| Wed 2 Mar 2011, 11:10 | | THEE - Competition Commission refers pilings cartel case to the Competition |
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JSE
THEE
THEE - Competition Commission refers pilings cartel case to the Competition
Tribunal and settles with Aveng (t/a Steeledale) on wire mesh and rebar
cartels
MEDIA RELEASE
02 March 2011
Competition Commission refers pilings cartel case to the Competition Tribunal
and settles with Aveng (t/a Steeledale) on wire mesh and rebar cartels
The Competition Commission (`Commission`) continues to make good progress in
uncovering cartel conduct in construction related areas. In two separate
developments, the Commission has today referred a case of collusive conduct in
pilings and related activities, which are a crucial component of many large
construction projects, and has also settled with Aveng (Africa) Ltd on two
cartels in wire mesh and reinforcing steel bar in which its Steeledale
subsidiary was involved.
Pilings cartel referral
The Commission has referred a case of collusive tendering, price fixing and
market allocation in the pilings market against Grinaker-LTA (an operating
group of Aveng (Africa) Ltd), Esorfranki Ltd, Rodio Geotechnics (PTY) Ltd,
Dura Soltanche Bachy (PTY) Ltd), Geomechanics CC and Diabor (PTY) Ltd.
Grinaker-LTA applied for and was granted conditional immunity and therefore no
penalty is sought against it. The Commission is seeking a penalty of ten
percent (10%) of the annual turnover of the firms implicated in this case
other than Grinaker-LTA.
In terms of formal arrangements among themselves the respondents allocated
tenders/customers/projects between themselves and fixed tender prices. The
tenders were allocated in accordance with agreed rules and each allocation
was recorded in a document called the "scorecard" or "Book" which was intended
to record the agreed percentage market share of each participant. These
arrangements existed in both Gauteng and KwaZulu-Natal. There was furthermore,
ad hoc collusive conduct pertaining to certain projects.
There are indications that the conduct may have been in place since the 1970s.
Some of the projects implicated in this conduct are: Lusip Dam grouting in
Swaziland; SAPPI/SAICCOR piling project; Moses Mabhida Stadium Piling project;
Coega Harbour diaphragm wall project, the Gautrain; and Lesotho Highlands
Water project.
The conduct appears typical to that already uncovered by the Commission in
other construction related areas and points to the far reaching nature of such
practices in the construction sector.
Aveng/Steeledale settlement
The Commission has reached a settlement with Aveng (Africa) Ltd in the mesh
and rebar cartel cases referred by the Commission. In terms of the settlement
agreement, Aveng:
- admits that its Steeledale operation entered into agreements with its
competitors to fix prices and divide markets by allocating customers in
the mesh and rebar markets, and to collusive tendering in the rebar
market;
- will pay an administrative penalty of R128,904,640 (one hundred and
twenty eight million nine hundred and four thousands six hundred and
forty rands) equivalent to 8% of Steeledale`s annual turnover for the
2008 financial year;
- undertakes to cooperate with the Commission in its prosecution of the
remaining respondents;
- has committed to cooperate in the Commission`s Construction Fast Track
Process; and
- undertakes to implement a competition compliance programme.
The settlement agreement will be submitted to the Competition Tribunal for
confirmation.
END
Further Info:
Oupa Bodibe, Manager: Advocacy & Stakeholder Relations
082 563 6970/ oupaB@compcom.co.za
Keitumetse Letebele, Head of Communication
082 783 3397/ keitumetseL@compcom.co.za
Background
1. Pilings
Grinaker-LTA (an operating group of Aveng (Africa) Ltd) lodged an
application for corporate leniency on 1 April 2009 on behalf of GEL (a
division within Grinaker-LTA`s civil engineering business unit
responsible for ground engineering services, such as piling, grouting,
lateral support and geotechnical drilling investigations services). The
application detailed GEL involvement with its competitors principally in
Gauteng and KwaZulu-Natal, in collusive tendering in the provision of
piling, grouting, lateral support services as well as related markets for
the provision of geotechnical drilling investigations services. The
application related to formal and certain ad-hoc collusive practices.
Another application for leniency was lodged by Grinaker-LTA on 20 July
2009 for its involvement through GEL in certain ad-hoc collusive
practices in geotechnical drilling investigation services. The Commission
consolidated the complaints.
