Computicket loses ‘abuse of dominance’ case at appeal

Ticketing company Computicket, which is owned by retailer Shoprite, has lost an appeal over a R20-million fine imposed on it for “abuse of dominance”.

The Competition Appeal Court on Wednesday dismissed an application from Computicket, which was seeking to have the ruling by the Competition Tribunal overturned. Computicket was ordered to pay costs.

In January, the tribunal found Computicket guilty of abuse of dominance in contravention of the Competition Act between 2005 and 2010 and ordered to pay the R20-million “administrative penalty”.

The tribunal found that the ticketing company used exclusionary contracts with clients to keep competitors out of the market. The contracts prevented ticketing rivals from signing agreements with entertainment providers.

The tribunal was asked to probe whether Computicket abused its dominance by securing these exclusive arrangements with its clients. The matter was referred to the tribunal in April 2010 by the Competition Commission following a series of complaints that were lodged by Computicket rivals.

The origins of the case date back more than a decade: Computicket rival Strictly Tickets laid a complaint against Computicket with the commission, with subsequent complaints from Soundalite, KZN Entertainment News and Reviews, L Square Technologies and Ezimidlalo Technologies.

The commission consolidated the complaints as they raised overlapping issues, with the matter then referred to the tribunal in April 2010.

‘Foreclosure’

The tribunal found that Computicket’s exclusive agreements with inventory providers had resulted in anticompetitive effects. “During the proceedings, the Competition Commission was able to show that the agreements resulted in foreclosure of the market to effective competition,” the commission said in a statement on Wednesday.

“The tribunal accepted evidence concerning ‘supra competitive’ pricing effects, a decrease in supply by inventory providers, a reluctance by Computicket to timeously make use of available advances in technology and innovation as well as a lack of choices for end consumers, all of which cumulatively established the anticompetitive effects of the agreements.”

The tribunal furthermore found that Computicket was unable to demonstrate that its exclusive agreements were justified based on efficiency grounds.

Computicket appealed and the matter was heard by the Competition Appeal Court in June.

The company’s central argument was that the tribunal erred in its factual conclusions on exclusion and anticompetitive effects, and that the commission’s expert witness, Liberty Mncube, who at the time was the chief economist of the commission, was not independent and therefore his testimony should have been dismissed, it said.

“On the independence of the commission’s expert witness who was labelled as biased by virtue of him having been the chief economist of the commission, the Competition Appeal Court rejected that contention,” the commission added.

The genesis of matter dates to at least 2005, when Shoprite bought Computicket from MWeb. A condition of sale was a profit guarantee from MWeb. To ensure it could meet this guarantee, “MWeb decided to extend the ambit of Computicket’s exclusive contacts”, the tribunal said in January. The new exclusive contracts were longer in duration and had various other features not found in earlier contracts.

Agreements signed after 2005 required a minimum three-year exclusivity on ticket sales for all Computicket client events.

The effect was that new entrants into the ticketing market were “unable to challenge Computicket’s dominant position because of the exclusionary effects of the exclusive contracts”.

The Competition Act prohibits dominant companies from engaging in an exclusionary act, unless they can show technological, efficiency or other pro-competitive gains which outweigh the anticompetitive effect of the act. They are also prohibited from requiring or inducing a supplier or customer not to deal with a competitor.

“Computicket has used the exclusive contracts to weaken rivalry by raising the barriers to entry of competitors and thus increase its market power,” the tribunal said.

Further investigations

Despite the appeal court’s ruling, Computicket and Shoprite still face further investigations.

In December 2018, the commission referred for prosecution another exclusive-agreements complaint against Computicket covering the period from January 2013, and this time it included Shoprite Checkers as a respondent.

This matter is currently before the tribunal for prosecution and, if found guilty, Computicket and Shoprite Checkers could be liable for a fine of up to 10 % of turnover, the commission said in Wednesday’s statement.

Shoprite has been asked for comment.  — (c) 2019 NewsCentral Media