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SAFLII Note: Certain personal/private details of parties or witnesses have been redacted from this document in compliance with the law and SAFLII Policy

 

COMPETITION TRIBUNAL

REPUBLIC OF SOUTH AFRICA

 

Case No: 79/CR/Sep06

 

In the matter between:

 

The Competition Commission                                                                   Applicant

 

and

 

Oakley Athletic (Pty) Ltd                                                                              Respondent

 

Panel  :           D Lewis (Presiding Member), N Manoim (Tribunal Member), and Y Carrim (Tribunal Member)

 

Heard on        :           11 October 2006

 

Decided on    :           11 October 2006

 

 

Order

 

 

Further to the application of the Competition Commission in terms of Section 49D, in the above matter -

 

The Tribunal hereby confirms the order as agreed to and proposed by the Competition Commission and the respondent.

 

 

D Lewis

Presiding Member

 

Concurring: N Manoim and Y Carrim

 

IN THE COMPETITION TRIBUNAL OF SOUTH AFRICA

HELD IN PRETORIA

 

Tribunal Case No:

CC Case No: 2005Sep1842

 

In the matter between:

The Competition Commission                                                               Applicant

 

 and

 

Oakley Athletic (Pty) Ltd                                                                          Respondent

 

 

APPLICATION FOR THE CONFIRMATION OF A CONSENT AGREEMENT AS AN ORDER OF THE COMPETITION TRIBUNAL

 

KINDLY TAKE NOTICE THAT Applicant intends bringing an application in terms of section 490(1) of the Competition Act 89 of 1998, as amended ("the Act"), read together with Rule 24 of the Rules for the Conduct of Proceedings in the Competition Tribunal ("the Tribunal Rules") to this Honourable Competition Tribunal as soon as the matter may be heard for an order in the following terms:

 

1          The Consent Agreement entered into by and between Applicant and the Respondent, attached hereto marked "A" is hereby made a Consent Order

 

2          Further and/or alternative relief as this Honourable Tribunal may order

 

Kindly place this matter on the roll for hearing.

 

Signed at PRETORIA on this the 27^th day of September 2006

 

COMPETITION COMMISSION

1^st Floor

Mulayo Building (Block C)

the dti Campus

77 Meintjie Street

Sunnyside

Pretoria

Ref 2005Sep1842

 

TO:

 

The Registrar

COMPETITION TRIBUNAL

3^rd Floor

Mulayo Building (Block C)

the dti Campus

77 Meintjie Street

Sunnyside

Pretoria

 

AND TO:

 

The Managing Director

OAKLEY ATHLETIC (PTY) LTD

Humerail Business Centre

Oakworth Drive

Humewood

Port Elizabeth

Ref: Steven Adshade

Tel: (041) 501 0201

Fax: (041) 585 3481

 

IN THE COMPETITION TRIBUNAL OF SOUTH AFRICA

Held at Pretoria

CT Case No.

CC Case No. 2005Sep1842

 

In the matter between:

 

The Competition Commission                                                                           Applicant

 

and

 

Oakley Athletic (Pty) Ltd                                                                               Respondent

 

AGREEMENT

BETWEEN THE COMPETITION COMMISSION AND THE RESPONDENT ON THE TERMS OF AN APPROPRIATE CONSENT ORDER

in terms of section 49D of the Competition Act, 1998 (Act No. 89 of 1998), as amended

 

The Competition Commission ("Commission") and Oakley Athletic (Pty) Ltd ("Oakley SA"), being a Respondent in Competition Commission Case No. 2005Sep1842 hereby agree that application be made by the Commission to the Competition Tribunal for a consent order in terms of section 49D of the Competition Act No. 89 of 1998, as amended, on the terms set out below.

 

1.         DEFINITIONS

 

For the purposes of this agreement and any consent order pursuant hereto, the following definitions shall apply unless otherwise stated or the context otherwise requires:

 

1..1 "Act" means the Competition Act, 1998 (Act No. 89 of 1998), as amended;

 

1..2 "Commission" means the Competition Commission of South Africa, a statutory body established in terms of section 19 of the Act, with its principal place of business at 1st Floor, Mulayo Building (Block C), the dti Campus, 7[...] M[...] Street, Sunnyside, Pretoria, Gauteng;

 

1.3 "Tribunal” means the Competition Tribunal of South Africa, a statutory body established in terms of section 26 of the Act, with its principal place of business at 3^rd Floor, Mulayo building (Block C), the dti Campus, 7[...] M[...] Street, Sunnyside, Pretoria, Gauteng;

 

1.4  "Complaint” means the complaint lodged by Mr Steven Jacobs in terms of section 49B of the Act under case number 2005Sep1842;

 

1.5 "Consent Order Agreement” means this agreement duly signed and concluded between the Commission and the Respondent;

 

1.6 "Respondent” means Oakley Athletic (Pty) Ltd, a company duly registered and incorporated in terms of the Company Laws of the Republic of South Africa, with its principal place of business at Humerail Business Centre, Oakworth Drive, Humewood, Port Elizabeth..

