Dawn Consolidated Holdings (Pty) Ltd and Others v Competition Commission (155/CACOct2017) [2018] ZACAC 2; [2018] 1 CPLR 1 (CAC) (4 May 2018)

Dawn Consolidated Holdings (Pty) Ltd and Others v Competition Commission (155/CACOct2017) [2018] ZACAC 2; [2018] 1 CPLR 1 (CAC) (4 May 2018)

The court held that the non-compete clause in the shareholders agreement was reasonably required and proportionate to the legitimate interests served, namely the protection of Sangio's confidential information and know-how. The restraint was limited to the period during which Dawn remained a shareholder and was geographically reasonable. The main agreement was unobjectionable from a competition law perspective, and the restraint was ancillary to its implementation. The Commission failed to discharge the onus of proving that the clause, properly characterised, amounted to a contravention of s 4(1)(b)(ii) of the Competition Act. The appeal was upheld and the complaint dismissed.

Citation
[2018] ZACAC 2
Parties
Appellant: Dawn Consolidated Holdings (Pty) Ltd; Appellant: DPI Plastics (Pty) Ltd; Appellant: Sangio Pipe (Pty) Ltd; Respondent: Competition Commission
Court
Competition Appeal Court
Jurisdiction
South Africa
Judgment Date
4 May 2018
Case Number
155/CACOct2017
Procedural Posture
Civil Appeal / Appeal From Competition Tribunal Decision
Outcome
Appeal upheld; Tribunal decision set aside; complaint dismissed.
Judges
Rogers, Davis, Boqwana
Legal Topics
Restraint of Trade, Horizontal Agreements, Market Division, Ancillary Restraints, Shareholders Agreement
Competition Law Commercial and Corporate Restraint of Trade Horizontal Agreements Market Division Ancillary Restraints Shareholders Agreement

Case Brief

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Parties

Dawn Consolidated Holdings (Pty) Ltd

Appellant

DPI Plastics (Pty) Ltd

Appellant

Sangio Pipe (Pty) Ltd

Appellant

Competition Commission

Respondent

Procedural Posture

Civil Appeal / Appeal From Competition Tribunal Decision

Legal Issues

  1. 1 Whether a non-compete clause in a shareholders agreement constitutes a prohibited horizontal market division under s 4(1)(b)(ii) of the Competition Act.
  2. 2 Whether the parties were in a horizontal relationship (competitors) at the time of the agreement.
  3. 3 Whether the restraint was reasonably required and proportionate to the legitimate interests served.

Ratio Decidendi

The court held that the non-compete clause in the shareholders agreement was reasonably required and proportionate to the legitimate interests served, namely the protection of Sangio's confidential information and know-how. The restraint was limited to the period during which Dawn remained a shareholder and was geographically reasonable. The main agreement was unobjectionable from a competition law perspective, and the restraint was ancillary to its implementation. The Commission failed to discharge the onus of proving that the clause, properly characterised, amounted to a contravention of s 4(1)(b)(ii) of the Competition Act. The appeal was upheld and the complaint dismissed.

Court Disposition

Appeal upheld; Tribunal decision set aside; complaint dismissed.

Orders

  • The appeal succeeds with costs, including those attendant on the employment of two counsel.
  • The decision of the Tribunal is set aside and replaced with an order that the complaint is dismissed.