On 19 April 2010, the Competition Tribunal handed down a decision in which it found that Netstar, Matrix and Tracker had contravened section 4(1)(a) of the Competition Act. This resulted, it found, from an agreement and/or concerted practice amongst them which had as its effect the setting and subsequent implementation of a performance standard for admission of firms to membership of the stolen vehicle recovery (SVR) category of the Vehicle Security Association of South Africa (VESA).

This agreement and/or concerted practice was found by the Tribunal to be exclusionary in its effect and hence to substantially prevent or lessen competition in the SVR market by preventing competitors from entering into or expanding in the market, and denying consumers the benefit of lower prices, greater choice and technological developments

These findings were not, in the Tribunal's view, outweighed by any technological, efficiency or other pro-competitive gains raised by the respondents.

The liability of VESA under section 4(1)(a) of the Competition Act was found to have arisen from its decision, as an association of firms, which had as its effect the setting and subsequent implementation of the impugned performance standard.

The relief sought by the Competition Commission and Tracetec (as the complainant) did not extend to the imposition of an administrative penalty or behavioural remedies. Insofar as the former is concerned, the Tribunal noted that a first-time contravention of sections 4(1)(a) and 8(c) of the Competition Act does not attract an administrative penalty. As regards behavioural remedies, the Tribunal noted that the exclusionary conduct complained of endured until August 2003 after which it ceased, with the result that any behavioural relief in the current market circumstances would be academic. Thus, the parties sought only a declarator from the Tribunal that the conduct of the respondents constituted a contravention of sections 4(1)(a) and 8(c) of the Competition Act.

The import, presumably, of the Commission's and Tracetec's decision to pursue an order for declaratory relief against the respondents is to set the foundation for a damages claim in the civil courts. To found such civil action, Tracetec requires a certificate from the Chairperson of the Tribunal certifying that the conduct constituting the basis for the claim has been found to be a prohibited practice in terms of the Competition Act.

Whilst the technical criteria imposed by the SVR sub-committee of VESA (comprising, in the main, Netstar, Matrix and Tracker) were regarded by the Tribunal as inoffensive from a competition law perspective, the performance criteria imposed by them were found to create a barrier to entry for new firms in the SVR market.

In attempting to differentiate between "benign" and "malign" standard setting, the Tribunal took into account comparative jurisprudence (particularly from the US antitrust experience) in order to determine the applicable criteria. Importantly, however, the Tribunal indicated that "there seems to be no magic answer to this question. The best one can do is to have regard to the following factors...":

Does the standard setting body have market power?
If yes, then...

Who drove the standard?
If it is set by rivals, then...

What is the effect of the standard?
If it is essential or, at least, an important component of entry into or expansion within, a particular market, then...

Is the standard reasonable?
If it is not, then...

the standard under scrutiny will be anticompetitive in contravention of section 4(1)(a) of the Competition Act, unless technological, efficiency or pro-competitive gains outweigh its anticompetitive effects.

In applying the aforementioned factors to the evidence before it, the Tribunal concluded that that the respondents failed to defend the reasonableness of the standards and were unable to demonstrate any technological, efficiency or pro-competitive gains arising from the standards that may outweigh the anticompetitive effects thereof.

On the contrary, the Tribunal held that "the effect of the standards was to condemn consumers to higher prices and deny them the benefit of new technologies that would otherwise have entered this innovation market far earlier than they did".

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