The Competition Tribunal has dismissed an abuse of dominance complaint brought by Nu Africa duty-free shops against Distell.
In a public statement yesterday, the Tribunal said 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 the Competition Act .
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.
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.
The Tribunal said it did not adjudicate on the subject of whether illicit trade took place on the part of Nu Africa. Instead it said 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 found that Nu Africa had 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 said it noted: “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 concluded that an exclusionary act in terms of competition law and economic theory had 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.”
In July, the Commission unconditionally approved the proposed transaction whereby Diageo intended to terminate the distribution agreement with Castle Wine relating to the sale and distribution of two branded alcoholic beverage products, namely Gordon’s London Dry Gin and Pimm’s No. 1 Cup (the “target products”) in South Africa, Namibia, Lesotho, Botswana, and Eswatini.
The Diageo Group of companies is a global drinks company based in the United Kingdom. The Diageo Group’s production activities in South Africa are primarily channelled through its local subsidiary, Diageo South Africa (the primary acquiring firm).
BUSINESS REPORT