act, as the practice was enforced through a credible sanction and...

Court Disposition

The Tribunal found that Federal Mogul Aftermarket Southern Africa (Pty) Ltd contravened Section 5(2) of the Competition Act by engaging in resale price maintenance.

Orders

  • Federal Mogul Aftermarket Southern Africa (Pty) Ltd is found to have contravened Section 5(2) of the Competition Act.
  • The matter is referred for determination of an appropriate remedy in accordance with the Act.