Federal-Mogul Aftermarket Southern Africa (Pty) Limited v Competition Commission and Another

The Competition Commission referred a complaint alleging that Federal-Mogul Aftermarket Southern Africa (Pty) Ltd engaged in minimum resale price maintenance in contravention of section 5(2) of the Competition Act 89 of 1998. The allegation arose from Federal-Mogul’s conduct towards its distributors of Ferodo brake products. A new distributor, Pee Dee Wholesalers (Pty) Ltd (PD), entered the market in 1999 and sold products at higher discounts, triggering a price war. Other distributors complained to Federal-Mogul. Federal-Mogul subsequently reduced PD’s rebate from 47.5% to 40%. Federal-Mogul contended that the rebate reduction was due to PD’s poor creditworthiness and strategic considerations, while the Commission argued that the rebate reduction functioned as a sanction to enforce minimum resale prices. The Competition Tribunal found a contravention of section 5(2) and later imposed an administrative penalty of R3 million under section 59(3). Federal-Mogul appealed both the finding of contravention and the penalty.

The appeal against both the finding of contravention and the imposition of the administrative penalty was dismissed. The Tribunal’s decisions, including the R3 million administrative penalty, were upheld.

The case is a leading authority on the interpretation of section 5(2) of the Competition Act. It confirms that minimum resale price maintenance is prohibited per se in South African law and does not require proof of a vertical agreement. The judgment underscores the importance of interpreting South African competition law in light of its own statutory language and policy objectives, rather than importing foreign doctrines uncritically.