INTRODUCTION
This is an application for interim relief brought by South African Fruit Terminals (Pty) Ltd in respect of a complaint lodged by it
with the Commission on 19 September 2001, against Portnet, Capespan, and its related companies. The applicants allege that the respondents
are engaged in practices prohibited by Chapter 2 of the Competition Act, 89 of 1998. More specifically, the applicants allege that
the respondents are contravening the provisions of sections 5(1), alternatively 5(2), alternatively 8(b), alternatively 8(c), alternatively 8(d)(ii), alternatively 8(d) (iv), alternatively 9 of the Competition Act.
The Parties
SAFT
The applicant is South African Fruit Terminals (Pty) Limited (“SAFT”), a company incorporated in South Africa, which
provides agency and logistical services for the export of citrus and deciduous fruit from South Africa. SAFT is controlled by SAFT
Europe BV in Rotterdam, the Netherlands. The ultimate ultimate controlling shareholders are Seabrex Rotterdam BV of the Netherlands and the Sea-Invest Group of Belgium.
Portnet (Transnet)
The first respondent is cited as Portnet, (“Portnet”) and is merely an operating division of Transnet Limited (“Transnet”).
It is the latter which is the registered owner and/or operator of all port facilities in the ports of the Republic of South Africa,
specifically, Durban, Cape Town and Port Elizabeth. Transnet had no objection to the incorrect citation and we allowed the applicant
to amend the citation. Transnet was formed in terms of the Legal Succession to the South African Transport Services Act No. 9 of
1989 and became the legal successor to the South African Transport Services (“SATS”). It thus inherited all its rights
and obligations vis-à-vis existing agreements as well as those under the old harbour regulations in terms of which SATS controlled
the ports. It further acquired ownership of all movable and immovable property previously owned by SATS. Transnet is specifically
designated as the port authority in terms of various Acts. It owns, controls, manages, maintains and exploits the harbours of Table
Bay, Durban and Port Elizabeth. For convenience all the parties herein have throughout the proceedings referred to Transnet as Portnet
and we, likewise, adopt this approach in this decision.
Capespan
The second respondent is Capespan (Pty) Ltd (“Capespan”), the largest export agent and logistics service provider in the
fruit export market. It has been trading since 1999 when it acquired the operations of Unifruco and Outspan and their associated
subsidiaries. The latter two companies are now Capespan’s principal shareholders, each holding 34.29% of its issued share capital.
IHS
The third respondent is International Harbour Services (Pty) Ltd (“IHS”). IHS was originally incorporated under the Companies
Act No. 61 of 1973, its entire issued share capital being registered in the South African Co-operative Deciduous Fruit Exchange Limited
(which later became known as “Universal”). It was brought into existence to handle deciduous fruit exports at arm’s
length from the Deciduous Fruit Board (“DFB”). When Unifruco took over the position of marketing agent for deciduous fruit from the DFB in 1991, Universal sold and transferred
its entire shareholding in IHS to Unifruco, which became a wholly-owned subsidiary of Unifruco. The shares in IHS were subsequently
transferred to Capespan on 1 January 1999.
IHS is entitled to conduct certain cargo operations, including handling of fresh fruit at Table Bay Harbour, by virtue of an agreement
concluded with Transnet in 1993.
FPT
The fourth respondent is Fresh Produce Terminals (Pty) Ltd (“FPT”), a subsidiary of Capespan, held via an intermediate
company, Fleurbaix (Pty) Ltd. At present, FPT operates as the managing agent of Capespan and IHS.
By virtue of the sharing of premises and certain common directorships between the various companies, the applicant contends that the
second to fourth respondents constitute one economic entity. They therefore refer collectively to all the respondents as “Capespan”.
Portnet concedes that Capespan, IHS and FPT are in effect one and the same economic unit or “combined respondents”. Capespan contends that although Capespan, IHS and FPT conduct their businesses as part of the Capespan group, they do not form one economic entity. Nevertheless, it has been accepted by all parties that “Capespan” be used to refer to the three respondents
for the sake of convenience. We will also follow this approach throughout these Reasons.
