Siyakhuphuka Investment Holdings (Pty) Ltd v Transnet Soc and Another (158/CAC/Nov17) [2018] ZACAC 4; [2018] 1 CPLR 88 (CAC) (3 July 2018)

REPUBLIC OF SOUTH AFRICA

IN THE COMPETITION APPEAL COURT OF SOUTH AFRICA

CAC CASE NO: 158/CAC/Nov17

3/7/2018

In the matter between:

SIYAKHUPHUKA INVESTMENT HOLDINGS (PTY) LTD

APPELLANT

and

TRANSNET SOC

FIRST RESPONDENT

TRANSNET NATIONAL PORTS AUTHORITY

SECOND RESPONDENT

JUDGMENT

MNGUNI JA:

[1] This appeal has its origin in an unsolicited proposal submitted by the appellant to the second respondent, a division of the first respondent, on 25 January 2008 for the development of a container operation at the Port of Richards Bay. The proposal had been developed following significant research in collaboration with Maersk, a major shipping line, and was aimed at addressing the development block for Zululand, through the creation of container shipping connections to major global shipping destinations to enable importers, exporters and potential establishers of new industry to be competitive in global markets.

[2] On 30 April 2009, the respondents rejected the proposal, resulting in the appellant filing a complaint with the Ports Regulator of South Africa (the Regulator) in terms of s 47(2)(a) and (c) of the National Ports Act 12 of 2005 (the NPA).[1] The appellant alleged in that complaint that when the second respondent was integrated as an operating division of the first respondent with the mandate to increase market share, the second respondent, which would have been a competitor of the appellant in respect of the proposal, lost its ability to fairly determine the appellant's application.

[3] Whilst the complaint was still pending before the Regulator, the appellant referred a prohibited practice complaint to the Competition Commission ("the Commission") on 2 April 2014 comprising of two parts.

(a) In the first complaint the appellant alleged that the second respondent operates as a division of the first respondent and there is no delineation between these two respondents. The appellant alleged that since the first respondent's corporate strategy includes protecting base cargo volumes against new entrants and growing its market share, the second respondent is incapable of impartiality in the execution of its duty under the NPA. The appellant contended that this conduct constitutes an abuse of the first respondent's dominant position and violates s 8 of the Competition Act 89 of 1998 ("the Competition Act").

(b) In the second complaint the appellant alleged that after rejecting its proposal, the respondents availed the proposal to the Transnet Port Terminals ("the TPT") which is the appellant's direct competitor. The TPT subsequently implemented the appellant's concept and design despite having previously expressed the view that the Port of Richards Bay terminal was not suitable for the containers. The appellant alleged that this conduct too constitutes an abuse by the first respondent of its dominant position in violation of s 8 of the Competition Act

[20] He further submitted that the powers of the second respondent to conclude agreements in terms of s 56 and grant licences in terms of s 57 and/or 65 of the NPA are matters of law, the exercise of which is specifically subject to oversight by the Regulator in terms of ss 30 and 47 of the NPA and cannot be said to constitute economic activity as envisaged in s 3 of the Competition Act. He pointed out that in Gcaba[7] (above) the court found further that the pleadings must be properly interpreted to determine what claim the applicant is actually asserting and which court has the competence to determine such claim and that the mere fact that the complaints were couched as competition issues does not mean that they were in truth competition issues.

[21] It is common cause that in terms of s 56 of the NPA the second respondent has powers to conclude agreements and to grant licences in terms of ss 57 and/or 65 of the NPA. Section 3(1) of the Competition Act provides that the Act applies to all economic activity within, or having an effect within, the Republic.[8] The legislature established the Competition Commission and Tribunal as the primary authority in competition matters and by introducing s 3(1A)(a) established that where another regulatory authority has jurisdiction over any area of a matter covered by the Competition Act its jurisdiction would be concurrent with that of the competition authorities. The section provides:

'In so far as this Act applies to an industry, or sector of an industry, that is subject to the jurisdiction of another regulatory authority which authority has jurisdiction in respect of conduct regulated in terms of Chapter 2 or 3 of this Act, this Act must be construed as establishing concurrent jurisdiction in respect of that conduct.'

In the course of argument the respondents' counsel conceded that the legislature established the competition authorities as the primary authority in competition matters and that by introducing s 3(1A)(a), established that where another regulator has jurisdiction over any matter covered by the Act, its jurisdiction would be concurrent with that of the competition authorities. He, however, harked back to s 56(5) of the NPA and contended that any agreement contemplated in subsections (1) or (4) may only be entered into by the second respondent in accordance with a procedure that is fair, equitable, transparent and cost-effective.

[22] In Competition Commission of SA v Telkom SA Ltd & another Malan JA said:[9] 'Both the repeal of section 3(1)(d) and the introduction of section 3(1A)(a) brought about a complete change from the earlier position. They are general provisions intended to regulate the subject-matter comprehensively and intended to establish the general jurisdiction of the competition authorities in all competition matters. The Competition Act applies to all economic activity within or having an effect within South Africa. It provides for wide powers and general remedies more effective than the limited ones given by the Telecommunications Act. There is no room for the implication of exclusive jurisdiction vested in ICASA contended for. The authorising legislative and other provisions Telkom relied upon did not oust the jurisdiction of the Commission and the Tribunal but could well give rise to defences to the complaints referred. The competition authorities not only have the required jurisdiction but are also the appropriate authorities to deal with the complaint referred.'

