6 December 2009 by

Hearings commences on key case concerning the single economic entity defence

The Tribunal will soon be considering the issue of when two separate firms, with a common shareholder, can invoke the so-called single economic entity defence against allegations of collusion.

The Commission referred complaint proceedings, relating to the furniture and bedding foam market to the Tribunal, alleging that Loungefoam and Vitafoam had fixed the selling price of foam produced for furniture manufacturers and had also fixed the price at which they purchase raw materials from suppliers as well as divided markets by allocating customers in contravention of the Competition Act (Act). Steinhoff International Ltd (Steinhoff) owns 47% of the shares in Loungefoam and 100% of the shares in Vitafoam and the parties contend that the common shareholding, together with other factors relating to how the businesses are run, results in the parties being part of a single economic entity within the Steinhoff Group, albeit that Steinhoff does not own the majority of shares in Loungefoam. Single economic entities cannot be found guilty of collusion as such firms (within a single economic entity) cannot conspire with themselves.

The Tribunal's ruling on this issue is much anticipated, as this will be the first time the single economic entity defence will be adjudicated on by the Tribunal in the context of alleged collusion.

Chris Charter, Director Competition and
Pia Harvey, Senior Associate, Competition

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