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The Competition Tribunal (“the Tribunal”) has dismissed an abuse of dominance complaint brought by Nu Africa Duty Free Shops (Pty) Ltd (“Nu Africa”) against Distell Ltd (“Distell”). 
 
Nu Africa is a retailer of duty-free liquor, among other products, to diplomats, marine travellers and other persons entitled to duty-free products in the South African market, through their off-licence retail outlets in Pretoria and Cape Town. It also exports alcohol into the African market. Distell, in turn, manufactures liquor products and has supplied duty-free liquor to Nu Africa, in accordance with terms and conditions in a supply agreement.
 
This matter arose after Distell stopped supplying liquor products to Nu Africa. Distell alleged that duty-free products supplied to Nu Africa had made their way into the South African duty-paid market, a form of illicit alcohol trading known as 'tax leakage'. Nu Africa denied Distell’s claims and asked the Tribunal for an order declaring that Distell’s conduct amounts to an exclusionary act in contravention of section 8(1)(c) of the Competition Act (“the Act”).
 
This section of the Act prohibits a dominant firm from engaging in an exclusionary act, if the anti-competitive effect of that act outweighs its technological, efficiency or other pro-competitive gain. An “exclusionary act” is one that “impedes or prevents a firm from entering into, participating in or expanding within a market”.
 
The Competition Commission, which investigates such matters before deciding whether or not to refer such cases to the Tribunal for adjudication, decided not to refer this matter. Nu Africa subsequently self-referred the matter to the Tribunal. 
 
Tribunal reasons
 
The Tribunal did not adjudicate on the subject of whether illicit trade did in fact take place on the part of Nu Africa. Instead it focused on whether the cessation of supply by Distell amounted to exclusionary conduct in terms of the Act.
 
On Nu Africa’s primary claim that Distell’s conduct has impeded its expansion, the Tribunal has found that Nu Africa has not demonstrated that its business has not grown or continued to grow following the cessation in supply: “The available evidence suggests otherwise, or at least that the impact is likely to have been ambiguous... We find that there are no anti-competitive effects emanating from Distell’s conduct.”
 
On Distell’s justification for cessation of supply, the Tribunal notes the following: “Distell’s justifications for the cessation of supply relate to its concerns in general about illicit trade in alcohol products and the various harms arising to the economy and the duty-paid market, amongst others… Although Nu Africa contests Distell’s position, we cannot dismiss the fact that Distell was within its contractual rights to cease supply if it believed that a violation of its illicit trade provisions had occurred.”
 
The Tribunal has concluded that an exclusionary act in terms of competition law and economic theory has not taken place and that “Distell took a rational, legitimate commercial decision to not supply Nu Africa (and others) in accordance with its contractual entitlement to cease supply inter alia where products destined for the duty-free market are found in the duty-paid market and given the information it had regarding potential or actual illicit trade.”
 
A public version of the Tribunal’s reasons will be available on the Tribunal’s website at www.comptrib.co.za once any confidential information in the reasons has been finalised.

Issued by Gillian de Gouveia, Communications Manageron behalf of the Competition Tribunal of South Africa