The substance of the Commission`s investigation and referral is that the
respondents entered into arrangements to divide/allocate projects/tenders
amongst themselves in accordance with scorecards, also known as `the
Book`, largely corresponding to their market shares. They further engaged
in ad-hoc arrangement from time to time that went beyond the formalised
scorecard arrangements, in terms of which they divided/allocated
project/tenders amongst themselves. Briefly the relevant markets or
activities are described below:
Piling: Piling is a process used to stabilise foundations of big
structure such as building, bridges, substations and dams, in order to
prevent the collapse of these structures. Different types of piles are
used in the process whereby piles are driven into the ground to support
the structure/building.
Lateral support: Lateral support techniques are used to prevent
horizontal movement in excavations. The process involve reinforcing
earth walls with a view to ensuring that adjacent foundations or
structures that are already in existence do not collapse (or move or
shake) during surface excavations.
Grouting: grouting is a process used in construction to stop water flow
through the ground and the filling of voids in cavities to stabilise
ground masses. It is done through drilling holes and filling the holes
with cement and water mix known as grout.
Geotechnical drilling investigation services: Geotechnical drilling
investigations services refers to investigation processes and techniques
carried out by geotechnical companies to assess ground/earth conditions
prior to design and/or construction of usually big structures such as
bridges and buildings. These investigations are aimed at providing an
overview of the subsurface conditions (that is below surface of an area
identified for construction), depth of bed rock and soil characteristics
in order to determine whether the site/location is suitable for
construction and if so, what foundation solution would be suitable.
2. Mesh
The Commission initiated a complaint in the mesh market on 26 January
2009 following an application for corporate leniency received from Murray
and Roberts Steel filed on behalf of its subsidiary, BRC Mesh Reinforcing
(PTY) Ltd. Information submitted by M&R indicated that between 2001 and
2008, Reinforcing & Mesh Solution (PTY) Ltd (RMS), Aveng (Africa) Limited
t/a Steeledale, Vulcania Reinforcing and BRC had engaged in price fixing
and dividing markets by allocating customers in the mesh market.
The Commission also found that the respondents were members of the South
African Fabric Reinforcing Association (`SAFRA`) in which suggested price
lists (or recommended price lists) as well as periodic adjustments to
these price lists, were calculated and circulated. In addition to formal
meetings at SAFRA, the companies met informally and had telephonic
discussions for purposes of agreeing on the levels of discounts to be
offered to different categories of customers in the mesh market. The
respondents also discussed increasing prices of reinforcing mesh and the
date of implementing the increases.
The investigation also revealed that there was clear customer allocation
between the respondents and that a breach of this arrangement will be met
by retaliatory action against the offending cartel member. A customer
sheet was prepared for this purpose by cartel members to identify which
customer `belonged` to which competitors, as well as which customers were
`free game` for all to supply.
3. Rebar
The Commission initiated the rebar complaint on 26 January 2009 following
an application for leniency made by Murray & Roberts on behalf of its
subsidiary Reinforcing Steel Contractors (PTY) Ltd (RSC). Information
submitted by RSC indicated that there was agreement on price fixing,
market allocation and collusive tendering in the supply, cutting, bending
and sale of rebar. Firms implicated in these arrangement included
Steeledale, Silverton Reinforcing and Wire Products (PTY) Ltd,
Reinforcing Mesh Solutions (PTY) Ltd, Koedoespoort Reinforcing Steel
(PTY) Ltd, Witbank Reinforcing and Wire Products (PTY) Ltd, Dynamic (PTY)
Ltd, Bestforce Reinforcing (PTY) Ltd, Apex Rebar and Mesh CC, Dynamic
(PTY) Ltd, Domestic Reinforcing Steel (PTY) Ltd, Barker Reinforcing (PTY)
Ltd, Hulse Reinforcing (PTY) Ltd, Siyazama Reinforcing (PTY) Ltd, Alert
Steel (PTY) Ltd, Kopanong Reinforcing Steel Contractors (PTY) Ltd, Mac-
Fell Laduma Reinforcing (Pty) Ltd, Reinforcing Contractors (PTY) Ltd and
the South African Reinforcing Concrete Engineers` Association.
The Commission`s investigation revealed that the cartel conduct took
place in five regions - Gauteng, KwaZulu-Natal, Mpumalanga, Limpopo and
Western Cape. While the conduct may have taken place in the five
regions, it was part of a single overall national conduct involving
common participants, similar ways of operating and the same objective of
price fixing, customer allocation and collusive tendering. The
investigation revealed that there were discussions, meetings or contacts
between the firms to discuss prices, margins, tenders/projects as well as
customers. In most instances, the respondents used an agreed price list
to determine prices and cover pricing, and an agreed allocation sheet to
allocate customers and collude on tenders.
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