Tourvest Holdings was a specialist retailer operating curio craft stores at OR Tambo International Airport. The Airports Company of South Africa (ACSA) issued a tender for retail opportunities, including Opportunity 3 covering three stores where Tourvest was the incumbent. ACSA imposed stringent mandatory requirements including minimum financial guarantees (R450,000 per month rental), prior experience managing retail stores with minimum R6 million annual sales, and mandatory attendance at the bid presentation. Siyazisiza Trust, a non-profit organization established in 1987 to assist rural women crafters, sought to bid for Opportunity 3. The Trust lacked retail experience, financial capacity, management infrastructure, and the ability to calculate rental bids. Tourvest and the Trust entered into a Memorandum of Understanding whereby Tourvest would provide management services, skills transfer, and operational support to enable the Trust to bid. The MoU disclosed that: (1) Tourvest would submit a separate bid in its own right, and (2) both bids would propose the same rental amount. The Trust did not purchase bid documents nor attend the mandatory briefing session. Both bids were submitted with identical rental figures. ACSA's Bid Evaluation Committee immediately disqualified the Trust's bid for failing to meet antecedent administrative requirements. ACSA then compared the bids, noted similarities, and disqualified Tourvest for alleged collusion. The Competition Commission referred the matter alleging collusive tendering under section 4(1)(b)(iii) of the Competition Act. The Tribunal found both parties guilty of collusive tendering and imposed an administrative penalty exceeding R9 million on Tourvest.
The appeal was upheld. The Competition Tribunal's order of 29 September 2021 was set aside and replaced with an order dismissing the Competition Commission's Complaint Referral against Tourvest Holdings (Pty) Ltd and Siyazisiza Trust. The Commission was ordered to pay Tourvest's costs including the costs of two counsel where employed.
The binding legal principles established are: 1. The characterisation inquiry under section 4(1)(b) of the Competition Act requires a two-stage analysis: (i) whether parties are in a horizontal relationship, and (ii) whether the conduct constitutes price fixing, market division, or collusive tendering. 2. The determination of whether parties are in a horizontal relationship must be conducted using the counterfactual analysis – examining whether the parties would have been actual or potential competitors absent the impugned agreement. This approach accords with accepted competition economic theory and has sound economic foundations. 3. Parties do not become horizontal competitors merely by submitting bids in the same tender process. The horizontal relationship must exist independently of the act of bidding itself. 4. Section 4(1)(b) properly construed requires the parties to be in an actual or potential horizontal relationship at the time they commit the offence in issue. The potential for future competition arising from the impugned agreement itself cannot satisfy the horizontality requirement. 5. Where a party would not have been able to compete absent an agreement providing support, resources, or capacity, the relationship is vertical in nature, not horizontal. 6. The concept of parties 'holding themselves out' as competitors or creating an 'illusion of competition' cannot establish a horizontal relationship where no actual or potential competitive relationship exists. Such an approach contradicts the express requirements of section 4(1)(b). 7. Once it is determined that parties are not in a horizontal relationship, the characterisation inquiry as to whether conduct constitutes collusive tendering cannot proceed as a matter of law.
The Court made several non-binding observations: 1. The Court noted that whilst the case could potentially have been decided on the basis that the Trust's bid was not technically allowed into the tender process (and thus section 4(1)(b) was not engaged), it was preferable to decide the matter on competition principles given the Tribunal's findings. 2. The Court observed that an overly literal approach to concepts like 'price fixing' and 'collusive tendering' should be avoided. As the US Supreme Court stated in BMI (quoted with approval): 'Literalness is overly simplistic and often overbroad.' 3. The Court noted that the Tribunal's reliance on its previous decisions in Eye Way and Aranda was misplaced, and that proper application of economic disciplines to those cases would have yielded different conclusions. The Court confirmed that Aranda was subsequently reversed on appeal for failing to properly characterize the relationship between the parties. 4. The Court commented that the Tribunal appeared to have worked backwards in its reasoning – having decided that the price was 'fixed', it then sought to construct a theory of collusive tendering, leading it to infer a corrupt design by inference. 5. The Court observed that Mr de Jager's explanation that Tourvest submitted its own bid due to a rational fear that the Trust would be disqualified was an obvious explanation that the Tribunal failed to properly consider. 6. The Court noted that characterisation involves statutory interpretation and that tribunals and courts must draw on their legal and economic expertise and the experience of other legal systems that have grappled with similar issues. 7. The Court commented on the importance of rigorous application of economic disciplines to the facts of each case, emphasizing that economic competition theory operates on the basis that parties must be potential or actual competitors at the time they enter into the impugned agreement.
This judgment is significant in South African competition law for several reasons: 1. It definitively establishes that the characterisation inquiry under section 4(1)(b) must apply the counterfactual analysis – examining whether parties were actual or potential competitors absent the impugned agreement – as required by accepted competition economic theory. 2. It clarifies that parties do not become horizontal competitors merely by submitting bids in the same tender process. The horizontal relationship must exist independently of the bidding itself. 3. It rejects the concept that parties can be deemed competitors by 'holding themselves out' as competitors or creating an 'illusion of competition' when no actual or potential competitive relationship exists. 4. It provides important guidance on distinguishing vertical collaboration from horizontal collusion, particularly in tender contexts involving enterprise development initiatives. 5. It reinforces the rigorous application of economic principles to competition law analysis, drawing on EU and US competition guidelines and jurisprudence. 6. It clarifies the proper application of the per se prohibition in section 4(1)(b), emphasizing that such prohibitions should only capture conduct that is economically harmful with no redeeming features. 7. It provides guidance on the treatment of collaborative arrangements that enable market entry by parties that would otherwise lack capacity, particularly in the context of BEE and enterprise development objectives. The judgment serves as an important counterweight to an overly expansive interpretation of collusive tendering that could inadvertently capture pro-competitive or neutral conduct, particularly joint ventures and enterprise development arrangements.