The Competition Tribunal has dismissed, with costs, an appeal brought by petroleum products importer Gas2Liquids against the Competition Commission’s decision to exempt the South African Petroleum Industry Association (Sapia) and its members from the ambit of the Competition Act.

The tribunal found that the company’s appeal against the decision did not have merit and that its criticism of the commission’s investigation was without substance.

The appeal came after the commission had granted Sapia and its members an exemption to engage in conduct prohibited by the Competition Act, in October 2011.

The exemption was granted for a range of cooperation agreements and practices which, in the commission’s view, were required to ensure the continuity and stability of liquid fuels supply to various sectors and locations in South Africa.

Sapia had applied for the exemption following recommendations by a task team appointed by the then Minister of Minerals and Energy, which concluded that, to avoid a repeat of the 2005 fuel crisis, the fuel industry needed a coordinated approach over issues such as fuel supply lines and production shutdowns.

However, the task team cautioned that such coordination would be anticompetitive and, therefore, advised that an exemption be sought.

As a result, Sapia was granted an exemption for the period of the 2010 FIFA World Cup and was granted a further exemption for the period October 3, 2011 to December 31, 2015.

It was the latter exemption that formed the subject matter of Gas2Liquids’ appeal.

Gas2Liquids’ initial grounds for appeal emphasised that the exemption would exclude smaller competitors who were not party to the agreements and that this conflicted with government policy initiatives for the sector.

It further criticised the process adopted by the commission in assessing the necessity for the exemption.

The commission and Sapia both opposed the appeal.

The tribunal heard the case – the first exemption appeal to come before it – on November 26 last year, and found that several of the issues raised by Gas2Liquids regarding the methodology used by the commission in conducting its investigation resembled review points that Gas2Liquids could not use to advance its appeal.

It also noted that the commission actively investigated the competition issues in the industry by seeking comments from industry players. Moreover, the commission had imposed conditions on the exemption to limit the ambit of the exemption and to require Sapia to widen its membership.

Further, the tribunal also found that the argument that the commission had not considered the exclusionary effects the exemption would have on the smaller competitors of the large petroleum players, was fallacious because the anticompetitive effect was the rationale for an exemption, the exemption did not exclude nonparties from becoming parties to the agreement and the real problem for smaller players was the current physical constraints on supply as identified by the task team rather than the exemption itself.

In addition, the tribunal found that no viable alternatives were put forward by Gas2Liquids and that it had instead displayed  ambivalence as to whether the exemption should be granted in a modified form or not at all. 

Finally, the tribunal found that the commission was not obliged to consider any industrial policy arguments, as this fell outside its jurisdiction and was the function of the relevant Ministers.