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Longest Running Cartel In South Africa

1759 words - 8 pages

On 13 February 2009, the Commission referred a complaint to the Competition Tribunal of South Africa (Tribunal) for contravention of s 4(1)(b) of the Competition Act. The Commission had initiated an investigation after receiving an application from Rocla for leniency in terms of the Commission’s corporate leniency policy on 7 December 2007 in which Rocla alleged that the above-mentioned firms were members of a cartel. On 18 March 2008, the Commission initiated an investigation and found that the cartel operated from 1973 until 2007 in Gauteng, Kwa-Zulu Natal and in the Western Cape.
Shortly after the complaint was filed, 4 of the firms obtained consent orders, D&D and Craig ...view middle of the document...

The cartel members also developed a document called the Modus Operandi, which identified each cartel member, by a number to conceal the identity of the cartel members. The Modus Operandi reflected the agreed percentages for each cartel member; a geographic market allocation arrangement splitting up the production and sales of pipes, culverts
and manholes; as well as a split of the precast concrete products which each firm could produce and sell in each identified market. Furthermore there were sanctions for non-compliance, payments to keep competition out of the market, intent and ability to raise prices and effective monitoring mechanisms.

Southern Pipeline contractors (tribunal)
Facts: Southern Pipeline Contractors and Conrite admitted contravention of s 4(1)(b) of the Act however rejected the penalty imposed and therefore approached the Tribunal.
Commission: argued that there was no legislative basis for the Tribunal to limit the imposition of the penalty to affected turnover only and that the firm’s annual total turnover should be subject to sanction. They argued that the affected turnover for SPC should only exclude civil engineering activies.
SPC: SPC argued that the affected turnover should exclude in-out costs, civil engineering activities and concrete products supplied to the Gautrain project. Furthermore they listed a number of factors the tribunal should consider.
Conrite: listed a number of mitigating factors court should consider.
Tribunal decision and reasoning
The Tribunal considered the approach by other jurisdictions in calculating a penalty. Than proceeded look at each parties’ relevant conduct. Looked at the nature, duration and extent of contraventions.
Imposed a penalty of R16 882 597 on SPC (10% of total turnover) and Conrite was fined R 6 192 457 (8% of total turnover).

The approach followed by the Tribunal in this case shows that penalties for cartels of long duration will attract maximum penalties.

Facts: both SPC and Conrite appealed the Tribunal’s decision.
SPC Argument

In its appeal, first appellant argued against the decision of the Tribunal for mainly 3 reasons (i) that the Tribunal was incorrect in basing its penalty on SPC’s total turnover for the preceding year (ii) the Tribunal erred in accepting the Commission’s calculations of SPC’s net affected turnover and (iii) that the Tribunal unfairly imposed the maximum penalty when there were mitigating factors warranting a reduced percentage in calculating the appropriate penalty.

Conrite Argument

Conrite argued that the tribunal had failed to take into consideration that the second appellant was only part of a smaller cartel which only operates in Durban not nationally or regionally, and that the activities of the regional or national cartel cannot be imputed to them.
It was further argued by Conrite that the tribunal disregarded its evidence and ignored the fact that they did not enjoy...

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