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SAB case closed but not resolved

The Competition Commission's prosecution of South African Breweries (SAB) is over and is unlikely to reappear.

The commission, which has 15 days to appeal against the Competition Tribunal's ruling on Thursday, 7 April 2011, that it could not hear the commission's referral against the brewer, is biding its time. It has kept the door open to appeal.

But given the ruling that the commission's referral of the complaint against SAB was not in accordance with the law, the commission may have to do a lot of work to bring the referral again. How much work is unknown.

It may only become clear after appeals to superior courts for clarity.

"I don't know what we have to do," says deputy commissioner Tembinkosi Bonakele.

Challenges

And now the commission has a bigger fight on its hands - to get clarity on how it does its job. Thursday's ruling means the other referrals at present before the tribunal could be challenged on the same grounds SAB used.

The open loophole is arguably a bigger priority for the commission now than fighting the brewer.

Legal deadlines may mean the case against SAB is in effect over, but the company - which says it has not done anything wrong and that a full hearing would exonerate it - has not cleared its name.

Charges

So what were the commission's charges?

The main one was that SAB, with a share of the South African beer market between 85% and 90%, discriminated against independent wholesalers by not giving them the same discount on beer it gave to a group of 13 "appointed distributors".

Further, it alleged that SAB carved up territories between these distributors.

SAB, which says it has a right to choose the most effective distribution system, uses different means to get its product to market across SA.

It owns 40 depots that supply retailers and other parts of the chain.

The 13 appointed distributors act like depots, but are independently owned and work with SAB and are subject to its rules.

Nico Pitsiladi, the owner of Port Elizabeth-based Big Daddy's Group, said if he got the same discount, he could beat them.

Competition

"Big Daddy's competes at the distribution level with SAB's appointed distributors," he said in his witness statement. "Big Daddy's runs a low-cost distribution operation but (is) effectively blocked from competitive supplies from SAB.

The Big Daddy's distribution business is limited by the differential treatment between (it) and the ... appointed distributors."

It was not a case of discount for the appointed distributors and nothing for the others.

But Pitsiladi argued that however much deduction he was able to secure in the course of business - such as through volume-based discounts and normal rebates - he would still fall a few percentage points short of the discount the appointed distributors enjoy.

This limited his sales and prevented him from expanding his business, he said.

SAB's reply was to present Pitsiladi's firm as inefficient and unable to provide the level of service it offered, to dismiss his claims that his firm was a real competitor of the appointed distributors and could match them even if it got the same reduced price.

SAB's advocate, David Unterhalter, listed a number of examples where customers - at SAB's bidding - had rung a Big Daddy's company to ask for deliveries of certain products, only to be told the company could not do them.

Pitsiladi complained about being subject to a "witch-hunt", but Unterhalter was unrelenting.

"You come to the tribunal and make claims about how you are an effective distributor and all my client is doing is getting information to check you are as good as you say, and the evidence is not."

SAB further tried to paint Pitsiladi, the commission's main witness, as out of touch with the operations of his own business, and ineligible to pronounce on SAB's.

The economic experts both sides lined up would have taken the arguments further. But it was not to be.

The hearing is over and many questions - about all the players involved - remain unanswered.

Source: Business Day



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