BACKGROUND
History of the Litigation
On 19 September 2001 the Applicant lodged a complaint with the Competition Commission against the respondents.
Simultaneously, on the 19 September 2001 the applicant launched an application for interim relief against the respondents. Lengthy
papers were filed by all the parties and the matter was only set down for hearing on the 13 December 2001. The hearing lasted one
day and was then resumed on 1st and 2nd February 2002 and again on the 4th and 5th March 2002.
The issues in the case
South Africa currently exports approximately 1.4 million pallets of deciduous, citrus and sub-tropical fruits per annum. Historically, the export of South African fruit was controlled by the Deciduous Fruit Board and the Citrus Board. South African fruit
was marketed abroad by agents of the various Control Boards. Capespan is the effective successor to one such control board that was
the single channel marketer of the SA fruit industry. As the only company acting as a marketing agent for South African fruit, it
enjoys long lease agreements with Portnet in respect of the various South African ports.
In particular, Capespan is the inheritor of a long lease in respect of the Cape Town port. and through such lease benefits economically
from the lease insofar as Iit is entitled to use the leased premises, as well as B, C, and D berths on a long-term basis. In return,
it pays a market related rental to Portnet for the quayside and existing sheds.
Both SAFT and Capespan provide logistical services for the export of citrus and deciduous fruit to overseas markets. In its capacity
as export agent, Capespan acts as middleman between producers and foreign fruit purchasers and provides agency services in this regard.
It however also logistical and other service functions to itself and other export agents. SAFT only provides logistical services to export agents and in this regard, is the competitor of Capespan. This entails logistical
(chain) management of the entire export process. SAFT has been in existence for approximately 3 years and allegedly has a 30% market
share of the logistic services market. There are no other competitors other than Capespan and SAFT which provide this specialised service.
The citrus and deciduous fruit market can be broken down into two segments, sterilised (“steri”) and non-sterilised (“non-steri”).
The distinction comes about, not because of any intrinsic difference in the products, but because of the health requirements of the
country to which the fruit is exported. Countries whose phytosanitary health requirements place them in the sterilised fruit market,
are distinguished by the fact that they impose a more rigorous control regime on the exporting country, (which has to certify fruit
as being of the sterilised category), in the language of the industry, “to ensure the integrity of the cold chain.”
The practical effect of the distinction for the purpose of this case, is the different manner in which the fruit is handled at the
ports by logistic service providers. Fruit that meets the sterilised fruit standard has to be loaded from a cold storage facility
located at the quay; non–sterilised fruit may be stored in a cooling facility that is located away from the quay and, as is
the case with the applicant, this facility need not be located on the port premises i.e. the property controlled by Portnet.
Capespan is active in both these markets. It, or entities it controls, have long term leases with Portnet at Cape Town and Durban
harbours which have enabled it to construct a quayside storage facility at both harbours from which it handles both sterilised and
non-sterilised fruit. This location means that it is able to handle sterilised fruits, an advantage none of its rivals has.
In relation to non-sterilised fruits, its arrangement with Transnet is also different to that of its rivals, in that it can load its
non–steri from its quayside facility thus obviating the necessity to have to enter into an extensive arrangement with Portnet
for access to the quayside and use Portnet labour. It does however pay a royalty to Portnet at R7.83 per pallet in Cape Town and
R1.93 in Durban.
As mentioned, SAFT presently competes against Capespan in the non-steri market for the provision of logistic services to export agents
and has been doing so since 1999 when it entered the market.
SAFT does not compete in the steri market although it wishes to do so. At the moment it claims it is unable to do so because it does
not have access to quayside cold storage facilities, which it alleges is an essential pre-requisite to enter this market.
It states that in order to enter the market either of two things needs to happen –
1.
Portnet should lease it appropriate space at the quayside so it could have an arrangement similar to that of Capespan; or
2.
Capespan should be required to lease it part of its existing facilities .
It alleges that neither has been willing to enter into such an arrangement and that each has pointed a finger at the other as the
cause of the applicant’s predicament . For this reason SAFT seeks relief in the form of temporary access to an essential facility
against Capespan. (Prayer 6.1 in the original Notice of Motion, prayer 3.1 in the amended notice of motion )
As ancillary relief it seeks the excision of certain clauses in the leases that provide for the exclusive use by the respondents of
the quayside cold storage facilities. .
