| Tue 1 Feb 2011, 12:40 | | THEE - The Competition Commission - Competition Commission invites construction |
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JSE
THEE
THEE - The Competition Commission - Competition Commission invites construction
firm to settle
MEDIA RELEASE
1 February 2011
Competition Commission invites construction firm to settle
The Competition Commission (the `Commission`) today announced a "fast track
settlement" for firms in the construction sector who have been party to
collusive practices in bidding for projects in the public and private sectors.
Construction firms are invited to apply for fast-track settlement with complete
and truthful disclosure of information regarding collusion. In addition the firm
must undertake to cooperate and cease anti-competitive conduct. Upon complying
with the requirements, the Commission will settle with participating firms with
a reduced administrative penalty compared to the penalty if each transgression
were to be prosecuted separately.
The Commission`s investigation in the construction industry has uncovered
widespread anti-competitive conduct through various arrangements. Major firms in
the sector, for example, have held meetings to allocate tenders and police each
other`s behaviour through a structure referred to as `The Party`.
It is against this background that the Commission has devised a fast-track
settlement procedure to incentivise firms to enter into a comprehensive
settlement that is financially advantageous. It aims to minimise the associated
legal costs and speedily resolve cases. Further, the process will strengthen
evidence against those firms not taking advantage of this initiative.
The Commission is currently investigating 65 bid rigging cases in the
construction sector implicating over 70 projects with an estimated value of R29
billion. Further, markets for construction products such as long steel, mining
roof bolts, concrete pipes, plastic pipes, wire-mesh, reinforcing steelbar
installation and pilings construction have also been investigated. Subsidiaries
of several major construction companies are involved in these cartles. A case
against the primary producers of reinforcing steel bar (the steel mills) was
previously referred to the Tribunal. The Commission will soon be referring cases
in rebar and pilings.
In addition, 150 marker applications (indicating an intention to apply for
corporate leniency), some relating to more than one project, have been received
by the Commission. Most of these corporate leniency applications were submitted
by Group Five which has been cooperating with the Commission since 2009. In
addition, applications were received from Grinaker- LTA and Murray & Roberts,
who have committed to cooperate with the Commission.
The fast-track settlement process will work concurrently with the Commission`s
Corporate Leniency Policy (CLP). A firm that applies for settlement may also
apply for leniency. The provisions of the CLP process will then apply. A firm
that has received conditional immunity for a particular conduct will not pay a
penalty for it in terms of the settlement process.
For the purpose of calculating the penalty in each of the 6 main construction
sub-sectors delineated by the Construction Industry Development Board, the
following factors will be taken into account:
* the number of contraventions in the relevant subsector;
* whether or not the applicant won or lost the bid;
* the size of the contract(s); and
* whether the applicant has settled any claim for damages that may arise as a
result of the non-prescribed prohibited practice.
Firms in the construction sector are invited to respond to this invitation in
order to settle their bid-rigging and collusive conduct by making an application
to the Commission by no later than 15 April 2011 at 12:00 pm.
The procedure, forms, and substantive terms and conditions of the fast-track
settlement process is set out in detail in the document "Invitation to Firms in
the Construction Industry to Engage in Settlement of Contraventions of the
Competition Act" available on the Commission`s website www.compcom.co.za .
Alternatively, a copy can be obtained from the Commission`s Registry at 77
Meintjies Street, dti Campus: Block C, Sunnyside, PRETORIA or via email by
writing to construction@compcom.co.za.
Should a firm fail to take advantage of this settlement procedure the Commission
will prosecute and ask for the imposition of maximum penalties with respect to
each project. Further, the Commission will advocate that Government cease
conducting business with firms found guilty of collusion following a
prosecution.
For any enquiries regarding the settlement process please contact Lemogang
Moletsane on 012 394 3408, or by email, construction@compcom.co.za.
ENDS
Media queries can be directed to:
Oupa Bodibe, Manager: Advocacy & Stakeholder Relations
012 394 3267/ 082 563 6970/ oupaB@compcom.co.za
Keitumetse Letebele, Head of Communication
012 394 3183/082 783 3397/ keitumetsel@compcom.co.za
Background
The Competition Commission has taken a decision to implement a fast-track
settlement process in the construction sector targeted at finalising
investigations into the bid-rigging of projects. This is informed by the need
to rid the sector of widespread and deeply-entrenched anti-competitive conduct
in the context of some firms cooperating with the Commission but many others
remaining in denial. Bid-rigging imposes costs on customers by artificially
raising the cost of construction projects. It also undermines the competitive
bidding process by deceiving customers into believing that they have received
independent tenders for construction projects.
The Commission has been cognisant of the approach taken in other jurisdictions
where such widespread conduct has been uncovered, such as the Netherlands and
UK.
The Competition Commission has taken a proactive approach to construction as it
was identified as a priority sector in recent years due to its importance for
the economy. A number of investigations have either been finalised or are under
investigation.
The Competition Act no.89 of 1998 (as amended) prohibits collusive tendering or
bid-rigging in terms of section 4(1)(b)(iii). Bid-rigging or collusive tendering
includes the rigging of particular bids, bid allocation and bid rotation over
time. Furthermore, it includes the submission of cover bids and cover prices,
agreements on tender prices and the allocation of bids to customers and/or
territories.
On 10 February 2009 the Competition Commission ("the Commission") initiated a
complaint in terms of section 49B(1) of the Competition Act no.89 of 1998 (as
amended) ("the Act") into alleged prohibited practices relating to bid-rigging
and collusion in the construction of the 2010 stadiums for the Soccer World Cup.
On 1 September 2009, following the receipt of applications for immunity in terms
of the Commission`s Corporate Leniency Policy ("CLP"), the Commission initiated
a complaint in terms of section 49B(1) of the Act into prohibited practices
relating to bid rigging and collusion in the construction industry.
Based upon the investigations to date, it is evident that there were widespread
contraventions of the Act, particularly section 4(1)(b). This has included
referrals and settlements in cast concrete products, plastic pipes and
reinforcing steel. There are also ongoing investigations in markets such as
cement, bricks and pilings. Many of the firms that have been respondents in
these cases are also alleged to be implicated in bid rigging of construction
projects.
Recently the Competition Tribunal has sent a firm message by imposing the
maximum penalty of 10% of total turnover on Southern Pipeline Contractors, which
decided not to settle with the Commission but to contest the matter in the
Tribunal. Where companies contest the Commission`s findings of hardcore cartel
backed by leniency applications, the Tribunal, in this ruling, shows that it may
impose the maximum allowable penalty.
Cartel conduct in the cutting, bending and installation of reinforcing steel
involves many firms engaged in undertaking such work for construction projects.
The coordination by these firms was organized by region, with firms agreeing on
pricing and allocating business amongst themselves through regular meetings and
discussions. Reinforcing Steel Contractors, part of Murray and Roberts Steel Pty
Ltd, has been granted conditional leniency by the Commission. Reinforcing steel
is used in a wide variety of construction projects. In addition, through the
South African Reinforcing Concrete Engineers` Association, reinforcing steel
firms agreed on purchase prices and terms from the steel mills.
Date: 01/02/2011 12:40:02 Produced by the JSE SENS Department.
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