Competition Commission dismisses Cape Gate application

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Lerisha Naidu, senior associate in the Competition Practice at Cliffe Dekker Hofmeyr, says in the referral the Commission alleged that Cape Gate (together with other respondents) contravened section 4 of the Competition Act, 1998 by entering into an agreement or engaging in a concerted practice to fix the purchase price of scrap metal in South Africa.

"In particular, the Commission contended that the parties operate as a buyer's cartel in the market for the purchase of scrap metal. The Commission's referral papers indicate that the respondents adopted interrelated mechanisms to coordinate the purchase of scrap metal, including engagements and related agreements with scrap merchants," Naidu explains.

On 2 October 2013, Cape Gate filed an exception application on the grounds that the Commission's referral was contradictory, vague and embarrassing and lacked essential averments necessary to sustain a complaint.

Horizontal relationship

"In respect of the allegation that the referral lacked the averments necessary to sustain a complaint, it was argued by Cape Gate that, in order for a complaint to be sustained under section 4(1)(b) of the Act, it must be alleged that the relevant parties are in a horizontal relationship (ie that a competitive relationship exists between the parties). Cape Gate argued that the allegations of the Commission were unsustainable on this basis as the implicated parties (being scrap customers and scrap merchants) operate at different levels of the supply chain and, as such, could not properly be categorised as competitors.

"On this issue, the Tribunal refrained from determining whether the Commission's case was unsustainable for want of establishing the presence of a competitive relationship between the parties. The Tribunal found that, in order to express a view on the presence or otherwise of a horizontal relationship, evidence would need to be led to understand the relationship between the respondents and scrap merchants. The Tribunal therefore dismissed the application for this reason (among others)," she notes.

Naidu adds that this case is a reminder that, while exception applications are procedural in nature and are designed to ensure that respondents are apprised of the case against them, the success of such applications often turns on a substantive assessment of the merits of the matter (and a concomitant consideration of all available evidence).

"In such cases, the Tribunal appears to be disinclined to find in favour of applicants where a full ventilation and consideration of the facts and evidence has not occurred."