[23] This reasoning commends itself to me as applying equally to the present matter. As I understood the argument advanced on behalf of the appellant, this court is called upon to determine a narrow question without reference to the merits of the dispute, of whether the basis of the claim as foreshadowed and formulated in the complaint involves the Tribunal's competence. In light of this narrow question which this court is required to answer, it seems to me that the argument advanced on behalf of the respondents based on the requirements in ss 56, 57 or 65 of the NPA puts the cart before the horse. In the circumstances the answer to the narrow question is in the affirmative.

[24] This is however not the end of the enquiry. The next step to consider is whether there is any substance in the appellant's contention that the Tribunal mischaracterised its two complaints?

[25]

The main thrust of the first complaint as pleaded in the supplementary founding affidavit is the following: The second respondent owns and controls all the land in all South African ports, including the Port of Richards Bay. In terms of the NPA, the second respondent is exclusively empowered to authorise the design, construction, rehabilitation, development, financing, maintaining and operation of port terminals and port facilities or the provision of services relating thereto. The second respondent is the only entity that is authorised to grant licences to operate port facilities and services throughout South Africa.

[26] The second respondent has prevented the appellant, which is a potential competitor in the market to the TPT, from developing a container terminal and providing a container terminal service at the Port of Richards Bay. The refusal by the second respondent to provide access to an essential facility to the appellant has impeded and prevented it from entering into and expanding within a market and constitutes an exclusionary act for purposes of the Competition Act. There was also no technological or efficiency or other pro-competitive gain which arose as a result of the respondents refusal to accept its proposal. In addition, the first respondent's refusal to grant the appellant's proposal and the second respondent's subsequent entering into an agreement with Maersk Line had the effect of inducing the appellant's customer Maersk not to deal with the appellant. The appellant did not complain that its proposal was not properly considered, which would be a public law complaint, but rather that the proposal was considered in sufficient detail and that the first respondent itself attempted to implement the proposal through the use of coercion and abuse of its dominant position.

[27] The appellant asserted that the first respondent realised that its proposal involving a container operation backed by Maersk, would constitute a significant threat to the respondents' monopoly if implemented. The respondents therefore used their dominant position to prevent this threat or challenge in line with their broader and avowed strategy to protect volumes against new entrants. Shortly after the refusal of the appellant's proposal, the respondents implemented a similar proposal without following a s 56 process and without a licence issued by the second respondent. The appellant asserted that the TPT applied and received approval for the first time for such a licence in March 2016. The appellant asserted that the first respondent's recent decision demonstrates that there are sufficient actual and potential volumes of base cargo to justify the development of a dedicated container terminal at Richards Bay. And that since there have been no significant changes in the base cargo volumes since April 2009, when the first respondent refused the appellant's proposal, its decision to now develop a container terminal in Richards Bay undermines the foundation of the first respondent's refusal to approve its proposal in the first instance and confirms that the decision was an abuse of dominance. The appellant has alleged that the respondents' conduct contravenes ss 5(1), 000000">8(b), (c) and (d)(i) of the Competition Act.

[1] Section 47(2)(a) and (c) of National Ports Act 12 of 2005 provides:

'A complaint against the Authority may be based on any ground provided for by the Regulator by direction under section 30(3) or on the ground that -

(a) access to ports and port facilities are not provided in a non-discriminatory, fair and transparent manner;

(c) Transnet is treated more favourably and that it derives an unfair advantage over other transport companies.'

[2] The supplementary founding affidavit was deposed to on 6 June 2016.

[3] Section 56 of the NPA.

[4] AEC Electronics (Pty) Ltd v Department of Minerals and Energy (48ICRIJune 09) [2010] ZACT 12 (8 February 2010).

[5] Gcaba v Minister of Safety and Security & others 2010 (1) SA 238 (CC) para 75.

[6] Makhanya v University of Zululand 2010 (1) SA 62 (SCA) para 27.

[7] Gcaba v Minister of Safety and Security above para 75.

[8] The exceptions provided in this section are: '(a) collective bargaining within the meaning of section 23 of the Constitution, and Labour Relations Act, 1995 (Act 66 of 1995); (b) a collective agreement, as defined in section 213 of the Labour Relations Act, 1995; and (c) and (d).......(e) concerted conduct designed to achieve a non-commercial socio-economic objective or similar purpose'.

[9] Competition Commission of SA v Telkom SA Ltd & another [2010] 2 All SA 433 (SCA) para 35.

[10] Section 11(1)(a) and (g) of the NPA

[11] Section 47(2)(a) of the NPA

[12] Section 47(2)(c) of the NPA

[13] Sections 54(c) and 56 of the Competition Act.