It further complains that it is not able to compete on an equal footing with Capespan in the non-steri market because Portnet’s
arrangement with it is less favourable than the arrangement it has with Capespan. This discrimination raises SAFT’s costs in
comparison to that of Capespan. It alleges that Capespan’s response has been to lower its fees in the non-steri market, to
a level where SAFT cannot make a return and has cross-subsidised this by increasing its fees in the steri market, where it is not
subject to competition.
Portnet, as a dominant provider of quay loading facilities, is obliged to treat it in a non-discriminatory fashion – it has
not done so and hence SAFT argues that it is entitled to the relief sought under the heading quayside services. These prayers for
relief are designed to level the playing fields so that it can continue in the market.
The relief sought by SAFT against both Capespan and Portnet in respect of access to the cold storage facilities has undergone a major
shift during the course of this case. in relation to the essential facility. Prayers sought primarily against Portnet in respect
of access to the multipurpose terminals, the access to the quayside service claim, have also evolved, although less dramatically.
For this reason it is convenient to set out below the changes in the relief sought, and when they were sought, as the evolution is
relevant as becomes apparent later on, especially when it comes to the issue of costs.
The Nature of the Relief Claimed
The applicant, in its original Notice of Motion, sought an order in the following terms:-
1.
that Portnet allow SAFT to conduct its own Quayside services against payment by SAFT to Portnet of a royalty of R7.82 or such other
royalty payment currently paid by any of the other respondents to Portnet for such right;
2.
that all provisions in the Lease Agreements and other relevant agreements between Portnet and the other respondents which expressly,
tacitly or by implication reserve or provide for the exclusive use by any of the respondent of the Quayside Cold Storage Facilities
in all the relevant ports of South Africa be varied and/or expunged from these agreements;
3.
that Portnet makes available to SAFT an area constituting at least 30% of the Quayside Cold Storage Facilities in all the ports in
South Africa for the purpose of arranging, managing and/or exporting produce to foreign destinations on behalf of its clients;
4.
that SAFT pays to Portnet 30%, or a proportionate equivalent, of the sum currently paid by the respondents to Portnet for the use
of and access to each of the Quayside Cold Storage Facilities in the relevant ports of South Africa;
5.
that Claimant pays to the relevant respondent/s, on a monthly basis, 25% of the cost incurred by such respondent/s in regard to the
running expenses of the various Quayside Cold Storage Facilities , alternatively a sum to be determined by the Tribunal which will
adequately reimburse the respondent/s for such running costs;
ALTERNATIVELY TO PRAYERS 2 TO 5
6.1
the second to fourth respondents be compelled to allow SAFT access to at least 30% of the Quayside Cold Storage Facilities in all
the ports in South Africa for the purpose of arranging, managing and/or exporting produce to foreign destinations on behalf of its
clients; and
6.2
that SAFT pays to either of the second to fourth respondents 30%, or a proportionate equivalent, of the sum payable by such respondent/s
in respect of its leases of such Quayside Cold Storage Facilities with Portnet; and
6.3
that SAFT pays to second to fourth respondents , on a monthly basis, 25% of the costs incurred by such respondent/s in regard to the
running expenses of the various Quayside Cold Storage Facilities , alternatively a sum to be determined by the Tribunal which will
adequately reimburse the respondent/s for such running costs.
7.
Costs of the Application; and
8.
Further and/or alternative relief.
At the first hearing, it transpired that SAFT was only requiring use of the cold storage facility situate at Berth D in Cape Town.
The respondents took the view that they could not proceed with their arguments until they (the respondents) received clarity on the
relief which was being sought by SAFT. The Tribunal accordingly requested SAFT to reformulate its prayers specifically with regard
to the access point. The matter was accordingly adjourned until February 2002 to enable SAFT to file a supplementary affidavit reformulating
its prayers for relief, which it duly did.
