Recently, the Competition Appeal Court (CAC) reversed the decision of the Competition Tribunal in the matter of Nationwide Poles CC and Sasol Oil (Pty) Ltd.
The Tribunal had found that Nationwide Poles, a small business and supplier of treated wooden poles, had been the victim of abuse of dominance, in the form of price discrimination, at the hands of Sasol. Nationwide Poles alleged that Sasol had discriminated against it by charging it higher prices for creosote, a substance used in the treatment of poles, than that charged to its larger competitors. Sasol's price list indicated that it offered volume discounts to its customers, thereby charging different prices to different customers. The Tribunal found that Sasol's volume based discounts constituted price discrimination in contravention of the Competition Act, 1998.
Sasol appealed to the CAC. The CAC agreed with the Tribunal's observation that the prohibition on price discrimination in the Competition Act is aimed at protecting small businesses. In considering the appeal, the CAC focussed mainly on whether the discrimination complained of resulted in a substantial prevention or lessening of competition and what evidence would be required to prove such a lessening or prevention of competition. The CAC agreed with the Tribunal that no actual proof of harm was required to prove a lessening of competition and found, after considering foreign case law on the point, that the test for a substantial lessening of competition requires "a reasonable possibility" of harm to competition. The CAC, however, found that no evidence of such reasonable possibility of harm was shown by Nationwide Poles.
The CAC further held that a determination of a reasonable possibility of harm could not rest on an inherent effect of Sasol's pricing policy without any recourse to evidence. Given the evidence that Sasol's pricing increased Nationwide Poles' costs by between 3,6% - 4%, the CAC seems to have had a sufficient basis to find a reasonable possibility of harm to competition.
The CAC, however, listed lack of evidence in the form of the cost structures of other small firms, the nature of Sasol's main competitor's operations and whether any firms had exited the market as categories of evidence which should have been presented in order for a reasonable possibility of harm to competition to be proved. The CAC therefore upheld Sasol's appeal. Ironically, Nationwide Pols was reported to have gone out of business shortly after the CAC's decision.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
