Cross Fire Management (Pty) Ltd v The Competition Commission of South Africa

Cross Fire Management (Pty) Ltd (Cross Fire) was one of seven firms accused by the Competition Commission of collusive tendering in the fire protection systems industry, in violation of section 4(1)(b) of the Competition Act 89 of 1998. Five firms were accused of collusive tendering, and two others of market division. Before the hearing, the Commission settled with several firms. The Tribunal dismissed the complaint against Tshwane Sprinklers but found the case proved against Cross Fire and Belfa, imposing administrative penalties of R12,894,000 and R10,100,126 respectively. Cross Fire admitted collusion in 14 projects, the most recent in July 2009 (Nampak Kliprivier). Cross Fire's witnesses, particularly Ms Catherine Stewart (who became managing director in August 2009) and Mr Anton Kriel, testified that from early 2009 they took steps to withdraw from the collusive cartel. Key incidents included: the One Monte project (late 2008/early 2009) where they withdrew from a collusive arrangement; anti-collusion board presentations in June/July 2010; and rebuffing subsequent approaches. The complaint was initiated on 13 March 2015. Cross Fire contended its prohibited conduct ceased before 13 March 2012, meaning the complaint was time-barred under section 67(1) which provided that a complaint could not be initiated more than three years after the practice ceased.

• Whether Cross Fire's prohibited conduct ceased before 13 March 2012, meaning the complaint was time-barred under section 67(1) of the Competition Act
• Whether a firm must communicate its withdrawal from a cartel clearly and unambiguously to other cartel members for the prohibited conduct to cease
• When prohibited conduct in the form of collusive tendering ceases - when the last collusive deal is struck or when the effects end
• Whether the Competition Appeal Court has jurisdiction to grant condonation for non-compliance with section 67(1)
• Whether condonation should be granted for the late initiation of the complaint
• Whether a late condonation application brought for the first time on appeal should be entertained

The appeal succeeded. The application for condonation was dismissed. Paragraphs 2 and 3 of the Tribunal's order were set aside and replaced with: "The Commission's complaint against Cross Fire Management (Pty) Ltd is dismissed." The Commission was ordered to pay Cross Fire's costs in the appeal and condonation application, including costs of two counsel.

The binding legal principles established are: 1. The requirement of "clear and unambiguous distancing" from a cartel, derived from European price-fixing cases, cannot be applied mechanically to all types of cartels. Distancing is only required where a firm's silence or passivity has the potential to perpetuate actual competitive harm through wrong assumptions about the firm's stance. 2. In a sporadic bid-rigging cartel where specific tenders only become collusive through communication between cartel members, a firm's prohibited conduct ceases when it stops actually performing collusive acts, provided this does not perpetuate competitive harm. Communication of withdrawal to other members is not an independent legal requirement in such circumstances. 3. Prohibited conduct in collusive tendering generally continues for as long as adverse effects are felt in the market, typically until the last payment is received in respect of a contract concluded as a result of the collusion. 4. The Competition Appeal Court lacks jurisdiction under section 58(1)(c) of the Competition Act to grant condonation for non-compliance with section 67(1), as this power is vested in the Tribunal. The Court's appellate jurisdiction under section 37(2) does not extend to making orders on matters never before the Tribunal. 5. The Court cannot remit a condonation application to the Tribunal where no such application was brought in the Tribunal and the Tribunal is functus officio. 6. Section 68 provides that the standard of proof in Competition Act proceedings is on a balance of probabilities, applicable to issues of when prohibited conduct ceased.

The Court made several non-binding observations: 1. If the Court had jurisdiction to decide the condonation application, it would have dismissed it given: (a) the very late stage at which it was brought (June 2021, when it should have been brought in November 2017); (b) the Commission is a well-resourced regulator and should have appreciated the need for a contingent application; (c) litigation prejudice arising from the parties having conducted the trial on the common assumption that section 67(1) was an absolute time-bar; (d) the unfairness of the Commission using evidence from the completed trial to bolster its condonation case; and (e) the fact this was not a case of a firm deliberately "running down the clock" but of genuine withdrawal from collusion. 2. If the Court had power to remit the matter to the Tribunal, it would not have exercised its discretion to do so, given: (a) the importance of finality; (b) the significant further delay that would result; (c) the reduction in significance of the appeal, which had already consumed significant resources; and (d) that Cross Fire might not have thought it worthwhile to appeal if the issue was only relevant to penalty. 3. It is conceivable that for purposes of establishing the egregiousness of conduct and appropriate penalty, the Commission may bear the onus of proving the duration of prohibited conduct, though this was unnecessary to decide in this case. 4. Where a firm wins the last collusive tender in which it participated, it must establish when it reaped the last fruits. But where another member won, fairness may dictate the Commission should bear at least an evidentiary burden of showing when the winner reaped the last fruits, as the information would not be readily available to the firm which provided a cover bid. 5. The Court expressed the view that Cross Fire would likely have sought corporate leniency in March 2014 if it had known section 67(1) was condonable, and that both parties must live with the consequences of the then-common misapprehension about the law.

This case is significant in South African competition law for several reasons: 1. It clarifies the legal test for cessation of prohibited conduct in bid-rigging cartels, holding that the European law requirement of "clear and unambiguous distancing" cannot be mechanically applied without regard to the specific dynamics of different types of cartels. 2. It establishes that in sporadic bid-rigging cartels (as opposed to systematic price-fixing), a firm's prohibited conduct ceases when it stops actually performing collusive acts, provided its silence/inactivity does not perpetuate competitive harm through wrong assumptions by other cartel members. 3. It clarifies the burden of proof regarding cessation, holding that the party invoking the time-bar generally bears this burden (subject to fairness considerations), and that this position was not altered by the Constitutional Court's decision in Pickfords that section 67(1) is condonable. 4. It confirms that the Competition Appeal Court lacks jurisdiction to grant condonation under section 58(1)(c) for non-compliance with section 67(1), as this power is vested in the Tribunal and the appellate court cannot assume jurisdiction not conferred by statute. 5. It demonstrates the importance of timeous condonation applications and the consequences of failing to bring such applications when a jurisdictional defense is raised, even where the applicant was operating under a mistaken view of the law. 6. It shows the Court's willingness to interfere with the Tribunal's factual findings where those findings are based on erroneous legal tests, piecemeal assessment of evidence, or failure to consider inherent probabilities and the totality of evidence.