The Competition Tribunal recently dismissed an application for interim relief brought by Normandien Farms (Pty) Ltd, a sawmill owner, against Komatiland Forests (Pty) Ltd, a timber plantation owner.
To contextualise the application, a supply agreement was concluded between the parties in terms of which Komatiland undertook to supply Normandien with a specified amount of sawlog. The sawlog is supplied at an open market price and prices are adjusted in accordance with supply and demand. In 2013, Normandien placed a bid for sawlog from a pool (Pool 2) belonging to Komatiland. Pool 2 was oversubscribed and in accordance with general practice, the price would increase in the second round. As a result of the price increase, Normandien and other bidders elected not to bid in the second round.
In its application, Normandien alleged that Pool 2 was never actually oversubscribed and that Komatiland said this to artificially increase the price. Normandien alleged that Komatiland's conduct amounted to price manipulation and contravened provisions of the Competition Act, No 89 of 1998 (Act) relating to excessive pricing and exclusionary conduct. It was also alleged that Komatiland committed breach of contract by its unilateral variation of a term of the supply agreement relating to Broad Based Black Economic Empowerment (BBBEE) rebates.
Ultimately, the Tribunal dismissed the application on the basis that Normandien had failed to substantiate any of the competition law allegations raised. In respect of the excessive pricing claim, the Tribunal found that no evidence was presented to indicate the economic value of the product in question. The Tribunal also noted that merely having to pay more for a product does not automatically give rise to a competition law contravention. In relation to the alleged exclusionary conduct, the Tribunal stated that Normandien did not even attempt to establish that Komatiland is impeding Normandien's ability to expand in the market. The mere fact that Normandien may have been negatively affected by the conduct does not automatically result in a substantial prevention or lessening of competition in the market as a whole.
In addition, the Tribunal stated that while the unilateral variation of the BBBEE rebates may amount to breach of contract or even fraud, Normandien had failed to show why such an issue was brought before the Tribunal. The Tribunal recognised that while certain conduct may amount to both a contractual breach and a prohibited practice in terms of the Act, such a nexus must be proven. Consequently, the contractual allegation was dismissed for falling outside the Tribunal's jurisdiction.