Dealers to fight MTN over commissions

The complainants, who are referred to as MTN dealers in their affidavit, want the High Court in Pretoria to, among other things, interdict MTN from implementing any further cuts in commission. They also want the company to repay commissions that they say were agreed upon but have been "unilaterally" reduced by MTN since 2013.

The reductions have resulted in up to a 40% decrease in income for the dealers, according to their legal representative, Douw Steenkamp. The complainants had also requested that the court declare certain clauses of the dealer agreements invalid, and were demanding the repayment of commissions that had been contractually agreed upon between the parties and that MTN had "unilaterally and, in our view, unlawfully cut since 2013", he said.

Over the past two years, MTN has been cutting costs, including commissions paid to distributors and resellers of its range of products such as SIM cards and airtime. Many dealers had become unprofitable and were barely sustainable, with some stores having had to close while further closures were "imminent", said Steenkamp. These closures had had a "severe negative impact" on the surrounding communities as many employees had lost their jobs, he said.

According to the dealers' affidavit, MTN stated in a letter sent in 2012 the incentives were implemented only to "drive system consistency and uniformity within the dealer channel". The intention had not been to continue with these commissions and incentives "indefinitely, but rather once the universal adoption had been achieved" to discontinue them, the letter stated.

According to the affidavit, in July 2013 MTN informed its dealers it had set a target for reducing expenses by R100m. The plan was to reduce these expenses in the dealer channel, according to the document.

Graham de Vries, corporate services executive at MTN SA, said the firm had entered into agreements with various distributors, in terms of which MTN paid them commissions for sales made through their channels.

"A discrete contractual dispute has arisen between some of the dealers and MTN which has not been capable of resolution yet. MTN is dealing with the application in the ordinary course of its business and continues with its business relationship with such dealers. We confirm that we have received application papers from some of the dealers and that we are going to oppose same."

Source: Business Day