In its Notice of Intended Amendments to Prayers, filed on 14 January 2002, the Applicant requested an order in the following terms:
QUAYSIDE SERVICES
1.11
that Portnet allow SAFT to conduct its own Quayside services against payment by SAFT to Portnet of a royalty payment as is currently
made by either Second and/or Third and/or Fourth Respondent to SAFT for the same right.
that SAFT be ordered to pay to Portnet in addition to such royalty, an amount per pallet, alternatively an amount per square metre,
as the Tribunal deems reasonable, for the intermittent and non-exclusive use of the Quayside area adjacent to the Quay Apron required
by SAFT for the effective provision of logistic services.
1.3
In the alternative to 1.1 and 1.2 above, the Tribunal orders that Portnet reduces its charges to
SAFT, current R50 per pallet in Cape Town and R52,50 in Durban, to a level which , in the view of the Tribunal, is non-discriminatory,
fair and reasonable in the circumstances.
2.
LEASE AGREEMENTS
2.1
that all provisions in the Lease Agreements and other relevant agreements between Portnet and the
other respondents which expressly, tacitly or by implication reserve or provide for the exclusive use by any of the respondents of
the Quayside Cold Storage Facilities in all the relevant ports of South Africa be varied and/or expunged from these agreements.
3.
ACCESS TO AN ESSENTIAL FACILITY
3.1
that First Respondent and/or Second Respondent and/or Third Respondent and/or Fourth Respondent allow SAFT effective access to an
area constituting at least 30%, or, alternatively, such percentage as the Tribunal deems appropriate, of the Quayside Cold Storage Facilities in all the ports in South Africa for the purpose of arranging, managing and/or exporting
produce to foreign destinations on behalf of its clients; and
3.2
SAFT pays to Second or Third Respondent a proportionate equivalent (commensurate to the rights attached to and period of time of such
access) of the lease payments currently incurred by Second or Third Respondent having regard to the square metre area of the Quayside
Cold Storage Facility to which access is awarded by the Tribunal, alternatively an appropriate sum determined by the Tribunal for
such access; and
3.3
That SAFT pays to Second or Third Respondent on a monthly basis 25% of the aforesaid lease payment determined in paragraph 3.2 above,
in order to reimburse Second or Third Respondent for any other cost it may incur in respect of the area to which access is awarded
by the Tribunal to SAFT (in terms of paragraph 3.1 above) during the period of access of such area by SAFT; alternatively a sum to
be determined by the Tribunal which will adequately reimburse the relevant Respondent /s for such costs; and
3.4
Such other terms and conditions of access as the Tribunal deems appropriate.
4.
Costs of this Application.
5.
Further and/or alternative relief.
The nature of the relief claimed changed yet again on the final day of hearing. SAFT abandoned its claims against Capespan contained
in prayer 3, with the exception of prayer 3.4. and the question of costs. It therefore requested the Tribunal to make an order in
terms of prayer 3.4 only. SAFT made a proposal as to how we should formulate this relief which we deal with more fully below when
we consider the case against Capespan. What is relevant to note at this stage is that SAFT did not propose a formal amendment of
the notice of motion arguing that this could be accommodated in terms of the existing prayer 3.4. As against Portnet, it abandoned
its prayer 2 but persisted with prayer 1, in respect of the quayside services at the multipurpose terminals.
It is common cause that we may confine ourselves to the relief sought by SAFT on the final day of argument.
EVALUATION
Legal Issues
Standard of proof required for an interim relief application
Section 49C(3) of the Act states:
‘In any proceedings in terms of this section, the standard of proof is the same as the standard of proof in a High Court on a common
law application for an interim interdict.”
It is important to note that the section mandates the application of the common law “standard of proof”, for an interim
interdict, but not the common law requirements for an interim interdict.
The requirements for an interim interdict in terms of section 49C are set out in section 49C(2)(b) and are similar to the requirements
for an interim interdict at common law:
“The Competition Tribunal
may grant an interim order if it is reasonable and just to do so, having regard to the following factors:
(i) The evidence relating to the alleged prohibited practice;
(ii) the need to prevent serious or irreparable damage to the applicant; and
(iii) the balance of convenience.”
The standard of proof required is less exacting than the civil burden of a balance of probabilities.
