| Tue 1 Sep 2009, 16:20 | | THEE - The Media release from Competition Commission |
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THEE
THEE - The Media release from Competition Commission
The Competition Commission
1 September 2009
The Media release from Competition Commission
Competition Commission requests fines for steel companies and initiates
construction sector investigation
The Competition Commission today referred findings of its investigation
into collusion by four producers of long steel products in South Africa and
their industry association to the Competition Tribunal for prosecution.
In a separate matter, the Commission initiated an industry wide
investigation into collusive practices in the construction industry, a
priority sector for the Commission.
Prosecution of steel companies
The Commission is recommending that the Competition Tribunal impose an
administrative penalty against ArcelorMittal South Africa Limited, Cape
Gate (Pty) Limited and Cape Town Iron Steel Works (Pty) Limited amounting
to 10% of their annual turnover in South Africa and their exports from the
Republic for the preceding financial year.
On 22 April 2008 the Commissioner initiated a complaint against producers
of long and flat steel products and pursued an investigation concerning
steel mills as well as steel merchants in South Africa. The investigation
was as a result of concerns raised by the Department of Trade and Industry
and research conducted by the Commission which suggested that the steel
mills were charging local steel customers at around import parity price
levels since 2002; notwithstanding that South Africa is a net exporter of
steel.
Following a search-and-seizure operation in some of the respondent`s
premises one of the respondents investigated, Scaw South Africa (Pty) Ltd,
applied for corporate leniency for price fixing and market allocation in
relation to rebar, wire rod, sections (including rounds, squares, angles
and profiles). Scaw admitted its participation in the cartel and confirmed
that there has been a long-standing culture of cooperation amongst the
steel mills regarding the prices to be charged, and discounts to be
offered, for their steel products. The cooperation extended to arrangements
for market division.
The Commission`s investigation confirmed the allegations made by Scaw and
uncovered further evidence of collusion. The Commission found that the four
producers exchanged information by using their membership in The South
African Iron and Steel Institute (SAISI) to facilitate cartel activity,
which involved price fixing, the fixing of trading conditions and market
division.
The Competition Commission has therefore referred a complaint to the
Competition Tribunal against the alleged parties for an order in the
following terms:
- Declaring that Mittal, Cape Gate and Cape Town Iron Steel Works commit or
committed a prohibited practice in contravention of section 4(1)(b)(i) and
(ii) of the Competition Act, 89 of 1998 ("the Act");
- Interdicting them from contravening section 4(1)(b)(i) and (ii) of the
Competition Act, 89 of 1998 ("the Act");
- Interdicting all of the respondents from exchanging and/or facilitating
the exchange of sensitive market information, i.e. in any manner that
facilitates collusion amongst any of the respondents.
Investigation into collusive practices in construction industry
Since March 2009, the Commission has received several applications for
corporate leniency from construction companies for collusive practices with
respect to certain construction projects.
The Commission`s preliminary investigations on the projects covered in the
CLP applications indicate that there may be wide spread collusion in the
construction industry. In particular, the applications revealed that the
following collusive practices could be prevalent in the sector:
- Price fixing in the form of fixing margins for tenders and compensating
the losing bidder;
- Allocation of customers/projects/tenders through the use of score cards;
- Collusive tendering by submitting uncompetitive bids (cover pricing).
The Commission`s preliminary investigations also show that construction
firms, which will ordinarily bid independently, often form joint ventures
when bidding for certain projects. In so far as they bring competitors
together, these joint ventures may be used as a platform to engage in
collusive practices. Some of the joint ventures have permanent status and
continue to be used by competitors in the industry as a platform for
sharing sensitive competitive information.
Consequently the Commission has initiated an industry wide investigation
against Grinaker, Stefanutti, Group Five, WBHO, Concor, Liviero, Giuricich,
Hochtief, Dura, Nishimatsu, Esorfranki, VNA Pilings, Rodio, Diabor, Gauteng
Piling, Fairbrother, Geomechanics, Murray & Roberts, Aveng and other firms,
including joint ventures in the construction industry.
Such collusive practices tend to distort competition and increase prices.
This is particularly problematic given the recent boom in activity in
infrastructure and construction in the country, as it implies that costs
have been inflated while above desirable competitive levels - creating
burden on the state and the economy. The collusive practices may also slow
down delivery of key infrastructure as well as houses in the country.
"International experience has shown that collusive practices of this nature
are also prevalent in the construction industry in other countries" says
Tembinkosi Bonakele, the Deputy Commissioner. "Examples include the
Netherlands and the United Kingdom where a large number of construction
firms took advantage of the corporate leniency policy to come forward and
to clean up their act once investigations were launched."
ENDS
Prepared by: FD Beachhead
Jennifer Cohen 011 214 2401/ 082 468 6469/ jennifer.cohen@fd.com
Dani Cohen 021 487 9021 / 082 897 0443 dani.cohen@fd.com
Senzi Dlamini 011 214 2420 / 073 494 0030 senzi.dlamini@fd.com
On behalf of: The Competition Commission
Further info:
Keitumetse Letebele, HOD Communications
012 394 3200 / 082 783 3397
Jennifer Cohen
Managing Director, FDBeachhead
Johannesburg
1st Floor, Lumley House, Rosebank Office Park
177 Jan Smuts Avenue, Parktown North
Johannesburg, 2193
T +27 (0)11 2142401
F +27 11 214 2405
M +27 (0)82 468 6469
www.fd.com
A member of FTI Consulting, Inc.
Date: 01/09/2009 16:20:01 Produced by the JSE SENS Department.
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