 

2.         BACKGROUND

 

2.1  During September 2005, the Commission received a complaint from a concerned consumer, Mr Steven Jacobs, alleging that Oakley SA might be engaged in a prohibited practice of minimum resale price maintenance in as far as the sale of Oakley sunglasses are concerned, by prescribing minimum prices to its retail outlets.. This allegation is based on the fact that Mr Jacobs wanted to buy a pair of Oakley sunglasses and while he was shopping around at retail outlets, he found that they were all charging the same price for the same type of Oakley sunglasses and that none of these outlets allowed any discount on the product It is alleged that this is the result of Oakley SA directing its retail outlets not to give discounts off its retail price lists for its current range of sunglasses.

 

2.2 The Commission's investigation under case number 2005Sep1842 encompassed minimum resale price maintenance imposed by Oakley SA on its retail outlets [a contravention of section 5(2) of the Act].

 

2.3  As a result of the Commission's investigation, Oakley SA reviewed its trading practices and in December 2005, it sent notices to all of its retail outlets, advising them that its price list is to be used as a guide only and that retailers were entirely free to set their own retail prices.. Oakley SA stated that it would be proactive in getting its sales agents to discuss this with Owners I Managers of its retail outlets and will be conducting independent mystery shopping to verify progress.. This apparently was the end of Oakley SA's practice of minimum resale price maintenance..

 

3.         COMMISSION'S INVESTIGATION

 

Pursuant to its investigation the Commission arrived at the following conclusions:

 

3.1 In South Africa, Oakley SA sells its sunglasses through a network of approximately 800 retail outlets countywide..

 

3..2 A vertical relationship as contemplated in section 1 of the Act exists between Oakley SA and its retail outlets..

 

3.3  The relationship between Oakley SA and its retail outlets is governed by, amongst others, a Retail Sales Standards Agreement in terms of which Oakley SA sells products to various retail outlets in areas within the Republic of South Africa for resale.

 

3.4 The position regarding Oakley's brand image is clearly explained to retailers before being appointed as a stockist of Oakley sunglasses as part of the trading requirements.. Retailers are warned that they might jeopardise future supply of Oakley products and/or forfeit their status as Oakley stockist should they in any way diminish the Oakley brand.. This would include discounting and/or selling any of Oakley SA's current line of sunglasses below the minimum price as set by Oakley SA.

3.5 Oakley SA from time to time publishes and circulates to its retail outlets a "recommended retail price list" or price structure in relation to various models of Oakley sunglasses.

 

3.6  Some of the retail outlets are conducting business on a "just in time" stock system, where tagging and pricing of sunglasses are done by Oakley SA on request of the outlet in question.

 

3.7 Oakley SA conducted regular visits at randomly selected retail outlets.. Discounting by outlets was noted in meetings with retail outlets, as well as Oakley SA's management review meetings..

 

3.8 Oakley SA stopped the above conduct during December 2005, as soon as it became aware that the Commission was of the view that its conduct contravened the Act.

 

4.         RELEVANT PROVISIONS OF THE ACT

 

Section 5(2) of the Act prohibits the practice of minimum resale price maintenance. Section 5 of the Act states:

 

"5. Restrictive Vertical Practices Prohibited.

 

1)         An agreement between parties in a vertical relationship is prohibited if it has the effect of substantially preventing or lessening competition in a market, unless a party to the agreement can prove that any technological, efficiency or other pro-competitive, gain resulting from that agreement outweighs that effect..

 

2)         The practice of resale price maintenance is prohibited.

 

3)         Despite subsection (2), a supplier or producer may recommend a minimum resale price to the reseller of a good or service provided –

 

(a)       the supplier or producer makes it clear to the reseller that the recommendation is not binding;

 

and

 

(b)       if the product has its price stated on it, the words "recommended price" appear next to the stated price"

 

5.         COMMISSION'S FINDINGS

 

5.1  The Commission is of the view that conduct referred to in paragraph 3 above amounts to minimum resale price maintenance prohibited by section 5(2) of the Act, in that:

 

5.1.1 Oakley SA only allowed its retail outlets to discount on "out of season" and/or discontinued lines of Oakley sunglasses;

 

5.1.2 Oakley SA conducted visits to its network of retail outlets and monitored adherence to its minimum prescribed prices on its current range of sunglasses; and

 

5.1.3 Retailers are warned that they might jeopardise future supply of Oakley sunglasses and/or forfeit their status as Oakley stockist should they in any way diminish the Oakley brand.. This would include discounting and/or selling any of Oakley SA's current line of sunglasses below the minimum price as set by Oakley SA.