Factual Issues
SAFT claims Portnet is discriminating unfairly against it in respect of the multipurpose terminals (“MPT”) it uses, relative to those charges levied againstd to Capespan in respect of the leased quayside facilities that it uses. While not
abandoning a claim under section 9, it frames its case primarily under section 8(c) since there is some legal doubt as to whether
this case, where the services being compared are not equivalent transactions, could be sustained under section 9, which envisages
classic price discrimination between like services. The MPT through which the cargo handled by SAFT is shipped are the E and F berths in Cape Town and L and M berths in Durban.
We have been mindful about how we should decide the matter. We have been faced not only with the considerations of section 49D of
the Act, but a veritable minefield of other points either taken in limine or as part of the consideration of the merits. We have decided to approach our decision by deciding as limited a range of issues as are necessary for us to come to a conclusion
on whether it would be competent to grant interim relief. The matter may well be referred to us for final relief on a more extensive
record and it would thus be inappropriate for us to express a view on factual or legal issues that are not necessary for us to decide
at this stage. Because of this we decided to approach the matter from the end rather than the beginning.
We have found that SAFT has not made out such a case for interim relief and accordingly relief is denied against all the respondents.
Our reasons for this follow. Because it is convenient to do so, we have dealt separately with the relief sought against Portnet and
Capespan.
CAPESPAN
The relief sought against Capespan is now limited to prayer 3.4:
“Such other terms and conditions of access as the Tribunal deems appropriate.”
As stated above, the precise nature of the relief claimed was never formally framed in terms of an order, nor did SAFT request an
amendment thereof. SAFT, in its oral address to us, asked, in terms not entirely clear to us, for an order that Capespan be required
to deal with it on a non-discriminatory basis and on terms no less favourable than those granted to its most favoured customers.
The shift in relief from that claimed in the original notice of motion and the amended notice of motion is profound - SAFT instead
of seeking to be Capespan’s sub-lessee, seeks to be its customer, treated on most favoured customer terms.
SAFT does not claim that Capespan is refusing to deal with it – rather that it is only prepared to deal with it on terms that
SAFT says would make it uncompetitive in the steri market. The issue is the manner in which Capespan calculates volume-based discounts
to its customers. The discount structure does not distinguish between steri and non-steri produce and offers a discount based on
the aggregate of both. SAFT states that its steri volumes will never reach the level at which it can obtain the maximum discount
. The only way to do this would be for it to give its non-steri to Capespan, which would be pointless, or to subsidise its steri customers.
Neither alternative is viable. It wants, in effect, for us to order that the discount structure for steri and non-steri be calculated
separately.
Capespan opposes this relief. In the first place, they complain that at the eleventh hour, when all the affidavits had been filed
and after we had ruled that we would accept no further affidavits from any party, SAFT has come with a new case not contemplated
on the papers. In the second place, a point which flows from the first, they have not been given the opportunity to meet this new
case - which is now about their standard contract - when they had come to us to meet a case which was about access to their facilities.
They have thus not only been put in a position where they do not know why their contract is objectionable, but they also have not
been afforded the opportunity to meet such a case by justifying its terms.
We accept this argument. Whilst competition law recognises that volume discounts may be applied in a discriminatory manner to raise
rivals’ costs, they are equally defensible on the grounds that they either raise no competition concerns, or if they do, that
they are premised on achieving efficiencies based on those volumes. In this case, the lateness of the amendment has meant that Capespan
only knows of the case against it from submissions from the bar and has not been given an opportunity to state its case in its filings.
SAFT seeks to persuade us that we have a wide discretion to award alternative relief and that the order sought is contemplated in
correspondence forming part of the record. If the respondent had chosen not to deal with these issues it was its own fault.
We cannot agree. The oblique mention of these issues in the welter of correspondence forming part of this record does not excuse SAFT
from making its case. Whilst we do not take a formalistic approach in relation to amending one’s relief, knowing what case
you have to meet and being afforded the opportunity to answer itthis is not a mere technical matter , it is about fairness., knowing
what case you have to meet and being afforded the opportunity to answer it Capespan has been afforded neither.
.RTF of original document