Senwes Limited was found to be dominant in the upstream market for grain storage. The Competition Commission alleged that Senwes abused its dominance by charging differential storage fees: lower fees to producers who agreed to sell their grain to Senwes, and higher fees to producers who sold to third parties competing with Senwes in the downstream grain trading market. CTH, a competitor, alleged this practice made it virtually impossible to compete with Senwes in the grain trading market within the relevant geographical area. The Tribunal found against Senwes, and the Competition Appeal Court upheld this decision on 13 November 2009. Senwes then applied for leave to appeal to the Supreme Court of Appeal.
Application for leave to appeal to the Supreme Court of Appeal DISMISSED with costs, including costs of two counsel.
The binding legal principles established are: (1) The concept of 'margin squeeze' falls within the exclusionary conduct provisions of section 8 of the Competition Act, despite the term not appearing in the statute itself, because the Act's terms are widely couched. (2) Margin squeeze occurs where a firm dominant in an upstream market supplies a key input to undertakings competing with it in a downstream market, and the dominant firm's pricing of the input affects the ability of firms to compete in the downstream market. (3) In assessing whether pleadings meet due process requirements in competition cases, the complaint and supporting documents must be read by reference to established competition law jurisprudence and by qualified practitioners in the field. (4) Special leave to appeal from the Competition Appeal Court to the Supreme Court of Appeal requires both a reasonable prospect of success and special circumstances (importance to parties and public interest), with expeditious resolution of disputes being an important public interest consideration. (5) A party cannot claim due process violations based on strategic litigation choices it made during the proceedings, such as choosing not to formally object to the legal characterization of conduct alleged against it.
The Court made several non-binding observations: (1) It clarified that the Competition Appeal Court is not opposed to granting leave to appeal on 'technical issues' and applies the same special leave test to all applications, whether technical or substantive. (2) The Court distinguished interlocutory applications brought on a 'Stalingrad' approach (seeking to delay proceedings) from substantive appeals, noting that such applications must be scrutinized with extreme care as they subvert the Act's objective of expeditious dispute resolution. (3) Davis JP observed that allowing parties to recharacterize strategic litigation choices as due process violations 'would play havoc with the outcome of any case which comes before the Tribunal, because the argument could be that ignorance of the law, or alternatively a risky litigation choice that is, not to have taken a particular cause of action, has now resulted in a conclusion which undermines due process.' (4) The Court noted that had the circumstances been different (no averments in the complaint, no witness statements clarifying the case, no skilled counsel advising the appellant), constitutional arguments regarding due process may have had application, but they did not apply on the specific facts of this case.
This case is significant in South African competition law for: (1) clarifying that margin squeeze constitutes exclusionary conduct under section 8 of the Competition Act even though the term does not appear in the statute; (2) establishing standards for pleading requirements in competition cases before the Competition Tribunal, balancing the Tribunal's inquisitorial powers against due process rights; (3) defining the test for special leave to appeal from the Competition Appeal Court to the Supreme Court of Appeal; (4) emphasizing that competition law pleadings must be read by reference to established competition law concepts and by qualified practitioners; (5) confirming that strategic litigation choices cannot later be recast as due process violations; and (6) reinforcing the importance of expeditious resolution of competition disputes as a matter of public interest.