Trudon (Pty) Limited v Directory Solutions CC and Telkom SA Limited

Trudon (Pty) Limited, a company majority-owned by Telkom SA Limited, publishes regional telephonic directories in South Africa under contract with Telkom. Telkom operates a fixed-line telephone communications network under licence and is required to publish annual telephone directories listing minimum subscriber information (names, addresses, telephone numbers) in light print at no charge. Subscribers may pay for 'enhanced' directory listings with additional information in bold type at approximately R300.00 per annum. Directory Solutions CC operates a business assembling information for insertion in Telkom telephone directories, amending company details and submitting entries for placement. Directory Solutions charges its own fee of approximately R1,650.00 plus the R300.00 payable to Trudon. In 2005, Trudon imposed a condition requiring upfront payment of subscription fees and a power of attorney from subscribers before accepting placements from Directory Solutions. In March 2009, Directory Solutions lodged a complaint with the Competition Commission alleging discriminatory and unlawful conduct. In November 2009, Directory Solutions launched an application for interim relief under section 49C of the Competition Act, seeking an order requiring Trudon to publish entries without upfront payment for the 2010/2011 telephone directories. The Competition Tribunal granted the interim order on 8 April 2010, requiring Trudon and Telkom to accept entries without upfront payment for specified geographical areas.

• Whether the interim order of the Competition Tribunal was appealable as a 'final' or 'irreversible' order under section 49C(8) of the Competition Act 89 of 1998
• Whether Directory Solutions established a prima facie case for interim relief under section 49C of the Competition Act
• Whether Trudon's conduct constituted a prohibited practice under section 8 of the Competition Act, specifically abuse of dominance
• Whether the founding affidavit contained sufficient allegations to establish contraventions under sections 8(b), 8(c), and 8(d)(i) and (ii) of the Competition Act
• Whether the relevant markets were properly identified for purposes of establishing dominance and anti-competitive conduct
• Whether the upfront payment requirement constituted an exclusionary act with anti-competitive effects

The appeal was upheld and the interim order of the Competition Tribunal dated 8 April 2010 was set aside.

An interim order under section 49C of the Competition Act is appealable under section 49C(8) if it is 'final or irreversible in effect', which is determined by whether the order disposes of the issues in relation to specific, non-repeatable events such that the Tribunal cannot later reverse its effect. An order relating to a specific once-off publication satisfies this test even if temporally limited. For interim relief under section 49C, an applicant must establish a prima facie case of a prohibited practice by setting out in the founding affidavit specific factual allegations addressing all elements of the alleged contravention under section 8 of the Competition Act, including: (i) that the respondent is a dominant firm (with evidence of the relevant market, market share, and market power under section 7); (ii) the specific conduct constituting the prohibited practice; (iii) for exclusionary conduct under section 8(c), that the conduct is an exclusionary act as defined in section 1 with anti-competitive effects outweighing pro-competitive gains; (iv) for refusal to supply under section 8(b), that there was refusal of access to an essential facility when economically feasible; and (v) for conduct under section 8(d), the specific exclusionary acts alleged. A tribunal errs in law if it condones fundamental omissions in the founding papers that deprive respondents of a fair opportunity to answer the case. Market definition requires evidence that particular activities constitute a distinct market rather than internal functions within a broader competitive market.

The Court noted that by its nature, all competition is exclusionary, and the important question is to distinguish between well-functioning competition and malfunctioning competition. Rivals frequently lose custom or profits as a result of another firm's actions in healthy competition; such losses often result in elimination of competitive deadwood and do not generally warrant state intervention. It is generally threatened harm to consumer welfare that warrants intervention. The Court observed that even if a manufacturer performs distribution functions in-house through a vertically integrated division, this does not make them a competitor in a separate distribution market - there is no requirement that manufacturing processes begin and end at predetermined points, and manufacturers are entitled to distribute products to customers as they see fit (citing National Association of Pharmaceutical Wholesalers v Glaxo Wellcome). The Court also commented that it would have been proper for Directory Solutions to identify the particular subsection of section 8 relied upon, though it did not base its decision on this procedural defect alone. The Court indicated it was unnecessary to deal with the requirements of serious or irreparable harm and balance of convenience given the fundamental deficiencies in establishing a prohibited practice.

This case is significant in South African competition law for establishing important principles regarding: (1) the appealability of interim orders under section 49C(8) of the Competition Act - interim orders that are final and irreversible in their practical effect are appealable even if limited in temporal duration; (2) the evidentiary standard required for interim relief in competition matters - applicants must set out a coherent prima facie case in founding papers with specific allegations addressing the elements of the alleged prohibited practice under section 8 of the Act; (3) market definition in competition cases - the importance of properly identifying and evidencing the relevant market(s) in which alleged anti-competitive conduct occurs; (4) abuse of dominance claims - the necessity of establishing dominance through evidence of market share, market power, and the relevant market before alleging contraventions of section 8; and (5) the principle that not all exclusionary conduct is anti-competitive - competition law distinguishes between healthy competition (which may result in rivals losing business) and malfunctioning competition that harms consumer welfare. The judgment reinforces procedural rigor in competition litigation and the substantive requirements for establishing abuse of dominance.