In the recent case of Doorware CC v Mercury Fittings CC [2025] JOL 68741 (SCA), the Supreme Court of Appeal (SCA) addressed a dispute pertaining to the enforceability of an arrangement, which on the face of it, appears to be an allocation of markets, amounting to a cartel agreement which is prohibited by the Competition Act. The case highlights the importance of timeously raising issues that may require referral to the competition authorities when one is appearing before a civil court. Additionally, it reaffirms the grim consequences of failing to provide one’s opponent with sufficient opportunity to defend a legal point.
The matter concerns an oral agreement concluded between the erstwhile owners of Mercury Fittings and Doorware CC, to sell and distribute stainless-steel ironmongery and door controls. The agreement was that the two entities would independently conduct their business in separate provinces and that they would not compete with each other in certain geographical areas. Specifically, Mercury Fittings would operate in the Western, Northern, and Eastern Cape, while Doorware would cover the rest of South Africa.
Upon the passing of the owner of Mercury Fittings, Doorware attempted to reinforce its agreement with Mercury Fittings through a Memorandum of Understanding, which was never signed. Doorware later opened an office in Cape Town, which was designated as Mercury Fittings’ area of business under the oral agreement. As a result, Mercury Fittings filed an urgent application to prevent Doorware from breaching the agreement.
Doorware denied the existence of an agreement between the parties, arguing that the agreement between the two owners was ‘a gentlemen’s agreement’, which terminated when the owner of Mercury Fittings died. The High Court referred the dispute to oral evidence due to the uncertainty around the nature of the agreement, and whether it is binding on their heirs and successors in title.
The Superior Courts Act, 10 of 2013, authorises the two Judges of Appeal considering an application for leave to appeal to dispose of the application without the hearing of oral argument. However, the President of the SCA may, in exceptional circumstances, refer the decision to the Court for reconsideration and, if necessary, variation.
Doorware argued that the decision refusing them leave to appeal should be reconsidered on the basis that there is a legal argument that has not been canvassed in the High Court; and that it is in the interests of justice that leave to appeal be granted. Doorware submitted that the interim interdict was wrongly issued because it results in a contravention of the Competition Act and should have been referred to the Competition Tribunal, which has exclusive jurisdiction to hear such matters. It was further submitted that the agreement entered into between the parties constituted a prohibited restrictive horizontal practice as contemplated in section 4(1)(b) of the Competition Act because the parties are competitors who colluded by allocating geographic areas in order to avoid competition.
The SCA was of the view that the grounds advanced do not constitute exceptional circumstances warranting reconsideration. Firstly, the SCA made reference to the wording in section 65(2) of the Competition Act, which provides that if, during the course of a civil matter, a party raises an issue concerning conduct which contravenes the Competition Act, then the issue must be referred to the Competition Tribunal, provided the court is satisfied that the issue has not been raised in a frivolous or vexatious manner and that the resolution of that issue is required to determine the final outcome of the action before that court. The SCA was of the view that Doorware failed to raise the point regarding referral to the Tribunal to the High Court initially and consequently, failed to place the court in a position to decide whether the issue had been raised frivolously or vexatiously and whether the issue needed to be resolved in order to determine the outcome of the case.
The SCA was also of the view that the argument relating to section 4(1)(b) of the Competition Act did not constitute an exceptional circumstance warranting reconsideration because Mercury Fittings should have been given notice of the point and an opportunity to put forward a section 4(1) defence in the proceedings before the High Court. Puzzlingly, the SCA ventured into the arena of competition law adjudication (a jurisdiction exclusively earmarked for the Competition Tribunal and Competition Appeal Court) and went on to say the point relating to section 4(1) of the Competition Act had no merit and does not apply as the two parties are not in a “horizontal relationship” (i.e. competitors) as defined by the Competition Act. The SCA instead found that the parties were not competing with each other, but rather that they had agreed “to offer the same goods at the same prices in different geographic areas of the country for reasons of practicality, convenience and efficiency”.
Further, the SCA offered a brief discussion on characterisation - a concept in competition law wherein alleged cartel conduct must be analysed to assess whether it's true nature and “character” fits within the definition of so-called “hardcore cartel” conduct, as provided for in section 4(1)(b) of the Competition Act. On this point, the SCA referred to the case of American Natural Soda Ash Corporation and another v Competition Commission of South Africa and others [2005] 1 CPLR 1 (SCA) where it was held that the process to establish whether the character of the conduct complained of coincides with the character of the prohibited conduct involves the scope of the prohibition and the nature of the conduct complained of.
The Court ultimately held that it is open to Mercury Fittings to place facts before a court to contradict the allegations by Doorware that the agreement between the parties is anticompetitive. For these reasons, the SCA was unable to decide the section 4(1)(b) point and stated that there was nothing preventing Doorware from raising the point in the high court proceedings on the merits of the matter, as an alternative to its defence that there was no agreement between the parties. The SCA ultimately struck the application from the roll, and as a result, upheld the interdict preventing Doorware from competing with Mercury Fittings in breach of the agreement between the parties.
The SCA’s decision underscores the importance of raising issues that may need to be referred for consideration by the competition authorities, while a matter is in the court a quo. Additionally, the judgment incorporates principles of fairness as the Court refused to entertain the competition arguments on the basis that the other party was not allowed to consider and defend such arguments.
Importantly, the judgment raises questions on the ability of civil courts to opine on matters that clearly fall outside of their jurisdiction. While the SCA in this instance was correct to remind parties that the grounds for reconsideration are quite narrow, it is hard to imagine that any competition authority would agree with the finding that parties engaged in the same commercial activities and who have agreed not to compete in certain geographic areas, does not amount to a cartel agreement, which is strictly prohibited by the Competition Act. The judgment therefore raises an interesting question on the permissibility of a civil court enforcing an anticompetitive agreement and whether the court’s decision places the parties at risk of prosecution by the competition authorities for continuing to uphold a potentially collusive agreement.
This bulletin is authored by Partner Palesa Mpe and Candidate Attorney Camilla Mathonsi.