 

6.         AGREEMENT CONCERNING CONDUCT

 

The Commission and Oakley SA agree that Oakley SA's conduct constituted a contravention of section 5(2) of the Act. Oakley SA has already taken steps to bring to an end the prohibited practice, but the Commission and Oakley SA further agree that Oakley SA shall:

 

6.1 not impose a maximum discount structure in respect of sales of Oakley sunglasses;

 

6.2  take all reasonable steps to procure that the retail outlets of Oakley SA terminate their part in implementing the alleged anti-competitive conduct

 

6.3  not itself or through any officer or employee of Oakley SA or any person authorised to act on behalf of Oakley SA notify to dealers, or otherwise publish in relation to any goods, a price stated or calculated to be understood as the minimum price which may be charged on the resale of any Oakley sunglasses, and shall not recommend any minimum resale price for such sunglasses other than as expressly provided for in section 5(3) of the Act

 

6.4  refrain in the future from engaging in any of the alleged unlawful conduct in its dealing with its retail outlets.

 

6.5 circulate to all its retail outlets within one month from the date of this agreement being confirmed as a consent order by the Tribunal, a statement conveying the substance of the consent order and advising them:

 

6.5.1 that they are free to sell and display for sale sunglasses supplied by Oakley SA at whatever price they may choose;

 

6.5.2 that Oakley SA does not in any way condone and positively discourages agreement between retail outlets as to the prices to be charged or quoted for sunglasses supplied by Oakley SA;

 

6.5.3 that Oakley SA will not be party to, or in any way support agreement between retail outlets as to the prices to be charged or quoted by the outlets for sunglasses supplied by Oakley SA.

 

6.6  provide copies of this consent order to each of its present directors and during the five-year period following the confirmation of the order provide a copy to any future director on his or her appointment and in each case draw the attention of the director to the content of the order.

 

6.7 institute, within twelve months from the date of this order, a compliance programme designed to ensure that employees and all agents are informed about Oakley SA's obligations under Competition Law and the existence and substance of this consent order.

 

6.8 submit its compliance programme to the Commission, which programme will include, but not be limited to, establishing a mechanism for dealers and/or consumers to report any contraventions of the Act.

 

6.9  require its employees to comply with the substance of this consent order and take appropriate disciplinary action against any employee who fails to do so.

 

7.         ADMINISTRATIVE PENALTY

 

7.1  In accordance with the provisions of section 58(1)(a)(iii) read with section 59(1)(a), 59(2) and (3) of the Act, Oakley SA has agreed to pay an administrative penalty in the amount of R212 100, 00 (TWO HUNDRED AND TWELVE THOUSAND ONE HUNDRED RANDS) in settlement of any contravention of Section 5 (2) of the Act, in relation to the period from 1 September 1999 to 31 December 2005. Oakley SA records that the amount does not exceed 10% of its annual turnover during the preceding financial year.

 

7.2  The administrative penalty will be paid not later than thirty (30) business days after the confirmation of this agreement as a Consent Order by the Tribunal.

 

7.3  The said amount is payable to the Commission, whose banking details are as follows:

 

Bank: ABSA

 

Name of Account: The Competition Commission Fees

 

Branch Name: Pretoria

 

Branch Code: 3[...]

 

Account Number: 4[...]

 

7.4       The Commission will pay over the penalty amount to the National Revenue Fund, referred to in section 59(4) of the Act

 

8.         DAMAGES

 

8.1  In terms of section 49D of the Act, read with Rule 18 of the Rules For The Conduct Of Proceedings In The Competition Commission, the complainant in Commission case number 2005Sep1842, Mr Steven Jacobs, has indicated that he is prepared to accept damages in the amount of R220-00 and Oakley SA has agreed to pay the claimed amount of damages..

 

8 .2  The damages will be paid to Mr Steven Jacobs not later than thirty (30) business days after the confirmation of this agreement as a Consent Order by the Tribunal.

 

8.3  A Form CT 3 completed by Mr Steven Jacobs is annexed marked "A"..

 

9.         FULL AND FINAL SETTLEMENT

 

This Agreement, upon confirmation by the Tribunal, concludes proceedings between the Commission and Oakley SA under Commission Case Number 2005Sep1842..

 

10.       VARIATION

 

No contract varying, adding to, deleting from or canceling this agreement, and no waiver of any right under this agreement, shall be effective unless reduced to writing and signed by or on behalf of both the parties..

 

Dated and signed at Port Elizabeth on the 13^th day of September 2006.

 

 

Steven Adshade

Managing Director

Oakley Athletic (Pty) Ltd

 

Dated and signed at Pretoria on the 20^th day of September 2006.

 

Shan Ramburuth

Commissioner

Competition Commission

 

Steven Jacobs vs Oakley Athletic (Pty) Ltd

Case No: 2005Sep1842

 

The claimed damages in the amount of R220-00 will be paid in cash into the bank account of Steven Jacobs not later than thirty (30) business days after the confirmation of the consent agreement as a Consent Order by the Competition Tribunal

 

Account Details:

 

Steven Jacobs

 Standard Bank

Staff Banking 0[...]

Account: 0[...]

 

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